Economy Notes 14 Chapters on Key Economic Concepts

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S. No. Chapter Name Page No.

01. National Income and accounting 2-4
02. Inflation 5-9
03. Inclusive growth 10-13
04. Unemployment & poverty 14-16
05. Money and banking 17-24
06. Government budgeting 25-27
07. Industry 28-34
08. Capital Market 35-38
09. International Economics 39-42
10. International Organisations 43-44
11. Agriculture 45-59
12. Infrastructure and energy 60-78
13. Investment models 79-80
14. Land reforms 81-81
1 | Economy
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National Income and

accounting 01
1. Re-basing GDP estimates 3. Total Factor Productivity
2. The issue of Nominal GDP
1. Re-basing GDP estimates
Why in news: Central Statistics Office (CSO) proposes to replace the gross domestic product (GDP)
series of 2011-12 base year with a new set of National Accounts using 2017-18 as the base-year.
This change will be done, as per chief statistician at CSO, as soon as the new consumer expenditure
survey and the Annual Survey of Industries (ASI) results become available.
About Base year Criterion for selecting base year:

As per the United Nations System of National The well-known criteria for the selection of
Accounts (UN SNA) -2008, base year of Gross a new base year are:
Domestic Product (GDP) series should be revised 1. A normal year, i. e. , a year in which
from time to time to better capture structural changes there are no abnormalities in the level
in the economy. of production, trade and the price level
A base year is carefully selected because of the impact and price variations,
it has on the calculation of numbers/data. 2. A year for which reliable production,
The base year of the national accounts is chosen to price, and other required data are
enable inter-year comparisons. It gives an idea about available, and
changes in purchasing power and allows calculation 3. A year as recent as possible and
of inflation-adjusted growth estimates. comparable with other data series.
System of National Accounts 2008 (2008 SNA)

The 2008 SNA is an update of the System of National Accounts, 1993 (1993 SNA).
It is the latest version of the international statistical standard for the national accounts, adopted by the
United Nations Statistical Commission (UNSC).
It is intended for use by all countries, having been designed to accommodate the needs of countries at
different stages of economic development.
2. The issue of Nominal GDP
Why in News: Recently, the first advanced estimate of the national income was released by the
National Statistical Office (NSO), estimating the GDP growth in “nominal” terms at 7. 53% and
projecting the growth of real GDP at 4. 98% (Lowest since 2008 financial crisis).
The estimation of nominal GDP is the lowest since the 7. 35% for 1975-76.
It is also the first time that India is looking at a single-digit nominal GDP growth since 2002-03.
2 | Economy
Grasp the concepts
GDP
Gross Domestic Product (GDP) is the market value of all final goods and services produced within
the boundary of a nation inclusive of all taxes and subsidies on products, during a year.
The word domestic (In GDP) suggests the inclusion of all economic activities done within the
boundary of a nation/ country.
Real vs Nominal GDP

The market value of all domestic final goods and services taken at current prices is the nominal GDP.
The value taken at constant prices i. e. the calculation of the value of all products at a price taken at an
unchanged base year (2012 at present) — is the real GDP.
E. g. : A company has been constantly producing 8 packets of biscuits annually over the years. The
price of a packet was Rs. 10/- in 2012 and Rs. 15 in 2019. The year 2012 has been taken as a base year.
Real value of produce in 2019 = 10 * 8 = Rs. 80/-
Nominal Value of produce in 2019 = 15 * 8 = Rs. 120/-
In simple terms: Real GDP = Nominal GDP – Inflation (over the base year)
If the production of the packets has not increased, the real value of the biscuits will remain the same,
whereas the value of the nominal GDP will increase due to the upward shift in the price over time.
Why is the narrowing gap between nominal and real GDP a cause of concern?
 It is to be noted that the narrowing gap is not always a cause of concern. It depends upon the
factor squeezing the gap. e. g. the narrowing gap because corporate productivity is pushing
upwards and prices are going downwards, is not a bad sign for the economy.
 In the current year, not only the nominal GDP growth is very low, the growth rate of real GDP is
very low as well.
 It signifies that producers have not gained due to the absence of both higher output or higher
prices, resulting in low salary and wages, leading to low consumption and demand.
 In the past companies have seen a nominal year-on-year growth of 14-15%, doubling their
turnover in five years or so.
 If this growth rate falls to 7-8%, doubling turnover would take around 9-10 years.
 Rural distress, as low nominal GDP arising out low food prices, means low or absence of profit
margin for farmers.
 As the government uses nominal GDP as a benchmark to target tax revenues. The current
massive shortfall in government revenues is often attributed to low nominal growth.
Other related terms

GDP deflator: GDP price deflator measures the difference between nominal GDP and real GDP. The
formula to calculate the GDP price deflator is:
GDP price deflator = (nominal GDP ÷ real GDP) x 100
NSO: The National Statistical Office (NSO) headed by a Director-General is responsible for the
conduct of large scale sample surveys through nation-wide household surveys on various socio-
economic subjects, Annual Survey of Industries (ASI) and data on rural and urban prices, etc.
3. Total Factor Productivity
Why in news: The article published in the mint suggests to become a $5 trillion economy, Indian
economy requires growing at 8% in real terms, along with a 0. 7% rise in total factor productivity
(TFP).
TFP in India: In 2016, India’s TFP growth was 3. 5%, in 2017 it was 1. 6% and in 2018 it was 2. 4%.
3 | Economy
Grasp the concepts
Total Factor Productivity (TFP)

TFP is derived as a ratio of the total production and weighted average of inputs such as labor and
capital.
A higher TFP implies higher growth with the same set of labor and capital employed.
e. g. if the weighted average of inputs is 50 and total production (output) is 100 in 2018. Then,
the TFP is = 100/50 = 2 (in 2018)
Now, for 2019, if the weighted average of inputs remains at 50 and total production (output) increases
to 150, the TFR will be 3. It implies an increase in the total output with the same level of inputs
(factors of production) i. e. higher productivity of inputs.
Significance of High TFP

 It is easy to understand that if more people and capital are employed, more goods and services
can be produced. Thus, Countries with more accumulated capital and more labor due to the
increasing population can easily increase output (without increasing productivity).
 But if the Total productivity of factors (TFP) is also high, an economy can grow faster with the
same set of labor and capital being employed.
 It depicts the increase in efficiency with which resources are being used.
 Technological progress and skill up-gradation plays a huge role in improving TFP.
 The higher growth rate achieved by Japan in the 1980s was not only because of the rapid growth
rate of capital stock but also due to relatively higher TFR (Mainly due to technological progress).
 As per the data on TFP and GDP growth by TED (Total Economy Database) and Federal Reserve,
most economies with 8% or higher growth with TFP growth above 3%, saw a substantial rise in
private capital formation in that period.
How can India improve its TFP?

 India can take some bold market and structural reforms to release its productive capacity stuck in
the primary sector (Agriculture sector).
 These reforms include reallocation of land and labor from the agriculture sector to other more
productive sectors of the economy.
 Other measures to improve productivity include Investments in physical infrastructure such as
highways, dedicated freight corridors, and human capital.
4 | Economy
Inflation 02
1. Operation Twist 5. Negative Interest rate
2. Long-Term Repo Operations (LTROs) 6. Is the Indian economy staring at
3. Partial credit guarantee scheme stagflation?
4. External Benchmark based interest rates
1. Operation Twist
Why in news: RBI conducted its third tranche of special open market operation (OMO) which is
similar to Operation Twist.
More about RBI’s operation

Under this special OMO, RBI bought ₹10, 000 About Operation Twist
crore worth of 10-year government bonds while  It was a monetary policy tool of the US
sold four shorter-term government bonds adding Federal Reserve initiated to influence the
up to the same value. prevailing rate of interest in the markets.
The intent behind this move was to moderate  The tool is used for changing the shape of
high long-term interest rates in the market and the yield curve through the simultaneous
bring them closer to the repo rate. buying and selling of long- and short-term
government bonds.
Reasons  In the US such tactics were first used in 1961
 Some of the factors have been affecting when the economy was recovering from
Indian economy negatively, like the slump in recession post the Korean War.
demand and lower consumption.
 To ease the pressure, central bank slashed About Bond yield
the repo rate by a cumulative number of 135  The effective rate of return that a bond earns
basis points. But the benefit was not will be called bond yield. Rate of return is
transmitted to the consumer i. e. rate cut was linked to the price of the bond. As the price
not passed on. changes Rate of return also changes.
 Thus, RBI is using some of the  There are 2 components of bond i. e. face
unconventional methods to bring down value (bond's price when it is first issued)
interest rates on long-term loans. and coupon payment (Fixed annual return
 Notably, high market yields on long-term on the bond).
government securities often send interest  E. g. if the Face value is 100 and coupon rate
rates on long-term loans soaring. is 5, then the bond’s yield, or effective rate
 Between the yield on short term and long- of interest, is 5%. Now if due to competitive
term bonds, the 10-year bond yield is the bidding, price of the bond increases to 110
benchmark for interest rates on all fixed-rate (Coupon rate will remain the same). Then
loans. the yield falls to 4. 5%.
 RBI using Special OMO, purchased 10-year  Thus, a bond’s price and its yield are
government bonds in the hope of pulling the inversely related.
bond yield downwards and in effect interest
rates as well.
5 | Economy
How interest rates and bond yield are related?

Generally, Interest rates and bond yield are aligned. If there is any difference between initial coupon
payment and interest rates in the country, market (demand-supply matrix) forces start working to
align them.
e. g. if the interest rate in an economy is 4% and govt. has announced a bond with a 5% yield then due
to higher return, people will invest more in this bond. It would result in an upwards shift in the prices
and downward shift in the bond yield. Thus aligning the interest rate and bond yield.
2. Long-Term Repo Operations (LTROs)
Why in news: RBI has announced LTRO, a new liquidity facility.

About LTRO
 Under LTRO, RBI announced the infusion of ₹1 lakh crore into the banking system in phases.
 The infused funds will be provided to banks on the prevailing repo rate for 1 to 3 years.
 As collateral against loans, RBI will accept the government securities with matching or higher
tenure.
 LTRO will be in addition to the existing liquidity adjustment facility (LAF) and marginal standing
facility (MSF) operations.
 At present, under the liquidity adjustment facility (LAF) and marginal standing facility (MSF),
RBI facilitates short term money to banks, ranging from 1-28 days.
 LTROs will be conducted on CBS (E-KUBER) platform.
Reasons Marginal Standing Facility

 Despite RBI’s step to slash the repo rate by 135  MSF is the overnight liquidity support
basis points since January 2019, very small facility for commercial banks by RBI for
changes could be seen in the lending rate to emergency-situations, under which banks
borrowers. can avail borrow funds at an interest rate,
 As a reason for this, banks complained that It higher than the repo rate.
is not viable for them to cut down lending
rates based on repo rate cut as repo loansLiquidity Adjustment Facility
constituted only a minuscule portion of their  LAF is the facility for scheduled
overall funds. commercial banks (excluding RRBs) and
 Moreover, Under the LAF, banks could primary dealers either to avail of liquidity
borrow only up to a maximum of 0. 75 percent in case of the requirement (At Repo) or to
of their net demand and time liabilities. park excess funds with the RBI (At
Reverse Reo).
 LAF is conducted by way of repurchase
agreements (repos and reverse repos)
with RBI.
Benefits
 The cheap loans of short duration, aligned with repo rates will help banks to cut down the short
term lending rates.
 It will also pull the overall short-term interest rate downwards.
 The LTRO will also help bring down the yields for shorter-term securities (in the 1-3-year tenor)
in the bond market.
3. Partial credit guarantee scheme
Why in news: Union cabinet approved a partial credit guarantee scheme for financially sound Non-
Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs).
6 | Economy
About Scheme
The scheme is offered to Public Special Mention Accounts (SMA)
Sector Banks (PSBs) for Special Mention Accounts (SMA) are those accounts that have
purchasing high-rated pooled the potential to become an NPA/Stressed Asset. Based on their
assets from financially sound delay in repayment, Borrowers accounts are classified into the
Non-Banking Financial following types of SMAs:
Companies (NBFCs) /Housing 1. SMA-0, where repayment overdue is between 1-30 days.
Finance Companies (HFCs) ’. 2. SMA-1, where repayment is overdue between 31-60 days.
3. SMA-2, where repayment is overdue between 61-90 days.
Objective: To save financially
sound NBFCs/HFCs from distress sale of their assets to meet their fund requirements occurring due
to the temporary asset-liability mismatches.
The window of guarantee will remain open till 30th June 2020 or till such date by which Rs. 1, 00, 000
crore assets get purchased by the Banks.
Covered assets: Under this scheme, the assets that PSBs are allowed to purchase are high-rated
pooled assets, rated BBB+ or higher, from ‘financially sound’ entities.
Covered entities: NBFCs / HFCs that may have slipped into SMA-0 category during the one year
period prior to 1. 8. 2018, are covered under this scheme.
4. External Benchmark based interest rates
Why in news: RBI mandated all banks to link their floating rate loans to an external benchmark
instead of the marginal cost-based lending rate (MCLR).
This step by RBI was taken to ensure the transmission of RBI's action on key policy rates in a timely
and transparent manner to the ender user, i. e. , the borrower.
About MCLR
 MCLR based regime replaced the base rate regime. MCLR is an internal benchmarking system
based on various factors such as fixed deposit rates, source of funds and savings rate.
 The price of loans or interest rate of loan comprises the MCLR and the bank's profit margin i. e.
the spread.
 As MCLR was based on internal system for each bank, lack of transparency and standardization
was there.
External Benchmark based interest rates

Under this method, Banks are free to choose from any of the external benchmark mentioned below:
a. RBI's Repo Rate
b. 91 day Treasury Bill yield published by the Financial Benchmarks India Pvt Ltd (FBIL)
c. 182 days Treasury Bill yield published by the FBIL
d. Any other benchmark market interest rate developed by the FBIL
Over and above External Benchmarks, banks are free to charge a spread, i. e. , margin and risk
premium.
e. g. if a bank takes repo rate as external benchmark, then,
Interest rate applicable on home loans = Repo rate + spread (margin) + risk premium.
Interest rate must be reset as per the external benchmark at least once every three months.
5. Negative Interest rate
Why in news: Negative Interest rate is becoming a more attractive option for economies worldwide
to counter an unwelcome rise in their currencies.
7 | Economy
About Negative Interest rate
This tool was used by a few economies post-2008 global financial crisis, to boost their subdued
economic growth.
Under a negative rate policy, financial institutions are required to pay interest for parking excess
reserves with the central bank.
That way, central banks penalize financial institutions for holding on to cash in the hope of
prompting them to boost lending.
Pros of negative interest rate.

