CRACK LAS en by Qu ae were! poe rofes: PRELIMS GENERAL STUDIES PAPER - I INDIAN ECONOMY Book Code - SET-IITEXT BOOKS FOR CIVIL SERVICES PRELIMS Your success means the world to us Published by CRACK TAS Delhi, Chandigarh For Details, visit: CrackIAS.com © All Rights Reserved u/ ROC Nos. 311238/07-31148/07 Reproduction of this material without written permission of CRACK IAS through any means - printing, photocopying, typing or any other electronic means is a punishable offence under Indian Copyright Act. Infringement of copyright is criminal offence punishable under the Copyright Act and the Police are empowered to take necessary action. Any person who knowingly infringes or abets the infringement of the copyright in a work shall be punishable with a imprisonment of 6 months to 3 years and with a fine of Rs. 50, 000/- to Rs. 2 lakhs. WE DO NOT HAVE ANY OTHER WEBSITE OR BRANCH If you like our notes please refer them to others to encourage our efforts. 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Team crackIAS FyA book on INDIAN ECONOMYTo know, how to read this book and your approach in UPSC for Indian Economy, scan this code with any app or download our app ‘Zuccess’ by crack ias on Google Play (go to menu of app) ryISSUES RELATED TO INDIAN ECONOMY Issues Related to Poverty, Inclusion, Employment & 6 Sustainable Development Issues Related to Growth & Development - Public 38 Finance, Taxation & Black Money Issues Related to Growth & Development - Banking, 76 NPAs & RBI Issues Related to Growth & Development - Capital 114 Market & SEBL Issues Related to Growth & Development - Inflation be & Monetary Policy Issues Related to Planning & Economic Reforms 139 Issues Related to Growth & Development - Industry 157 & Services Sector Issues Related to Growth & Development - Foreign 176 Capital, Foreign Trade & BOP Issues Related to Growth & Development - i“ Demographic Economics & Various Indexes GLOBAL ECONOMIC ORGANISATIONS World Trade Organization 201 International Monetary Fund - IMF 232 World Bank 242 Important Terms in Economics 249 Important Schemes & Programmes of the 271 Government peer 5Issues Related to Po Inclusion, Employme Overview Ask your friend how much money he has it he has more money in his pocket than you, he is rie ‘you are poor (relative poverty). If you have so less money in your pocket that you even can’t afford food, then it is, absolute poverty. Now the question is which ‘food’ we are talking about — affording a kulcha chana on a nearby rehriwala or eating in a 4-star hotel? Or if your friend has 10 Jakhs in his pocket and you have 9 lakhs, are you poor? Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. World Bank defines poverty as an income level below some minimum level necessary to meet basic needs. This minimum level is usually called the “poverty line”. The defines Extreme Poverty as living on on Purchasing Power Parity basis (PPP), and Moderate Poverty as less than US$ 3.10 a day. According to the most recent estimates, 10% of the world’s population (73 crore people) lives in extreme poverty, down from 36% in 1990 (185 crore). People under extreme poverty do not have and they will have poor clothes and houses. Income poverty is due to people not having access to money or other assets. « There are primarily 4 dimensions of poverty - * Material dimension (food, clothing etc.) + Psychological dimension (respect, self-esteem, trust, fear). * Political dimension (power, representation), + Social dimension (education, health, work). , such as shelter, health and education can result in following material Ses, especially curable ones isk of famine nomic migration pee er a* The is much mor no less important. This dimension shows us vulnerability about the future, about trust an comparing to others, feeling like a failure, self-esteem etc. . point to the fa social & political cooperation if it is to be eli political and social dimensions can, to some exte! . refers to the state of severe di human needs. . is defined contextually as economic ineq society. It views poverty as dependent on social context, hence relative poverty is a measure of income inequality. Usually, relative poverty measured as the percentage of population with income less than some fixed proportion of median income. There are several other different , for example the or the The main poverty line used in the OECD and the EU i based on “economic distance”, a level of income set at 60% of the median household income. . , a term apparently coined by Michael Lipton, connotes being amongst poorest of the poor in low-income countries. It means receiving less than whilst spending more than 80% of income on food. A 2007 report by International Food Policy Research Institute defined ultra-poverty as living on less than 54 cents per day. Distribution of Extreme Poverty across World * While in all regions, progress has been uneven. According to the ‘Poverty and Shared Prosperity 2018: Piecing Together the Poverty Puzzle’ report of World Bank, much of the progress in the past quarter century has been in * China's economic rise has helped lift millions of people out of poverty. Two regions, East Asia and Pacific (47 million extreme poor) and Europe and Central Asia (7 million) have from 62% in 1990, achieving the 2030 target much earlier. More recently, has made impressive inroads against extreme poverty, helping to reduce the global rate further. The number of poor in South Asia dropped to 216 million people in 2015, compared half a billion in 1990. live in Sub-Saharan Africa. In ber of poor in the region increased by 9 million to total 2015, more than all the other regions combined. If the by 2030, nearly 9 out of 10 extreme poor will be in a, pee er 7World population living in extreme poverty, 1 Ferasnal§ aoa td fri eierenesebatveu courses ar for pie Triton billion bilfon ube of peonte =a ae . has been shown to be one of the most efficient ways in which absolute poverty can be eradicated in comparison to Primary Health Care, which has a target of treating diseases. is the focus of Selective Primary Health Care, which puts this system on higher grounds in terms of preventing malnutrition and illness, thus putting an end to Absolute Poverty. Poverty at the International Poverty Line of $1.90/day (in 2011 PPP) Ronn Headcount | No. of poor ratio (%) East Asia and Pacific 2.3 Europe and Central Asia 15 7 Latin America and the Caribbean 41 26 Middle East and North Africa 5.0 19 South Asia 12.4 216 Sub-Saharan Africa 4.1 413 World Total 10.0 735 with the rest of orld and even if conditions there improve in absolute 30 will be home to a larger proportion of the world’s n it is today. The reason for the faster economic ia and South Asia is a result of their Cette Gee a phenomenon called the convergence hypothesis Jonvergence hypothesis. Because these economies later than richer nations, they could benefit from poe er 8simply levels of productivity that had been invent: nations. Populous countries such as China, India, Indonesia, and Bangladesh are home toa ignificant share of the total number of people living in extreme poverty. on les than $190 ay 20 FPR) most racet valu in 2010-13) mber of people i wan] tn 2013 there wore 25 lon ~ * somesstreme : people in both ‘China and rn nes ee cone In 201 ci os than 20 ion os fe peeplin Insubs e» lca more tan 250 hon people thedon es en S190adeyn 2013 * The World Bank classified the various countries on the 1 with per capita GNI $728 or less (PPP GNI per capita $1,959 or less). with per capita GNI of more than $4,754 or less than $12,616 (PPP GNI per capita $9,558). Within middle income, there are lower-middle-income and upper-middle-income countries. + Lower-middle income countries with per capita GNI of more than $2,074 but less than $7,604 (PPP per capita $5,966) (2013). * Upper middle income countries with per capita GNI $7,604 (PPP per capita $13,405). with per capita GNI of $39,812 or more r capita $40,788 or more). -ountries accounted for about 12% of the world population. ‘ome countries constituted 70% of world population between the rich and the poor jap is widening over the years. pee erl 9Low-income Countries | 85 crore Middle-income Countries [500 crore |1.2 High-income Countries [130 crore [0.6 Lower Levels of Living and Productivity Lower Levels of Human Capital High Rate of population Growth and Dependency Burden Higher Levels of Inequality and Absolute Poverty Greater Social Fractionalisation Larger Rural Populations but Rapid Rural to-Urban Migration Substantial Dependence on Agricultural Production and Lower Levels of Industrialisation and Manufactured Exports Underdeveloped Financial and Other Markets Lingering Colonial Impacts External Dependence : Abundance of natural resources provides an important base for rapid economic development Without adequate availability of capital, neither technical progress nor the development of human resources can possibly be achieved. Technological changes are the most important factors in the process of economic growth. Rate of growth of population has been an important factor in modern economic growth. Mere growth in the size of the population would not lead to economic development. It depends on the efficiency of the people. This could be achieved by good expenditure on health, education, sanitation and on social services and security measures Investments in the health, knowledge and skills of the people-human capital-are as important as investments in the more visible, physical capital of the country. Social and cultural factors have influenced economic gr the world. In the western countries, education and to the spirit of physical adventure and discoveries e of new mercantile classes who were interested in ments and in undertaking risks in order to earn lot Pere tasteme olitical Freedom: Enlightened electorates, educated ally straight administrators would ensure greater ent and growth poe etyand Governance : Governments need and reliable. : Institutions have been define of a society or more formally are the humanl structure human interaction. Economic growth merely refers