Economy

Friday, January 13, 2023 9:44 AM

STAKEHOLDERS - Govt, economy, people, private sector, env

 GST, FRBM (20 years)

 Structure
○ Inclusive growth - 'REACHING THE LAST MILE'
 General Economy - UE, inflation (CPI-Headline falls below 5% but cereal, milk etc. remain > 6% hurting the poor), financial inclusion (financial services), Housing
(Model Tenancy Act)
 Agriculture problems
 Industries - Mfg, MSME, skilling, labor reforms, PLI, DESH, disinvestment
 Services - Gig, e-commerce, startups, Social services (pensions, insurance)
 External sector - Exports, FDI, internationalisation of rupee
 Women led development
 Green growth
 Budget
 $5Tn economy
Opportunity Challenges
a. Economic - revival, govt measures (Capex push, PLI, GST reforms), RBI a. Domestic
measures (Rupee trade, monetary tightening) a. Present - inflation, Rupee weakening, twin deficit (CAD+FD)
b. Political - stability and effective leadership b. Persistent - Jobless growth, pre-mature de-Industrialisation, low
c. Social - Demographic dividend credit ratings, Tax-to-GDP, Middle-income trap, Regulatory
d. Technological - Gig, Start-ups, Global capability centres (GCC - offshore cholesterol, Dwarfism
units of MNCs), e-commerce c. Social - Poverty-inequality, Low human capital, Misery index
e. Global - China+1, Friend shoring, energy diplomacy (Russia) d. Political - freebies, politicisation of economic issues
b. Global - RU War, 2-Oil problem, Fed interest rate hike, capital flight
Way forward CASE - Japan Abenomics - monetary easing, fiscal stimulus by govt and
a. Attract 'Anchor firms' - key position in a regional economy, helps in structural reforms
growth of other industries
b. Global capability centres
c. Encourage investments by NRI, OCI
d. Identify priority areas
 Value addition
□ 5 Vicious cycle

□ Poverty trap (growth and development loops)

□ 4 Balance sheet syndrome - Arvind Subramaniam (Banks, Corporates, Real estate, NBFC)
 Conclusions
□ Growth is inclusive when it takes place in sectors in which the poor work, live and consume.

□ Covid 19 pandemic has scrapped the economic surface and explored the inequalities within.

□ While we are floating in the same ocean, some are in superyachts while others are clinging on the drifting debris - Antonio Guterres (UN G.Sec)

□ Growth magnets - financial health, edu and skilling, governance, digital strides, global supply chain

□ Labor intensive sectors to absorb 45.5% labor force of agriculture

 Mfg - textiles, Food processing, toys, footwear, Construction
 Services - Tourism, restaurants, healthcare

□ Growth dampeners
 Private CAPEX decline
 High inflation and hard landing
 Widening CAD
 Geo-political friction and slowing global trade
 Plateauing growth of exports

□ Vision For Amrit Kaal (An Empowered and Inclusive Economy) - youth, jobs, macro-economic stability

□ 4 Is to make India developed by 2047 - infra, investment, innovation and inclusiveness

□ Parmeshwaran Iyer - Triad of Budget - Physical, Digital and Social infra

□ Growth rate of 7% for next 25 years couple with ICOR of 4%

□ China's growth trajectory in last 15 years

 Statistics
2007 2022
GDP $ 3.5 Tn (same as India 2023) $ 19 Tn
Exports $ 1.3 Tn (India present $ 0.77 Tn) $ 3.6 Tn
Investment 40% GDP (India present 30%) 43% GDP
FLFPR 66% (India present 23%) 61%
 For India to emulate and even surpass this growth story
◊ Women led development (Budget 2022-23) - Increase FLFPR
◊ Improve exports
◊ Welcome investments - reduce tariffs
◊ Digitisation for masses - Shaji phenomenon and e-commerce dividends

□ Real Wage growth

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 ○ Investment and Infra
 PPP
 Road, Rail, waterways, airport, island
 DPI
○ Gov budgeting
 fiscal federalism, GST, direct, indirect, retro tax
 State finances, FRBM
 Capital expenditure
 Gender budgeting

○ Money - DeMo, other banking related reforms

FC, GST, DeMo, Budget 2023, MSME, Gig, PLI, DESH, Startup, State finances, PPP, Infra schemes, airports, port, island, Internationalisation, Logistics, Crypto, MDB, CCI, e-Commerce

BUDGET

1. Vision For Amrit Kaal (An Empowered and Inclusive Economy)

a. Opportunities for citizens with focus on youth
b. Growth in job creation.
c. Strong and stable Macro Economic Environment

2. 4 Transformative Opportunities
a. Economic Empowerment of Women
b. PM VIshwakarma Kaushal Samman (PM VIKAS)
c. Tapping the potential of Tourism
d. Green Growth leading to efficient use of energy across sectors and green jobs
3. Size:
a. Total expenditure - Rs 45 L Cr
b. RE - Rs 35 L Cr
c. CE - Rs 10 L Cr
d. GDP - Rs 257 L Cr or $ 3.18 L Cr

4. SAPTARISHI
Inclusive dev a. Agriculture
1. DPI for agriculture - open source, open standard and inter-operable public good to access agri factors of production
2. Agriculture Accelerator Fund: To encourage agri-startups in rural areas
3. Aatmanirbhar Horticulture clean plant programme
a. Aim
i. to boost availability of disease-free, quality planting material for high value horticultural crops
ii. Improve share in horticulture exports
b. Fully central funding of ₹2,200 Cr
c. Clean plants to be set up by NHB via PPP
4. Global Hub for Millets (‘Shree Anna’) - Indian Institute of Millet Research, Hyderabad will be supported as the Centre of Excellence

b. Health
1. 157 new nursing colleges
2. Sickle Cell Anaemia Elimination Mission -
a. Genetic condition present at Birth
b. Eliminate by 2047
c. universal screening of 7 crore people in the age group of 0-40 years in affected tribal areas
d. Sickle cell disease Support Corner launched by MoTA
3. Multidisciplinary courses for medical devices - for skilled manpower for futuristic medical technologies

Reaching the last a. PVTG dev mission - 15 K Cr in next 3 years for Tribal Sub-plan for basic infra
mile b. Aspirational blocks programme - 500 blocks
c. Ekalavya Model residential schools - 38 k teacher recruitment
d. Bharat SHRI
1. digital epigraphy museum, with digitization of one lakh ancient inscriptions in the first stage
2. will be set up by ASI at Hyderabad
e. Water for Drought Prone Region: For Upper Bhadra Project, central assistance of ₹5,300 crore

Infra and a. Capex = 3.3% GDP (10 L Cr)

Investment b. Effective capex = 4.5% GDP (13.7 L Cr)
c. 50 year interest free loan to state governments for one more year
d. Infrastructure Finance Secretariat (IFS) to assist private investment
e. Urban infra dev fund (UIDF)
1. To create infra in Tier 2, 3 cities
Tier 1 >1L
Tier 2 50k - 1 L
Tier 3 20k - 50k
2. To be managed by National housing Bank
3. Corpus to be made from PSL shortfall

Unleashing the a. Lab grown diamonds

potential b. 5G apps in eng colleges
c. Vivad se Vishwas 1 and 2 - MSME relief
1. dispute is settled on payment of 100% of the disputed tax and 25% of the disputed penalty or interest or fee
2. Disputes related to wealth, securities transactions, commodities transaction tax, and the equalization levy are not covered under the scheme.
d. 3 Centres of excellence for AI
e. National Data Governance Policy: To unleash innovation and research by start-ups and academia

Green growth a. NGHM - annual production of 5 MMT by 2030

b. Battery Energy Storage Systems: Developing capacity of 4,000 MWH will be supported with VGF
c. Renewable Energy Evacuation: Inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh
d. Amrit Dharohar - Promote local communities for optimal use of wetlands
e. Green Credit Programme - Will be notified under EPA to incentivise env sustainable actions by companies, individuals and local bodies
f. PM-PRANAM - Aim to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers
g. GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme: 500 new ‘waste to wealth’ plants for promoting circular economy
h. Bhartiya Prakritik Kheti Bio-Input Resource Centres
1. 10,000 Bio-Input Resource Centres will be set-up to create a national-level distributed micro-fertilizer and pesticide manufacturing network
2. Aim is that over the next 3 years, government will facilitate 1 crore farmers to adopt natural farming.
g. MISHTI(Mangrove Initiative for Shoreline Habitats & Tangible Incomes): Mangrove plantation along the coastline and on salt pan lands. Through
convergence between MGNREGS, CAMPA Fund and other sources

Youth power a. Pradhan Mantri Kaushal Vikas Yojana (PMKVY 4.0) - New courses viz coding, AI, robots in 30 Skill India International Centres
b. Tourism - 50 destinations to be developed as complete package for domestic and foreign tourists
c. Unity malls at prominent tourist spots - Sale of ODOP, GI and handicraft products

Financial sector a. Credit Guarantee for MSMEs: This will enable additional collateral-free guaranteed credit of ₹2 lakh crore
b. Mahila Samman Savings Certificate
c. 50 year interest free loan to States for investment in Capex in 2023-24 itself
d. States will be allowed a fiscal deficit of 3.5% of GSDP of which 0.5% will be tied to power sector reforms

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 ECONOMIC SURVEY

1. Themes
a. 2020-21 - Saving lives and livelihoods
b. 2021-22 - Agile approach and Barbell strategy
c. 2022-23 - Amrit Kaal and G20
2. Highlights:
a. Report card 2022-23
b. Fully recovered from Covid shock
c. Mentions all reforms from last 8 years
3. Flow
a. Report card
b. Medium term growth outlook
c. Agri
d. Infra
e. Industry
f. Services
g. Inflation
h. External sector
i. Fiscal policy - CG, SG finances
j. Monetary policy and banking
k. Social sector, CC, Env

STATE OF THE ECONOMY

1. Report card of the economy

a. Story time

2020 2021 2022 2023

Covid - loss of lives Recovery Increased production No pent up demand

and livelihoods phase
EMP, EFP Pent up Global slowdown GLOBAL POLY-CRISIS = Covid + Climate + Conflict
demand a. RU war - 2 OIL PROBLEM = Crude + Edible
b. Supply chain for FFF
c. China lockdown - Zero Covid policy
Pent up demand Inflation Inflation stronger (CMP) Growth dampeners
(demand pull) a. FPI out, depreciation a. Private CAPEX declined in last few years
b. rising bond yields + increased cost of borrowing b. High inflation
c. Increased CAD c. Monetary tightening by RBI
d. Strong domestic demand coupled with high
commodity process - higher costly imports ---> CAD
widening
e. Geo-political friction and slowing global trade
f. Plateauing growth of exports growth

b. Trend analysis

Trend Inference Opportunities Threat Budget Analysis

a. GDP gr a. Slowdown started before a. IMF - India = Bright Spot, expected to be fastest a. Global poly-crisis - affects a. Amitabh Kant - 5 transformative strategies of
Covid growing amid global slowdown exports Budget
b. Contraction during Covid b. Capex - Counter-cyclical policy - virtuous cycle b. Q3 data - Falling PFCE, may 1. Infrastructure
c. 2 years lost as Real GDP gr of result in reduced Investment in 2. Urbanisation - Urban Infra Fund
2018-19 and 2021-22 almost future 3. Digitisation - DPI esp. in Agri
same 4. Green Growth - Decarbonised industrial
d. V-Shaped recovery vs K development
shaped recovery (some 5. Women led development - Scaleup SHG to
sectors and even some Large producer organisations
people not back in
employment) b. Parmeshwaran Iyer - Triad of Budget - Physical,
b. GDP e. Slowdown again after Covid Digital and Social infra

1950 $ 30.6 Bn
2022 $ 3 Tn

c. Real GDP
2012-13 92 L Cr
2022-23 160 L Cr

d. Per Capita income (almost double in last 8

years, more growth in preceding decade)
2006-07 Rs 33,717
2014-15 Rs 86,647
2022-23 Rs 172,000

Agriculture a. No contraction - resilience a. Opportunity for Agri-exports amid Global poly-crisis - a. Heat waves a. Micro-irrigation - Bhadra Project on
even during Covid, only sector $50 Bn in 2021-22 b. Erratic and untimely Monsoon Tungabhadra
with +ve gr b. Sri-Anna c. Input cost, Productivity, income b. Agri-accelerator fund
and market access related