 Help in depreciation of the country’s currency, making exports profitable.
 lowering borrowing costs
Cons of Negative interest rate

 It may put downward pressure on bond yield and squeeze the margin for financial institutions.
 Financial Institutions will hold off onto lendings as they would have to pay interest on
borrowing.
 It would discourage savings in the banks as depositors would like to hold their cash instead of
depositing and paying the interest rate for that.
6. Is the Indian economy staring at stagflation?
Why in News: A recent rise in retail price inflation to a nearly six-year high of 7. 35% in December
ignited the debate that the Economy of India may be moving towards stagflation.
Grasp the concepts

Stagflation: It is a scenario in an economy, where it faces both low growth (and high unemployment)
and high inflation, at the same time.
Factors that led to stagflation debate?

 In December, retail price inflation was at a nearly six-year high of 7. 35%.
 There is a lack of sufficient consumer demand for goods and services.
 The Indian economy has now faced six consecutive quarters of slowing growth since 2018. The
growth rate for the most recent quarter for which data is available was just 4. 5%.
8 | Economy
The most important factor that keeps the hope up is the fact
Core inflation: It shows a price rise
that core inflation, which excludes items such as vegetables
in all goods and services excluding
whose prices are too volatile, remains within the RBI’s
energy and food articles.
targeted range.
Consumer Food Price Index:
 It is a measure of change in retail
Why stagflation is a major issue?
prices of food products consumed
 In a normal scenario, to boost the consumer demand to
by a defined population group in
recover from the slowdown, greater spending by the
a given area with reference to a
government and the central bank, is prescribed.
base year.
 But when stagflation keeps the government from taking
 calculated on a monthly basis.
such countercyclical policy steps as it may push the
already high inflation rate upwards.  Released by: Central Statistics
 Moreover, in such a scenario, RBI also cannot cut interest Office (CSO), Ministry of Statistics
rates further, to assist the economy. and Programme Implementation
 On the one hand, the slowdown in growth could affect (MOSPI).
peoples’ incomes. On the other side, higher inflation  It is released for 3 categories i. e.
could cause a reduction in people’s standard of living as rural, urban and combined,
they can afford fewer things. separately on an all India basis
 Stagflation for the first time arose in the US in the 1970s
due to an increase in oil prices.
 It also falsifies the Phillip Curve that suggests there is an inverse relationship between Inflation
and unemployment i. e. lower the inflation, higher the unemployment and higher the inflation,
lower the unemployment.
9 | Economy
Inclusive growth 03
1. DRAFT NATIONAL RESOURCE 2. NATIONAL STRATEGY FOR
EFFICIENCY POLICY FINANCIAL INCLUSION
3. Randomised Control Trials (RCTs)
1. DRAFT NATIONAL RESOURCE EFFICIENCY POLICY
Why in news: Ministry of Environment, Forest and Climate Change released Draft National Resource
Efficiency Policy (NREP).
Need
 Material consumption in India has increased by six times from 1. 2 billion tonnes in 1970 to 7
billion tonnes in 2015.
 Consumption is further expected to double, due to rapid urbanisation, increasing population, and
growing economic development.
 It may result in serious resource depletion and environmental degradation.
 To tackle this issue, policy seeks to enable efficient use of natural resources and promote
upcycling of wastes.
About Policy
 Draft NREP envisions a future with environmentally sustainable and equitable economic growth,
resource security, healthy environment (air, water and land), and restored ecosystems with rich
ecology and biodiversity.
 Policy seeks to Implement resource efficiency for all resources including both biotic and abiotic,
sectors across all their life cycle stages i. e. raw material extraction, material processing, product
manufacturing, use and maintenance, disposal or recycling.
 The Policy aims to achieve India’s commitments under the UN Sustainable Development Goals
(SDGs) by 2030.
 Policy stresses on 6Rs Principle (namely, reduce, reuse, recycle, refurbish, redesign and
remanufacture)
The guiding principles of the policy are set as:

 Reduce primary resource consumption to ‘sustainable’ levels, in keeping with achieving the
Sustainable Development Goals and staying within the planetary boundaries
 Create higher value with less material through resource-efficient and circular approaches
 Minimize waste creation and loss of embedded resources at the end-of-life of products.
 Ensure the security of material supply and reduce import dependence for essential materials.
 Create employment opportunities and business models beneficial to the cause of environment
protection and restoration.
Authority
 Setting up a ‘National Resource Efficiency Authority’ (NREA) to develop an action plan with
three years’ time-frame, create and maintain a database, measure progress and build capacities.
10 | Economy
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2. NATIONAL STRATEGY FOR FINANCIAL INCLUSION
Why in news: RBI unveiled the five year (2019-24) National Strategy for Financial Inclusion.
Aim: To provide access to formal financial services affordably, broadening & deepening financial
inclusion and promoting financial literacy & consumer protection.
About strategy
Financial inclusion has been defined as “the process of ensuring access to financial services, timely
and adequate credit for vulnerable groups such as weaker sections and low-income groups at an
affordable cost”.
Prepared by: Strategy has been prepared by RBI under the aegis of the Financial Inclusion Advisory
Committee and is based on the inputs and suggestions from Government of India, other Financial
Sector Regulators viz. , Securities Exchange Board of India (SEBI), Insurance Regulatory and
Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority
of India (PFRDA).
Reasons for financial exclusion
Figure: Causes of Financial Exclusion

Source: RBI doc
Strategic Pillars of financial inclusion and recommendations
1. Universal Access to Financial Services

Objectives: Every village to have
access to a formal financial service
provider within a reasonable distance
of 5 KM radius.
Easy and hassle-free digital process
and processes.
Less-paper ecosystem
Recommendations:
Providing a robust and efficient digital
network infrastructure to all the
financial service outlets / touch
points.
To extend the digital financial
infrastructure to co-operative banks
and other specialized banks (Like
payment banks) as well as other non-
bank entities such as fertilizer shops.
Source: RBI doc
11 | Economy
2. Providing Basic Bouquet of Financial Services

Objective: a basic bouquet of financial services should be provided to Every adult who is willing
and eligible including Bank account, insurance products, pension product and investment
product.
Recommendation:
Designing and developing customized financial products by banks and ensuring efficient
delivery of the same through leveraging Fin-tech and BC (Banking correspondent) networks.
To facilitate delivery of a wider range of financial products, banks should strive for capacity
building of their BCs
3. Access to Livelihood and Skill Development

Objective: A new entrant to the financial system willing to undertake any livelihood or skill
development program, should be given the information of relevant government programs.
Recommendation
To attain convergence of objectives of various employment generation and skill development
programs. NRLM, NULM, PMKVY, etc. through an integrated approach.
New entrants should be assisted through information dissemination and coordination regarding
new livelihood programs.
4. Financial Literacy and Education

Objective: Easy to understand financial literacy modules with specific target audience orientation
(e. g. children, young adults, women, new workers/ entrepreneurs, family person, about to retire,
retired, etc. in the forms of Audio-Video/ booklets shall be made available t spread awareness.
Recommendation
It is recommended that the existing mechanism of SLBC/ DCC/ DLRC be leveraged and
coordinated efforts are made by RBI, NABARD, NRLM resource persons, NGOs, PACS,
Panchayats, SHGs, Farmers’ Clubs, etc. to promote financial literacy at grassroots levels.
5. Customer Protection and Grievance Redressal

Customers shall be made aware of the recourses available for the resolution of their grievances.
About storing and sharing of customer’s biometric and demographic data, adequate safeguards
need to be ensured to protect the customer’s Right to Privacy.
Recommendation:
There is a need to have a robust customer grievance redressal mechanism at different levels. It is
recommended that internal audits should also assess the qualitative efficacy of the customer
grievance redressal mechanism already in place in the banking system viz. , Internal Ombudsman
Scheme.
6. Effective Co-ordination
Objective: There needs to be a focused and continuous coordination between the key
stakeholders viz. Government, the Regulators, financial service providers, Telecom Service
Regulators, Skills Training institutes, etc. to make sure that the customers can use the services in a
sustained manner.
Recommendation:
Promoting coordination through technology and adopting a decentralized approach to planning
and development by creating separate smaller forums will help accelerate local level financial
inclusion.
3. Randomised Control Trials (RCTs)
Why in news: Esther Duflo, Abhijit Banerjee and Michael Kremer were awarded with 2019 Nobel
Prize for their work adapting the method of randomized control trials (RCTs) to the field of
development.
12 | Economy
About Randomised Control Trials (RCTs)

A randomised controlled trial is an experiment that is designed to isolate the influence that a certain
intervention or variable has on an outcome or event.
RCT is usually used in medical drug trials since long, thus its use in development economics is a
novel idea.
How does it work?

At any point in time, there are multiple factors that work in tandem to influence various social events.
e. g. For promoting education various interventions can be taken, such as providing more textbooks,
midday meal, hiring more teachers, or Providing teaching assistance to the weakest students etc.
RCTs allow economists and other social science researchers to isolate the individual impact that a
certain factor alone has on the overall event.
For instance, to measure the impact that hiring more teachers can have on children’s learning,
researchers must control for the effect that other factors such as intelligence, nutrition, climate,
economic and social status etc. , which may also influence learning outcomes to various degrees, have
on the final event.
How is it used?
In an RCT, two groups are randomly selected from a homogeneous population: the first receives an
“intervention” (medicine, grant, loan, training, etc. ), while the second gets a “placebo” – either a
different intervention or no intervention at all. After a certain time, the two groups are evaluated to
compare the efficacy of the intervention or analyze two distinct approaches.
13 | Economy
Unemployment & poverty 04

1. Yuwaah Youth Skilling Initiative 3. Future Skills PRIME
2. India Skills Report 2019-20
1. Yuwaah Youth Skilling Initiative
Why in news: UNICEF has launched ‘YuWaah’ Generation Unlimited in India.
About initiative
‘YuWaah’ launched in India, is one of the 1st national initiative around the world, linked to the global
Generation Unlimited movement.
Aim: Providing education, skills, and employment to more than 300 million young Indians aged 10-
24 years.
Launched by: Women and Child Development Ministery in alliance with UNICEF
It is a multi-stakeholder alliance that aims to facilitate youth to gain relevant skills for productive
lives and the future of work.
It intends to create platforms to guide youth to market opportunities (career guidance, mentorship,
internships, apprenticeships) and facilitate the integration of career guidance in school education.
About Generation Unlimited

Generation Unlimited is a global movement, supported by UNICEF and began in New York in
September 2018.
Generation Unlimited brings young people together with the private sector, governments,
international and local organizations to tackle the urgent challenge of investing in their learning and
training so that they are prepared for the complex and fast-changing world of work and can be active
and engaged citizens.
14 | Economy
2. India Skills Report 2019-20
Why in news: 7th edition of India Skills Report 2019- National Policy on Skill Development
20 has been released and Entrepreneurship 2015
About report Policy supersedes the 2009 policy on skills