to a development implies changes in technological and ins organization of production as well as distributive pattern of income. Thus, economic development is a than economic growth. Three Core Values of Development - + Sustenance: The life-sustaining basic human needs include food, shelter, health and protection. + Self-esteem: A second universal component of good life is self- esteem-a sense of worth and self-respect-of not being used as a tool by others for their own ends. + Freedom from Servitude- To be Able to Choose: The concept of human freedom should encompass various components of political freedom, freedom of expression, political participation and equality of opportunity. Roughly, for measuring poverty are used + insufficient income insufficient consumption spending insufficient caloric intake food consumption spending above a certain share of total spending certain health indicators such as stunting, malnutrition, infant mortality rates or life expectancy + certain education indicators such as illiteracy None of these parameters is ideal, although the first and second on the list are the most widely used. . : World Bank consider extreme poverty level below US$ 1,90 a day; moderate poverty below US$ 3.10 a day; expressed in terms of purchasing power parity PPP. In developed countries, ie is a common definition because it’s easy to measure, as it ‘om defined & organised sources. In developing countries, come data tend to be underestimated because it’s ue the income of farmers which fluctuate heavily nditions, crop yields etc. and people are generally lose their full income. (GDP) per capita is another measure of r, the problem with this measure is that it tells us \d not how it is distributed over the spectrum. For ja, the people below poverty line are much below per capita.: The main advantage of than income to measure poverty is that ¢| stable over the year and over a lifetime. TI of farmers who depend on the weather f have a more volatile income. As farmers this issue is all the more salient for povert\ called the (as shown) using consumption is that people aren’t as retl + Income with Pension ‘consumption Tncame without Pension Fermer’s income ~~ a Age However, consumption of goods like durable goods and housing is difficult to measure because it’s difficult to value them. Another difficulty in measuring consumption is that in developing countries households consume a lot of what they themselves produce on the family farm. Different people have different consumption needs, depending of their age, health, work etc. It’s not clear how these different needs are taken into account when consumption is measured and used as an indicator of poverty. the problem with this is that different people need different amounts of calories (depending on their type of work, their age, health etc.), and that it isn’t very easy to measure how many calories people actually consume. An average adult male has to eat food representing approximately 2000-2500 calories per day in order to sustain the human body. as a fraction of total spending: here the problem is that if we say people who spend more than x% of their total spending on food are considered poor, we still have to factor in relative food prices as an indicator of malnutrition and hence of poverty: stunting (height for age) is a notoriously difficult thing to measure. er measure of poverty is work out the parameters related released by the International Food h Institute (IFPRI). It ranks countries based on PCIE C Sema ndernourishment, child mortality, child wasting (low \t) and child stunting (low height for age). It places lon proportion of the population that is estimated to hd, a third on the estimated prevalence of low body ratio in children younger than five, and remaining the proportion of children dying before the age offive for any reason. India is estimated to have 1/3” of the impressive economic growth. + As per UNDP, 37.2% of Indians live below. poverty line in 2010. * As per World Bank, of the total Indian populatio\ and 20.7% in 2015 lived below international pove per day). * However, rapid economic growth since 1991, has led to in India * As per global Multidimensional Poverty Index (MPI) released in September 2018 by UNDP and Oxford Poverty and Human Development Initiative (OPHI), the incidence of multidimensional poverty in India has almost halved between 2005/6 and 2015/16, climbing down to 27.5% from 54.7%. * According to the definition by ; poverty line is drawn with an intake of 2155 calories in rural areas and 2090 calories in urban areas. If a person is unable to get that much minimum level of calories, then he/ she is considered as being below poverty line. As per Planning Commission Report in 2014, incidence of poverty has come down from 38,2% to 29.5%. . in India is increasing, with a Gini coefficient of 0.5 in 2017. India’s growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. Poverty rates in (43%) and (41%) are among the world’s most extreme. + There were 65 crore poor living under the MPI in India, 42 crore of whom are concentrated in eight North India and East India states of Bihar, Chhattisgarh, Jharkhand, MP, Orissa, Rajasthan, UP and West Bengal. This number is higher than the 41 crore poor living in the 26 poorest African nations. Set Up By _| Planning Commission Planning Commission ‘Set Up/ 2005/ 2009 2012/ 2014 Report Estimation | Per capita Expenditure Monthly Expenditure of Method Monthly family of 5 Calorie Only calorific value in Calorie + Protein + fat Expenditure _| Expenditure Calories in | 2400 2155 Rural Areas Calories in [2100 2090 Urban areas pee ee 13Urban 33 47 Poverty Line Per Day per Person Rural poverty | 27 32 line Per Day Per Person Below 27 crore 37 crore Poverty Line in crore Main Focus | Only counts Expenditure on | Counts Expenditure on Areas food, health, education, and | Food, nonfood items such clothing. as education, healthcare, clothing, transport, rent and non-food items that meet nutritional requirements. oO for Poverty Estimation In India Alagh Committee (1977) Lakdawala Committee (1989) Saxena committee Hashim Committee India has the largest chunk of global poor China e of olobal pose LS, 13% ina poor Jom) > 14% (258 m) of nda poor « Bs 206m —>11% Of the individual countries for which estimates are available, no other country crosses 5% of the global poor irrespective of the line chosen. poe 14The expert group moved away from anchor| calorie intake norm in view of the fact that calol by converting the consumed quantities in the’ by NSS has not been found to be well correlal ‘outcomes observed from other specialized surv: NSSO has decided to shift to consumption surveys in future, namely, (clothing, footwear, durables, education and inst expenditure) and 30-days for all the remaining items. THI captures the household consumption expenditure of the poor households on low-frequency items of purchase more satisfactorily than the earlier 30-day recall period The Expert Group decided to adopt the MRP-based estimates of consumption expenditure as the basis for as against previous practice of using estimates of consumption expenditure The new poverty lines have been arrived at after assessing the adequacy of ‘on education and health, while the earlier calorie-anchored poverty lines did not explicitly account for these. It may be noted that although those near the poverty line in urban areas continue to afford the original of 2100 per capita per day, their actual observed calorie intake from 61st Round of NSS of is 1776 calories per capita, This actual intake is very close to the currently recommended for India by the Food and Agriculture Organization (FAO). Actual observed calorie intake of those near the new poverty line in rural areas (1999 calories per capita) is higher than the FAO norm. Separate allowance for private expenditure on transport and conveyance has been made in the recommended poverty lines. For rent and conveyance, actual expenditure share for these items were used to adjust the poverty line for each state. 270,000,000 - 6o050 Indians are poor Lin 5 Indians is poor 80, re 2, ah @ elon) ontteetttl)* The on poverty estf the all India urban poverty line basket ag state-level rural and urban poverty. It did times. * Expert Group (Rangarajan) reverts to the practi os level rural and urban estimates from these. + The poverty line should be based on eo of adequate nourishment, clothing, house rent, conveyal education, and a behaviourally determined level of other non-food expenses. + It computed the average requirements of calories, proteins and fats based on ICMR norms. Energy requirement works out to 2,155 kcal per person per day in rural areas and 2,090 kcal per person per day in urban areas. Rangarajan Committee viewed the Calorie norm not as a single number but as an average in a band of +/- 10 per cent of these values. + The have been estimated on the same lines as for energy. These requirements are 48 gm and 28 gm per capita per day, respectively, in rural areas; and 50 gm and 26 gm per capita per day in urban areas. oA that simultaneously meets all the normative requirements of the three nutrients defines the food component of the poverty line basket proposed by the Expert Group (Rangarajan). The on food is Rs 554 in rural areas and Rs 656 in urban areas. * The thus work out to monthly per capita consumption expenditure of Rs 972 in rural areas and Rs. 1407 in urban areas in 2011-12. For a family of five, this translates into a monthly consumption expenditure of Rs 4860 in rural areas and Rs 7035 in urban areas. * Rangarajan Group uses the consumption expenditure data of the NSSO as these are considered to be more precise compared to the MRP, which was used by the Tendulkar Expert Group. + The Rangarajan Group recommends the updation of the poverty line in the future using the poem ee ce about the clear cut positive or negative impact poverty. The response is a mixed one. While pened up a plethora of opportunities; it is also well jation is heartless, favouring only the fittest. In this jan be noted as highlighted by P. Sainath - in rural India has risen to extraordinary poe e 16levels where 75% of poor live. While publi shrank to 2% of the GDP, and the nation s| crisis in decades; at the same time, Indi one of the highest number of dollar billior . in India has reached its highest incomes have collapsed. . across India have collap of collapse. Non-farm employment has stag towards towns and cities where, too, there are fem * Very high portion of rural households entered into (Wienges fal resulting in a very high number of farm suicides. * Liberalisation encouraged farmers to switch to which resulted in an extraordinary increase in farm input costs, while market forces determined the price of the cash crop. Disproportionately large number of affected farm suicides have occurred with cash crops, because with food crops such as rice, even if the price falls, there is food left to survive on. Prevalent in India which hindered the access to opportunities to lower castes During the the Indian economy was purposely and severely de-industrialized, making India predominately a poor agriculture society. Independent India’s driven by mistrust and supported by license raj, red tape & corruption made India to achieve only a moderate growth as compared to countries of similar size. In 1947, average annual income in India was US$ 439, compared with US$ 619 for China, and by 2014 the numbers were US$ 1581 and US$ 7,590 respectively. 