Industries a. Most affected a. China + 1 a. Global slowdown a. MSME, Handicraft

b. Sudden jump due to base b. Semi-C deal with US b. Decline in PFCE and Exports b. PM Vikas Yojana

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 b. Sudden jump due to base b. Semi-C deal with US b. Decline in PFCE and Exports b. PM Vikas Yojana
effect c. Tax rebate for Mfg units, including Coop before
c. 2022 March 2024
i. Input cost and supply d. PLI
chain - China
ii. Global slowdown
iii. No base effect

Services a. Different from industry as a. DPI a. Travel, tourism a. Tourism, MSME

contraction only in Covid
years, not beforehand
b. Sudden jump due to base
effect
c. Revival of contact based
services

c. Core debt
i. ES compares Covid levels vs GFC 2008
ii. India's core debt = 170% GDP
1) less than global avg which is 248%
2) 7% lower than GFC levels
iii. 2 types of classification
1) Type 1
a) Public debt (Govt - internal + external) = 82%
i. Less than Global avg which is 88%
ii. 16% higher than GFC levels
b) Private debt - corporate, industrial, HH - reduced than GFC
2) Type 2
a) Financial debt (in financial market) - bonds etc.
b) Non-financial debt (outside financial market) - credit card, home loan, treasury bills - increased globally
i. HH debt - 36%
i. Less than Global avg which is 62%
ii. Good for short term, but will increase future liability and reduced future consumer spending
ii. Private non-financial = 88% (Global avg 160%)

d. RBI reports
i. Consumer confidence survey
1) based on economic situation, emp, prices, income and spending
2) 2 indices (both show increasing trend)
a) Consumer situation index (CSI)
b) Future expectation index (FEI)
ii. Business expectation index (BEI) - demand scenario in mfg sector
1) 0-200 range with 100 threshold (value > 100 good)
2) showing improvement

INDIA'S MEDIUM TERM ECONOMIC OUTLOOK

a. 1950s - 70s a. 2000 - 2002 (2nd and 3rd generation)

i. Hindu rate 3-5%
ii. Dominance of PSE - Backbone of economy (monopoly) i. FDI reforms
iii. Weak private sector
iv. Import decreased (huge control)

b. 1980-90 (liberalisation)
i. GDP gr improved to 5.5% - reason = Modest liberalisation ---> less restriction on business,
imports
ii. Foundation of crisis:
i. X<<<M (huge TD ----> huge CAD)
ii. Gulf crisis - costlier oil + poor remittances ---> huge CAD
iii. Forex all time low (import cover 2.5m)
iv. Inflation = 13% in 1991

c. 1991 LPG - 1st generation

i. Twin objectives: ii. New Telecom policy 1999 ---> New license policy - License fee collected as a % of service provider's revenue
i. Macroeconomic stabilisation iii. IT Boom
ii. Structural reforms (promote trade, manage taxes) iv. PSE
ii. Trade and investment liberalised i. Before 1999 - minority disinvestment
iii. PSE monopoly ended and private entry promoted ii. Disinvestment (2000 onwards)
iv. Import licensing for almost all intermediate inputs and capital goods abolished a) Ministry of Disinvestment set up ---> merged with MoF
v. Automatic approval of FDI up to 51% b) Strategic disinvestment
vi. Exchange rate made flexible and allowed to depreciate for export competitiveness iii. Privatisation - Maruti Udyog, Hindustan Zinc etc.
vii. Full Current a/c convertibility and partial capital a/c convertibility v. Golden quadrilateral (5800 km) - largest infra project in Independent India, the largest globally then
viii. Impact: vi. FRBM Act 2003 - gross fiscal deficit (CG+SG) declined post FRBM
i. Growth increase from 5.5% (1980) to 6.3% (1990s) vii. Banking reforms
ii. Effect on external trade - Trade to GDP ratio rose from 17.2% (1990) to 30.6% (2000) i. Interest rate deregulation - mare choice to depositors, competition among banks
ii. SARFAESI Act - 2002 - Banks/FI could recovery of dues without court intervention
d. 1998-2002 shocks iii. Impact - improved credit flow
i. Nuclear tests ---> economic sanctions ---> FDI drop
ii. 2 successive droughts
iii. Dot com bubble - increased valuation of IT equities ---> speculation ----> failed to meet profit
expectations ---> burst
iv. 9/11 attacks
v. RESULT - FDI drop, nullified positive impact of 1991 reforms

a. 2003-08 (Global Boom - 'lagged effect' due to continuous reforms) a. 2014 - 2022 (New India Reforms - Sabka saath sabka vikas) - 4 principles of growth
i. Favourable factors:

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 i. Favourable factors:
1) Better corporate performance i. CREATING PUBLIC GOODS TO ENHANCE OPPURTUNITIES, EFICIENCY AND EASE OF LVING
2) Conducive investment climate
3) Positive sentiments for India as a preferred investment destination 1) Physical infra - Golden Quad, NIP (Rs 111 L Cr), NMP (6 L Cr), Bharatmala (35000 km), Sagarmala
4) Encouraging global liquidity conditions / interest rates 2) Digital public infra
ii. Global gr = 4.8% but India gr = 8% a) JAM trinity ----> Financial inclusion
iii. FDI boom Bank a/c
2015 53%
2019 78%
b) e-KYC, digital sign, UPI, GST
3) EoDB
a) National Single Window clearance system - managed by DPIIT
b) PM-GATI Shakti
c) UMANG app (>1200 Gov services)
b. 2010 - 2014 - Policy paralysis and inflation d) e-Shram portal - unorganised labor force data
4) Additionally
c. 2014 - 2022 - Internal and external crisis a) Digital public goods infra compounds while physical infra depreciates due to:
a. Growth of tech itself
b. Network effect – As more people indulge, transactions on that interface increase
c. Rapid creation of new layers of tech
b) “public good” = non-excludable (you cannot prevent someone from using or consuming the good) and non-rivalrous (one’s
consumption or usage does not limit or take away from someone else’s)

ii. TRUST BASED GOVERNANCE

1) Real Estate Regulation Act (RERA) 2016

a) Increased transparency in Real Estate
b) Protect consumer + Make seller more responsible ---> register + SWC
c) Real Estate Appellate Tribunal to appeal against Decisions of RERA
d) Projects with plot size > 500 sq.mt or eight apartments = mandatory registered with Regulatory Authorities
e) Depositing 70% of the funds collected from buyers in a separate escrow bank account for construction of that project only
2) Minor offence - Procedural delays - 1400 cases resolved outside courts
3) Taxation
a) GST reform
b) lower corporate tax
c) exempt sovereign wealth fund, pension fund from tax
d) Tax buoyancy increased
e) Increased tech use (faceless tax assessment)
f) Multiple check points (reduce evasion)
g) Easy compliance - 25000 compliances repealed, 1400 laws removed

4) IBC 2016:
a) Easy exit mechanism
b) Debtor and creditor both can start 'recovery' proceedings against each other
c) It does not apply to financial service providers like banks and insurance companies
d) Insolvency and Bankruptcy Board of India
a. to regulate insolvency professionals
b. Ch (CG appoints) + 3m (officers of CG) + 1 nominated by RBI + 5 nominated by CG
e) 4 pillars of IBC
i. Insolvency Professionals (IPs), members of IP Agency (IPA - enroll and recruit IPs)
ii. Information Utilities (IUs) to store details on lenders, lending terms etc.in an electronic database e.g. National E
Governance Services Limited
iii. Insolvency and Bankruptcy Board of India (IBBI) to regulate functioning of IPs, IPAs and IUs
iv. Adjudicating Authority - National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT)
f) Based on the assets value and debtor type, IBC provides for different corporate insolvency resolution processes as:
i. Corporate Insolvency Resolution Process (CIRP)
ii. Pre-Packaged Insolvency Resolution Process (PPIRP)
iii. Fast Track Corporate Insolvency Resolution Process (FIRP)

Swiss challenge is when a 3rd party makes a better offer

iii. PROMOTE PRIVATE SECTOR AS CO-PARTNER IN DEVELOPMENT

1) FDI 4) MSME
2) MII and PLI 5) Infra - NIP, NMP, PM-GS, NLP
3) Disinvestment 6) Start-ups

iv. ENHANCING PRODUCTIVITY IN AGRICULTURE

b. 2023 onwards - similar lagged effect like 2003-08

c. FUTURE

i. Will the economy achieve and sustain a steady growth rate once the one-off hocks recede?
ii. YES - GROWTH MAGNETS (5)
i. Healthy financial system - lower NPAs and better corporate returns from completing projects
ii. Digital revolution - inclusion, formalisation, healthier credit cycle than before as banks aware of credit scores
iii. Education and Skilling
iv. Global supply chain - India as a new potential FDI destination, supply chain diversification
v. Governance
1) Health, CC and energy related reforms
2) Asset monetisation

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 2) Asset monetisation
3) Simpler compliances
4) MSME reforms

AGRI & FOOD MGT - FROM FOOD SECURITY TO NUTRITIONAL SECURITY

1. AGRICULTURE 2. COOPERATIVES
a. Performance indicators

i. Production 2022
1) Though Kharif rice impacted by delayed monsoon, still production 6
year high
2) Wheat impacted by heat waves but still good production

ii. Investment - public investment stagnant

a. Top states with MSCS - MH > Delhi > UP

b. Situational Assessment Survey (SAS) by NSO (data for rural areas)

i. Monthly Income of Agri HH - Meghalaya > PJ > HR
ii.

iii.

PHYSICAL AND DIGITAL INFRA - LIFTING POTENTIAL GROWTH

PHYSICAL INFRA DIGITAL INFRA

a. Definition - a. Digital public infra - systems that enable provision of essential society-wide function in
i. Physical facilities, institutions, organisational structure and social and digital space
economic foundations b. PM - Democratisation of technology is a crucial tool to help bridge the digital divide
ii. Crowding in, multiplier effect, +ve externalities, reduce poverty c. Evolution
i. Verify beneficiary - Aadhar 2009
b. Policies ii. Knowledge of scheme @ MyScheme
i. NIP 2020-25 iii. Minimise search cost @ Umang platform
1) 9k projects, 111 Tn Rs iv. India Stack - 3 layers - Aadhaar (unique identity), payment services (UPI, AEPS) and
2) Project monitoring group (to expediate > 500 Cr projects) + Invest data exchange (DigiLocker and Account Aggregator)
India Grid (all info on projects) = Aim of this survey to combine both d. Features
ii. NMP 2021-25 - 6 Tn Rs i. “public good” = non-excludable (you cannot prevent someone from using or
iii. PM-GS 2021-25 consuming the good) and non-rivalrous (one’s consumption or usage does not limit
1) 7 engines - road, railway, airport, port, mass TP, waterways, logistics or take away from someone else’s)
2) Ownership - CG + SG + private ii. 46% of all Global transactions in 2022 in India
iv. NLP 2022-32
e. Concerns
i. No legislative oversight (except Aadhaar) thus no accountability under RTI or audits
c. Sectoral performance by CAG as they are created by joint ventures or SPV
i. POWER SECTOR ii. State surveillance - most platforms are data guzzlers by seeking data beyond
technical requirements

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 technical requirements
iii. Digital 'Have nots' and financial literacy - gender divide
iv. Digital India has Urban Bias - quality of electricity and internet
v. Fiberisation
vi. Data protection - AIIMS cyber-attack, Cowin data in public domain
f. Digital India Programme 2015

Growth rate of RE > Thermal > Large hydro

i. UPI
year # banks Share in digital transactions
2018 35 17%
2021 380 52%
ii.

iii. OpenForge - portal which invites people to improve codes of Gov apps
iv. Bhashini - text to speech and vice versa
v. National AI portal - all initiatives here