Prepared by: Wheebox (global talent-assessment development.
company), PeopleStrong and Confederation of Indian
Industry (CII) in collaboration with UNDP, AICTE, Objective: To empower the individual, by
and Association of Indian Universities. enabling her/him to realize their full
potential through a process of lifelong
Objective: It captures the skill level of the supply side learning.
and changing trends of demand-side for skills i. e.
employability and hiring trends in the market. The core objective of the
entrepreneurship framework is to
Findings of the report coordinate and strengthen factors
 Compared to 33% in 2014 and 47. 38%, about 46. 21 essential for growth of entrepreneurship
per cent students were found employable or ready across the country.
to take up jobs in 2019.
 Female employability witnessed an upward trend Pradhan Mantri Kaushal Vikas Yojana
at 47 per cent this year from 38 per cent in 2017 (PMKVY)
and 46 per cent in 2018.
 A rising share of gig workers. Launched by: Ministry of Skill
Development & Entrepreneurship
Performance of courses (MSDE).
 MBA Students at 54 per cent found to be most
employable as against 40 per cent in the last two It is a Skill Certification Scheme to enable
years. a large number of Indian youth to take up
 Employability of B Pharm, Polytechnic, B Com and industry-relevant skill training to help
BA courses, on the other hand, increased by more them in securing a better livelihood.
than 15 per cent.
 Employability of BTech, Engineering. MCA Recognition of Prior Learning (RPL)
graduates, Technical & Computer-related courses component assess and certify the skills of
found to be declining. Individuals with prior learning experience
or skills.
Performance of states
 Top 3 states in terms of employability are Under this Scheme, Training and
Maharashtra followed by Tamil Nadu and Uttar Assessment fees are completely paid by
Pradesh. the Government.
 West Bengal and Haryana registered a dip in
ranking, could not make it to top 10 states.
 Mumbai and Hyderabad respectively found to be top 2 most employable cities.
 Bengaluru, New Delhi, Pune, Lucknow, and Chennai have maintained their presence in the top
10 over the last six years.
3. Future Skills PRIME
Why in news: Government has approved the expansion of the 'Future Skills' initiative and the
expanded digital platform would be called Future Skills PRIME.
About Future Skills
Launched by: Wipro (as a part of Wipro’s CSR initiative, TalentNext) in partnership with NASSCOM
(National Association of Software and Services Companies).
15 | Economy
Aim: To reskill 2 million IT professionals and potential employees & students in the industry over 5
years through the FutureSkills portal.
Focus areas: It focuses on 155+ skills spanning across 70+ job roles on 10 emerging technologies
namely Artificial Intelligence, Blockchain, Big Data Analytics, Cloud Computing, Cyber Security,
Internet of Things, Mobile Tech, Robotic Process Automation, Virtual Reality & 3D Printing
Future skill PRIME
Launched by: Ministry of Electronics and IT along with NASSCOM

To train 4 lakh professionals in the next three years, Future Skills has been expanded through PRIME
to the industry professionals across different segments, higher education students and government
officials.
It is the next phase of the Future Skills platform and is open to professionals from outside the IT
industry as well, who want to skill themselves in ten emerging technologies.
The courses are a mix of material developed by industry and academia. Several course materials are
free, while more advanced courses are available for between Rs 6, 000-70, 000, depending on the kind
of technology.
16 | Economy
Money and banking 05

1. RBI revised the extant guidelines on 8. DEVELOPMENT BANKS
liquidity risk management for NBFCs 9. Small Finance Banks
2. India International Financial Services 10. Microfinance Institutions- RBI raises
Centres (IFSC) Authority Bill, 2019 lending limit
3. RBI REGULATORY SANDBOX 11. Sovereign Gold Bond (SGB) scheme
4. ADVISORY BOARD FOR BANKING 12. Urban Cooperative Banks (UCB)
FRAUDS (ABBF) 13. Mobile Aided Note Identifier (MANI)
5. Bank deposit insurance App
6. BHIM 2. 0 14. Revised Supervisory Action Framework
7. Fit-and-proper criteria (SAF)
1. RBI revised the extant guidelines on liquidity risk management for NBFCs
Why in news: To strengthen and raise the standard of asset-liability management (ALM) framework
applicable to non-banking finance companies (NBFCs), RBI revised the extant guidelines on liquidity
risk management for NBFCs.
Applicability: Guidelines will apply to:

 All non-deposit taking NBFCs with asset size of ₹ 100 crore and above.
 Systemically important Core Investment Companies and all deposit-taking NBFCs irrespective of
their asset size.
Exclusions  Type I - NBFC-ND not accepting public

 Type 1 NBFC-NDs funds1/ not intending to accept public funds
 Non-Operating Financial Holding in the future and not having customer
Companies and interface2/ not intending to have customer
 Standalone Primary Dealers interface in the future.
 Type II - NBFC-ND accepting public funds/
Guidelines intending to accept public funds in the future
 The net cumulative mismatches for 1-7 and/or having customer interface/intending
days, 8-14 days, and 15-30 days shall not to have customer interface in the future.
exceed 10%, 10% and 20% of the
cumulative cash outflows in the respective Liquidity Coverage Ratio
time buckets.  The liquidity coverage ratio requires banks to
 NBFCs shall adopt liquidity risk hold enough high-quality liquid assets
monitoring tools/metrics in order to (HQLA) – such as short-term government
capture strains in liquidity position. debt – that can be sold to fund banks during a
 All non-deposit taking NBFCs with asset 30-day stress scenario designed by regulators.
size of ₹ 10, 000 crore and above, and all  LCR was introduced as part of the Basel III
deposit-taking NBFCs irrespective of their reforms.
asset size, shall maintain a liquidity buffer  The LCR is calculated as:
in terms of LCR (Liquidity Coverage LCR = HQLAs / Net cash outflows
Ratio).
17 | Economy
 Maintaining LCR will ensure, banks have sufficient High-Quality Liquid Asset (HQLA) to
survive an acute liquidity stress scenario.
 The LCR requirement will be binding on NBFCs from December 1, 2020, with the minimum
HQLAs to be held being 50% of the LCR, progressively reaching up to the required level of 100%
by December 1, 2024.
2. India International Financial Services Centres (IFSC) Authority Bill, 2019
Why in news: Rajya Sabha passed the International Financial Services Centres (IFSCs) Authority Bill,
2019.
About bill
The Bill provides for the establishment of a unified authority to regulate and develop all financial
services in the IFSCs set up in Special Economic Zones (SEZs).
IFSC authority will consist of nine members, appointed by the central government. The Authority will
consist of nine members, appointed by the central government. The authority will consist of:
i. The Chairperson,
ii. 4 members to be nominated from the RBI, SEBI, IRDAI, and the PFRDA
iii. 2 members from amongst officials of the Ministry of Finance
iv. 2 members to be appointed on the recommendation of a Selection Committee.
Functions of authority include:

1. Regulating financial products, financial services, and financial institutions in an IFSC which have
been approved by any regulator (such as the RBI or SEBI).
2. Regulating any other financial products, services, or institutions in an IFSC
3. Regulating any other financial services, products, or institutions that may be permitted in an IFSC.
3. RBI REGULATORY SANDBOX
Why in news: Recently, RBI released the enabling framework for regulatory sandbox, for innovation
in fintech firms.
RBI’s framework
RBI will launch the sandbox for entities that meet the criteria of the minimum net worth of ₹25 lakh as
per their latest audited balance sheet.
The entity should either be a company incorporated and registered in the country or banks licensed to
operate in India.
Services included are money transfer services, digital know-your-customer, financial inclusion and
cybersecurity products.
Services excluded are cryptocurrency, credit registry and credit information.
About REGULATORY SANDBOX (RS)

 It refers to live testing of new products or services in a controlled/test regulatory environment for
which regulators may (or may not) permit certain regulatory relaxations for the limited purpose
of the testing.
 The RS allows the regulator, the innovators, the financial service providers (as potential deployers
of the technology) and the customers (as final users) to conduct field tests to collect evidence on
the benefits and risks of new financial innovations, while carefully monitoring and containing
their risks.
Advantages
18 | Economy
 Without the need for a larger and more expensive roll-out, Users of an RS can test the product’s
viability.
 RS fosters ‘learning by doing’ on all sides. Feedback from customers, as end-users, educates both
the regulator and the innovator as to what costs and benefits might accrue to customers from
these innovations.
 RS could lead to better outcomes for consumers through an increased range of products and
services, reduced costs and improved access to financial services.
4. ADVISORY BOARD FOR BANKING FRAUDS (ABBF)
Why in news: Central Vigilance Commission (CVC) has constituted the Advisory Board for Banking
Frauds (ABBF).
About ABBF
 It will be a 5 member board and formed in consultation with the RBI.
 The board will have one nominated member from the financial sector and the tenure of the
chairperson and members will be for a period of two years.
 It is aimed at distinguishing honest business decisions of bankers from the ones that are not.
Functions
 The board’s jurisdiction would be limited to those cases involving the level of officers of general
manager and above in public sector banks
 Board will act as a first level of examination for all large fraud cases before recommendations or
references are made to the investigative agencies by the respective Public Sector Banks.
 It will handled all alleged frauds of a magnitude of at least Rs 50 crore in state-run banks and
public financial institutions.
5. Bank deposit insurance
Why in news: In budget 2020 speech, Union Finance Minister proposed to hike the bank deposit
insurance in scheduled commercial banks to Rs 5 lakh per depositor from the current Rs 1 lakh.
This proposal came in the wake of the PMC (Punjab and Maharashtra Cooperative) Bank crisis.
Present status
As per guidelines by RBI, Insurance is provided on deposits with all commercial banks and
cooperative banks under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Exception:
Only entities not covered under DICGC are Primary About DICGC
Cooperative Societies.  Established under the Deposit
Few types of deposits are not covered i. e. Insurance and Credit Guarantee
 Deposits of foreign governments Corporation Act, 1961, It is a wholly-
 Deposits of Central/State Governments owned subsidiary of Reserve Bank of
 Inter-bank deposits India.
 Deposits of the State Land Development Banks  It was established to provide insurance
with the State co-operative bank for deposits and guarantee of credit
 Any amount due on account of and deposit facilities.
received outside India
 Any amount, which has been specifically exempted by the corporation with the previous
approval of Reserve Bank of India
Insurance limit: Deposits up to Rs 1 lakh for both the principal and interest amount are insured. It
includes all deposits held by a person in the current account, savings account, fixed deposits and so
on.
19 | Economy
Even if a person is having multiple accounts with the same bank, the limit of all accounts combined
remains the same i. e. Rs. 1 lakh.
e. g. If a bank goes bankrupt and an individual's deposits exceed Rs. 1 lakh then she/he will only get
Rs. 1 lakh.
6. BHIM 2. 0
Why in news: Government unveils BHIM 2. 0 with additional language support and features.
About BHIM
Bharat Interface for Money (BHIM) is an app that allows real time fund transfer using Unified
Payments Interface (UPI).
It is developed by National Payments Corporation of India (NPCI).
 Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single
mobile application (of any participating bank), merging several banking features, seamless fund
routing & merchant payments into one hood.
 It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per
requirement and convenience.
BHIM 2. 0
 This new version of the app includes more features such as a 'Donation' gateway, increased
transaction limits for high-value transactions, linking multiple bank accounts, offers from
merchants, option of applying in IPO, gifting money.
 It also supports three additional languages -- Konkani, Bhojpuri, and Haryanvi -- over and above
the existing 13 languages.
7. Fit-and-proper criteria
Why in news: RBI updates and tightened the fit and proper criteria for PSU bank directors.
Objective: The Centre’s nominee director shall not be part of the nomination and remuneration
committee (NRC).
Qualification: The candidate’s age should be between 35 to 67 years as on the cut-off date fixed for
submission of nominations for election and should at least be a graduate.
All the banks are required to constitute a Nomination and Remuneration Committee consisting of
 a minimum of three non-executive directors from amongst the Board of Directors, of which
o not less than one-half shall be independent directors
o at least one member should be from the Risk Management Committee of the Board
The non-executive chairperson of the bank may be appointed as a member of the committee but shall
not chair such a committee.
An elected director can be appointed for three years and could be re-elected but cannot hold office for
than six years.
Negative list of people who would not be eligible for directorship are:
 Candidate should not be holding the position of a Member of Parliament or state legislature or
municipal corporation or municipality or other local bodies.
 Candidates engaged in stockbroking, or a member of any other board of a bank or financial
institution, connected with hire purchase, financing, money lending, investment, leasing and
other para banking activities
 The candidate should not be a member of the Board of any bank or the Reserve Bank or a
Financial Institution (FI) or an Insurance Company or a NOFHC holding any other bank.
20 | Economy
8. DEVELOPMENT BANKS
Why in news: Finance minister in her speech mentioned the idea of setting up a development bank.
About development banks

 Development banks are financial institutions that provide long-term credit for capital-intensive
investments.
 These investments are spread over a long period and yield low rates of return and are in fields
like urban infrastructure, mining and heavy industry, and irrigation systems.
 As these banks, lend for the long term, their sources of the fund are required to be of long-term
nature such as long-dated securities in the capital market, subscribed by long-term savings
institutions such as pension and life insurance funds and post office deposits.
Development banks in India

 IFCI (Industrial Finance Corporation of India), India’s first development bank for financing
industrial investments, was set up in 1949.
 In 1955, ICICI (Industrial Credit and Investment Corporation of India) was set up as a
collaborative effort between the government with majority equity holding and India’s leading
industrialists.
 In 1964, IDBI was set up as an apex body of all development finance institutions.
 In 1991, on the recommendation of Narasimham Committee reports on financial sector reforms,
development finance institutions were disbanded and commercial banks replaced them.
Difference between commercial banks and development banks