60% of the population depends on agriculture contributing just 17% of GDP; there is a huge surplus of labour. While services and industry have grown at double-digit figures, agriculture growth rate has dropped from 4.8% to 2%. without proportionate development of education, health and job opportunities. fects of poverty may also be causes, thus creating a rating across multiple levels, individual, local, national and ths - some 18 million people a year or 50,000 per day . Those living in poverty suffer from hunger or even starvation and disease. Those ffer lower life expectancy. HO, are the single he world’s public health and malnutrition is by far itor to child mortality, present in half of all cases. poe e ctnourish the children efficiently and provide The children may also suffer from disease t! to the child through birth. Asthma and rickel children acquire when born into poverty. Poorly nourished mothers give Malnourished children grow ne ealas birth to babies with low birth adults weight Low birth weight infants are likely to be malnourished in their childhood © There is a high risk of for children who are from low-income circumstances. + For children with low resources, the risk factors are similar to excuses such as , higher levels of teenage pregnancy, and the economic dependency upon their low income parent or parents. Poor children have a less healthcare opportunities and this ultimately results in many . Additionally, poor children are much more likely to suffer from hunger, fatigue, ability, headaches, ear infections, flu, and colds. These illnesses entially restrict a child or student's focus and concentration. , who make up a third of the world’s urban population, no better than rural people. IN report on modern slavery, the most common form Prue is for prostitution, which is largely fuelled by poe e etyThe poor spend more of their budget on food, fuel and light & on ts ie [J 33s, tos-ro0n India’s Poverty Profile Qjworneancenour + Regner Nurkse explains poverty trap as “since a country is poor, it remains poor”. Vicious cycle of poverty is the set of factors or events by which , is likely to continue unless there is outside intervention. + The poverty trap makes it very difficult for people to escape poverty. A poverty trap is created when an economic system requires a significant amount of. in order to earn enough to escape poverty, When individuals lack this capital, they may also find it difficult to acquire it, creating a cycle of poverty. fo Low \ PRODUCTIVITY Low \ DEMAND Low cara FORMATION NN tow INVESTMENT to creating a poverty trap, including: edit and capital markets, extreme environmental depletes agricultural production potential), corrupt pee e 19governance, capital flight, poor education ¢ lack of public health care, war and poor infras The extreme poor business capital, infrastructure, natural capital, and knowledge capital. In order to poverty must be given sufficient aid so that they § necessary to raise themselves theory of poverty helps to explain why certain aid 9 not provide a high enough level of support may be ineff individuals from poverty. Governments should concentrate their efforts on (health, education, nutrition), infrastructure (roads, power, water and sanitation, environmental conservation), natural capital (conservation of biodiversity and ecosystems), public institutional capital (a well-run public administration, judicial system, police force), and parts of knowledge capital (scientific research for health, energy, agriculture, climate, ecology). The of United Nations (World Commission on Environment and Development 1987) defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Acting on the Brundtland report, the in Rio de Janeiro propagated SD as the key to integrating the main - social, economic and environmental dimensions of development in planning and policy making. Its Action Plan, was released reaffirmed commitment to the Rio principles and Agenda 21 Sustainability is related to the quality of life in a community - whether the that make up the community are providing a healthy, productive, meaningful life for all community residents, present and future. Sustainability requires managing all households - individual, community, national, and global - in ways that ensure that our economy and society can on which we all depend. pee oy. im of environmental pressure and quality, indi private & public agents to deal with environ! sense, it is an index of potential environm country, sustainable development, including political (huma is an additive measure using ar of natural resource use and absorption of pollutants as the c measuring rod. It focuses on of a place. It does not incorporate economic indicators but assumes that human economic activity is responsible for exceeding the world’s bio-capacity. seeks to be a barometer of sustainability, combining human and ecosystem wellbeing in a two-dimensional chart. Ok ust Medium Poor, Almost unsustainable HUMAN WELLBEING Bad, Unsustainable ECOSYSTEM WELLBEING . (HDI), used in the Human Development Reports to compare countries in the world, has been designed as an alternative to per capita income, the single most commonly used measure to evaluate development outcomes thus far. It is an aggregate of E + Longevity, it uses life expectancy at birth. Knowledge, it uses adult literacy and mean years of schooling, that is, gross enrolment ratio (GER) (primary, secondary and tertiary level combined). Command over resources, it uses GDP per person after adjusting jt for purchasing power. Adjusted real GDP per capita-PPP stands ‘hasing power parity. PPP GDP is calculated after eliminating rences among countries. IDI represents a distinct improvement over income easure of human well-being, it says nothing about degradation. classified into three groups: 1. High human untries with HOI values of 0.800 and above; 2. evelopment countries with HDI values of 0.500 to bw human development countries with HDI values DENeermeGET: of Sustainable Economic Welfare is a morecomprehensive indicator of well-being, taki average consumption but also BCI , Such as depletion of non-ren| farmland from soil erosion and urbanizatiol the cost of air and water pollution. It also long-term a figure that atteml such large-scale changes as the effects of gl damage to the ozone layer. is a measure of W income countries. It captures the satisfaction of a basi since people cannot survive if annual grain consumption fa below 180 kilograms (about 1 pound a day) for an extended period. . or (GPI) is related to the national accounts. The idea is to value and add or subtract positive and negative welfare effects, which are not measured by GDP, to or from private consumption. It’s a index. $ per capita ii i 1950 1960 1970 1980 1990 2000 + Later, the Millennium Development Indicators ( ) and Sustainable Development Goals (SDGs) of the United Nations became more accepted norms than the narrowly defined environmental and sustainable development indicators + In September 2000, the 189 member countries of the United Nations at that time adopted , committing themselves to making substantial progress toward the eradication of poverty and achieving other human development goals by + The MDGs assign - including increased aid, removal of trade and investment barriers, and eliminating unsustainable debts of the poorest nations. pwn as the , build on the success of the piversal call to action to PERS cur ; of 17 goals to be achieved by all the nations of the and 2030. PREME SBIR , the 17SDGs of the PECs opted by world leaders in September 2015 at an officially came into force. Over the next 15 years, Pals that , countries willmobilise efforts to end all forms of poverty, climate change, while ensuring that no one SDGs were born at the United Nations C Development in produce a set of universal goals that meet tl political and economic challenges facing our The SDGs replace the MDGs, which started a tackle the indignity of poverty. The new in that they call for acti poor, rich and middle-income to promote prosperity the planet. The 17 SDGs with 169 targets are and go further than the MDGs by addressing the root causes of poverty and the universal need for development that works for all people. The goals cover the : economic growth, social inclusion and environmental protection. The new Goals are , whereas the MDGs were intended for action in developing countries only. A core feature of the SDGs is their -the mobilization of financial resources-capacity- building and technology, as well as data and institutions. se rioe RIN 3 rcoein FETE cin or ASS bide seh care ston 7 woman ern S00 chron MEE chicren are ci MR axles than water diseases wae au ‘Ghowmariet etecrcty mie Ee me eg ‘since 1990, (jaa eae 13 million Seaton dane [RE set afeces poets byaimesson Da SM cts = ceateomiton BUREEETEM —cocicsmen ome people to Assistance was Tealion people abandon ther $135 billonin homes 2018 pee pry‘THE SUSTAINABLE DEVELOPMENT GOALS. 