INDUSTRY - STEADY RECOVERY

• Focus - Mfg, MSME, Start up, Industry and infra

1. Overall performance 4. India as key player in Global Value chain?

a. GVA share - Mfg > cons > utility = mining

b. Growth rate - utility > cons > mfg > mining a. Innovation
1) UN WIPO - annual (2007) - Global innovation index - 80 indicators
c. Mfg i. India 40 (2022) from 81 (2015)
i. Inventory Pile up (and consequently lower production and slower industry growth) due to ii. Switzerland > US > Sweden > UK
inflation, China lockdown and war induced supply chain disruption iii. Modernising IP office, low legal compliance, women led
ii. Chips increase = boost automobile, computer, electronics enterprise in original solutions
iii. Global demand for leather and textile decrease 2) AIM = Atal tinkering labs + Atal incubation centres + Atal community
iv. Pharma decrease as covid boom in the past (Base effect) innovation centres
3) Technology Incubation and Development of Entrepreneurs (TIDE) 2.0
d. Elec - low b/c excess rain last year, thus cooling and low electricity demanded i. Financial and tech support like AI, Blockchain, robotics to
selected areas of national concern
2. Performance indicators ii. FELLOWSHIP - 4 L, 7 L

a. Demand stimulus to industrial growth b. Start ups

i. External demand - inflation, global slowdown, war 1) Meaning - <10 years, Turnover < 100 Cr (in a particular year), not
ii. Domestic demand - main factor as inflation under control + CAPEX push will spur jobs from a merger/split, potential for high emp/GDP/tech ---> DPIIT
iii. Investment demand - infra increase recognised
2) 9 L jobs created
b. Supply 2016 452
i. IIP - by NSO under MoSPI every month (Base 2011-12)
2022 84000
2024 1.17 L
3) Initiatives:
i. Tax benefits - 3 year generally
ii. Easy compliance and handholding
iii. Finance - grants, low IR, FoF with SIDBI (10000 Cr)
iv. Support for International patent protection in Electronics and
IT - financial support to start-ups and MSME applying for
international patents
v. MeitY start up hub (MSH)
1) Promoting 8000 tech start-ups in India
2) Coordination and monitoring of different incubators
vi. National initiative for developing and harnessing innovation
(NIDHI)
1) Umbrella scheme under DST
ii. ICI - 2) Financial support and incubation to young start ups
1) by DPIIT (Base 2011-12)
2) Comprise 40% of IIP basket of goods

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 2) Comprise 40% of IIP basket of goods c. Flipping and reverse flipping
3) R > E > S > C > Cr > NG > Ce > F 1) A company reg in India has both Indian and foreign shareholders
10.33 6.88 8.98 28.04 2.63 17.92 5.73 19.85 (ownership and IP both in India)
2) Now shareholders transfer ownership and IP of this Indian firm to
some an overseas entity for reaping benefits in that country
(US/Singapore), making older Indian company its branch = This is
flipping, startup culture gets diluted in India
3) Reverse flipping - to reverse this scenario, GoI needs to
i. Simplify paperwork
ii. Easy tax rules
iii. Simplify capital flow process
iv. Better incubation

d. EoDB
Only crude oil production negative 1) NSWS - 2021 - 81000 approvals + 43000 pending
2) Eased compliance
3. Selected sectors 3) > 3500 provisions decriminalised
a. MSME 4) DPIIT Business reform action plan (BRAP) - ranking of states based on
reform undertaken in states (4966 reforms already undertaken)

e. INDUSTRY 4.0
1) Semi-C technology investment in India
2) Smart Advanced Manufacturing and Rapid Transformation Hubs
(SAMARTH) - Udyog Bharat 4.0: By ministry of Heavy industries for
tech adoption in mfg and awareness creation
3) Centre for IR 4.0-2018 by CG + Niti Ayog + WEF
i. to develop policy framework for emerging tech
ii. 1st phase - Drone, AI, Blockchain

i. Portals
UDYAM Self-declaration by MSME using Aadhaar - 1.27 Cr registered
Samadhan Monitor their outstanding dues, resolve cashflow difficulties
CHAMPIONS GRM
TReDS uploading, accepting, discounting, trading, settling invoices / bills of MSMEs
ii. 20 k Cr subordinate debt to covid hit stressed MSMEs
iii. RAMP
1) CG + WB - 6062 Cr
2) UK Sinha and KV Kamath committee - for post covid recovery
iv. PM-SVANidhi
1) Central SS for Urban street vendors by MoHUA extended till 2024
2) Technical partner - SIDBI
3) Only those States/UTs which have notified Rules under Street Vendors Act, 2014
4) Collateral free working capital (Interest subsidy @ 7%)
1) 10k (1 year)
2) 20k (1.5 years)
3) 50k (3 years)
5) 57 L street vendors benefitted
6) SVANidhi se Samriddhi - for Social sector benefits, QCI is implementing partner
1) QCI est. as a National body for Accreditation in 1996 - a non-profit org registered
under Societies Registration Act 1860
2) set up through a PPP model as an independent autonomous organization with
support of CG and Indian Industry represented by Associated Chambers of
Commerce and Industry of India (ASSOCHAM), Confederation of Indian Industry
(CII) and FICCI
3) Governed by 38 members council with equal representations of govt, industry
and consumers. Chairman is appointed by PM on rec. of Industry
i. ECLGS -
1) 100% guarantee is provided to Member Lending Institutions (MLIs)
2) All Scheduled Commercial Banks (SCBs) are eligible as MLIs
3) 1.14 Cr MSME granted 2.38 L Cr collateral free loan
ii. PM VIKAS
1) To improve the quality, scale and reach of Artisans and handicraft people
2) Integrating their products with MSME value chain
3) Financial support, skill training, and market brand support
4) Converges Seekho aur Kamao, USTTAD, Hamari Dharohar, Nai Roshni (empower minority
women by awareness about rights) and Nai Manzil (employment linkages for minority youth)

a. Shipbuilding sector

CHAPTER 6 SERVICES

1. Meaning: 3. Service sector performance

a. Contact based - Tourism, trade, entertainment (more impacted, slower recovery) a. Tourism and Hotel
i. 2022 - Recovery in Jan-Sept, slowdown post Oct due to globe
ii. Medical Tourism
1) Ayush Visa for tourists
2) Swadesh Darshan 2.0 - improve local tourism (initially 15 states)
3) Heal in India - standardisation portal for medical services
4) Regional Connectivity Scheme Udan-3
iii. NIDHI platform - reg if u provide accommodation services
iv. SAATHI - restaurants reg for standardisation
v. Loan Guarantee scheme for covid affected tourism service sector - tour
operators get collateral free loan upto 10 lakh (CG) or 1 lakh (SG)

b. Non-contact based - IT, Communication, financial and business services (faster b. Real estate
recovery) i. Rebound - demand for affordable housing after covid increased
ii. National Housing Bank (NHB, apex bank) publishes 2 indices - survey in
2. Data 50 cities
a. India service share in Global GDP - steady increase, >40% since 2005 (except in 1) HPI @ assessment price - based on prices of houses collected
2020) from primary lending institutions - 50 cities = 46 (HPI-A increase),
b. Rank 7 - service exports 4 (HPI-A decrease)
1) Software and business services = >60% of India’s total services 2) HPI @ Market price - based on price of unsold stock collected
c. FDI 2021 - rank 7 - Steps from developers- 50 cities = 43 (HPI-MP increase), 7 (HPI-MP
1) National Single Window Clearance System (NSWS) decrease)
2) Liberalisation - 100% in Telecom, Insurance (49%---> 74%), LIC (20%) iii. Initiatives:
1) Home loan rate reduced
2) PMAY - Low and Middle income groups, Credit linked subsidy
3. High frequency indicators of services scheme for weaker sections
a. Service PMI (Purchasing manager index) 3) WFH - Tier 2,3 demand increase
i. questionnaire based survey by HIS Markit 4) Liquidity infusion facility scheme 2019 - 30 K Cr liquidity to HFC

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 i. questionnaire based survey by HIS Markit 4) Liquidity infusion facility scheme 2019 - 30 K Cr liquidity to HFC
ii. Contributions: 5) Special refinance facility (SRF) - 24 K Cr to HFC and primary
1) 30% - new order lending institutions to extend home loan to consumer
2) 25% - output 6) Under Azadi ka Amrit Mahotsav - NHB concessions on loan to
3) 20% - employment SC/ST/Women/green housing, J&K, Ladakh, Divyang
4) 15% - supplier delivery time 7) GoI - decreased stamp duty and interest on house loans
5) 10% - stock of items purchased 8) Affordable Housing Fund (AHF) - if annual income < 6 L in urban,
or < 3 L in rural
iv. Global Real Estate Transparency Index (GRETI)
1) John lang Lasalle 2022 list
2) Across 94 countries for 1-5 score (1 = 1 transparent)
3) India - 2.82 (2020)----> 2.73 (2022)

c. IT-BPM
i. Revenues and exports both increased in 2021 vs 2020 - because
inflation forced outsourcing, Global competency centres opened in
India, Opex low in India, trained workers increased
ii. Exports - USA > UK > Europe
iii. Revenue - IT (50%) > BPM > Engineering and R&D

d. e-commerce
i. 70% growth in Tier 2,3
b. Bank credit - good in wholesale and retail trade, not good in aviation and shipping ii. Covid triggered, smart phone increase, UPI, internet penetration
industry iii. GeM
1) 2021-22 - Rs 1 L Cr worth items procured
2) SHG, Tribal community, MSME (57%), women (6%)

e. Digital Financial services

i. Global Fintech adoption index - India 87% (vs Globe 64%)
ii. Tools:
1) Digital documents - DigiLocker
1) Flagship initiative of MeITY and Digital India programme
2) real-time verification of documents issued by CG/SG
3) As part of DigiLocker system, e-Sign facility is also provided
2) DBU
3) Neo-bank - no physical presence, online institution partners with
c. Service trade (more Exports as inflation led to wage hike abroad, so countries 'brick and mortar' bank, RBI regulates only partner bank, not them
outsourced services to India) 4) CBDC

EXTERNAL SECTOR

1. Trade openness - 50% India 2022 vs Global avg 50-60 %

2. BOP

VISIBLE INVISIBLE CAPITAL a/c

1. Exports (increase) 1. Services (X > M) 1. FDI fall (trend is zig-zag since 2020)
a. POL - 21% 2. Incomes (outward increase a. Top sectors - Computers (H&S, 23.4%) > Services (15.4%) > Trading (12.2%)
b. Non POL - 79% bad - interest, profit, rent)
2. Imports (increase more than exports) 3. Transfers (increase)
a. POL 1. shift from low skill jobs
b. Au, Ag of Gulf to High skill jobs
c. Non POL, Au, Ag in developed nations
2. Remittances - increase
by 26% than 2021
a. 111 Bn $
b. Rank - India >
Mexico > China
c. States - MH > KR
d. zig-zag trend b. Country wise - Singapore (37%) > Mauritius (12%) > UAE (11%) > US (10%)
e. US > UAE > UK > c. State wise - KT (37%) > MH (27%) > Delhi > TN
Singapore > Saudi d. 100 % AR - coal mining, helicopter services/seaplane services, NRI in Scheduled Air Transport
Arabia Service/Domestic Scheduled Passenger Airline, Single brand retail (online/offline), online gaming
f. Slowdown e. 74% AR - insurance
expected in 2023 - a. For Biotech (Brownfield), Healthcare (Brownfield), Pharma (Brownfield), Defence - 74% AR,
base effect, low 74% to 100% GR
momentum of oil f. 51% GR - Multi-brand retail
industry due to g. 49% AR - domestic airlines
lower prices in a. Banking (Private) - 49% AR, 49% to 74% GR
GCC, slowdown of h. 26% in news via digital media
IT in US, Europe i. 20% LIC
- This is overall trade picture (Merchandise + exports). Trends for merchandise and services are zig-zag in

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Pururaj Singh Solanki AIR 21 CSE 23
 i. 20% LIC
- This is overall trade picture (Merchandise + exports). Trends for merchandise and services are zig-zag in j. FDI by GDP ratio
similar fashion
2004-14 2.2%
- both India’s exports and imports have become slightly more concentrated, or limited to fewer countries in
the last decade 2014-22 2.6%
- Total international trade crossed $1Tn mark
- Total trade with India rank - US > China 2. FPI fall (trend is zig-zag since 2020)
- 2021-22 data 3. Loans (net outflow)
○ Exports 4. Banking Capital (bank assets - liabilities) - increased
5. Rupee debt service (repayment of global loan in rupee) - reduce
6. Other capital - delayed payments by foreign firms - data missing