 Loans provided by the commercial banks are of short term and medium-term (against the
mobilisation of short- to medium-term deposits), compared to long-term loans provided by
development banks.
 Commercial banks accept deposits from the public. Development banks accept deposits from
commercial banks, Central and State governments.
 Commercial banks finance needs of the consumer, whereas development banks provide refinance
facilities to commercial banks.
9. Small Finance Banks
Why in news: Guidelines for ‘on tap’ licensing of Small Finance Banks (SFB) in the private sector,
issued by RBI.
About guidelines
 Payment banks can apply for conversion into SFBs after five years of operations.
 A minimum Rs 200 crore net worth is needed for the license of small finance banks.
 For Primary (Urban) Co-operative Banks (UCBs), willing for transiting into Small Finance Banks
(SFBs) will initially require a net worth of ₹ 100 crores, which will have to be increased to ₹ 200
crores within five years from the date of commencement of business.
 SFBs will be given scheduled bank status immediately upon commencement of operations.
 SFBs will be allowed to open banking outlets from the date of commencement of operations.
 Except for promoters, investors will not be allowed to hold more than 10 percent stake in the SFB.
 The listing of SFB will be mandatory within three years after it reaches the net worth of Rs 500
crore for the first time.
21 | Economy
Difference between Payment Banks and Small Finance Banks
Source: Livemint
10. Microfinance Institutions- RBI raises lending limit
Why in news: RBI has revised the criterion for NBFC-MFIs, after taking into consideration the
important role played by MFIs in delivering credit to those in the bottom of the economic pyramid.
About revised criterion

 It raised the lending cap for microfinance institutions to Rs 1. 25 lakh from the previous Rs. 1
lakh.
 It Increases the household income limit for borrowers of NBFC-MFIs from the current level of ₹ 1.
00 lakh for rural areas and ₹ 1. 60 lakh for urban/semi-urban areas to ₹ 1. 25 lakh and ₹ 2. 00 lakh,
respectively.
About NBFC-MFIs
 On the recommendations of Y. H. Malegam committee, this separate category of NBFCs was
created.
 Microfinance is a source of financial services for entrepreneurs and small businesses lacking
access to banking and related services.
Criterion for identification of NBFC-MFIs

 A minimum of 75% of an NBFC-MFI’s loan portfolio must have been originated for income-
generating activities.
 Additionally, an NBFC-MFI must have 85% of its total assets as qualifying assets (excluding cash,
balances with banks and financial institutions, government securities and money market
instruments).
11. Sovereign Gold Bond (SGB) scheme
Why in news: After consultation with Reserve Bank of India, the government has decided to issue
Sovereign Gold Bonds.
About scheme
 Substitute for holding physical gold, SGBs are gold denominated (in grams) government i. e. each
bond represents one gram of gold of 999 purity.
 On behalf of govt. , Bonds will be issued by RBI.
22 | Economy
 Investors are assured of the market value of gold at the time of maturity and periodical interest.
 One exclusive benefit of gold bonds that is not available on gold ETF or gold mutual funds is that
any capital gains, at maturity is tax-free.
 The bonds will be restricted for sale to resident Indian entities as defined under the Foreign
Exchange Management Act, 1999.
 For Individuals, the minimum and maximum permissible investment limit will be 1 gram and 4
kg of gold respectively, whereas the limit for HUF will be 4 kg and for trusts, 20 kg.
 Gold bonds have a maturity period of eight years. Any sell before that period can either tae lace
at exchange or on permission of govt. (After 5 years).
 GST is not levied on sovereign gold bonds. Whereas Physical gold purchase attract GST at 3%.
12. Urban Cooperative Banks (UCB)
Why in news: RBI capped withdrawals from Punjab and Maharashtra Co-operative (PMC) Banks.
About Urban Cooperative Banks
Co-operative banks, unlike commercial banks, were formed on the concept of co-operative credit
societies where community members come together to extend loans to each other, at favorable terms.
Co-operative banks are broadly classified into urban or rural co-operative banks based on their region
of operation. Urban co-op banks are classified into scheduled and non-scheduled banks
Urban Co-operative Banks (UCBs), though not formally defined, refers to primary co-operative banks
located in urban and semi-urban areas.
Regulations
 Urban co-operative banks are regulated and supervised by State Registrars of Co-operative
Societies (RCS) and by Central Registrar of Co-operative Societies (CRCS) in case of multi-state
co-operative banks.
 The banking related functions are regulated and supervised by the Reserve Bank under the
provisions of the Banking Regulation Act, 1949.
Difference between scheduled commercial banks and cooperative banks

 While commercial banks are fully controlled by RBI, Cooperative banks are partially regulated by
RBI (Lay down rules for their capital adequacy, risk control, and lending norms) and their
registration, audit, management, and resolution in the case of distress is regulated by Registrar of
Co-operative Societies.
 UCBs are structured as co-operatives, with their members carrying unlimited liability, whereas
commercial banks are structured as joint-stock companies.
 While in the case of commercial banks, there is a clear distinction between shareholders and its
borrowers, in the case of a UCB, borrowers can become shareholders.
13. Mobile Aided Note Identifier (MANI) App
Why in news: RBI launched a mobile app for visually impaired people to identify the denomination
of currency notes called the Mobile Aided Note Identifier (MANI).
Need for the app

It was reported that due to the same sizes of different currency notes visually challenged faced issues
in identifying the new currency notes.
Features of app
 It is capable of identifying the denominations of Mahatma Gandhi Series and Mahatma Gandhi
(New) series banknote.
 The app assists the visually impaired by scanning the currency note using their mobile camera
and revealing the denomination of the note audio output in both Hindi and English language.
 Once the app has been downloaded, it works in offline mode.
 The app does not authenticate a note as either genuine or counterfeit.
23 | Economy
14. Revised Supervisory Action Framework (SAF)
Why in news: To expedite the resolution of UCBs in financial stress, RBI revises the supervisory
framework, in line with the prompt corrective action (PCA) framework for commercial banks.
About SAF
On breach of specified threshold limits, SAF envisages corrective action by the UCB and/or
supervisory action by the Reserve Bank.
SAF can be imposed by RBI on UCBs (Urban Cooperative Banks) on Prompt Corrective
breach of the following parameters: Action framework
1. Asset quality: when its Net NPAs exceed 6% of its net advances. (PCA)
2. Profitability: when it incurs losses for two consecutive financial
years or has accumulated losses on its balance sheet. Under PCA commercial
3. Capital to Risk-weighted Assets Ratio (CRAR) : when its CRAR banks breaching certain
falls below 9%. parameters are put
4. when continued normal functioning of the UCB is no longer under watch by the RBI.
considered to be in the interest of its depositors/public.
Parameters include:
RBI may take the following actions, depending upon the severity of the  Capital to risk-
stress: weighted assets ratio
 Advising UCBs to submit a board approved action plan for (CRAR),
o reducing net NPAs below 6%, for restoring the profitability  Net non-performing
o wiping out the accumulated losses, and assets (NNPA), and
o increasing capital adequacy ratio to 9% or above within 12  Return on assets
months. (RoA)
 Asking the board of the UCB will be asked to review the progress  Leverage ratio
under the action plan on a quarterly/monthly basis and submit the
progress report.
 if CAR falls below 9%, RBI may also seek a board-approved proposal for the merger of UCB with
any other bank or converting it into a credit society.
 In case any of the parameters are breached, RBI can
o Restrict the fresh loans and advances carrying risk-weights.
o Restrict the declaration or payment of dividend or donation without prior approval
24 | Economy
Government budgeting 06
1. RBI’s transfer of funds to government 3. 15th Finance commission
2. Direct Tax Vivad se Vishwas Act, 2020 4. Off- budget financing
1. RBI’s transfer of funds to government
Why in news: RBI transfers surplus of a little over Rs 1. 76 lakh crore to the government.
These transfers have been made based on recommendations by the committee formed under the
chairmanship of former RBI Governor Bimal Jalan.
As per Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934, the central
bank is required to pay the balance of its profits to the central government after making provision for
bad and doubtful debts, depreciation in assets, and contributions to staff.
About RBI reserves

The central bank has three different funds that together comprise its reserves. These are the Currency
and Gold Revaluation Account (CGRA), the Contingency Fund (CF) and the Asset Development
Fund (ADF).
CGRA, which is made up of the gains on the revaluation of foreign exchange and gold, is by far the
largest and makes up the significant bulk of the RBI’s reserves.
CF is the second biggest fund, amounting to ₹2. 32 lakh crore in 2017-18.

As per recommendations of Bimal Jalan committee, the Economic framework of RBI has been revised
i. e. :
 RBI should maintain a Contingent Risk Buffer (CRB) (most of these comes from the CF) of
between 5. 5-6. 5% of the central bank’s balance sheet (Lower limit of 5. 5% was taken this time),
excess amount was to be transferred to the government. Thus, excess ₹52, 637 crore was
transferred.
 Committee recommended keeping CGRA in the range of 20-24. 5% of the balance sheet. As of
June 2019, it stood at 23. 3%. Thus in effect, ₹1, 23, 414 crore was transferred.
2. Direct Tax Vivad se Vishwas Act, 2020
Why in news: To reduce direct tax litigation, Government notified the Direct Tax Vivad se Vishwas
Act, 2020.
Objective: Providing a mechanism for resolution of pending tax disputes related to income tax and
corporation tax.
It offers a complete waiver of interest and penalty for payments made by the taxpayer by March 31,
2020.
An Appellant as per the bill could be an income tax authority or the person whose appeal is pending
before any appellate forum as on January 31, 2020.
25 | Economy
Appellate forum can be Supreme Court, the High Courts, the Income Tax Appellate Tribunals, and
the Commissioner.
Mechanism
The Bill proposes a resolution mechanism under which an appellant can file a declaration to the
designated authority to initiate resolution of pending direct tax disputes.
Based on the declaration, the designated authority will determine the amount payable by the
appellant against the dispute, within 15 days of the receipt of the declaration.
The taxpayer is then allowed 15 days to pay the amount.
Post payment designated authority will issue the certificate and appeals pending before the Income
Tax Appellate Tribunals and the Commissioner (Appeals) deemed to be withdrawn.
If there is appeals or petitions pending before the Supreme Court and High Courts then the appellant
himself would require to withdraw the appeal or petition.
3. 15th Finance commission
Why in news: 15th FC submitted its 1st report consisting of recommendations for the financial year
2020-21.
15th FC will provide 2 reports in total, the 2nd and final report with recommendations for the 2021-26
period will be submitted by October 30, 2020.
About 15th FC
Under Article 280 of the Constitution, 15th FC was constituted on November 27, 2017, under the
chairmanship of N. K. Singh. Its mandate included providing recommendations for a period of five
years from April 2020 to March 2025.
Highlights of the report111

After factoring in the conversion of state of J&K into 2 Union Territories, FC reduced the share of
states in the divisible pool of central taxes by one percentage point to 41%.
The 15th Finance Commission used the following criteria while determining the share of states: (i)
45% for the income distance, (ii) 15% for the population in 2011, (iii) 15% for the area, (iv) 10% for
forest and ecology, (v) 12. 5% for demographic performance, and (vi) 2. 5% for tax effort.
Compared to 14th FC, It made few changes to the criteria and weights, for calculation of allocation of
funds to the states.
Table: Criteria for devolution (2020-21)