2. End hunger, achieve food ‘employment and decent work sustainable development Ensure healthy lives and ‘sustainable industrialization and manage forests, combat ‘promote well-being for all at foster innovation desertification, and halt and all ages: OT reverse land degradation and ‘quality education and promots. = ——___________ 46. Promote peaceful and inclusive forall ‘sottlomonts inclusive, safe, development, provide access to resilient and sustainable ‘Achiove gander equality and — fempower allwomen and ils 12. Ensure sustainable consumption and produetion patterns B a Toko urontaction to compar V7 Stangthon the moans of implementation and revitalize the global partnership for sustainable davelopment justice forall and build efective, aceauntable and inclusive institutions at all levels 18, Tako urgont action to combat climate change and ts impacts ‘modern energy for worn guttmacher ora * The three main statistical systems and frameworks provide concepts and data for compilation of Economic, socio- demographic and environmental data are organized and aggregated in the United Nations Systems of National Accounts (SMA), Social and Demographic Statistics (later changed into a framework) (SSDS), and a Framework for the Development of Environment Statistics ( ) (MFA, SEEA) and such as the PSRF or DPSRF are used DPSRF | Driving-Force-Pressure State Response Framework FDES [Framework for the Development of Environment Statistics MFA [Material Flow Accounts. Pressure-State-Response Framework United Nations Systems of National Accounts Social and Demographic Statistics System for Integrated Environmental and Economic Accounting Social Accounting Matrix incorporates environmental assets and their functions into national and corporate accounts. 993 issued a handbook on a System for integrated pee 57Environmental and Economic Accounting nature’s environmental and economic asset cost’ of their degradation and depletion into A tcuIaD CRE (SNA). + National environmental accounting req! outputs and environmental impacts, and uses both monetary values (prices, costs) and particular the mass of material flows) to this en physical flows of environmental impacts to the costs economic activity requires putting a price on physical impatt™ considers material flows from the environment, through the economy and back (as waste) to the environment as pressures on the carrying capacities of natural systems; the objective is to reduce this pressure to tolerable levels by ‘dematerializing’ the economy. makes use of the established requisite for economic growth, ‘capital maintenance’, & extends the (produced) capital concept to include non-produced natural capital * A greened-economy GDP is indeed quite different from an (EDP): whereas EDP represents a still-life picture of an economy that has accounted for environmental (social) cost, the greened-economy GDP is the result of modelling the consequences of environmental cost internalization for structural change and growth of the economy. . refers to All four types of capital are necessary for communities to function. Thus all 4 types of capital needs to be cared for, nurtured and improved over time. Built Capital Human and Social Capital Natural apital DEE mectie consists of natural resources, ecosystem services, sor beauty of nature at the base of the pyramid es are all of those things that we take out of nature plants, animals, and materials from the earth such letals and minerals. ices are natural processes that we rely on in some ,, Soil in an acre of farmland can produce food that fal for clothes that we wear. If we are not careful in pee pthow we use them, we can degrade them. Aesthetics or beauty of nature is recreation, which form the basis of some . consists of peo} Human capital is each individual's pel physical and mental health, and education. Social capital is the connections in a coi which people interact and relate to each others of people to form governments to deal with com! includes roads, heavy equipment, fa houses, and apartment buildings. It includes basic necessitie: and clothing. means the size of population that can be supported indefinitely by its supporting systems. It depends upon the amount of resources available in the ecosystem, the size of the population, and the amount of resources each individual is consuming. Living within the carrying capacity means using those supplies no faster than they are replenished by the environment. means whether all people have similar rights, opportunities and access to all forms of community capital. It means fairness between current and future generations of a community. Reduce by half the proportion Developing countries as a whole of people living on less than met the Millennium Development $ 1a day. Reduce by half the Goal target of halving extreme proportion of people who suffer | _ poverty rates five years ahead of from hunger the 2015 deadline. Sub-Saharan Africa still lags behind « East Asia and Pacific has had the most astounding record of poverty alleviation; despite improvements, Sub-Saharan Africa still lags behind. Ensure that all boys and girls |* The primary school completion complete education a full rate for developing countries course of primary schooling, reached 91% but fell short of target, Eliminate gender disparity + Developing countries will likely in primary and secondary reach gender parity in primary education, preferably by 2005, | and secondary education and at all levels by 2015 Reduce by two-third among + The under-five mortality rate in children under 5 mortality rate | developing countries declined by half, developing countries as a whole are likely to fall short of the target. pee 51Reduce by three-quarters the maternal mortality ratio The maternal mortality ratio has steadily decreased in developing countries as a whole, from 430 in 1990 to 230 in 2013, falling short of target. Halt and begin to reverse the spread of HIV/AIDS. Halt the incidence of malaria and other major diseases The prevalence of HIV is highest in Sub-Saharan Africa. The spread of HIV/ AIDS there has slowed and the proportion of adults living with HIV has begun to fall. Global prevalence has remained flat since 2000. Globally, the target of halting and reversing tuberculosis incidence by 2015 has been achieved. Reduce by half the proportion of people without sustainable access to safe drinking water. Achieve significant improvement in lives of at least 100 million slum dwellers by 2020 In developing countries the proportion of people with access to an improved water source rose achieving the target. The large urban-rural disparity, especially in South Asia and Sub-Saharan Africa, is the principal reason the sanitation target is unlikely to be met on time. pee ey* Financial inclusion, as defined by Committ} Chaired by C. Rangarajan, is the proces: Eons) by vulnerable groups such as weaker sections at an affordable cost. * Financial Inclusion, broadly defined, refers tou) WEEE Raa wide range of financial services at a reasonable co not only banking products but also other insurance and equity products. * The essence of financial inclusion is to ensure delivery of financial services which include - for savings and transactional purposes, low cost credit for productive, personal and other purposes, financial advisory services, insurance facilities (life and non-life) etc. * Financial inclusion broadens the resource base of the financial system by developing a among large segment of rural population and plays its own role in the process of economic development. + Further, by bringing low income groups within the perimeter of formal banking sector; financial inclusion and other resources in exigent circumstances. Financial inclusion also sections by the usurious money lenders by facilitating easy access to formal credit. The essence of Financial Inclusion is to ensure that a is available to every individual of the country. This should include o Regular financial Intermediation such as banking which includes basic” with low or minimum balance/ charges for sending and receiving money. © Saving Products which are suitable to the pattern of cash flow of the poor household. © Availability of the Money transfer facilities, remittance facilities, insurance etc. © Availability of small loans & overdrafts for productive, personal and other uses. © Availability of cheap but more importantly prompt credit. Barriers for poor people to appropriate financial services include gconomic factors e.g., lack of education-illiteracy-awareness, g age, low and irregular income, and geography. , branch timings, cumbersome procedures, unsuitable products, language, staff , regulatory factors e.g. ements of identity documentation and product proof of identity/ address. of borrowers, savers as well as banks. pee oy* Asper 59th Round Survey, more than are financially excluded from both formal and 75% of farmer households have no access to’ + As per , only 60% of househol services in the country. published a comprehensive financial incl in 2013. CRISIL identified 3 critical parameters services namely branch penetration, deposit penetral penetration. Inclusix indicate that there is an overall improv the financial inclusion in India. . study worked out an Index on financial inclusion (IFI) based on three variables namely penetration (number of adults having bank account), availability of banking services (number of bank branches per 1000 population) and usage (measured as outstanding credit and deposit). The results indicate that Kerala, Maharashtra and Karnataka has achieved high financial inclusion released by the * Up to 80% of Indians now the same proportion that have a mobile phone, but financial inclusion levels are still among the world’s worst, lower than sub-Saharan Africa on