○ Imports

Merchandise Trade deficit Invisible trade surplus Capital a/c surplus, but its magnitude reduced
Overall - CAD Overall - BoP = CAD + Capital a/c surplus = overall deficit
a. 1.3% (2021-22)
b. 4.4% (2022-23) - modest and manageable
c. US rate hikes
i. FPI out, depreciation
ii. Slowdown so no export growth but costlier imports (oil, metal, gold) --> increased CAD
iii. The nominal trade deficit initially grows after a devaluation, as prices of exports rise before quantities
can adjust - explained by J-Curve

3. FOREX
a. Trend since 2021 - increase [Sep 2021 - $643 Bn (15m import cover)], steady decline, now slow pickup

b. Forex levels comparable with 2019 pre covid

c. Components - FCA > Au > SDR > RTP
d. Global rank - China (I), India (6)
e. Reasons for Forex plunge
1) Other currencies depreciated vis-a-vis $, which appreciated (Forex value wise reduced)
2) FPI withdrawal ---> RBI sold $ to prevent depreciation ---> Reduce forex ($563 Bn = 9m import cover)
f. Adequacy:
i. Criteria
1) Enough for Import cover of 3 months (actual = 9)
2) IMF - Equal to short term debt repayment (<1 year)
3) Guidotti–Greenspan rule is an international economics guideline - a country's Forex should equal short-term external debt
ii. Cost
1) Diminishing returns
2) Valuation loss - qty same, value falls
3) Opportunity loss - use for infra
g. Exchange rate movements:
i. Dollar appreciated rather than rupee depreciating
ii. Proof
1) Dollar Index basket (Euro, Yen, Pound, Swiss Krone, Franc, Canadian dollar)
2) This basket can now be bought with lesser dollar, thus $ appreciated vis-a-vis rupee and all above 6 currencies
iii. REER, NEER both reduce

4. Foreign trade steps:

a. Schemes
i. Interest equalisation scheme
1) 3% interest subversion - MSME manufacturer exporter
2) 2% interest subversion - other merchants who manufacture and export
ii. Export credit guarantee - insurance to both exporter and loan providing bank owing to foreign payment risks
iii. Krishi Udan scheme - export agri product
iv. Trade infra for export scheme - grants to Centre/state agencies who create such infra
v. District as export hub - One district one product
vi. RoDTEP

b. Trade agreements
i. India - UAE CEPA - Goods, Services, Digital trade, Gov procurement (steel > 200 Cr can be brought from Indian or UAE firms), pharma (India exports)
ii. India - Aus ECTA (precursor to CEPA) - Goods, services, Visas

c. Trade settlement in Rupee

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 i. Reduces dependence on $
ii. Less prone to external shocks
iii. Less risk for Indian businesses
iv. Project Rupee as international currency

d. Indicators of External sector

i. International Investment Position (IIP)

1) = India's external financial asset (financial assets of residents + gold bullion held as reserve assets) - India's financial liability
2) A/L = 68.5% i.e. India's Foreign assets cover 68% of India's foreign liabilities

ii. India's external debt

1) ED, though absolute increase, but % of GDP decreased

2) FOREX/Total debt has deteriorated
3) Short term debt increase not a good sign
4) Dollar denominated debt (55.5%), rupee denominated (30.2%)
5) Sovereign debt reduced, non-sovereign debt increased

INFLATION

1. Comparison

2. Trends in 2022-23 compared to 2021-22

WPI-Basket with weightages - Headline decrease CPI - headline increase
a. Primary articles - 22.6% a. Food and beverages - 45.86% - increase b/c cereal, tomato, spice and animal feed
i. Food - 15.3% shortage
ii. Other - 7.3% b. Pan masala, tobacco and intoxicants - 2.38
b. Fuel and power - 13.2% - increase b/c post covid demand but OPEC suppressed supply, also c. Clothing and footwear - 6.53 - increase
rupee depreciation and costly imports d. Housing - 10.07 - increase
i. LPG - 0.6% e. Fuel and light - 6.84
ii. Petrol and Diesel - 4.7% f. Misc - 28.32 (includes services) - HH services increase, health services decrease because
iii. Other - 7.9% demand pull loosened after covid, education service increase
c. Manufactured products - 64.2% - decrease b/c slowdown in global commodity prices, also CG
reduced duties
i. Food - 9.1%
ii. Other - 55.1%
WPI-food - 24.4% - increase b/c erratic monsoon CPI-food - 39.6% - increase
WPI-core - 55.1% - decrease CPI-Core - 47.3% (ignore a and e) - increase
Steps to control:
a. Wheat export ban
b. 20% increase in rice export duty
c. Buffer stock of pulses + reduce import duty
d. Edible oil - reduce custom, stock limit imposed, Soyabean under ESA 1955
WPI vs CPI GAP - decreasing RURAL vs URBAN
a. Food weights 24% and 39 resp.
b. Services weight 0 and 28% resp.

a. Covid - Urban > Rural

a. WPI reduce as crude oil, Fe, Al prices reduce
b. 2022-23 - Rural > Urban for most states
b. CPI increase due to services
a. Food, fuel inflation cooled slowly in rural, but food inflation cooled faster in
urban as global prices cooled

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 urban as global prices cooled
b. Rural-urban differential reducing

Gap reducing for CPI-C and WPI-C

3. Causes
a. Demand pull - EFP, EMP, Pent-up demand after Covid
b. Cost push - Imported inflation (2-oil issue), Supply chain disruption (SemiC chips), food prices (seasonality in tomato, onion)
4. Impact
Positive Negative
a. Increased output from better remuneration a. Tax on poor
b. Moderate inflation - increased Employment b. Weakening of Rupee - worsen BoT
c. Uncertainty - capital flight, negative expectations
d. Fall in credit ratings
e. Stagflation and shrinkflation concerns

5. Way forward
a. Agriculture - change production pattern, import and export policy, supply chain reforms
b. Industry - labor productivity, ANB scheme
c. Services - Trade policy, GST rationalisation, GATI Shakti

6. Inflation expectation
a. Expectation of inflation leads to actual inflation in economy ----> RBI-CMP comes into picture ---> new expectation
i. Long run inflation = 6%
ii. Anchored inflation expectation - Belief that RBI will be able to control even when short term fluctuations - present case of India vis-a-vis both HH and businesses
iii. De-anchored inflation expectation - Belief in RBI lost
b. Landing
i. Hard landing - recessionary pressure on economy due to aggressive rate hike - eg US after GFC 2008
ii. Soft landing - no recession

7. 1970 vs today
a. 1970 - higher oil prices compared to today
b. 1970 - predominantly oil based inflation, today - broad based in varied commodities
c. 1970 - inflation built up from past, today - no build up but spontaneous reasons
d. 1970 - no supply chain resilience, today possible
e. 1970 - de-anchored inflation, today - anchored inflation

FISCAL DEVELOPMENTS - REVENUE RELISH

1. CG
a. Basics
i. Effective revenue deficit = RD - Grants for Capital assets
ii. FD = TE - Non-debt receipts
iii. Primary deficit (PD) = FD - Interest
iv. IMF uses the following:
i. Headline Fiscal Balance (FB) = TR - TE for that year
ii. Primary balance (PB) = FB - Interest paid in that year
b. Trends
i. Income of Govt ii. Expenditure of Govt

1. Borrowing > Direct tax (IT + CT) > Indirect tax (Excise + GST + Customs) 1. Interest > State share in taxes > Central SS > FC & other transfers > Centrally SS
2. GST > IT = CT > Excise > Customs 2. Max allocation for defence ministry

iii. FD, RD, PD - increase during covid time, now coming down, below data for 2022-23 BE
FD 6.4% - stable inspite of supply chain disruptions
RD 3.8%
PD 2.8%

iv. Gap between FD and PD = interest payment (increasing)

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 iv. Gap between FD and PD = interest payment (increasing)
2020 3.1%
2022 3.6%

v. REVENUE ACCOUNT

a. Revenue receipts b. Revenue expenditure (reduced)

i. Non-tax receipts - All its components reduce (interest receipts, dividends and
profits, external grants, others)

ii. Tax receipts

a) All direct taxes increase (IT, Corporate tax)
b) All indirect taxes increase except union excise duty (to reduce burden of
costly crude import)- overall indirect tax increase (GST, Customs)
c) Consistency in GST collection indicates economic revival

RE cannot be reduced beyond a limit (which we have reached!)

d) Overall increased Tax collection = proof for revival

e) NOTE
i. Tax elasticity = % change in Tax revenue / % change in tax rates
ii. Tax buoyancy
1) % change in Tax revenue / % change in GDP means rising
tax revenue with GDP w/o increasing tax rates
2) Effect of GST
Pre GST TB 0.9988
Post GST TB 1.1299
3) Improved TB due to
a. Post covid recovery
b. GST evasion difficult - no fake bills
c. Rate rationalisation by correcting Inverted duty
structure

vi. CAPITAL ACCOUNT

Capital receipts Capex (increase)

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 Capital receipts Capex (increase)
1. Non-debt creating receipts 1. Trend for effective Capex
1. Net recovery of loan and advances decrease
2. Disinvestment
Target 2022-23 65000 Cr
Actual 2022-23 31000 Cr
Target 2023-24 51000 Cr
3. 4 L Cr disinvestment earning since 2014-15
2. Debt creating receipts
1. Market loan increase

* in L Cr

Allocated Capex in 2022 Allocated Capex in 2023

CG 7 L Cr 10 L Cr
SG 3 L Cr 3 L Cr
Total Effective Capex 10.5 L Cr 13.7 L Cr

2. IMF - Increase by GoI in CAPEX can contribute to economic revival and crowding-in
i. AD rises
ii. Asset creation ----> revenue generation in future
iii. Multiplier effect (4.8 times)

3. Asset creation increase (except housing, health, space) - below arranged based on share in CG Capex

4. Loans to states and UT increase

c. Revenue vs Capex - Quality of expenditure

i. Capex increasing (good), revenue exp coming down (good)

ii. Long term trend in Capex - increasing

d. Fiscal policy
i. Counter-cyclical FP - since ancient times, adopted by GoI in dealing with Covid

ii. Pro-cyclical FP - Govt follows the business cycle

2. SG

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 Revenue mobilisation between CG and SG
a. Devolution to states
a. FC - 41% of Net proceeds (=Gross tax revenue - Cess - Surcharge - Tax collection charges)
b. Cess and surcharge % in GTR is increasing

State initiatives to increase revenue

a. RBI report - Property tax low, so TN, Kerala,
Telangana increase it
b. Power tariffs raised in TN, Andhra, TG, KT,
Assam
c. New liquor policy in UP
d. Disinvestment and monetisation
c. Tax devolution remains below FC recommendation

b. Transfers from CG to SG
a. Centrally sponsored schemes - increase
b. FC grants - shortfall of 30000 Cr

c. Other grants/loans/transfers

c. GST compensation
a. It initially did not cover any future crisis like Covid
b. ES 2022-23 - total fiscal resources to states after GST regime have increased compared to pre-GST regime i.e. Post
GST buoyancy > Pre-GST buoyancy

d. Interest free loan from CG to SG

a. Scheme for special assistance to states for capital investment - 50 year interest-free loans to SGs on condition that
major part to be used for Capex
2020-21 12000 Cr
2021-22 14186 Cr
2022-23 1.05 L Cr

3. Gov liability

a. Public debt
i. 78% = Internal debt - TBs, Dated securities (Rupee denominated) - low currency risk
ii. 22% = External debt - via MDBs, Foreign banks, NRI deposits - equivalent to 20% of GDP
iii. More long term debt (hence average maturity period of public debt increased)
2010 9.7 years
2022 11.71 years
iv. Mostly @ fixed interest rate - low interest risk

b. Public account liability

i. Liability due to National Small Savings Funds, PF etc.

c. Extra-budgetary resources
i. = Off-budget = not part of FD
ii. Resources raised by PSEs

4. General Govt finances

Debt to GDP ratio Indian debt looks manageable compared to many developed countries

How sustainable is India's debt?