Sources: Report for the year 2020-21, 15th Finance Commission; PRS.
26 | Economy
 It has included the criterion of of Demographic Performance, to reward the states performing
better in controlling population.
 ‘Forest’ has been replaced with ‘Forest and Ecology’ with increased weightage.
 ‘Tax efforts’: higher tax collection efficiency by states has been rewarded under this head.
 It is notable that all southern states except Tamilnadu set to loose some percentage in the
distribution of tax revenue.
 Bihar, Madhya Pradesh, Maharashtra, Rajasthan and West Bengal will be benefitted the most.
 Grants to local bodies has been increased from 3. 54% (in 2019-20) to 4. 31% of the divisible pool.
Few terms
 Income distance: It is the distance or difference of a state’s income from the state with the highest
income. Income here is calculated by finding out the average per capita GSDP between 2015-16
and 2017-18.
 Demographic Performance criterion: States with a lower fertility ratio will be scored higher on
this criterion.
 Forest and ecology: This criterion will be arrived at by calculating the share of dense forest of
each state in the aggregate dense forest of all the states.
 Tax effort: This criterion has been used to reward states with higher tax collection efficiency. It
has been computed as the ratio of the average per capita own tax revenue and the average per
capita state GDP during the three-year period between 2014-15 and 2016-17.
4. Off- budget financing
Why in news: CAG during scrutiny of few accounts, has found an alarming rise in the magnitude of
off-budget financing.
CAG has previously also warned about the off- FRBM Act
budget financing because it remains beyond the
control of the Fiscal Responsibility and Budget The FRBM Act aims to introduce
Management (FRBM) Act of 2003 or the Parliament. transparency in India's fiscal
management systems.
Grasp the concepts Off-budget financing The FRBM Act made it mandatory for the
Off-budget financing refers to the expenditure that’s government to place the following along
not funded through the budget. E. g. government sets with the Union Budget documents in
up a special purpose vehicle (SPV) to construct a Parliament annually:
road. On the guarantee of government, SPV will
1. Medium Term Fiscal Policy
likely borrow the money.
Statement
If the road is not a toll-road, then the government
2. Macroeconomic Framework
would require to support SPV for its interest
obligations. Statement
3. Fiscal Policy Strategy Statement
Thus, even though both interest payments and
Revenue deficit, fiscal deficit, tax revenue
government guarantee will have implications on
and the total outstanding liabilities be
budget, it is not being included in the calculation of
budget. Thus, it won’t increase the fiscal or revenue projected as a percentage of GDP in the
deficit of the government, even though expenditure MTFP statement
has been made. It requires the government to limit the
fiscal deficit to 3% of the GDP by 31
What has CAG suggested? March 2021 and the debt of the central
CAG has suggested a policy framework for off- government to 40% of the GDP by 2024-
budget financing that should include disclosures to 25, among others.
parliament about the amount, rationale and Recently government has raised the fiscal
objective of such funding. deficit target to 3. 8 per cent of the GDP
for 2019-20 using ‘escape clause’
27 | Economy
Industry 07
1. Kimberley Process Certification Scheme 7. Adjusted Gross Revenue (AGR)
2. Ease of Doing Business Report 2020 8. Draft E-commerce guidelines for consumer
3. Global Competitiveness Index protection, 2019
4. INDEPENDENT DIRECTOR’S 9. Mineral Laws (Amendment) Ordinance,
DATABANK 2020
5. National Public Procurement Conclave 10. Baba Kalyani report on Special Economic
(NPPC) Zone (SEZ) policy of India
6. Separate unique HS code for Khadi
1. Kimberley Process Certification Scheme
Why in news: India hosted Plenary meeting of the Kimberley Process Certification Scheme (KPCS)
About Kimberley Process
The Kimberley Process (KP) is a multilateral trade regime established in 2003 with the goal of
preventing the flow of conflict diamonds by uniting administrations, civil societies, and industries.
The core of this regime is the Kimberley Process Conflict diamonds are ‘rough
Certification Scheme (KPCS) under which States diamonds used to finance wars
implement safeguards on shipments of rough diamonds against governments’ - around the
and certify them as “conflict free". world.
At present, KPCS has 55 members representing 82

countries including EU with 28 members.
The Kimberley Process is chaired, on a rotating basis, by

participating countries. KP Vice-Chair is generally elected
by KP Plenary each year who becomes the Chair in the next
year.
About India’s participation

Currently, India exports around USD 24 billion cut and
polished diamonds and expected to reach an export target
of USD 1 trillion.
India is one of the founder members of Kimberley Process
Certification Scheme and is the Chair of Kimberley Process
for the year 2019.
India had earlier chaired KPCS in the year 2008.
28 | Economy
2. Ease of Doing Business Report 2020
Why in news: In the latest ranking for countries in ease of doing business, the World Bank has placed
India, 63rd out of 190 countries — an improvement of 14 places from its 77th position in last year.
Some of the highlights

New Zealand, Singapore and Hong Kong are ranked as top three in ease of doing business rankings
2020.
In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan,
Pakistan, Kuwait, China, India, and Nigeria.
Only two African economies rank in the top 50 on the ease of doing business; no Latin American
economies rank in this group.
Some of the reforms undertaken by India:
Source: Worldbank
 Doing business Project was launched by World Bank in 2002 and first study was released in 2003.
 It looks at domestic small and medium-size companies and measures the regulations applying to
them through their life cycle.
 2020 Index documented changes in regulation in 10 out of 12 areas of business activity (As
mentioned below) in 190 economies.
Figure: What is Measured in Doing Business?
29 | Economy
3. Global Competitiveness Index
Why in news: India has moved down 10 places to rank 68th on an annual global competitiveness
index, compared to 58th position in last index.
Findings of the index, 2019

 Fall in the ranking is largely due to improvements witnessed by several other economies.
 India is followed by some of its neighbours including Sri Lanka at 84th place, Bangladesh at
105th, Nepal at 108th and Pakistan at 110th place.
 Singapore has become the world's most competitive economy in 2019, pushing the US to the
second place.
 China is ranked 28th (the highest ranked among the BRICS) while Vietnam is the most improved
country in the region this year at 67th place.
About Index
Basic notion behind the GCI is to map the factors that determine the Total Factor Productivity (TFP)
in a country.
GCI is released annually by the WEF, was 1st launched in 1979, maps the competitiveness landscape
of 141 economies through 103 indicators organised into 12 pillars.
Figure: The Global Competitiveness Index 4. 0 framework
4. INDEPENDENT DIRECTOR’S DATABANK
Why in news: Government launched the Independent Director’s Databank.
About databank
As per sub-section 6 of Section
Launched by: Ministry of Corporate Affairs 149 of Act, Independent Director
means a director other than a
Maintained by: Indian Institute for Corporate Affairs (IICA) managing director or whole-time
Objective: Strengthening the institution of Independent director or a nominee director.
Directors under the Companies Act.
According to Section 149 (4)
This platform is expected to become a comprehensive Every listed public company shall
repository of both existing independent directors as well as have at least one-third of the total
individuals eligible and willing to be appointed as independent number of directors as
directors. independent directors.
30 | Economy
Salient features
 The databank will be maintained as per the provisions of the Companies Act, 2013.
 It would a platform for the registration of existing Independent Directors as well as individuals
aspiring to become independent directors.
 It will be powered by an Integrated Learning Management System, to enable Individual users to
easily acquire knowledge from diverse resources to develop distinct skills.
 Companies would also be able to register themselves with the databank, to connect with the right
skilled individuals for being considered for appointment as Independent Directors.
 Post-registration, the individuals, except for certain categories, have to pass a basic online
proficiency self-assessment test.
5. National Public Procurement Conclave (NPPC)
Why in news: 3rd edition of National Public Procurement Conclave (NPPC) organized.
Organised by: Government e-Marketplace (GeM) in association with Confederation of Indian
Industry (CII).
Key features:
 Panel discussions on the role of MSMEs, About GeM
Startups, and women in public procurement.  Government e-Market Place (GeM) is an
 It will facilitate an opportunity for buyers and end-to-end procurement system
sellers to share their experiences and developed for the purchase of goods and
opportunity. services of common use by government
buyers.
 Procurement Managers from various
Government Departments and PSUs will be  It is a completely paperless, cashless and
available to meet suppliers from the industry for system driven online marketplace that
the introduction of new products. allows all sellers to register themselves
and transact on the platform.
6. Separate unique HS code for Khadi
Why in news: Ministry of Commerce and Industry allocated a separate Harmonised System (HS)
code for Khadi.
About HS Code
 Harmonized System (HS) came into effect in 1988, is maintained by the World Customs
Organization, an independent intergovernmental body.
 It is a is a unique six-digit identification code, also called “universal economic language” for goods.
 It comprises about 5, 000 commodity group. Each commodity is identified by a unique code,
arranged in a legal and logical structure.
 It allows participating countries to classify traded goods on a common basis for customs
purposes.
 Custom officers use this code to clear every commodity that that enters or crosses any
international border.
 More than 200 countries in the world use this naming system.
31 | Economy
Significance of HS code
 As Khadi industry products in India are eco-friendly and natural, there is good demand of these
products in the International Markets.
 To further boost the export of The Khadi and Village Industries Commission (KVIC) is a
Khadi products, Commerce statutory body established by an Act of Parliament.
ministry accorded deemed
Export Promotional Council It took over the work of former All India Khadi and Village
Status (EPCS) to KVIC in 2006. Industries Board.
 However, due to the absence of
separate HS code, the data Major functions of the KVIC includes:
related to the export of Khadi  KVIC is charged with the planning, promotion,
used to be under general organisation and implementation of programs for the
clothing, making the export of development of Khadi and other village industries in
Khadi products difficult to the rural area.
categorize and calculate.
7. Adjusted Gross Revenue (AGR)
Why in news: The Supreme Court has upheld the definition of Adjusted Gross Revenue (AGR)
calculation as stipulated by the Department of Telecommunications.
What’s the issue?

The dispute between the DoT and telecom operators is mainly on the definition of this AGR.
As per DoT, the charges are calculated based on all revenues earned by a telco – including both
telecom or non-telecom related sources such as deposit interests and asset sales.
Whereas, Telcos, insist that AGR should comprise only the revenues generated from telecom services.
Supreme Court upheld the DoT’s definition of Adjusted Gross Revenue (AGR).
8. Draft E-commerce guidelines for consumer protection, 2019
Why in news: Department of Consumer Affairs issued draft guidelines on E-commerce.
Need
 Increasing popularity of E-commerce websites for shopping and other needs of everyday life.
 Increasing popularity has also exposed consumers to online frauds and unfair trade practices.
 Thus, the guidelines have been launched as a guiding principle to protect consumer from the
above-mentioned risks and protecting their legitimate rights and interests.
Prominent features of guidelines

 All e-commerce entities required to comply with the conditions mentioned in the Guidelines
within 90 days.
 A person convicted of any criminal offense, punishable with imprisonment in the last 5 years by
any Court of competent jurisdiction, cannot become a promoter or hold a key managerial position
in an E-Commerce entity.
 It shall comply with the provisions of Information Technology (Intermediaries guidelines) Rules,
2011.
Liabilities of E-Commerce Entities

Any e-commerce entity:
 shall not directly or indirectly influence the price of the goods or services and maintain a level
playing field.
 shall ensure that personally identifiable information of customers is protected and all relevant
provisions of the Information Technology (Amendment) Act, 2008 are being followed.
 to display all the terms relating to refund, exchange, warranty/guarantee, delivery and shipment
etc.
32 | Economy
 ensure the images or information as displayed in the advertisement are always consistent with
the actual goods or services.
 shall ensure that adequate information is provided regarding the methods of payment available,
its security, cancellations, refund, charge back options etc.
 Shall assure or guarantee the product to be authentic and shall be guilty of contributory or
secondary liability if such assurance or guarantee is found untrue or false.
Liability of seller
Seller’s liabilities included:
 Responsibility for any warranty/guarantee obligation of goods and services sold, providing a
proper break-down of the total bill including shipping charges, delivery costs, conveyance
charges etc.
 Displaying the health warnings and shelf-life statistics for the products they sell.
Consumer Grievance Redressal

 On its website, every e-Commerce entity shall Publish the name of the Grievance Officer and his
contact details as well as mechanism by which users can notify their complaints about products
and services availed through their web site.
 E-commerce entities shall provide a facility to consumers to register their complaints over phone,
email or website and shall provide complaint numbers for tracking the complaint.
9. Mineral Laws (Amendment) Ordinance, 2020
Why in news: Union Cabinet approved promulgation of Coal mines (Special Provisions)
Mineral Laws (Amendment) Ordinance 2020, which amends Act, 2015 (CMSP act)
Mines and Minerals (Development and Regulation) Act,
1957 and Coal mines (Special Provisions) Act, 2015. Following the report of CAG on
Coal scam in 2014, Supreme Court
Amendments introduced canceled the allocation of the coal
mines.
Removal of restriction on end-use of coal:
Present status: Coal produced through the acquisition of
CMSP act provides for the auction
Schedule II and Schedule III coal mines can only be used for
and allocation of such mines.
specified end uses such as power generation and steel
production.
Schedule I of the Act provides a list
of all such mines; Schedule II and III
Changes: Ordinance removes the restriction on end-use and
are sub-classes of the mines listed in
allows end-use for own consumption, sale or any other
the Schedule I.
purposes (As specified) to the companies.
Schedule II mines are those where
Relaxation in eligibility criterion:
production had already started
Present status: The Coal Mines Act and MMDRA restricted
then.
the licensing, permit/lease of mines to the companies that
'carry on coal mining operations in India'.
Schedule III mines are ones that had
been earmarked for a specified end-
Changes: Ordinance clarifies that the companies need not
use.
possess any prior coal mining experience in India to
participate in the auction of coal and lignite blocks.
Composite license for prospecting and mining

Present status: At present, separate licenses are provided for prospecting i. e. exploring, locating, or
finding the mineral deposit and mining of coal and lignite.
Changes: The Ordinance adds a new type of composite license, called prospecting license-cum-
mining lease, providing for both prospecting and mining activities.
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Prior approval from the central government:
Present status: Under the MMDR Act, for granting reconnaissance permit, prospecting license, or
mining lease for coal and lignite, state governments require prior approval of the central government.
Changes: The Ordinance provides that prior approval of the central government will not be required
in granting the licenses for coal and lignite, in certain cases, like:
 the allocation has been done by the central government,
 the mining block has been reserved by the central or state governments to conserve a mineral.
Advance action for auction:

Present status: MMDR Act provides that mining leases for specified minerals (minerals other than
coal, lignite, and atomic minerals) are auctioned on the expiry of the lease period.
Changes: state governments are now allowed to take advance action for auction of a mining lease
before its expiry.
10. Baba Kalyani report on Special Economic Zone (SEZ) policy of India
Why in news: The Baba Kalyani led committee was constituted by the Ministry of Commerce&
Industry to study the existing SEZ policy of India.
Constituted by: Ministry of Commerce & Industry in 2018.
Background
About Special Economic Zones:
This step of government will help in
achieving the
Asia’s first ‘export processing zone’ (EPZ) was set up
 To facilitate improvements in the
in India (Kandla) in 1965.
current environment of manufacturing
SEZ policy was announced by the government in
competitiveness and services, to
2000.
become a USD 5 trillion economy by
2025.
Regulated by: SEZ act, 2005
 The target of creating 100 million jobs
Aim: to develop ‘export hubs’ in the country to
and achieving 25% of GDP from the
promote growth and development.
manufacturing sector by 2022, as part
of its flagship ‘Make in India’ program.
Benefits provided to SEZs:
 to increase manufacturing value to USD
 Duty free import and domestic procurement of
1. 2 trillion by 2025.
goods.
 To make present policy framework
 Sunset clause: 100 percent income tax exemption
WTO regulations compliant to protect
on export income for first five years, 50 percent
the industry from any future hurdle in
for five years thereafter and 50 percent of the
international trade.
export profit reinvested in the business for the
next five years.
Objective
 Any supply of goods and services to SEZs are
 to evaluate the SEZ policy and
exempted from GST and levies imposed by
make it WTO compatible,
state government.
 suggest measures for maximizing
utilization of vacant land in SEZs SEZ amendment act, 2019
 suggest changes in the SEZ policy  Act amends the definition of a "person"
based on international experience recognised in the original law to set up SEZs.
 merge the SEZ policy with other  It includes 2 more categories ‘trust, or any other
Government schemes like coastal entity’.
economic zones, Delhi-Mumbai 7 Central Government SEZs and 12 State/Private
industrial corridor, national Sector SEZs were present prior to the enactment of
industrial manufacturing zones and the SEZs Act, 2005.
food, and textiles parks. Presently, 351 SEZs are notified, out of which 232
SEZs are operational.
34 | Economy
Capital Market 08
1. Bharat Bond ETF 4. National Stock Exchange (NSE)
2. Core Investment Companies (CICs) Knowledge Hub
3. RBI raised the foreign investment limit 5. Serious Fraud Investigation Office (SFIO)
under VRR route 6. The Chit Funds (Amendment) Bill, 2019
1. Bharat Bond ETF
Why in news: India’s first bond exchange-traded fund, Bharat Bond ETF, opened for investment.
More about Bharat Bond

 The fund is mandated to invest in AAA-rated bonds of public sector entities through its two
variants – the 3 years and a 10 years ETF.
 The minimum and maximum investment limit is Rs. 1000 and Rs 2 lakh, respectively, in these
funds.
 Edelweiss AMC is managing this fund.
Exchange-Traded Funds
 Exchange-Traded Funds (ETFs) are mutual funds listed and traded on stock exchanges like
shares.
 There are four types of ETFs already available — Equity ETFs, Debt ETFs, Commodity ETFs
and Overseas Equity ETFs.
 ETFs tracks indices such as the Nifty 50 index or Sensex index, avoiding the risk of poor
security selection by the fund manager.
Significance
 Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government-
owned entities), liquidity (tradability on exchange) and predictable tax-efficient returns (target
maturity structure).
• Access to retail investors: It will also provide access to retail investors to invest in bonds with
smaller amounts (as low as Rs. 1, 000) thereby providing easy and low-cost access to bond
markets.
• This will increase the participation of retail investors who are currently not participating in bond
markets due to liquidity and accessibility constraints.
• Tax efficiency compared to Bonds as coupons from the Bonds are taxed at marginal rates. Bond
ETFs are taxed with the benefit of indexation which significantly reduces the tax on capital gains
for investors.
• it will help the underlying PSE companies to raise funding for their operations.
35 | Economy
2. Core Investment Companies (CICs)
Why in news: RBI formed a working group that has recommended measures to strengthen core
investment companies (CIC).
Some of the key recommendations included:
About CICs
A core investment company is a non-banking financial company (NBFC) with asset size of Rs 100
crore and satisfies the following conditions:
1. It holds no less than 90% of its net assets in the form of investment in equity shares, preference
shares, bonds, debentures, debt or loans in group companies.
2. Its investments in equity shares in group companies constitute not less than 60 percent of its net
assets.
3. RBI raised the foreign investment limit under VRR route
Why in news: RBI reopened a window for FPI investment in government and corporate bonds under
revised “voluntary retention route” and also raised the investment limit.
VRR allows investment through easier rules in return for a commitment to remain invested for a
longer period.
Current norms
 Short-term investments by a foreign portfolio investor (FPI) should not exceed 20 percent of the
total investment of that FPI in either central government securities (including treasury bills) or
state development loans.
 The same norms apply to investments in corporate bonds.
Changes introduced
 The short-term investment limit has now been increased from 20 percent to 30 percent in both
cases (mentioned above).
 The RBI has also made relaxation in the voluntary retention route (VRR) for FPI investments in
debt with a minimum of three years.
 The investment limit under VRR has been increased to Rs. 1, 50, 000 crore from the Rs. 75, 000
crore of the earlier scheme, with a minimum retention period of three years.
Voluntary Retention Route:

 In March 2019, the RBI introduced a separate channel, the ‘Voluntary Retention Route’, to enable
FPIs to undertake long-term investments in the debt markets in India.
36 | Economy
 Investments through VRR are free of the macroprudential and other regulatory prescriptions
applicable to FPI investments in debt markets, provided FPIs voluntarily commit to retaining a
required minimum percentage of their investments in India for a particular period.
4. National Stock Exchange (NSE) Knowledge Hub
Why in news: The Union Commerce and Industry Minister inaugurated NSE Knowledge Hub in
New Delhi.
Created by: National Stock Exchange (NSE)
Objective: to assist the banking, financial services and insurance (BFSI) sector in enhancing skills and
help academic institutions in preparing future-ready talent for the financial service industry.
It will assist the banking, financial services, and insurance (BFSI) sector.
It is also available on mobile and attempts to bring together world-class content and learners through
this state-of-the-art and future-ready platform.
5. Serious Fraud Investigation Office (SFIO)
Why in news: The Corporate Affairs Ministry (MCA) has set up a high-level committee, to be chaired
by Injeti Srinivas, for preparation of investigation manual for serious fraud investigation office (SFIO),
within 45 days.
About SFIO
 Established and started functioning in 2003, under the Ministry of Corporate Affairs, it is a multi-
disciplinary organization to investigate corporate frauds.
 SFIO received the statutory status in 2015, as per the Companies Act, 2013
 For detecting and prosecuting or recommending for prosecution white collar crimes/frauds, the
office consists of experts in the field of accountancy, forensic auditing, law, information
technology, investigation, company law, capital market and taxation.
 SFIO can be assigned the investigation by the government:
(a) on receipt of a report of the Registrar or inspector under section 208 of the Companies Act,
2013;
(b) on intimation of a special resolution passed by a company that its affairs are required to be
investigated;
(c) in the public interest; or
(d) on request from any department of the Central Government or a State Government
6. The Chit Funds (Amendment) Bill, 2019
About the bill

The Bill seeks to amend the Chit Funds Act, 1982 which regulates Chit funds. It requires the prior
sanction of the state government for the creation of Chit Funds.
About Chit Funds
About the bill  Chit Funds are a type of saving scheme where
Bill adds new names like ‘fraternity fund’ and a specified number of subscribers contribute
‘rotating savings and credit institution’ to the payments in instalment over a defined period.
Chit funds.  Periodically, one of the subscribers is chosen by
drawing a chit to receive the prize amount
It specifies that a chit will be drawn in the from the fund.
presence of at least two subscribers, who can  Chit funds are legal and registered and are
also join via video-conferencing. different from Ponzi schemes as well as
unregulated deposits.
37 | Economy
It provides that the ‘foreman’ who is responsible for managing the chit fund, is entitled to a maximum
commission of 5% of the chit amount, at present. Bill seeks to increase the commission to 7%.
Bill increases the limit of the maximum amount of chit funds which may be collected by individuals
or associations with less than four partners and firms with four or more partners to three lakh rupees
and 18 lakh rupees, respectively.
Bill removes the lower limit of Rs 100, below which Act does not apply. Now the state can specify the
base amounts.
38 | Economy
International Economics 09
1. Advance Pricing Agreement (APA) 5. ARTIS (Application for Remedies in Trade
2. Currency Swap Arrangement for Indian industry and other
3. Nirvik scheme Stakeholders)
4. A contraction in CAD
1. Advance Pricing Agreement (APA)
Why in news: CBDT has signed the 300th Advance Pricing Agreement (APA).
About APA Program
The Indian government introduced the Advance Pricing Agreement (APA) program about six years
ago with the objective to provide much-needed tax certainty to multinational enterprises (MNEs)
operating in India, particularly on their intra-group transactions, and in the process, adopt global best
practices.
It is an agreement entered into between tax authorities and taxpayers, which determines the Arm’s
Length Price (ALP) concerning international transactions.
The duration of an APA can be maximum of 5 years. Once entered, an agreement is binding on both
taxpayer and tax authority.
Under the program, The Indian APA program provides for all three kinds of APAs - unilateral,
bilateral and multilateral.
Unilateral APA is an agreement between the Authority and taxpayer and does not involve any other
country.
In Bilateral APA, taxpayers and 2 competent authorities of the concerned countries required to reach
an arrangement through the Mutual Agreement Procedure (MAP).
In Multilateral, as the name suggests, Indian tax authorities will have to reach an arrangement with
competent authorities of more than one country, after the application of taxpayer/applicant.
2. Currency Swap Arrangement
Why in news: RBI has decided to put in place a revised Framework on Currency Swap Arrangement
for SAARC countries 2019-2022.
About agreement
On November 15, 2012, SAARC Currency Swap Facility came into operation, to provide a backstop
line of funding for short term foreign exchange liquidity requirements or balance of payment crises
till longer-term arrangements are made.
39 | Economy
RBI, Under the framework, would enter into bilateral swap agreements with interested SAARC
central banks.
RBI, Under the Framework for 2019-22, will continue to offer swap arrangement within the overall
corpus of US $ 2 billion.
About Currency swap

 Currency Swap Arrangement (CSA) is an arrangement to facilitate a currency risk-free, regular,
substantial or increasing trade, between two friendly countries.
 It is an open-ended credit line from one country to another at a fixed exchange rate, signed by the
concerned Central banks and governments and it is decided to swap funds in each other’s
currencies.
 The country which avails this credit facility will have to pay interest at a benchmark interest rate
such as the Libor (London Inter-bank rate).
 The central bank of a country can either sell the currency acquired to importers to settle their bills
or to borrowers to pay off their foreign loans or fill its foreign exchange reserves using the same.
3. Nirvik scheme
Why in news: NIRVIK (Niryat Rin Vikas Yojana) scheme has been announced by the government for
exporters.
About scheme
The scheme provides for:
 high insurance cover,
 reduction in premium for small exporters and,
 simplified procedures for claim and settlement
Salient features
 Scheme is also called Export Credit Insurance Scheme (ECIS),
 Under ECIS, insurance cover percentage has also been enhanced to 90% from the present average
of 60% for the both principal and interest.
 Enhanced cover will ensure that Foreign and Rupee export credit interest rates will be below 4%
and 8% respectively for exporters.
 Gems, Jewellery and Diamond (GJD) sector borrowers with limit of more than Rs. 80 crores will
have a higher premium rate under the NIRVIK Scheme as compared to non-GJD sector borrowers
of this category due to the higher loss ratio.
 ECGC cover will also provide additional comfort to banks as the credit rating of the borrower is
enhanced to AA rated account.
4. A contraction in CAD
Data released by the Reserve Bank of India (RBI) shows India’s current account deficit (CAD) reduced
to 0. 9% of GDP in the second quarter of 2019-20 from 2% in the first, primarily due to a lower trade
deficit.
Grasp the concept
Current Account
 RBI maintains the Current account.
 Current account is essentially a record of all trade, net transfers and earning transactions of a
country with the rest of the world.
 It has 4 major components:
o Trade: Net value of goods and services (Exports -Imports)
o Net income: income earned by residents from the rest of the world minus the income paid to
foreigners.
o Direct transfers: Net remittances
40 | Economy
o Net Asset income: net of the assets like deposits, bank loans, etc. held by Indians in foreign
banks and Foreigners in India
Current Account Deficit and surplus

Current account is said to be in surplus when the value of exports is greater than that of imports; it is
in deficit when the value of imports is higher.
As shown in the image below, CAD has contracted in 2019-20 to less than 2%.
Figure: Current Account Deficit (CAD) as per cent of GDP

Source: Reserve Bank of India
Capital account
It includes all the capital transactions between countries including purchase and sale of assets i. e. of
non-financial nature, like land and properties. 3 major components of the capital account are:
1. Loans and borrowing by both public and private sector
2. Investment like FDI
3. Changes in Foreign Exchange reserves
Is contraction in CAD always a positive sign?