some counts. * Despite the availability of and the narrowing of gender, wealth and education gaps in account ownership, few account holders are using facilities available to them, raising doubts around improvements for financial inclusion, India’s unbanked population has been the target of the government's flagship in 2014, It has been largely responsible for the rapid increase in opened accounts. »* No more than 1% of PMJDY account holders-3.1 million beneficiaries- facilities available to them, and 17% of PMJDY accounts are “zero-balance”, meaning they are not used, although that is down from 25% in 2016 and 75% in 2014. * There is and 38% of Indian accounts are inactive-meaning, there were no withdrawals or deposits over the course of a year-suggesting that many Indians are still not integrated into the formal banking system + The proportion of the Indian population accessing financial institution accounts from their phones or the Internet, mobile money wallets is significantly lower than in other economies. In 2017, 5% of Indians accessed a financial count from their phone or the Internet, and 2% of the ed a mobile money account. , where 21% of adults had a ‘ount in 2017, the highest anywhere in the world. bre also more widespread, with 97% of adults in fgital payment in 2017 and 60% in South Africa, in India. puntries are moving towards financial inclusion, Cou Res and capitalizing on the growth pee otof digital finance. The same cannot be said Using apps and online banking websites re| literacy and confidence that Indians in ru often do not possess while has i include 77% of all women in India, female services and financial literacy has not yet rea more than 22% of women owned a debit card i 43% of men. RBI has adopted a for achieving financial inclusion. Financial Inclusion Initiatives include - Advised all banks to open with minimum common facilities such as no minimum balance, deposit and withdrawal of cash at bank branch and ATMs, receipt/ credit of money through electronic payment channels, facility of providing ATM card. Relaxed and to facilitate easy opening of bank accounts, especially for small accounts with balances not exceeding Rs. 50,000 and aggregate credits in the accounts not exceeding Rs. 1 lakh a year, , domestic Scheduled Commercial Banks are permitted to freely open branches in centres with population of less than 1 lakh in Un-banked Villages, banks are directed to allocate at least 25% of the total number of branches to be opened during the year in un-banked (Tier 5 and Tier 6) rural centres. Opening of , for effective cash management, documentation, redressal of customer grievances and close supervision of BC operations, banks have been advised to open intermediate structures between the present base branch and BC locations. had been advised to submit Financial Inclusion Plan (FIP) with self-set targets in respect of rural brick and mortar branches opened, BCs employed, coverage of un- banked villages with population above 2000 and as well as below 2000, BSBD accounts opened, Kisan Credit Cards, General Credit Cards issued and others. (FLCs) and all the rural branches of -ommercial banks are advised to scale up financial literacy gh conduct of outdoor Financial Literacy Camps at least clusion works from supply side of providing access aI services, financial education feeds the demand awareness among the people regarding the needs \cial services. These two promote greater financial (FSDC) has focus on financial inclusion and financial literacy peer 30The Financial Tripod Financial Education Financial Inclu: Financial Stability . helps in bringing more people under sustainable development in a cost effective manner within a short span of time. * Though RBI has adopted the bank-led model for achieving financial inclusion, certain NBFCs which were supplementing financial inclusion efforts at the ground level, specializing in micro credit have been recognized as a separate category of NBFCs as NBFC- ‘+ At present, around 30 MFIs have been approved by RBI. Their asset size has progressively increased to reach Rs. 19,000 crore as at end Sept 2013. * A few large have undertaken projects such as E-Choupal/ E-Sagar (ITC), Haryali Kisan Bazaar (DCM), Project Shakti (HUL), etc. Reportedly, these pioneering projects have brought about vast improvement in the lives of the participants and set the tone for economic development in their command areas. . (GCC): Banks were asked by the RBI to launch and offer GCC facilities with an amount of up to at their branches located in semi-urban and rural areas. . (KCC): The RBI also instructed banks to provide Kisan Credit Cards exclusively to and who have very limited funds due to which they cannot invest in proper farming tools, fertilisers, pesticides, crop seeds, tractors, land for farming, storage warehouses, etc. They are forced to rely on other wealthy landlords for getting land to sow crops. These Kisan Credit Cards are intended to help farmers make instant gees Whenever required. The RBI also devised a plan to help h out to the unbanked individuals of the society by ation and communications technology (ICT)-based th the help of business correspondents (BCs). These ers to make withdrawals of cash, create deposits, and other forms of credit through electronic forms t makes banking inexpensive and simple. pOeeeCEE WUE The RBI also reported that many rural parts of the enough ATMs and this is hampering many buying pns of the people residing in those areas. In order to pee ESTincrease the availability of physical cash for of ATMs increased massively. Pradhan Mantri Jan Dhan Yojana (PMJDY) Atal Pension Yojana (APY) Pradhan Mantri Vaya Vandana Yojana Stand Up India Scheme Pradhan Mantri Mudra Yojana Pradhan Mantri Suraksha Bima Yojana (PMSBY) Sukanya Samriddhi Yojana Jeevan Suraksha Bandhan Yojana Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs) + Venture Capital Fund for Scheduled Castes under the Social Sector Initiatives + Varishtha Pension Bima Yojana (VPBY) It has provided every Indian with a much needed identity which has helped them to access various services and programmes of the government including banking; thereby pushing inclusion. UID is . * With the introduction of financial technology or fintech, financial inclusion is improving extensively across the whole world. India also has many fintech companies that are constantly working towards of providing financial services to prospective clients. Fintech companies have also been successful in offering financial services and products at + This is very helpful to customers as their expenses are low and they can distribute their savings to their other needs also. Financial technology companies are to apply for loans or open bank accounts by using Several people in Indian rural places have mobile phones and some of them have access to mobile internet and hence, they can make use of fintech services to get reliable financial services ‘A few of the latest fintech options that are used by individuals include (P2P), allets, etc. Many people in both rural and urban areas are ¢ advanced options of banking ly excluded people from traditional banking, can ‘ts for products and services in their residential Bip of . The fia has launched several electronic wallet systems 1@ apps such as Bharat Interface for Money ( dyAadhaar Pay, and lots more. + Electronic wallets or e-wallets refer to wall the help of electronic means such as Cre replace physical wallets. ‘+ With the implementation of the the year 2016, the need for digital financial number of digital wallets increased extensively * The government of India intends to carry out croi transactions for the present and upcoming years (UPI), Cuuetsg (USSD) banking methods, Immediate Payment (IMPS), National Electronic Funds Transfer (NEFT), Aadhaar Pay, debit cards, BHIM, and credit cards. « These digital financial apps will help in apart from achieving financial inclusion Along with the government-owned payment apps, there are many (e-wallet) systems created by private companies and banks. : it is most often used to show the in a society. The graph plots percentiles of the population on the horizontal axis according to income or wealth in a graphical manner. In Lorenz curve is often accompanied by a straight diagonal line with a slope of in income or wealth distribution; the Lorenz curve lies beneath it, showing the actual distribution it represents the measurement of inequalities derived from the Lorenz curve. The area between the straight line and ed line, expressed as a ratio of the area under the straight Gini coefficient, a measurement of inequality. It can range Area between Lorenz Curve and 45° Line Area above the 45° line Pe cometary neral hypothesis that Pere] fe realized tends to falls. It suggests that, as taxes pvels, tax revenue collected by the government alsoincreases. It also shows that tax rates incre would cause people not to work as hard or tax revenue. The Later Curve Tax Revenue Tax Rae 0) : it is an economic concept that shows that have a stable and inverse relationship. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. However, the concept has been somewhat disproven empirically due to the occurrence of stagflation, when there were high levels of both inflation and unemployment. it says that in society should be reduced as a means to stimulate business investment in the short term and benefit society at large in the long term. It states that tax benefits for corporations and the wealthy will trickle down to everyone else. It argues for income and or other financial benefits to large businesses, investors and entrepreneurs to stimulate economic growth: ‘A policy where a country seeks to benefit at the expense of another country. It is a term for policies that a country enacts to address its economic woes that, in turn, actually worsens the economic problems of other countries. It came about, originally, as a policy solution to domestic The basic idea is to increase the demand for a nation’s exports, while reducing reliance on imports. This is usually achieved with some kind of trade barrier— = ‘or competitive , in order to lower the price of exports and drive employment and the price of imports up. : occurs when © from one job to another. Full employment situation. After a company, it naturally takes time to find another job, pf unemployment short-lived. The person is employed for she gets new job. It is the least problematic from an it. Crem: When job exists for qualified persons but ot have the matching qualifications. It can also occur ble in plenty but other factors of production are not fe labour. It also comes about through technologicaladvances when people lose their jobs because India, structural unemployment has increased government intervention to upgrade the skills in the society. : Where people are recession. Also known as demand-deficiency around due to the business cycle itself. It rises durl and declines during periods of economic growth. It well as long-term. When people are apparentl their marginal product is zero. Even if they are removed from the there will be no decline in production. This is widespread in India especially in agriculture, , obtained by dividing the number of persons in the labour force by total population, is an important parameter in employment projections and formulation of employment strategies. NSSO defines LFPR as the number of persons/person days in labour force per thousand persons/person days. (No, of emploved persons + No, of unemploved persons) x 1000 Total Population is defined as the proportion of an economy's working-age population that is employed. As an indicator, the employment-to-population ratio provides information on the ability of an economy to create jobs. is defined as the number of persons employed per thousand persons. Worker Population Ratio is an indicator used for analysing the employment situation in the country. This is also useful in knowing the to the production of goods and services in the economy. ‘No. of emploved persons x 1000, Total population : it is defined as the number of persons/ person-days unemployed per 1000 persons/ person-days. Total population it is defined as the number of persons/ person-days g per 1000 persons/ person-days in the labour force (which ie employed and unemployed). It is the number of persons p proportion of the labour force (persons who are either \9 or available for work’), not the al population. loyed persons + number Ere Cares persons) Ree or Usual Status (PS) he status of activityon which a person has spent days prior to the date of survey is considered to 4 status of the person. The Usual Principal Activi Usual Status (PS), is determined using the mm: \RE Rate Menu) refers to the activity status on which h/she spent . is further used labour force. For instance, if an individual was ‘wor or available for work’ for major part of the year preced then h/she is considered as being part of the ‘Labour P™ if an individual reports as having worked and sought/availab seven months during the year or having sought or available for Wo seven months then he/she is classified as being in the Labour Force. UPSS is a more inclusive measure as compared to UPS. This approach seeks to identify ‘workers’ out of those who were classified as ‘unemployed’ or as ‘outside labour force’ on the basis the majority time criterion of the UPS approach. For example all individuals reported to have been employed and/ or unemployed for a total of less than six months will be treated as outside the labour force based on UPS criteria. Similarly if someone is classified as being in the labour force and has worked only for a minor period of time, then he will be classified as ‘unemployed’ based on UPS approach. It's quite likely that one who is outside the labour force by virtue of his spending longer time on ‘neither seeking/nor being available for work’ might have worked for a minor time period during the yearlong reference period. To capture such exclusions, the concept of ‘subsidiary status worker’ was devised and thus the approach of UPSS. . for employment has three different measures: . : number of persons who remain unemployed for a major part of the reference year. . : no. of persons who did not find work even for one hour during the reference period (week) though available for work. . no. of persons who did not find work on a day or some days during the Survey Week (Most comprehensive measure), + As per the NSSO, of the country is 47 crore of which 83% is in the unorganized sector. in total employment has come down from about 993 to about 43% in 2017. The share of manufacturing sector ed marginally during this period; while that of services increased Bureau, jobless economic growth continues to haunt the country’s rising to 5% in PCS eEticy = were the worst hit as the pace of unemployment rose F unemployment rate in rose to 5.1%, it irban areas. in India is highest among those people who are pee 36The reason is that poor unemployed, and hence, opt for any kind of wo} of the job. The better off have the capacity to bel the right job. are the most educated rate is higher among them. (LFPR) wa! females 24% and males 75%. The North Eastern general, display high female LFPR as compared to States, a new study releaset University’s Centre for Sustainable Employment * Confirming the specter of , the study contends that this divergence between growth and jobs had increased over time. If you look back at the 1970s and 1980s, when GDP growth was around 3-4%, ‘employment growth was about 2%, Currently, the ratio of GDP growth to employment growth actually shrank by seven million between 2013 and 2015. + Unemployment has risen to more than 5% overall, north Indian States are the most severely affected, while in demographic terms, with higher education levels suffer an unemployment rate as high as 16%. * While wages are rising in almost all sectors, in 2014, and has not risen since. + Inthe , though the number of jobs has grown, there has also been an increase in the share of contract work, which offers lower wages and less job security. Also, of concern is the in the organised manufacturing sector. Labour productivity in the sector is six times higher than it was 30 years ago; while production workers’ wages have grown a 1.5 times. in the paid workforce is still low, but the situation is unequal across States. In Uttar Pradesh, only 20 women are in paid employment for every 100 men, while that figure jumps to SO in Tamil Nadu and 70 in Mizoram and Nagaland. are over-represented in low-paying occupations, and severely under-represented in higher-paying ones. They earn only 55-56% of upper caste workers’ earnings. Notwithstanding the quantitative expansion in employment growth, some disconcerting features of employment growth have emerged in recent years: + Employment growth had decelerated. + The employment content of growth has shown a decline. rs with higher employment potential have registered relatively wth. despite a sharp decline in its importance in GDP, continues t employer because the non-agricultural sectors have not gh employment to effect a shift of workforce. loyment growth has been contributed by the unorganized aracterized by low incomes and poor conditions of work. jent growth in the organised sector has picked up in jas largely been led by an increase in employment of ict labour. pee EvIssues Related to Gro Development - Public Overview The money in your pocket may be much mo pocket of a rickshawala across the road. Though, 1 the essence of nature; but, the role of governments is to reduce the gap between 2 unequal. Taxes are imposed to redistribute the money from the pockets of well-offs (companies & individuals) to the pockets of not-so-well-off. It is not generally done directly, but thru various welfare programmes like food, pensions, insurances, education, health etc. and various infrastructure developments. is a very broad term used to include tax systems, government expenditures, budget procedures, stabilization policy The central government helps prevent market failure by overseeing the allocation of resources, distribution of income, and stabilization of the economy. Regular funding for these programs is secured mostly through from banks and others also help finance the central government also receive grants and aid from the central government. Other sources of public finance include user charges from ports, airport services, and other facilities; fines resulting from breaking laws; revenues from licenses and fees; and sales of government securities anc bond Policy of the government pertaining to taxation, public expenditure and public debt. It is implemented through annual It is the statement of revenues and expansive incurred by a government during a specified financial year. It has two parts:- 1. Revenue Account: means current receipts and expenditures incurred on day to day basis. 2. Capital account: means Lumpy receipts and expenditures curred by government on long-term basis. . is expenditure for which provision is made in government predominantly productive expenditure. |: is the expenditure for which provisions is made in ts because of its uncertain, unproductive and volatile les maintenance of exciting assets (Productive completion of unfinished projects (productive \d Expenditure on defence, subsidies, interest civil inproductive expenditure). poe 38Revenue capital Expenditure Expenditure 4 T.lnterest Payment 1. Expenditure on Construction 2. Grant & subsidies ‘of buildings, roads, bridges ote B.Payment of Wages 2. Expenditure on machinery & ‘salaries 4. Expenditure on Education 3. Expenditure on purchasing of ‘health services shares 5. Expenditure on defence 4. Loans to state & foreign Government. 5. Repayment ofleans Revenue Receipts Revenue Expenditure Tax receipts Non tax receipt Developmental Non- developmental T. income tox | 1. Interest eamned | Maintenance 1. Subsides 2. excise 2. Dividends and PSUs | of 2. Defence 3. Custom 3. Fees & User public utilities 3. Civil 4, Sales tax charges Administration 5. Now GST 4. Income from mint | Unfinished projects | 4. Interest payment Capital Receipts Capital Expenditure 1. Market borrowing 1. Creation of infrastructure 2. Sales of assets 2. Loans given to states 3. Disinvestments proceeds 3. Repayment of post loans. 