a. Debt to GDP depends on
a. Primary deficit = FD - interest rate, should by 0 as per NK Singh
b. GDP gr (g) - should be high
c. Cost of development debt (r) - should be low
b. If g > r, debt is sustainable

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 MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION - A GOOD YEAR (comparatively)

1. Monetary policy
a. Basics - Liquidity corridor (earlier meant the gap between MSF and FRRR, now means c. Monetary aggregates
difference between MSF and SDF, mind differences between them) i. M0 ~ Assets of a private bank = CiC + Banks deposits with RBI =
Reserve money / High Powered money / Monetary Base
ii. M1 = Narrow money = CiC + Net DD with commercial banks
iii. M3 = Broad money = M1 + NTD with banks
iv. Money multiplier = M3/M0

b. MPT
i. PSB - Good MPT compared to Private banks on fresh loans

d. G.Sec and Bond yields

i. US bond rates higher than Indian counterparts -----> demand of
Indian ones falls -----> Bond yields increased (increased cost of
borrowing)
ii. Indian bond yield trend

2. Banking sector
a. Basics c. NBFCs
i. G-NPA (gross) = NPA/Total loan assets
ii. N-NPA (Net) = [G-NPA - Provision Coverage (PC)] / Total loan assets
a. Provisioning Coverage Ratio (PCR) = PC/G-NPA - safe if > 70%
b. PCR higher for Private banks than PSB for last 3 years

b. SCB

1. Reduction in industry is not very great

SCB NPA are at 10 year low at 3.9% (Mar 2023)

1. Problem with industry because NPA problem decrease is not large

d. Improved credit flow

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 e. MSME - CIBIL report
i. 83% ECLGS borrowers = micro-entrepreneurs
ii. ECLGS borrowers had lower NPAs than non-borrowers

3. Capital market
a. Primary market (Apr-Nov 2022) d. IFSC - GIFT City
i. Equity capital - less resources raised 1. International Financial Services Centre - Gujarat International Finance Tech-city @ Gandhinagar
ii. Capital market - more resources raised a. Branches of Indian banks operating inside IFSC can deal in financial products which are not permitted by RBI in domestic
b. Secondary market - volatility market
i. India-VIX-2008 or Fear index b. Such financial products will attract prudential norms such as capital adequacy, exposure norms, periodical valuation,
i. shows volatility expected by traders and all other applicable norms
ii. First introduced by NSE in 2003 c. activities of branches/subsidiaries in foreign jurisdictions and IFSCs would be subject to the laws in India unless
iii. Represents investors' market perception for a following month specifically exempted by law
ii. Trends for India - VIX 2. High conc of financial institutions - Banking, insurance, Mutual funds, FinTech, Stock exchanges
i. Feb-Mar 2022 - R-U war - increase (pessimism, fear) 3. Infra - schools, hospitals, residents, recreation etc.
ii. Apr-Nov 2022 - falling ----> BSE Sensex and Nifty 50 are rising 4. Separate unified financial regulator for IFSC-GIFT = IFSCA
iii. BSE Sensex and Nifty 50 growth trends relative to last year and other global exchanges a. performs functions of RBI, SEBI, IRDAI, PFRDA only inside GIFT City
b. Ch + 8 m appointed by CG for 3 year term - includes a member each from RBI, SEBI, IRDAI, PFRDA, 2 from MoF, 2
appointed on recc. of a selection committee

e. Insurance
1. Statistics
a. Market size - US > China > Japan
b. Insurance penetration = total premium/GDP
2000 2.7%
2021 4.2% (increasing trend)
c. Insurance density = Total premium/population
2001 $11.1
2021 $91 (increasing trend)
d. Total premium volume - India (Rank 10)
2. Regulator - IRDAI - Targets 'Insurance for all' by 2047
3. 2 roles
a. Protection - mortality, property, risks
b. Savings - infra development
4. Drivers and challenges
c. Investments a. Favourable demographics - 20-59 population
i. Domestic Institutional investors (DII) and FPI constitutes 55% population
ii. Dollar moving from importing countries (India, China, South Africa) to exporting countries b. By 2030, India will add 140 Mn middle-income and 21
(Thailand, Brazil, S. Korea) Mn high-income households
c. Pandemic-related shift in demand patterns
d. Citizens' ease with digital tools

iii. FPI flight due to Fed rate hike was being compensated by investments of DII as per ES

5. Schemes
a. Ayushman Bharat Yojana 2018
i. World's largest HC scheme
ii. 2 components:
1) Protective care - 5L/Family/year for 2 and 3 degree in both public/private for 10 Cr poor and vulnerable
2) Preventive component - 1.5 L H&WC
iv. FPI trends - zig-zag b. PMJJBY
i. For death due to any reason
ii. Eligibility - 18-50 years
iii. 2L coverage
iv. Premium - Rs 436 pa
c. PMSBY
i. Accidental insurance scheme
1) Accident death or full disability - 2 L
2) Partial disability - 1 L
ii. Eligibility - 18-70 years
iii. Premium - Rs 20 pa
d. PMFBY
i. Premium
1) Kharif - 2%
2) Rabi - 1.5%
3) Commercial and horticulture - 5%
e. Unit linked insurance plan - Offers both insurance protection and investment returns
6. Way forward - 'Bima Trinity' plan in pipeline, will include 3 components
Bima Sugam a. Platform to integrate insurers and distributors on 1 platform
b. Consumers can pursue service requests and settlement of claims
through the same portal
Bima Vistar a. Bundled risk cover for life, health, property and casualties or
accidents
b. Defined benefits for each risk
Bima Vahaks (carriers) a. Women-centric workforce in each Gram Sabha that will meet
the women heads of each household to convince them about
benefits of composite insurance product

f. Pension
1. OPS = 50% of last drawn + DA

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 1. OPS = 50% of last drawn + DA
a. Pension Not taxed
b. Also called assured pension or Defined Benefit Scheme (DBS)
2. NPS (New/National) - 2004
a. 40% is taxable
b. NRI eligible

3. APY

a. replace existing Swavalamban scheme

4. PMVVY
a. LIC provides insurance for individual > 60 years
b. Guaranteed pension at specified rate for max 10 year period

4. Recent developments
a. Crypto exchange FTX collapsed
i. Exposed vulnerability
ii. Importance of a regulator to use them as a tool in Financial market
iii. Discussion on in G20, OECD
iv. EU, Japan, UK, Albania etc. creating policies to legitimise them - India should also work in this direction

SOCIAL SECTOR, CC AND ENV

1. Development indicators
a. HDI - UNDP
i. 132/191 - better than South Asia, approaching global avg
ii. Scores
India 0.633
South Asia 0.632
Globe 0.732
b. Gender inequality index - UNDP
i. 3 dimensions - reproductive health, env, labor market
ii. [0 (no ineq.), 1 (huge discrimination)]
iii. 123/161 - better than South Asia, approaching global avg
c. MPI
i. UNDP + OPHI
ii. 2022 - 111 countries
iii. India improved in all 10 indicators - comparatively better improvement in nutrition, sanitation, cooking fuel, electricity and housing

d. Social sector analysis

i. Trend

a. As % of GDP = 8.3% (increase)

b. As % of Govt expenditure = 26.6% (zig-zag)
c. In absolute terms = 21.3 L Cr (increase)

a. NHP target for 2025 = 2.5% GDP for health (challenge as currently only 2.1%)
b. As % of expenditure

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 b. As % of expenditure
a. Reduced for Education - maybe covid, reduced offline classes (challenge)
b. Increased for health

ii. Health sector

i. NFHS Data which deteriorated from 4 to 5
a) Overweight children under 5
1. NFHS 5 - 3.4%
2. NFHS 4 - 2.1%
b) Overweight women
1. NFHS 5 - 24%
2. NFHS 4 - 20%
c) Overweight men
1. NFHS 5 - 22.9%
2. NFHS 4 - 18.9%
ii. Expenditure

iii. Schemes
a) Ayushman Bharat - preventive (1.5 L H&WC) + Protective (5 L/family)
b) Vaccination
1. Universal immunisation programme - 12 free vaccines
2. Mission Indradhanush 2014 - for children
c) Covid
1. World largest programme - 97% eligible pop (1st dose), 90% 2nd dose
2. Cowin app - DPI
d) e-Sanjeebni
1. indigenous cost-effective telemedicine in all states, UT
2. Part of AB-DHM under MoHFW
3. Distinction of being the world’s largest government owned telemedicine platform in less than three years
e) Deworming
1. Both health and economic implications - Prof Michael Kremer
2. National Deworming days (Feb 1, Aug 1) - Albendazole tablets for 1-19 year children

iii. Education and Skill

i. School
a) Improved GER, reduced Dropouts for all - primary, upper primary and secondary
b) Improved Pupil-Teacher ratio (reduced) for all levels

iv. Employment
Demand side of labor Supply side of labor
a) Quarterly Employment Survey by Labor Bureau a) PLFS by NSO
i) covers establishments with >= 10 workers in 9 major sectors i) started 2017
ii) Result ii) 2 methods - US (30 days in last 1 year) vs CWS (1 hour in last 1
a. Total employment in 9 sectors = 3.2 Cr (2022>2021) week)
iii) UR = 6.8% Q4 data 2022-23
Male 68.2%
Female 31.8%

3.2 Cr Regular 86.4%

Contractual 13.6%

Salaried 98%
Self-employed 1.9%
b. More increase in IT, H, E

b) Annual survey of Industries by MoSPI

i) for registered organised manufacturing
ii) Results
a. Increased over time
b. Share of employment
Food processing 11%
Apparel 7.6%
Basic metal 7.3%
c. TN - largest people engaged in factories
d. Employment is rising faster in big industries than small
industries
e. Influence of ANB Rojgar yojana - 2020 for more emp and
social security benefits by incentivising firms

c) MGNREGS

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 i) Participation
Males 43.7%
Females 56.3%
ii) UNNATI scheme - skilling to returnee migrants
iii) Bare Foot Technicians (BFT) - training for better asset creation
iv) Trend - work on individual land > Water conservation and harvesting

d) National Career Scheme 2015

i) NCS portal - 2.8 Cr job seekers and 6.8 L employing institutions
registered
ii) Bridge for job seekers - also lists international jobs
iii) NCS has partnered with private sector under Digi Saksham
programme to offer a free, self-paced Online/Offline Training
Programme on “Career Skills”

v. Labor reforms
i. Code on Wages 2019
a) Min wages, payment modes, no gender based discrimination
ii. Code on Social security 2020
a) Empowers CG to notify SS schemes like PF, scheme for self-employed etc.
iii. Code on Industrial relations 2020
a) Expands defination of worker to include - skilled, unskilled, permanent, contractual
b) Gives their benefits accordingly
iv. Code on Occupational safety, health and working conditions 2020
a) No hazards at workplace to prevent injury, disease
b) Annual health check-ups

2. RURAL DEVELOPMENT

a. Rural Population f. JJM 2018

1960 80% i. CG + SG partner
ii. Tap water to every HH and public institution by 2024
2007 70%
2020 65% g. Mission Amrit Sarovar 2022
b. Aspirational districts (AD) programme i. Water conservation for future
i. Niti Ayog identifies low performing district in socio-economic indicators - 112 ii. Rejuvenate 75 water bodies in each district
districts h. Jaldoot app 2022
ii. Monthly ranking provided to AD on 5 themes i. Measure water level in Gram Panchayat twice every year
ii. GW monitoring and harvesting
i. SBM 2014
i. 2014-19 - ODF villages achieved
ii. 2020-24 - ODF+ villages
i. Maintain ODF status of all villages
ii. SWM + LWM in all villages
iii. A&NI - all villages ODF+ (Swachh Sujal Pradesh)
iii. 5 themes divided into 49 KPIs
j. SAUBHAGYA 2017
iv. Delta rankings - Delta means incremental improvement in any theme
i. Universal electrification for all willing unelectrified rural HH + all willing poor
v. To improve AD to become best in state, and further, best in nation
HH in urban areas
ii. Poor = free, others = Rs 500
c. Aspirational Blocks Programme
i. 500 blocks, 31 states/UT
k. SVAMITVA scheme 2020
ii. i-GOT Karmyogi Bharat portal for govt officials to monitor parameters
i. Provide 'Record of rights' to village HH owners possessing houses in rural
areas
d. Rashtriya Gram Swaraj Abhiyaan - 2018
ii. Aim - accurate land records, reduce property disputes, monetisation of
i. Centrally SS by MoPR
assets of poor
ii. To strengthen PRIs to achieve SDG
iii. Special focus on AD

e. DAY-NRLM - 4 components for skilling for self-employment

i. Empowerment of rural women - 8.7 Cr covered
ii. Financial inclusion
iii. Sustainable livelihood
iv. Social inclusion access to entitlements

f. DDU-Grameen Kaushalya Yojana (DDU-RKY)

i. Linked skill dev for rural youth for wage employment

3. CC and ENV

a. NGHM 2023
i. < 1% of global H2 is green
ii. Target - 2030 = 5 MMT
b. Green Bonds
i. Raise capital for env friendly projects
ii. RBI to sell 5-year and 10-year SGrBs for ₹4,000 crores each
iii. Global trend - UK > France > Italy
iv. India - 15 corporates --> Rs 4539 Cr via Green bonds
v. Budget 2022-23 ---> Sovereign Green Bonds- issued by Gov, NRI can also invest
vi. Green bonds traditionally are issued globally at higher premiums leading to lower returns. Since they are being issued with a sovereign guarantee, returns could
be even lower
c. Leadership group for Industry transition (LeadIT)