A contraction in CAD may be good during normal growth, but during a slowdown, it may hurt the
economy. Surplus Current Account will result in an appreciation of Rupee, which will make imports
cheap. Moreover, present contraction is majorly on account of lower imports that shows a weak
demand in the economy.
5. ARTIS (Application for Remedies in Trade for Indian industry and other Stakeholders)
It is an online portal to enhance transparency, efficiency and provide expedited relief to the domestic
producers for different trade remedies like anti-dumping duty, safeguard duty and countervailing
duty.
Launched by: The commerce ministry’s arm Directorate General of Trade Remedies (DGTR).
Applicants can also monitor the current status of their applications through this portal.
Grasp the concepts
Anti-dumping duty, safeguard duty and countervailing duty

These duties are trade remedy measures, provided under an agreement of the World Trade
Organisation (WTO) to its member countries to facilitate a level playing field to domestic industry in
case of dumping of goods, a significant increase in imports and subsidized imports.
41 | Economy
Anti-dumping duty: If a company exports a product at a price lower than the price it normally
charges on its home market; it is said to be “dumping” the product. GATT (Article 6) allows
countries to take action against dumping by imposing duties and can be levied on a retrospective
basis.
Safeguard duty: A WTO member may restrict imports of a product temporarily (take “safeguard”
actions) if its domestic industry is injured or threatened with the injury caused by a surge in imports.
This duty must have a sunset clause.
Countervailing duty: Countervailing duty is a customs duty on goods that have received
government subsidies in the originating or exporting country.
42 | Economy
International Organisations
10
1. Convention on Base Erosion and Profit 2. Regional Comprehensive Economic
Shifting Participation agreement (RCEP)
1. Convention on Base Erosion and Profit Shifting
Why in news: Cabinet has approved the ratification of the Multilateral Convention to Implement Tax
Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
It is the convention of OECD / G20 (of which India is a member), to tackle tax planning strategies that
exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations (tax
havens) which results in no economic activity in the country where revenue is actually generated,
resulting in little or no tax being paid.
Base Erosion: It is the use of financial
The Convention enables countries to implement the tax measures and tax planning such as
treaty related changes without bilaterally re- income restructuring and writing off
negotiating each such agreement. certain expenditures against taxable
income to reduce the size of a company’s
It will be applied alongside existing tax treaties (Such taxable profits in a country.
as existing double taxation agreements), modifying
their application in order to implement the BEPS Profit Shifting: Use of methods such as
measures. Transfer pricing, to move profits from
high-tax jurisdictions to low-tax regimes.
The BEPS Package provides 15 actions that equip governments with domestic and international
instruments to tackle BEPS.
Adoption of the BEPS framework means multinationals will have to disclose their profits, number of
employees and taxes paid in each country.
About G-20
It is the premier forum for international cooperation on the most important aspects of the
international economic and financial agenda. It brings together the world’s major advanced and
emerging economies.
The G20 comprises Argentina, Australia, Brazil, Canada, China, EU, France, Germany, India,
Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK and
USA.
The G20 Countries together represent around 85% of the world’s nominal GDP, 75% of global trade,
and two thirds of the world’s population.
43 | Economy
The objectives of the G20 are:
(a) Policy coordination between its members in order to achieve global economic stability,
sustainable growth;
(b) To promote financial regulations that reduce risks and prevent future financial crises; and
(c) To create a new international financial architecture.
The G20 is not a permanent institution with a headquarters, offices, or staff. Instead, its leadership
rotates on an annual basis among its members.
In 2019, summit was held in Osaka, Japan.
2. Regional Comprehensive Economic Participation agreement (RCEP)
Why in news: India decided to opt out of RCEP.
Why India declined joining RCEP?

 Trade deficits: India already is in trade deficit of $105 billion with all the countries in RCEP,
including a $54 billion trade deficit with China. Signing this agreement would have swamped
Indian market with cheaper imported product with low tariffs.
 The agreement was going against India’s Make in India initiative to promote indigenous
industries.
 Dairy products from New Zealand flooding Indian markets would have hurt India’s dairy sector.
 E-commerce chapter: The e-commerce chapter contains clauses that, if India had agreed to them,
would have prevented it from implementing data localization rules on companies doing business
in India.
About RCEP
RCEP is a mega trade deal involving 15 countries (10 ASEAN countries plus Australia, China, Japan,
New Zealand, South Korea) in the Asia-Pacific region. Its negotiations were started during the 21st
ASEAN Summit in Cambodia in November 2012.
RCEP aims to cover the trade in goods and services, as well as investment, intellectual property and
dispute resolution.
44 | Economy
Agriculture 11
1. MEGA FOOD PARKS 13. ONE NATION-ONE RATION CARD
2. Buffer stock SCHEME
3. Development of Mission for Integrated 14. Market Intervention Scheme
Horticulture 15. PARTICIPATORY GUARANTEE
4. Draft Seeds Bill 2019 SCHEME (PGS)
5. Contract Farming 16. National Animal Disease Control
6. Pradhan Mantri Kisan Maan Dhan Yojana Programme
7. Pradhan Mantri Kisan Samman Nidhi 17. Mahatma Gandhi National Rural
(PM-KISAN) Employment Guarantee Act
8. MUKHYA MANTRI KRISHI ASHIRWAD (MGNREGA)
YOJANA 18. RASHTRIYA GOKUL MISSION
9. 20TH LIVESTOCK CENSUS 19. DRAFT MODEL TENANCY ACT, 2019
10. Marine Fisheries Regulation and 20. Zero Budget Natural Farming (ZBNF)
Management (MFRM) Bill 2019 21. Pashmina Products Receive BIS
11. Pradhan Mantri Kisan Urja Suraksha Certification
evam Utthaan Mahabhiyan (PM-Kusum) 22. Araku Valley Coffee gets GI tag
12. Krushak Assistance for Livelihood and 23. KISAN CREDIT CARD SCHEME
Income Augmentation (KALIA) scheme
1. MEGA FOOD PARKS
Why in news: Union Minister for food processing inaugurated Avantee mega Food Park in Dewas
(MP), first food park of central India.
It will be used for the Processing of soybean, gram, wheat, and other grains and vegetables will be
done in the park.
About Mega Food Park scheme
The scheme is one of the components of an umbrella scheme of Pradhan Mantri Kisan Sampada
Yojana (PMKSY).
The scheme aims at providing a mechanism to link agricultural production to the market by bringing
together farmers, processors, and retailers to ensure
 maximizing value addition
 minimizing wastage,
 increasing farmers income and
 creating employment opportunities particularly in the rural sector
It is based on the “Cluster” approach and envisages the creation of state of art support infrastructure.
The primary objective of the Mega Food Park Scheme is to provide modern infrastructure facilities for
food processing along the value chain from the farm to the market.
45 | Economy
Components of Mega food parks: Parks typically consist of supply chain infrastructure including
Collection Centres (CC), Primary Processing Centers (PPC), Central Processing Centers (CPC), Cold
Chain infrastructure and around 25-30 fully developed plots for entrepreneurs to set up food
processing units.
The scheme is implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered
under the Companies Act.
Source: Food processing ministry website
Pradhan Mantri Kisan Sampada Yojana (PMKSY)
It is a central sector umbrella Scheme for Agro-Marine Processing and Development of Agro-
Processing Clusters (SAMPADA) with an allocation of ₹6, 000 crores for the period of 2016-20.
Scheme was later renamed from SAMPADA to Pradhan Mantri Kisan Sampada Yojana (PMKSY).
Scheme that are being implemented under this program are Mega Food Parks, Integrated Cold Chain
and Value Addition Infrastructure, Infrastructure for Agro-Processing Clusters, Creation of Backward
and Forward Linkages, Creation/Expansion of Food Processing & Preservation Capacities, Food
Safety and Quality Assurance Infrastructure, Human Resources and Institutions.
2. Buffer stock
Why in news: NAFED wasted over 30, 000 MT onions, more than half of its buffer stock, amid
soaring prices.
In the wake of Onion price rise, NAFED had managed a buffer stock of 57, 372 MT as against the
target to create a buffer stock of around 60, 000 MT for this year, under Price Stabilisation Fund (PSF).
Out of the buffer stock, NAFED has been able to disburse only 26, 700 MT among the states and other
agencies, rest were either disposed of in the local market due to being of sub-standard quality or were
destroyed because of decay caused by moisture and rain.
Moreover, due to sub-standard quality, NAFED had to bear twin losses in procurement and selling, i.
e. procuring at a price lower than the cost and selling below market price.
46 | Economy
About Price stabilisation Fund  NAFED is registered under

 It was set up under the Department of Agriculture, the Multi-State Co-operative
Cooperation & Farmers Welfare (DAC&FW) but Societies Act. NAFED was
transferred later to the Department of Consumer Affairs set up with the object to
(DOCA) promote Co-operative
 Its objective was to help regulate the price volatility of marketing of agricultural
important agri-horticultural commodities like onion, produce to benefit the
potatoes, and pulses. farmer.
 It provides for maintaining a strategic buffer of the  It is the nodal agency to
aforementioned commodities for subsequent calibrated implement price stabilization
release to moderate price volatility and discourage measures under "Operation
hoarding and unscrupulous speculation. Greens.
 For building such stock, the scheme promotes direct  It procures pulses, oilseeds
purchase from farmers/farmers’ association at farm and onion from farmers.
gate/Mandi.
3. Mission for Integrated Development of Horticulture
It is a centrally sponsored scheme with 85% contribution of total outlay by center for developmental
programmes in all the states except the states in North East and Himalayas, 15% share is contributed
by State Governments.
Aim: integrated and holistic development of the horticulture sector in the country covering fruits,
vegetables, root and tuber crops, mushrooms, spices, flowers, aromatic plants, coconut, cashew, cocoa
and bamboo through various interventions.
Components: Mission has six component schemes/missions –

 National Horticulture Mission (NHM),
 Horticulture Mission for North East & Himalayan States (HMNEH),
 National Agroforestry Bamboo Mission (NABM),
 National Horticulture Board (NHB),
 Coconut Development Board (CDB) and
 Central Institute for Horticulture (CIH), Nagaland.
4. Draft Seeds Bill 2019
Why in news: Seed industry proposes changes in Seed Bill 2019.
About draft seed bill, 2019

Bill seeks to replace the old Seed Act of 1966 and Seed Rules, 1968.
All varieties of seeds have to be registered and required to meet certain prescribed minimum
standards.
It authorizes the Central government to reconstitute a Central Seed Committee that will be
responsible for the effective implementation of its provisions.
Every state shall constitute a state seed committee
Due to compulsory registration of “any kind or variety of seeds”,

“Expected performance” of the registered variety “under given conditions” required to be disclosed
by the Breeders.
If under given circumstances abovementioned registered variety fails to provide expected

performance, the farmer “may claim compensation from the producer, dealer, distributor or vendor
under The Consumer Protection Act, 1986”.
47 | Economy
Transgenic varieties shall not be registered unless the applicant has obtained a clearance, under the
environment protection act, 1986.
The act doesn’t restrict the right of farmers to grow, sow, save, share or exchange, etc. their farm seeds
and planting material. However, farmers cannot sell any seed under a brand name.
Certain kind of varieties can be excluded from the registration on the grounds, such as
 If prevention from commercial exploitation of such variety is necessary to protect public
order/morality, life, and health, or environment.
 If a variety of seed is containing any harmful technology.
5. Contract Farming
Why in news: Tamil Nadu has become the first state in the country to enact a law on contract
farming.
About Tamil Nadu’s Agricultural Produce and Livestock Contract Farming and Services
(Promotion and Facilitation) Act
 Contract farming has been defined by the law as a written agreement between a farmer and a
buyer for producing an agricultural produce/product or rearing livestock.
 The Act provides legal protection to the farmers, producer companies and purchasers of
agricultural produce for their business transactions and by including farming elements like pre-
agreed price, quality, quantity or acreage.
 During the time of a bumper crop or major fluctuation in market prices, the act would safeguard
the interest of farmers.
 It also provides for the establishment of Contract Farming and Services (Promotion and
Facilitation) Authority, to oversee the implementation of the act.
 The act includes the output of agriculture, horticulture, apiculture, sericulture, animal husbandry
or forest activities, and exclude products that have been declared illegal, banned or prohibited by
law.
 The Act also provides for the setting up of a Dispute Settlement Committee, when mediation and
negotiations fail to settle a dispute, aggrieved parties can approach the Dispute Settlement
Committee for resolution.
Model Contract farming act, 2018
Released by: Union Agriculture Minister with the name Model Agriculture Produce and Livestock
Contract Farming and Services (Promotion & Facilitation) Act, 2018.
Objective: To integrate farmers with bulk purchasers including exporters, agro-industries, etc. for
better price realization through mitigation of market and price risks to the farmers and ensuring
smooth agro raw material supply to the agro-industries.
Salient features
 Considering farmers as weaker of the two parties entering into a contract, the act lay emphasise
on protecting the interest of farmers.
 It ensures buying of entire pre-agreed quantity from a producer at a fixed pre-agreed price and
quality standards as per the contract.
 For online registration of sponsors and recording of agreement, the act provides for “Registering
and Agreement Recording Committee” at district/block/ taluka level.
 In addition to contract farming, it also includes services contracts all along the value chain
including pre-production, production, and post-production.
 A contract ensures buying of entire contracted pre-agreed quantity at a pre-agreed price and
quality standard.
 Contracted produce is to be covered under crop/livestock insurance in operation.
48 | Economy
 Contract framing to be outside the ambit of the APMC Act.