4, Loans recovered (2, 3, 4 are non-debt) * In terms of public finance, subsidies are the * Subsidies can have a major impact in provided these are designed and administered efficiently to give a clearly stated set of objectives as , constitute an important ent for modifying market-determined outcomes. While posable income, subsidies inject money into circulation the economy through the by tive price of the subsidised commodity, thereby pase in its demand Seca cage re of government subsidies - crass itary education, primary health centres, prevention eases, social welfare and nutrition, soil and water id ecology and environment pee 39: Education (other than elemey services, family welfare, urban develop research and education, special program village and small industries, atomic research, other scientific research, censu meteorology. . : All others. * The has proved to bs transparent, largely input-based and poorly tal regressive, and inducing waste and misallocation of re * The government has been spending nearly 2 to ensure that farmers get the key agriculture input at cheaper rates. + The percentage of - * 2000-01 = 8% + 2012-14 = 18% * 2016-17 onwards = 12% . :meansthe over current revenue receipts. It signifies that government cannot meet its current expenditure from its current revenue . means the This is met by deficit financing. . means . : Signifies the extent of without burden on post loans. . : means that which government meets by Budgetary Deficit = Total Revenue ~ Total Expenditure Fiscal Deficit = Total Expenditure — (Total Revenue + Non debt creating capital receipts) otal expenditure - (Total revenue - Borrowing) Budgetary Deficit + Borrowing Primary Deficit = Fiscal Deficit - interest payment Effective Revenue Deficit = Revenue Deficit - Grants for the creation of Capital Assets poe zyBudgetary Deficit Revenue Deficit Expenditure Fiscal Defici “y Borro\ Revenue Deficit spending happens when a than the revenues it collects during a fiscal period. A number of economists, especially those in the Keynesian tradition, believe government deficits can be used as a tool to stimulate fiscal policy. Usually, government deficits are financed by the , especially government bonds. The act/process of by a government is deficit financing. It is a practice adopted for financing the excess expenditure with outside resources. The expenditure revenue gap is financed by either or through borrowing. Nowadays most governments both in the developed and developing world are having deficit budgets and these deficits are often financed through Hence the fiscal deficit is the ideal indicator of deficit financing In India, the size of in the budget. Deficit financing is very useful in developing countries like India because of revenue scarcity and development expenditure needs Through this route the developed world - the USA and Europe - was able to come out of the menace of the Great Depression (1929). India tried its hand at deficit financing in 1969 and since the 1970s it became a routine phenomenon, till it became , demanding immediate redressal. are the best money as a means to fulfil a government's It requirements even if it is coming with soft interest. are even better elements in this case (which comes interest nor any repayments). are the next best way to manage fiscal deficit pn that the external loans are comparatively cheaper pnsidered better than the internal borrowings due to ing bring in Jhard currency which to the government spending. er the internal borrowings due to pee ry. come as the next pref management. But going for it in a huge wa prospects of the public and the corporate heads for a double negative impact low: demands. The economy moves either for stag} . is the last resort for the g its deficit. Other damaging effects on the econ « Itincreases proportionally. It brings in regular pressure and obligation on t upward revision in of governmy ultimately increasing the government expenditures nec further printing of currency and further inflation. Ways and means advances Zero base budgeting Fiscal responsibility Act Reforms of public sector and disinvestments Voluntary retirement scheme Direct Benefit Transfer * The Gol and the RBI signed an agreement in to * A scheme of ways and means advances (WMA) by the RBI to the Central government was introduced to in the government's receipts and payments. This will not be a permanent source of financing the government's deficit. Thus, it is an instrument to * The system of ad hoc to finance budget deficit was discontinued with effect from April 1, 1997. * When government runs short of cash, the WMA is provided by RBI for period of . When limit of WMA is crossed the is provided to the government for periods not exceeding 10 consecutive working days. + The ‘on WMA and the rate of interest on Overdraft will be mutually agreed between RBI and Government from time to time. * The ‘on WMA/overdraft will be: Repo Rate Two percent above the Repo Rate The RBI as a banker to state ‘ovide temporary finance to tide over temporary cash flow of their receipts and payments as WMA. nce to states is provided in three ways: 19 Facility (SDF) or special WMA: The SDF is It Gol securities including Auction Treasury Bills est rate on SDF is charged at repo rate of RBI. is provided to state after it has exhausted its poe chquota of SDF. The interest rate on WMA RBI. Overdraft: The overdraft is given after st of WMA. A State can be in overdraft foi days. The rate of interest on overdraft is 2 . The RBI acts as the of the State's surplus funds. Surplus cash balan level indicated by it is automatically invested in Treasury bills. ‘+ DBT is a major reform initiative launched by Gol in to re-engineer the existing cumbersome using Information and Communication on Technology (ICT) * This programmes aims to transfer benefits / postal accounts, preferably Aadhaar seeded, of accurately targeted beneficiaries. In a nutshell, DBT intends to achieve: 1 of benefits, minimising levels involved in benefit flow 2 in payments 3. of the beneficiary 4, and duplication chatenges + Delayed Payments Lasting to + Inaceurate Targeting ie Multiple Layers of Sanctions Target Beneficiaries Beneficiaries across various Pension Irs cn tt + Piterage and Scholarship schemes, Fel and “owt + Duplication food subsidies, te -_ : Results + Robust Beneficiary Targeting System Direct Benefit Reduced Leakages Transfer— An idea + Timely Transfer of benefits + creased Financial inclusion + Huge Savings Potential + Minimum Government ‘Maximum Governance + Increased Transparency and (5 LS han cor ‘Accountability aera Enablers as + JAM Trinity connects + aC infrastructures + Payment Banks Mobile Money empt to ensure a ¢ people. This marks a paradigm shift in the process ernment benefits like wage payments, fuel subsidies, s, etc. directly into the hands of the beneficiaries, ents, removing leakages, and enhancing financial . Currently, thesetransfers happen through multiple channel delayed and its intangible value to the be reaches him or her. These kind of delays d huge leakage gap of 2% of GDP every year. effectiveness, transparency and accountabl system and infuse confidence of citizen in the Additionally, DBT through its Ce merc system enables the governments to transfer b@ individual's bank account number preferably linked This Aadhaar number or the biometric input, being un from the government DBT Mission was initially created in the Planning Commission to act as the nodal agency for implementation of DBT in government schemes. The Mission was transferred from Planning Commission to in 2013. For the purpose of DBT, Government Schemes are 1 transfer of cash benefits from Department to beneficiaries happens through different routes, as given below: a. directly to beneficiaries b, through State Treasury Account to beneficiaries c. through any Implementing Agency as appointed by Government to beneficiaries 2 - kind benefits are given by the Government to individuals through an intermediate agency. Individual beneficiaries receive these goods or services for free or at subsidised rates. ouken Individual Beneiary MGNREGA, ash PAKAL, sae, Scholarships SSA. Mid Day Meals 0S, Assistance to State for Conto of Animal Disease ind , for its success include - JAM Trinity: With over 21 crore Jan-Dhan bank accounts, 100 jobile connections and 98 crore Aadhaar numbers, there is ling belief that JAM is the way ahead in delivering financial is here that DBT by leveraging the JAM (Jan Dhan, Mobiles) trinity and the technological prowess offers prove this benefit delivery system. The JAM Trinity }ovel system to transfer benefits in a leakage-proof, shless and timely manner. spondents (BC) Infrastructure: RBI introduced pondents/ Banking Correspondents (BC) as an poe crealternative to brick and mortar banks f4 representative authorised to offer service: where the bank does not have a branch. a vital role in operationalising the progra mile connectivity. Payments Bank: A payments bank Is Ii operating on a smaller scale, without invol\ can carry out most banking operations and remittances through a mobile phone but cannol issue credit cards. With payments banks, RBI seeks penetration level of financial services in the remote ar country. Mobile money: Mobile money is a fast moving way of payment in the country and could be helpful in providing solution to last mile issue for better accessibility of DBT. There is a need to develop a comprehensive eco-system for carrying out cashless transactions over mobile platform using Aadhaar as identifiers. This will revolutionise the drive for financial inclusion. © © Stakeholders invoved Ministries & Departments IWTeam ‘Authentication Digitisation of of Beneficiaries Beneficiary Database © 9 IDAL/Registrar Banks/India Posts General of india Opening of Bank Accounts, India Aadhaar Enrolment Post Bank Accounts, Jan Dhan ‘Accounts, Aadhaar seeding in bank accounts resent, Aadhaar is not mandatory for availing DBT in any of fare schemes of the Government. However, Aadhaar seeding iry database and bank accounts is desirable to achieve ‘es in its true sense. Aadhaar seeding is done by jaar number in the beneficiary database and linking imber with the bank account of the beneficiary in the stem (CBS). 