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 c. Leadership group for Industry transition (LeadIT)
i. India + Sweden, supported by WEF @ 2019
ii. Energy intensive industries ---> MUST ----> Low carbon path ---> 0 carbon emission

INFRASTRUCTURE

1. Why need infra? - Infrastructure inevitability for realising demographic dividend

2. Challenges in infra creation
3. Financing
a. PPP - BOT (annuity, toll), BOOT, BOO, EPC, TOT, HAM (EPC + BOT annuity)
i. Advantages
i. Financial burden and risk sharing with private
ii. Transparency in fund usage
iii. Less delays - competitive environment
iv. Project expertise
ii. Challenges
i. Long gestation period causes policy uncertainty
ii. Delays - land acquisition, env and inter-ministerial approvals
iii. Risk of crony capitalism
iv. Rising NPAs
v. Lack independent regulator
vi. Model Concession Agreements (MCA)
a) One size fits all approach - rigid contracts
b) Renegotiation cost public exchequer
iii. Vijay Kelkar Committee
i. PPP Adjudication tribunal for dispute settlement
ii. Institute of excellence for PPP
iii. National policy on PPP
iv. Better identification and allocation of risk between stakeholders
v. Re-bid unsuccessful projects instead of continuing them inefficiently
b. IIPDF - To support PPP sponsoring authorities (CG, SG) by providing 75% of consultancy cost for private sector (25% by sponsoring authority) - entire money later
recovered from Successful bidder after project completion
c. VGF -
i. economically and socially desirable but financially unviable
ii. For 2021-22 to 2024-25
iii. For a Social infra project
1) operation cost recovery 100% (Water treatment plant) - C:S:P = 30:30:40
2) operation cost recovery 50% (Hospital), then for first 5 years
a) C:S:P = 40:40:20 (of TPC)
b) C:S:P = 25:25:50 (of O&M)
d. Green, Blue and transition bonds - green infra
e. Urban infra dev fund (UIDF)
i. To create infra in Tier 2, 3 cities
Tier 1 >1L
Tier 2 50k - 1 L
Tier 3 20k - 50k
ii. To be managed by National housing Bank
iii. Corpus to be made from PSL shortfall
f. NIP, NMP
g. NABFID - Type of development finance institution (DFI) for long-term finance for such segments where risk is too much for banks and other financers

4. PM-GS
a. Focus areas

b. 6 pillars of the Plan (COPSAD)

i. Comprehensiveness - one centralised portal for all existing and planned projects
ii. Optimisation - in terms of time and cost, identification of critical gaps
iii. Prioritisation - of projects through cross–sectoral interactions
iv. Synchronisation - no more working in silos
v. Analytical - GIS based spatial planning and other analytical tools
vi. Dynamic - All Ministries and Departments will be able to visualise, review and monitor the progress of cross-sectoral projects
c. PM-GS expanded to include social sector
i. Target for Health and education = $48 Bn expenditure b/w 2020-2025

5. LOGISTICS

a. Process of acquisition, storage, TP and distribution of resources

b. Present logistics challenges (= Need for NLP)
i. High Logistics costs (% GDP)
India 13-14%
Major economies 8-9%
ii. Skewed TP model
Relative cost India Globe
1.6 Road 60% 25%
1 Rail 35% 60%
0.8 Waterways 5% 15%
iii. Silos mentality - Shipping agencies II Container depots II IT ecosystem
iv. Poor asset and inventory planning
v. GHG emissions

c. Key initiatives
i. NLP 2022
1) Aim
a) To make Indian logistics system dependable, integrated, cost-effective and technology-enabled (DICT)
b) To achieve quick last mile delivery and end TP-related challenges
c) Logistics performance Index (WB) - 2018 - 44, Target for 2030 = top 25
2) Key Building Blocks
a) Digital Integration System - Seamless and faster work-flow
b) Unified Logistics Interface Platform (ULIP) - Collapse all logistics and transport sector digital services into a single portal
c) Ease of Logistics Services (E-Logs) - digital platform for industry to directly take up operational issues with government

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 c) Ease of Logistics Services (E-Logs) - digital platform for industry to directly take up operational issues with government
d) Comprehensive Logistics Action Plan - 8 key action areas including standardisation of physical assets, benchmarking service standards, HR
development, development of logistics parks
3) Expected jobs - 2-3 Cr

ii. MMLP (under Bharatmala)

1) 35 MMLP @ 50000 Cr via DBFOT PPP model
2) Move from Point to point model to Hub and spoke model

Aggregation Shipment Disaggregation

3) Services available
a) Core logistics - WH, TP, distribution
b) Value addition - Custom clearance, assembly and packaging
c) Support services - parking, recreation, O&M for trucks

iii. Dedicated Freight Corridor (DFC)

1) high speed and high capacity railway corridor exclusively for freight TP
2) 2 arms:
a) Eastern Dedicated Freight Corridor (EDFC) - Sahnewal (Ludhiana) to Dankuni (WB)
b) Western Dedicated Freight Corridor (WDFC) - Dadri (UP) to JLN Port trust, touching all major ports along the way
3) DFC Corporation of India Ltd. (DFCCIL) - PSU-SPV (HQ - New Delhi) under Ministry of Railway tasked with planning and completion of 3,306 kms of DFCs

iv. Logistics Ease across different states (LEADS) Report (index) 2022
1) By Ministry of Commerce and Industries
2) States - GJ > HR > PJ UT - Delhi N.E. states and Himalayan region - J&K > Sikkim > Meghalaya
3) Key suggestions for states
a) Drafting logistics policies in line with NLP 2022
b) GRM like E-logs

v. GoI plan to replace Multimodal Transportation of Goods Act, 1993 (MMTG) with National Logistics Efficiency & Advancement Predictability & Safety Act (NLEAPS)

6. RURAL HOUSING - PMAY - R

a. Target 2.95 Cr houses, delivered 70%
b. Major reforms -
i. Social Audit by GP
ii. AwaasSoft application for tracking
iii. Convergence with other schemes like AMRUT
iv. DBT for beneficiaries
c. Challenges - financial + identification (SECC 2011), quality, delays

7. ROAD TP

a. Key constraints
i. Land acquisition cost - 25-30% of project cost
ii. Project delays - Bharatmala (expected 35000 km roads till 2021-22) delayed to 2025-26
iii. Limited revenue sources for MoRTH
iv. Overburdened NH - 40% traffic but <2% of all Indian roads
v. Share of Private sector
2014 37%
2021 7%
vi. Road safety
1) 1% of global vehicles but 11% of global accidents
2) Costs 5-7% of National GDP
3) Recent news - 2022 was the most fatal year for traffic crashes in India - GoI report

b. Initiatives
i. Bharatmala phases I and II
1) 24800 km at 5.35 L Cr
2) focus on border, N.E. and economic corridors
ii. PM DevINE, North East Road sector Development Scheme (NERSDS)
iii. Finance
1) MoRTH gets 36% budgetary increase with around ₹2.7 lakh crore for 2023-24
2) NHAI InvIT - 10200 Cr investment collected - this investment can be used by NHAI to build assets (roads) in other parts of India
3) VGF
4) NIP, NMP
5) HAM
iv. Model Concessional agreements with standardised provisions

c. Successful implementation
i. PM Gram Sadak Yojana - 99% of targeted habitants covered, nearly 7 Lakh km roads complete
ii. Per day road construction
2014-15 12 km/day
2020-21 36.5 km/day
Target - Gadkari 60 km/day

d. Safety
i. Motor vehicle amendment act 2019 - Seat belt (1000), drunk (6 months or 10000)
ii. National Road safety policy
iii. Integrated road accident database system
iv. 6 airbags compulsory for passenger cars from Oct 1 2023

8. RAILWAYS
a. Electronic interlocking system
i. Prevents 2 trains from running on tha same track on the same time
ii. Components

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 b. 40k bogeys being developed on Vande Bharat standard

9. AVIATION

a. Statistics
i. 3 - domestic aviation market in terms of seat capacity
ii. UDAN - 1.3 Cr passengers
iii. # airports 2X
2014 74
2024 149
b. Covid impact - full recovery in passengers but cargo < pre-covid
c. Constraints
i. Passengers
1) Dynamic pricing + jet fuel cost
2) Duopoly in the air - Indigo and Air India market share > 80% -----> reduced competition, relatively higher prices
3) Safety issues - technical malfunctions
ii. Operational
1) Infra - airport, baggage management (regional disparity)
2) ~ 80% of India’s total commercial fleet is leased from foreign companies - huge operational costs often $ denominated
3) inadequate number of Flight Training Organisations
iii. Financial health -
1) ATF inflation from War and currency depreciation - ATF ~40% of operational cost
2) Finances in red even before Covid induced slowdown - 2019-20 - Indigo was the only profit making airline
3) 17 airlines, domestic and regional, exited market in last 3 decades including Jet Airways, Kingfisher and recently, Go First
iv. DGCA inadequacies
1) Poor history of punitive actions on airlines bloating financial statements
2) Inadequate financial audits
d. Initiatives
i. 100% FDI AR in domestic passenger airlines
ii. UDAN 4.0 and 4.1
1) 1 Cr people benefitted from regional connectivity scheme
2) N.E., hills, helicopter and sea plane service
iii. KRISHI UDAN
iv. Drones PLI
v. NMP - 25 new airports by 2024-25

10. INLAND WATERWAYS

a. Target
i. cargo movement on 111 National Waterways
2020 84 MMT
2030 200 MMT
b. Advantages:
i. Economy:
1) Cost advantage
Road Rail Waterways
1.6 1 0.8
2) Multimodal TP (waterways + other modes) can reduce logistics cost (14% to 10%) -----> improve exports, employment
3) Regional trade with Bangladesh and Myanmar - KMMTC
4) Tourism - MV Ganga Vilas cruise
ii. Env - modern inland water vessels with LNG/CNG as fuel can reduce SOx, NOx (70%), PM (95%) and CO2 (25%)
iii. Overcome topography related challenges for road based connectivity, esp. in NE

c. Concerns:
i. Economic:
1) Capital intensive - Development of modern-day multimodal terminals, jetties, ferry points and river information systems
2) Low levels of present investment - considered high risk
3) Rights of States and local communities
ii. Env - Noise and marine pollution can disturb aquatic ecosystems
iii. Seasonal fluctuations in river navigability - High siltation in monsoons
iv. Slower speed compared to railways

d. Initiatives:
i. Inland Waterways Authority of India (IWAI - constituted under IWAI Act, 1985) for development and regulation of inland waterways
ii. Jal Marg Vikas project (JMVP) - MoPSW to develop the stretch between Varanasi to Haldia (NH 1) for navigation of large vessels (1500-2000 T)
iii. Inland Vessel Bill 2021 - replaced Inland Vessel act 1917
1) SG can declare inland- water area as 'Zone' - now mechanical vessels need permission to operate
2) CG maintains central database on vessels and crew
3) Bill directs CG to designate a list of chemicals, substances, etc. as pollutants
iv. Maritime Skill Development Centre for the Northeast inaugurated in Guwahati
v. Bharat Pravah - highlight the challenges, policy issues and future goals relating to the maritime sector

e. Way forward:
i. Zero discharge vessels
ii. Strengthening Navigational infra
iii. Develop deep-river stretches for all-weather connectivity