1g of bank accounts in the beneficiary database will ication and curbing leakages. Use of Aadhaar is ens as he or she will not have to carry multiple ind will provide a faster channel for receiving all poe ciwelfare payments without any middle-m in beneficiary database and bank accou DBT objectives in its true sense. National Payments Corporation of Int organisation for all retail payments sy: up with the guidance and support of the Association (IBA). NPCI offers a range of Financial Switch (NFS), Aadhaar Payment Bri Cheque Clearing, Immediate Payments Service Automated Clearing House (NACH), Electronic Be RuPay cards, etc. All DBT transactions are to be through NPCI. While Aadhaar-linked DBT transactions will be routed through APBS, non-Aadhaar transactions will be routed through NACH. NPCI mapper is a repository of Aadhaar numbers maintained by the APB System and used for the purpose of routing the APB transactions to the destination banks. The NPCI mapper contains Aadhaar number along with Institution Identification Number (IIN) of the bank to which the beneficiary has seeded his/her Aadhaar number. NPCI does not maintain bank account details of the beneficiaries like account number, IFS code and branch address etc. of the beneficiary in NPCI mapper. In case a beneficiary seeds his/her Aadhaar number in multiple bank accounts, the previous mapping if any in the NPCI mapper, gets overwritten by the fresh seeding of the Aadhaar number. Public Financial Management System (PFMS) is a web-based online software application. PFMS is being delivered and implemented by the Project cell in the office of CGA. The primary objective of PMS is to facilitate sound Public Financial Management System for Government of India (Gol) by establishing an efficient fund flow system as well as a payment cum accounting network. PFMS is the payment platform for disbursal of funds for the schemes covered under DBT. PFMS is crucial for success of DBT initiative as it provides various stakeholders with a real time, reliable and meaningful management information system and an effective decision support system. It helps in tracking utilisation of funds from the Central Government upto the beneficiary. PFMS has been made mandatory for payment accounting and reporting under DBT w.e.f. April 1, 2015. PAHAL (Pratyaksh Hanstantrit Labh) or DBTL (Direct Benefit fer for LPG Subsidy) is a scheme which provides the LPG mount applicable on the domestic LPG cylinder directly nsumer’s bank account. At the time of LPG cylinder sumer will have to pay the full price of the LPG cylinder. olarship Portal (NSP) launched in 2015 under is a one-stop IT enabled platform for disbursement inder different Ministries/Departments. HAL transactions are routed through NPCI. compensation is given to banks to meet their fost. The commission is given in two parts, as poe cr1 Transaction charges: A transaction ¢ payable for each transaction to be sh banks, destination entities and NPCI extant NPCI circular. 2 Cash-out incentives: For MGNRE (ICDS) and Pension Schemes, a fixed ci transaction and a variable component of (transaction amount rounded up to the n to a maximum of Rs. 5/- would be payables provided to promote last mile delivery of financial Current Status of D8 in india MGHREGA and NSAP schemes Hes wih ile piso shows impressive figures transactions g Savings in schemes Fa ike PAHAL, 08 fr food Bre DBT transactions done in ‘the ast financial year - 2015-16 (nti January 2016) Beneficiaries have been reached; that's one-fourth ofthe country’s population * The idea of zero-base budgeting first came to the privately owned organisation of the USA by the 1960s. It was the US financial expert who first proposed this idea for government budgeting and , Governor of Georgia, USA was the first elected executive to introduce ZBB to the public sector. * It means that a budget is prepared by assuming that there was (i.e. zero base), so that each item of expenditure is allocated funds rather than reference to the past allocations. It makes it mandatory to justifying the continuance or termination of each programme in the agency budget proposal - in other words, an 9 from a believed to be in practice since - We cannot say that ess in ZBB, but many of the profit-fetching PSUs have it successfully and optimize their profits. Outcome and Perfd brt of While outcome pd by different departments and divisions of a ernment, the performance budget is presented by pee rdthe Ministry of Finance on behalf of the govd * Both go for rae) of the performance. The outcome budget is 4 performance budget is a macro-level proces! many outcome budgets in any one performal * The basic objective of such budgeting is to WOE RUMGE EE iutad and thereby making the government more anw the House and the public. + It was introduced in ; the concept is to ind objectives for which money was spent has been achie . : means budgetary allocations should be so pPe that it clearly brings about and biases of these allocations. Concept first time introduced in Australia 1984. Gender budgeting started in India with the Union Budget 2006-07 which proposed an outlay dedicated to the cause of women and created gender budgeting cells in 32 ministries and departments. * Based on New Zealand Model. It has Constitutional mandate under It came into force in July 2004 * Minimum annual reduction in revenue deficit by 0.5% of GDP beginning with 2004-05 with an aim to eliminate completely by March 2009. To reduce fiscal deficit by an amount by at least 0.3% of GDP, so that deficit is less than 3% of GDP by end of March 2008. To limit government guarantees to almost 0.5% of GDP in any financial year. To limit additional liabilities (including external debt) at current exchange rate to 6% of GDP in 2007-08. Not to borrow directly from RBI with effect from 1 April 2006. To present three statements before the parliament along with the annual budget: Macroeconomic framework statement, fiscal policy strategy statement and Mid-term fiscal policy statement. 2016, the government set up a committee under . The committee recommended Government should target a fiscal deficit of 3% of the GDP in years up to March 31, 2020, cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023. ombined debt-to-GDP ratio of the centre and states should Int down to 60% by 2023 (comprising of 40 per cent for the 20% for states) ‘nment should reduce its revenue deficit steadily by je (of GDP) points each year, to reach 0.8% by 2023 0.5% as ‘escape clause’ for fiscal deficit target the time of following essential circumstances: lonsideration of , acts of war, national proportion and collapse of agriculture ting farm output and incomes. in the economy with pened) eryunanticipated fiscal implications © Sharp decline in points below the average for the previ + The Government has set a 2018-19 and 3% for 2019-20 * Policy initiatives towards * Cutting down expenditure - by down-sizing/ rig) government; thus cutting down the burden of salaries, and the PFs. Cutting down the subsidies - Administered Price Mechanism in petroleum, fertilizers, sugar, and drugs to be rationalized, it was done with mixed successes. Interest burden to be cut down. Budgetary supports to the loss making PSUs to be an exception than a rule. General Services to be motivated towards profit with subsidized services to the needy only. Higher education declared as non-priority sector; fees of institutions of professional courses revised upward; etc. * Increasing * Tax reforms like GST. + The PSUs disinvested and even privatized. * Surplus forex reserves to be used in external lending and purchasing foreign high quality sovereign bonds. + Taxes are levied by governments on their citizens to generate income for undertaking projects to boost the economy of the country and to raise the standard of living of its citizens. + The authority of the government to levy tax in India is derived from the , hich allocates the power to levy taxes to the Central and State governments. All taxes levied within India passed by the Parliament or the State Legislature + Taxes can be classified as - * Direct tax is borne by some person on whom it is levied e.g. Income tax, wealth tax, corporate tax etc. ect tax is levied on a person but is recovered from someone sales tax, excise duty, service tax etc., all merged into GST levied on the merchant while it is paid by the consumer tax is imposed on the basis of total value of a imposed on the basis of volume, quantity, size, such specific attributes of a commodity. x is one under which as the income of a person fate of tax imposed on him goes up. It reduces pee zrinequality. + Regressive Tax is one under which the inc the rate of tax increases. Direct tax is levied and paid for by individuals, (HUF), firms, companies etc. whereas indirect t by the of goods and services. The in case of burden can be shifted for indirect taxes Lack of administration in collection of direct taxes can , while indirect taxes cannot be evaded as the taxes are charged on goods and services. Direct tax can help in , whereas indirect tax may enhance inflation. Direct taxes have than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes. Direct taxes help in and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive. Indirect taxes involve lesser due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs. Indirect taxes are as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments Indirect taxes have a as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets. Additional indirect taxes levied on harmful commodities such as cigarettes, alcohol etc. dissuades over-consumption, thereby helping the country ina 1950-51 40:60 1990-91 20:80 2000-01 36:64 2009-10 61:39 2012-13 53:47 2013-14 56:44 2014-15 56:44 2016-17 50:50 pee Ey