11. PORTS

a. 12 Major and 200 notified non-majors (minor/intermediate) ports

b. LPI of WB - 22 rank in international shipments
c. Significance
i. Maritime TP = 95% trade (Volume), 70% trade (Value)
ii. Blue economy - sustainable use of ocean resources for economic growth and livelihoods while preserving health of ocean ecosystem
iii. Maritime security and regional integration in IOR
iv. Low turnaround time (0.9 days) - one of the world's best

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 iv. Low turnaround time (0.9 days) - one of the world's best
d. Key constraints
i. Low berthing facilities
ii. Low port mechanisation - reduces efficiency
iii. Poor integration with Hinterland
e. Initiatives
i. Major Port Authorities act 2021
1) Replaces Major ports trust act 1963 to improve autonomy and professionalism of 12 major ports
2) Creates Board of Major Port Authority - using CSR, PPP, funds from SCB to best use
3) Adjudicating body - to resolve tariff disputes
ii. 100% AR in Port and harbour construction and maintenance
iii. Dry ports to improve exports, connect with hinterland
iv. National logistics portal (Marine) - Single window platform for all stakeholders
v. 150% increase in PPP projects
vi. Maritime vision 2030 - Employment 7-10 L, saving 6000-7000 Cr
vii. Indian shipping firms preferred over relatively cheaper foreign firms
f. Way forward - Niti Ayog
i. Expediate implementation of Sagarmala
ii. Completion of transshipment ports project
iii. Open up dredging market, attract global players

12. ISLAND DEVELOPMENT

a. News - MoEFCC approves 72 K Cr worth dev projects in Great Nicobar

b. Significance:
i. Strategic:
1) Proximity to international trade routes (Colombo, Singapore)
2) Distances from Port Blair - Coco Island (33km), Kra Canal (650), Sabang (700)
3) Tri service command @ A&NI
4) SAGAR
ii. Biodiversity hotspot
iii. Indigenous population - 5 PVTGs - Great Andamanese, Jarwas, Onges, Shompens and North Sentinelese
iv. Economy:
1) EEZ
2) save revenue loss of around $200-220 million a year as about 75% of India’s transshipped cargo is handled at foreign ports
3) Blue economy
4) Sustainable tourism

c. Challenges:
i. People specific - Dev induced displacements for Nicobarese and Shompen
ii. Env
1) Threatened species
a) Galathea Bay WS (denotified to develop ICTT) - nesting site for giant leatherback turtles (IUCN - VU)
b) Coral and mangrove loss
c) Flawed EIA report suggestions:
i) Compensatory afforestation to be carried out in Haryana and MP - no ecological comparison
ii) Coral ‘translocation’ - but studies show transplanted corals do not have a high survival rate and are susceptible to bleaching
2) Seismic zone 5 + threat of permanent subsidence of coastline
3) ESZ - increased run-off, sediment loss, pollution
iii. Gov
1) Securing SLOC
2) Expediating dev projects

d. Initiatives
i. Env - CRZ, ESZ
ii. Dev
1) NMEO-OP
2) International container transshipment terminal (ICTT)
3) Greenfield international airport
4) Township and power plant
5) OTEC plant at Kavaratti by National institute of Ocean Technology

e. Suggestions
i. ZSI - Translocation of affected coral reef to Gulf of Kutch
ii. Tribal grievances and DRR
iii. Niti Ayog
1) Connectivity - inter and intra island via high speed inter island ferry services, seaplane terminal
2) Green energy - floating solar, offshore wind as still diesel dependent
3) Carrying capacity based tourism

INCLUSIVE GROWTH

PM - '5 Is' for self-reliant India - Intent, Inclusion, Innovation, Investment and Infrastructure

1. GDP estimates 2022-23 - Is everything fine?

a. Lingering challenges
i. Poor revival of non-farm sector in rural areas - proof-->
1) Rural demand remains sluggish even as Agriculture growth is robust - FMCG consumed Volume low
2) Work demanded under MGNREGA remains above pre-pandemic levels
ii. Manufacturing sector gains in Q4 overshadowed by contractions in Q3, Q4 - only 1.3% growth combined in 2022-23
iii. Subdued spending by HH in middle and low income groups
1) drive down C in CIGNX
2) Large gap in real and nominal growth of agriculture and utilities explains constriction of HH expenditure by Inflation
iv. opportunity and obstacles after COVID black swan - 6-5-8 syndrome refers to policy acceptance for 6% growth, 5% inflation, 8% UE - by P Chidambaram

2. FINANCIAL SERVICES

a. CBDC
i. Legal tender issued by Central Bank in digital form
ii. SC Garg committee suggested

iii. Features:
1) Two forms
a) CBDC-Retail - private sector, non-financial consumers and businesses
b) CBDC-Wholesale - designed for restricted access by financial institutions
2) Held in a digital wallet overseen by RBI
3) No interest credited unlike bank deposits
iv. Need for CBDC
1) Leverage blockchain for $1 Tn digital economy by 2025
2) Safeguard common man's trust in national currency vis-a-vis proliferation of cryptocurrencies and associated risks
3) Favourable experience of other nations - E-Naira (Nigeria), Digital Yuan (China)
v. Data:
1) BIS survey - 90% central banks experimenting with CBDC
2) Currency to GDP ratio - 14.7% (2020-21)
vi. Benefits:
1) Printing cost of notes (incurred cost Rs 4900 Cr in 2020-21)
2) Financial Inclusion - Attributes of a CBDC like offline functionality, universal access devices, compatibility across multiple devices
3) Safety
a) Money trail for high value transactions- reduce illegal activities
b) Reduce settlement risk for transactions

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 b) Reduce settlement risk for transactions
c) Improve cross-border transactions
4) Ease
a) Cashless economy - no queues
b) No upper transaction limit like UPI wallets
vii. Challenges:
1) Cyber security challenges similar to Crypto
2) Data protection - anonymity vs digital trail
3) Digital and financial literacy - esp. rural and urban youth
4) Operational challenges
a) Impact on monetary policy
b) Withdrawing money from bank a/c -----> Increased disintermediation of banks and threat of bank-run
c) Monitoring cross border transactions
viii. Way forward - BIS principles -
1) Do no harm - not impede monetary policy mandate
2) Coexistence - with existing forms of money
3) Innovation and efficiency of payment systems
ix. Comparison
CBDC Mobile money Crypto
Liability Central bank Commercial banks and other FIs Decentralised
Age Restriction Universally accessible nationally KYC age limits Technically no age restriction
Supply More Flexible Less flexible Limited
Intermediaries Peer-to-peer Intermediary issuing and acquiring banks, Peer-to-peer
financial institutions, or Payment Service Providers
Examples E-Naira (Nigeria), Digital Yuan (China) Paytm, Mobikwik Bitcoin, Ethereum

b. FINTECH

i. Technologies that seek to improve and automate delivery of financial services

ii. Growth drivers in India
1) Youthful Demography
2) Neo-startups fueled by emerging tech
3) Key gov initiatives - UPI, Aadhar, JDY, e-KYC, Digital India
4) Internet and smartphone penetration
iii. Active Areas of FinTech Innovation
1) Digital Payments
2) Digital Lending
3) InsurTech - streamline insurance industry
4) RegTech - regulatory technology - easier KYC
5) Cryptocurrency

iv. Digital Payments

1) Positives - safe, quick, accessible anytime, improve credit access from financial footprint, financial inclusion
2) Concerns
a) Cash dependency - Cash to GDP 14%
b) Financial literacy - 27% only (ADB)
c) Cyber frauds
d) Cost of digi-payments deters users
3) Initiatives
a) UPI, RuPay, BHIM QR, BHARAT QR
b) Initiatives for feature phones - UPI123Pay, Unstructured Supplementary Service Data (USSD) technology
c) Scheme for financial support to digital payments
i) MeitY - financial outlay of ₹ 2,600 crore
ii) Banks will be provided financial incentive, for promoting Point-of-Sale (PoS) and ecommerce transactions using RuPay Debit Cards and low-
value BHIM-UPI transactions (P2M)
4) Suggestions - Nandan Nilekani
a) Digital payment sub-committees at state level
b) Dedicated GRM, esp. in vernacular languages
c) Digital payments abhiyaan

v. Digital lending

1) Types:
a. Balance sheet lenders like banks
b. Lending service providers (Neo banks, buy now pay later)
2) Advantage - reduce physical footprint and manpower need for banks, improve credit in rural areas
3) Concerns:
a) Illegal lending apps proliferated during Covid distress - RBI identified 600 in 2021
b) Data privacy - Fintech lenders adopting AI, ML
c) BNPL - not within RBI regulatory net
d) Rise in crypto-lending
4) Key initiative - Digital Banking units
a) Specialised fixed point business hubs equipped with minimum infra for digital banking
b) Only set up by commercial banks, not RRB, PB, Local Area Banks
5) RBI guidelines:
a. All data storage in servers within India
b. Explicit consent of borrower before sharing personal information with any third party
c. Provide a Key Fact Statement (KFS) to the borrower before contract execution - KFC has details on cost, recovery mechanism, GRM etc.
d. Reporting of all lending to Credit Information companies

vi. Cryptocurrency
1) Basics
a. A digital currency secured by cryptography
b. Created using mining - all transactions managed by a decentralised, distributed ledger
2) Advantages
a. Satisfies all functions of money - medium of exchange, store of value and a standard for deferred payment
b. Tool for economic empowerment?
i) Fast, cheap and more secure transactions
ii) No 3rd parties involved
3) Concerns:
a. No sovereign guarantee - risky and highly volatile (El Salvador 'Bitcoin revolution' failing - $60 Mn lost)
b. Cyber security:
i. Cyber-attacks - Mt Gox (Tokyo based crypto-exchange) bankruptcy due to stolen Bitcoins
ii. Money laundering
c. Weak monetary policy transmission
d. Energy intensive mining
4) Key initiatives:
a. Taxation of VDA
b. Companies act amended - Companies to disclose investments in crypto
5) EU crypto regulations 2023 - registration of crypto-asset service providers, info sharing with Anti-ML agencies etc.
6) IMF - Complete ban may not be good in the long run - need to regulate due to high risk

3. SOCIAL SECURITY:

a. Pension support

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 i. A regular income paid by Gov to people after retirement age
ii. Complex system in India:
1) Public Pensions such as OPS for civil servants and NPS (replacing OPS from 01 January 2004) for new entrants
2) Armed forces personnel are an exception to NPS and are still covered by OPS
3) Employee Pension Scheme (EPS) for employees in the organized sector by EPFO
4) Government Pension Schemes
a. Atal Pension Yojana
b. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
c. PM Shram yogi maan-dhan yojana - Central SS by Ministry of Labor for unorganised sector

iii. NPS evolution

a. 1998 - Ministry of Social Justice and Empowerment commissioned a report for an Old Age Social and Income Security (OASIS) under S A Dave committee
a. OASIS project was not meant to reform the government pension system but its primary objective was targeted at unorganised sector workers who
had no old age income security
b. 1.5 year after the Project OASIS report was submitted, Ministry of Personnel, Public Grievances and Pensions set up a high-level expert group (HLEG) under
B K Bhattacharya, to look into the situation for government employees
a. The HLEG suggested a defined contribution scheme for government employees.
b. OPS was discontinued by the government in December 2003. The new pension scheme came into effect on April 1, 2004 and regulated by PFRDA
c. NPS proposed by the Project OASIS report became the basis for pension reforms — and what was originally conceived for unorganised sector workers, was
adopted for government employees. NPS was made mandatory for all new recruits joining government service from January 1, 2004
d. Contribution - 10% of basic pay by GoI employee + upto 14% by employer (GoI)

iv. OPS vs NPS

Basis of NPS OPS
Difference
Nature NPS is a defined contribution pension where employees OPS is a defined benefit pension for
contribute towards NPS during their years of employment. government
employees on basis of their last drawn salary
Eligibility All Indian citizens between 18 and 65 years. Government employees only.
Risk It involves risk as the NPS amount is invested in market No Risk
linked securities
Pension Amount 60% of pension fund is tax-free when redeemed, while the It provides a fixed monthly pension of 50% of
on retirement remainder is taxable and remains invested in annuities. the last drawn salary

v. Why was NPS introduced = why re-visiting OPS bad! -

1) Unsustainable pension liability
a. By 2020-21, the Centre’s pension bill jumped by 58 times from its 1991 figure
b. for Himachal, pensions accounts for almost 80% of the state’s own tax revenues
2) Longevity risk - Pension companies need more cash to sustain longer living population
3) Other concerns
a. Low and skewed coverage - 85% current workers not members of any pension scheme
b. Large % of informal WF
4) Reallocation of resources from development expenditure that benefits poor towards the small group that benefited from secured jobs

vi. Way forward:

1) Introducing a minimum level of support for the poorest aged individuals.
2) Increasing coverage of pension arrangements for the unorganized working class
3) Introducing a minimum access age so that it is clear that benefits are preserved for retirement purposes.
4) Improving the regulatory requirements for the private pension system
5) Enhancing the retirement age

4. RESOURCE MOBILISATION - MDB

a. International institutions that provide loans, grants and technical assistance to LIC, MIC for socio-economic development
b. 2 types - Britten Woods institutions (IMF and WBG = IBRD, IDA, IFC, MIGA, ICSID) and New MDB (AIB, NDB, AIIB)
c. Importance
i. Grants and interest free loans to LIC, poor MIC
ii. Technical and policy support - structural changes like LPG 1991 in India
iii. Better loan appraisal and transparency - compare with China BRI
d. Concerns - WBG
i. Low diversification - Obsession with MIC
ii. Projects with high Carbon footprint
iii. Resource constraint - 1 Tn SDR with IMF amid increasing number of acute Forex deficits (Pak, SL)
iv. Dominance of Global North (Japan in AIB, US in IMF and WB - President nominated by US always, approved by US dominant board of directors)
v. Rise of a powerful alternate lender - China extending loans to European, Africa, Asian and Latin American countries
vi. Voting rights based on GDP - unlike AIIB (PPP)
vii. Current setup not reflective of aspirations of Global South
viii. Poor progress on SDG front
e. NK Singh recommends
i. Addressing newer dimensions (CC, digitisation) without compromising funding for traditional dimensions (poverty and shared prosperity)
ii. Increasing funding support to MDBs - rope in private funding
iii. Better inter-MDB cooperation
iv. Voting reforms

5. EXTERNAL SECTOR
a. INTERNATIONALISATION OF RUPEE
i. Process that involves increasing use of rupee in cross border transaction
ii. Present share of rupee in foreign exchange market - 2% vs 59% $
iii. Advantages
1) Mitigate currency risk
2) Less vulnerable to external shocks by reducing foreign currency dependence (Taper Tantrum 2013)
3) Bargaining power of Indian business would improve
4) Reduce need to maintain forex reserves
iv. Challenges
1) Requires full capital account convertibility
2) Availability in sufficient quantities - Re-calibration of Monetary policy
3) Mgt of rupee holdings of non-resident investors
4) Confidence loss in neighbours (Nepal, Bhutan) esp. after DeMo 2016
5) One-side tilted trade - Russia
6) Relations with Western nations like US
v. Initiatives
1) Local Currency settlement system (LCSS) between India and UAE
2) Vostro a/c with Russia
3) Currency swap agreements
vi. Way forward
1) Case - Renminbi Internationalisation using capital a/c convertibility and currency swaps
2) Tax incentives to foreign businesses for rupee trade
3) Currency mgt stability by RBI
4) Tarapore committee recommendations - preconditions for capital a/c convertibility
a. Reduce FD to <3.5%
b. Reduce gross inflation rate to 3%-5%
c. Reduce gross banking NPA to <5%

6. INCLUSIVE MARKET - CCI

a. Quasi-judicial body under the Ministry of Corporate Affairs, est. under Competition act 2002
b. Prevent
i. Anti-competitive practices - Google abusing dominant position on play store

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 i. Anti-competitive practices - Google abusing dominant position on play store
ii. Trade distortion - 2022 fine on Make My Trip for preferential pacts with select hotels
iii. Cartelisation - 2015 fine on Spice Jet, Indigo and Jet Airways for cartelization in determining the fuel surcharge on air cargo
c. Promote R&D, health competition
d. Review Mergers and acquisitions which can disrupt market
e. Issues - 'toothless regulator'
i. Most fines stuck in Courts (<5% recovery) - orders challenged in NCLAT and higher Judiciary
ii. Proving anti-competitive conduct - Evidence tampering, collusion
iii. Resource constraint
iv. Cross-border competition issue
v. New era of e-commerce and digital marketplace

GOVERNMENT BUDGETING

FD a. 2022-23 - 6.3% GDP

b. 2023-24 - 5.9% GDP (BE)
c. Budget 2022 target - < 4.5% GDP by 2025-26
RD a. 2022-23 - 4.1% GDP
b. 2023-24 - 2.9% GDP (BE)

1. STATE FINANCES

a. Statistics - RBI Annual Survey of state finances

i. States contribution to general govt parameters
Revenue > 33%
Expenditure 60% of which
RE 83% (84.3% Centre)
CE 17% (15.6% Centre)
ii. State FD = 2.9% of GDP ratio (2023-24 - BE)
iii. States debt to GDP ratio = 29.5% (higher than 20% FRBM)
iv. PJ - 47% Debt to GSDP
b. Challenges wrt state finances
i. Vertical imbalance:
1) Rising share of cesses and surcharges in Gross Tax revenue
2) Declining share of untied funds (tax devolution + revenue deficit grants) in central transfers to states
ii. Horizontal imbalance - variations within states ability in resource mobilization and expenditures
iii. Populist fiscal measures
1) State specific expenditure schemes
2) Reverting back to OPS
iv. Flattish growth of States own Tax Revenue (SOTR) - leads to moderation of tax buoyancy
v. Lower own non-tax revenues or returns of Capital Investments due to losses of State PSUs
vi. Increasing trend of off-budget borrowing through PSUs
vii. High DISCOM losses
viii. Burden of implementing Centrally SS
c. Measures to improve state finances:
i. Improve CAPEX:
1) Scheme for “Special Assistance to states for Capital Investment”, providing ₹1 L Cr interest free loan for 50-years
2) Reform-linked additional borrowing space to state government, allowing additional borrowing of 0.5% GSDP for power sector reforms
ii. Rationalising Centrally SS - allow states more flexibility
iii. Reduce borrowings
1) Ways and Means Advances (WMA) limit for State Governments/UTs is reduced to ₹47,010 crore from ₹51,560 crore.
2) Inclusion of off-budget borrowings in state debt positions
iv. State-level measures to augment revenues such as:
1) Green tax to discourage old vehicles by Assam and Kerala.
2) Measures for phased monetization of assets by Haryana
3) Property tax and power tariff reforms (TN)
4) Amnesty Scheme by Kerala and Rajasthan in 2020-21 - pay fixed tax amount in exchange for forgiveness of a tax liability
d. Way forward:
i. Targeting double-digit growth in SOTR
ii. Setting up state FC timely
iii. CAPEX on R&D, education, health, green energy transition
iv. EoDB, Inter-state T&C, health of PSEs

2. FRBM 2003

a. Aim - To inculcate fiscal discipline for GoI and ensure long-term macro-economic stability
b. Evolution
Old FRBM (Vijay Kelkar) New FRBM (NK Singh) Budget 2022
1. For 2003-04 to 2008-09 1. For 2017-18 to 2022-23 FD < 4.5% GDP by 2025-26
2. RD to be reduced 0.5% pa such that RD = 0 by 2008-09 2. RD to be reduced from 2.1% (2017) such that RD = 0.8% by
(actual 1.04%) 2022-23 (actual 4.1%)
3. FD to be reduced 0.3% pa such that FD = 3% by 2008-09 3. FD to be reduced from 3% (2017) such that FD = 2.5% by
(actual 2.5%) 2022-23 (actual 6.4%)

c. NOTE - FRBM requires for the presentation of the following documents before the Parliament -
i. Medium Term Expenditure Framework Statement (MTEF)
ii. Medium-Term Fiscal Policy Statement
iii. Fiscal Policy Strategy Statement
iv. Macroeconomic Framework Statement

d. NK Singh recommendations:
i. Debt-to-GDP ratio
2016-17 2022-23 2022-23 actual
CG - 49% CG - 40% CG - 54%
SG - 21% SG - 20% SG - 29%
ii. Escape clause - 0.5% flexibility in deficit targets owing to war, calamities of national proportion, collapse of agricultural activity, far-reaching structural reforms,
and sharp decline in real output growth of at least 3 percentage points
iii. Enact a new Debt and Fiscal Responsibility Act
iv. Compose a three-member fiscal council to prepare multi-year fiscal forecasts for CG and SG

3. Inefficiencies in Public expenditure

a. Instances highlighted by CAG reports
i. Fund remains unspent - Ganga Action Plan
ii. Funds diversion
iii. Wasteful expenditure
iv. Funds misappropriation - MDM, MGNREGA funds highlighted by Pawan Jaiswal
b. Way forward
i. Reorientation of budget with SDGs
ii. Outcome budgeting
iii. Sunset clause on funds - Public Finance Mgt System for tracking expenditure
iv. Expert financial institution to lay out spending priorities
v. Rationalisation of schemes

4. TYPES OF BUDGETING

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 4. TYPES OF BUDGETING
a. Line items - in line with past estimates
b. Zero based - start afresh every annum
c. Outcome budgeting = summation of performance budgeting
d. Participatory budgeting - direct involvement of people in deciding budget, some aspects devolved by 73, 74 CAA
e. Gender Budgeting
i. Applying gender lens on fiscal expenditure earmarking funds for gender specific outcomes
ii. Includes gender sensitive formulations for legislations, resource allocation, implementation and impact assessment
iii. Key areas
Education and skill dev a. Women in STEM <20%
b. Child marriage
i. BH > WB > RJ
ii. Average women marriage age = 20 years
NFHS-4 27%
NFHS-5 23%
c. Literacy rate
Women 71.5 %
Men 84.4%

Economic participation a. FLFPR

a. China - >60% in last 15 years
b. India - 22.7%
b. Gender pay gap
% labor income captured - World Inequality
Report 2022
Women 18%
Men 82%

Leadership and democratic participation a. Low representation in Parliament/LA

India 15%
Nordic 41%
b. 127/146 - Global Gender Gap Index 2023
c. Less women in Judiciary
a) 11 in SC since inception, no women CJI
b) Only 30% in subordinate Judiciary
d. Women in
Army 0.56%
Airforce 1.08%
Navy 6.5%
US 16%

Gender based violence, access to justice a. Rape cases - 87 per day (NCRB, 2021)
Poverty reduction, health and well-being a. Menstrual hygiene - 49.6% still rely on cloth
b. Anaemia - 53% in 15-49
c. Abortion
i. 70% gynec shortage in rural areas
ii. 53% registered abortions of 1.56 Cr abortions
(2015)
iii. 67% contraceptive prevalence (NFHS 5)
f. Examples - Nirbhaya fund, BBBP
g. Challenges
i. Funding
1) Inadequate allocation - <1% of GDP, hovers around 5.5% of budget in last decade
2) Poor fund utilisation coupled with instances of non-allocation by ministries/states
ii. Policy
1) Poor Prioritisation - only 30% of GB goes to 100% women centric schemes
2) Exclusion of many areas from GB purview
iii. Post pandemic women specific challenges - FLFPR, drop-outs, health indicators
iv. Socio-economic challenges in implementation
h. Best practices - Sweden (BUDGe tool), Canada (Gender budget impact analysis)
i. Way forward
i. Niti Ayog recommendations
1) Mainstream GB - improve fund allocation
2) Finalise National Policy for women
3) Improve social acceptance for Transgenders
4) Gender disaggregated data
ii. Promote competitive federalism - state wise rankings
iii. Allocation to women specific schemes

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