 No permanent structure can be developed on farmers’ land/premises.
 Farmer Producer Organization (FPOs) /Farmer Producer Companies (FPCs) can be contracting
parties if authorised by farmers.
 No rights, title ownership or possession to be transferred to the contract farming sponsor.
 For promoting contract farming and services at the village/panchayat level, the act provides for
Contract Farming Facilitation Group (CFFG).
 For quick disposal of disputes, a dispute settlement mechanism at the lowest level possible.
6. Pradhan Mantri Kisan Maan Dhan Yojana
Why in news: As per the Ministry of Agriculture & Farmers Welfare, over 18 Lakh Farmers registered
under, PM KISAN MAAN DHAN YOJANA.
About scheme
It is a central sector voluntary and contributory pension scheme, with entry age between 18 to 40
years.
Objective: To provide a social security net for the Small and Marginal Farmers (SMF), as they have
minimal or no savings to provide for old age and to support them in the event of the consequent loss
of livelihood.
Salient features of the scheme

 To the eligible small and marginal farmers, a minimum fixed pension of Rs. 3, 000/- is provided,
on attaining the age of 60 years.
 To become a member of the Scheme, the beneficiary required to subscribe to a Pension Fund
managed by the Life Insurance Corporation of India (LIC) and required to make a monthly
contribution of between Rs. 55/- to Rs. 200/- to the Pension Fund based upon the age of entry.
 The central government will make an equal contribution.
 Exit from the scheme may be voluntary or on the failure of contribution or demise.
 On exit from the scheme, the beneficiary will receive his/her accumulated share and the
Government’s contribution will be deposited in the LIC Fund.
 After the subscriber’s death, the spouse or heir shall be entitled to receive 50% of the pension as a
family pension, if she is not an SMF beneficiary of the scheme.
 On the death of the subscriber during the period of contribution, the spouse shall have the option
of continuing the Scheme by paying regular contributions.
 Around 3 Crore Small traders would be benefitted from the scheme.
PradhanMantri Shram Yogi Maan-Dhan (PM-SYM)
It is a voluntary and contributory pension scheme, meant for old age protection and social security of
Unorganised Workers (UW), who is:
 Aged between 18 and 40 years
 Have monthly Income of ₹15000 or below
Benefits: subscriber would receive a minimum assured pension of ₹3000/- per month after attaining
the age of 60 years.
Pradhan Mantri Laghu Vyapari Maan-Dhan Scheme
The scheme is now known as the National Pension Scheme for Traders, Shopkeepers, and Self-
Employed Persons.
It is a central sector voluntary and contributory pension scheme.
49 | Economy
Eligibility: traders in the age group of 18-40 years with annual turnover, not exceeding Rs. 1. 5 crore
and who is not a member of EPFO/ESIC/NPS/PM-SYM or an income taxpayer.
Benefits: Beneficiaries are eligible for a monthly minimum assured pension of Rs. 3, 000/-, after
attaining the age of 60 years.
7. Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)
Why in news: Agriculture minister launched a mobile app to broaden the reach of the programme
About scheme
It is a Central Sector Scheme to augment the income of the Farmers.
A budget of Rs. 75, 000 crore has been provided in the current Financial Year for the scheme.
Aim: To supplement the financial needs of the SMFs in procuring various inputs to ensure proper
crop health and appropriate yields, commensurate with the anticipated farm income at the end of
each crop cycle.
Benefit: Under the Scheme, an amount of Rs. 6000/- per year is transferred in three 4-monthly
installments of Rs. 2000/- directly into the bank accounts of the farmers.
Definition of Families: The SMFs landholder farmer family is defined as “a family comprising of
husband, wife and minor children who collectively own cultivable land up to 2 hectares as per land
records of the concerned State/UT”.
Eligibility: Initially the income support was provided to all Small and Marginal Farmers’ families
holding cultivable land up to 2 hectares, however, Its ambit was expanded in 2019 to cover all farmer
families in the country irrespective of the size of their landholdings with some exclusions, such as
 Income Taxpayers in the last assessment year
 professionals like Doctors, Engineers, Lawyers, Chartered Accountants, etc.
 pensioners drawing at least Rs. 10, 000/- per month
8. MUKHYA MANTRI KRISHI ASHIRWAD YOJANA
Why in news: Vice President launched Jharkhand government's 'Mukhya Mantri Krishi Ashirwad
Yojana’.
About scheme
 It is a Direct Benefit Transfer scheme.
 Under this scheme, beneficiaries (small and marginal farmers of the state) having farmland of less
than one acre to five acres, will be given grant-in-aid at the rate of Rs. 5000 / - per acre per year in
their bank accounts, in 2 installments.
 The amount will be directly transferred to the beneficiary’s bank account through Real Time
Gross Settlement (RTGS).
 It will help in govt’s target to double the income of farmers by 2022.
9. 20TH LIVESTOCK CENSUS
20th Livestock Census has been released by the Department of Animal Husbandry & Dairying, under
Ministry of Fisheries, Animal Husbandry & Dairying.
Need of census
There is a need for valid data, for proper planning and formulation of any programme meant for the
livestock sector and its effective implementation and monitoring.
The Livestock Census, being conducted since 1919, is the main source of such data in the country.
50 | Economy
About 20th livestock census

 It covers all domesticated animals.
 Various species of animals/poultry birds possessed by households; household enterprises/non-
household enterprises were counted.
 Another important feature of the 20th census is it has been designed to capture the Breed-wise
number of animals and poultry birds.
Key outcomes of the census

 Total Livestock population in India has been increased by 4. 6% over Livestock Census 2012 535.
78 million.
 Total population of bovines i. e. Cattle, Buffalo, Mithun, and Yak has increased by 1. 0% over the
2012 census.
 In the last 7 years, the Cow population has
increased by 18 percent but the number of
oxen plunges 30 per cent.
 The Exotic/Crossbred and
Indigenous/Non-descript Cattle population
in the country is 50. 42 million and 142. 11
million respectively.
 poultry population in the country has
increased by spectacular 16. 8 per cent.
 Among the States, Uttar Pradesh has the
highest number of livestock of 67. 8 million
(68. 7 million in 2012), followed by
Rajasthan 56. 8 million (57. 7 million), Madhya Pradesh: 40. 6 million (36. 3 million) and West
Bengal: 37. 4 million (30. 3 million).
 An increasing population of milk-bearing animals shows why India’s milk production has grown
at over 6 percent, despite drought and falling prices.
 A decline in the total indigenous cattle population has been observed.
10. Marine Fisheries Regulation and Management (MFRM) Bill 2019
Why in news: Marine Fisheries Regulation and Management (MFRM) Bill 2019 envisages the central
government's license for all types of fishing vessels.
Background
 India has obligations to frame laws under United Nations Convention on the Law of the Sea
(UNCLOS) 1982 and the World Trade Organisation (WTO) agreements. This bill is an effort
towards this obligation of India.
 As fisheries is a state subject, thus fishing in the IW and TS come within the purview of the states
concerned.
 Other activities in the TS and all the activities including fisheries beyond the TS up to the limit of
the EEZ, are in the Union list.
 At present, the respective State Marine Fishing Regulation Acts (MFRA) protect and regulate the
fishery resources in the territorial waters, that are up to 12 nautical miles from the baseline.
 Whereas, the fishing by foreign fishing vessels in the maritime zones of India are regulated by
Maritime Zones of India (Regulation of Fishing by Foreign Vessels) Act, 1981, or MZI Act.
 A judicious utilisation of the 5 million tonnes annual fisheries potential is crucial and
government’s resolve towards that was depicted by the formation of a new fisheries ministry.
 Bill is also a government’s response towards the issue of fisheries’ subsidies at the WTO.
Developed countries contend that nations without laws to manage fisheries in their respective
EEZs are not serious about unregulated fishing.
51 | Economy
About the bill Under UNCLOS, the sea and

resources in the water and the
It is a uniform fishing law for sustainable development and seabed are classified into three
management of fisheries in the exclusive economic zone (EEZ) of zones:
the country. 1. Internal Waters (IW) : It
includes the landward side
Objective: for regulation and management of fisheries and fishing of the baseline, which
related. includes gulfs and small
bays.
It will regulate fishery activities between 12 nautical miles and 200 2. Territorial Sea (TS) : It
nautical miles. extends outwards to 12
nautical miles from the
The Bill prohibits fishing by foreign fishing vessels, thus baseline. Coastal nations
nationalising our EEZ. enjoy sovereignty over
airspace, sea, seabed and
No Indian fishing vessel shall engage in fishing and fishing subsoil and all living and
related activity within the maritime zones of India and the high non-living resources.
seas, except with a license issued by the Central Government. 3. Exclusive Economic Zone
(EEZ) : It extends outwards
It proposes social security for fish workers and calls for protection to 200 nautical miles from
of life at sea during severe weather events. the baseline. Coastal
nations have sovereign
The fishing vessel licensed under the provisions of this Act shall rights for exploration,
be registered under the provisions of the Merchant Shipping Act, exploiting, conserving and
1958. managing all the natural
resources therein.
A license granted under this Act shall be non-transferrable.
Central government will provide for a system of monitoring, control and surveillance towards safety
and security of fishermen and fishing vessels.
Those boats, heading to the sea without the permit, would be seized and a fine would be slapped.
11. Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-Kusum)
Why in news: Government announced the expansion of Pradhan Mantri Kisan Urja Suraksha Utthan
Mahabhiyan (PM KUSUM) Scheme under which 20 lakh farmers would be provided funds to set up
standalone solar pumps.
Launched by: Ministry of New and Renewable Energy (MNRE)
Aim: to add solar and other renewable capacities of 25, 750 MW by 2022.
Under this scheme, farmers are provided with the extra income, by giving them an option to sell
additional power through solar power projects set up on their barren lands to the grid (Through
DISCOMs. Additionally, Scheme helps the Discoms to attain their RPO target.
Components:
The PM KUSUM scheme had three components:
1. Component-A: 10, 000 megawatts (MW) of decentralized ground-mounted grid-connected

renewable power plants. Renewable power plants of capacity 500 KW to 2 MW will be set up by
individual farmers/ cooperatives/panchayats / FPOs on their barren or cultivable lands.
2. Component-B: Installation of 17. 50 lakh standalone solar-powered agriculture pumps; and
3. Component-C: Solarisation of 10 lakh grid-connected solar-powered agriculture pumps ().
52 | Economy
All three components combined; the scheme aimed to add a solar capacity of 25, 750 MW by 2022.
Component-B will be implemented in a full-fledged manner, Whereas Component-A and
Component-C will be implemented respectively on pilot mode for 1000 MW capacity and one lakh
grid-connected agriculture pumps.
Funding: Farmers will get a subsidy of 60% on solar pumps, shared by both central and state
governments. 30% of the cost will be obtained as a bank loan and the rest of the 10% cost will be
borne by farmers.
12. Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme
Why in news: Odisha government has reduced the financial assistance given to farmers under the
Kalia scheme.
More about the news

The financial assistance under this scheme has been converged with the one provided under PM-
KISAN scheme.
Now, small farmers/ marginal farmers will be given Rs 5, 000 for 2019-20 and Rs 4, 000 per year from
2020-21 under Kalia scheme and rest of the amount (of assured Rs. 10, 000) i. e. Rs 6, 000 will be
provided under PM-Kisan.
However, the landless farmers of the State will continue to get Rs 12, 000 per year under the Kalia
scheme, as they are not covered under PM-KISAN.
Background
The scheme was launched by Odisha government as an alternative to farm loan waiver, to accelerate
agricultural prosperity and reduce poverty in the State.
Beneficiaries includes Small and marginal farmers, landless agricultural household, vulnerable
agricultural household, landless agricultural laborers and sharecroppers.
It provided that a sum of Rs. 10, 000 per year will be provided for Kharif and Rabi crops, wherein 5,
000 each will be provided for each of these crops respectively.
13. ONE NATION-ONE RATION CARD SCHEME
Why in news: Government has announced that One Nation, One Ration card' system will be
'implemented without fail in the entire country' by June 30, 2020.
About the scheme

 It was launched on pilot basis in Telangana, Andhra Pradesh, Maharashtra and Gujarat,
expanded to 12 states as of now and will allow portability of food security benefits.
 Eligible beneficiaries would be able to avail their entitled food grains (subsidised rice and wheat)
under the National Food Security Act from any Fair Price Shop (FPS) in the covered states using
the same ration card.
 Authentication of the beneficiaries would be done through biometric/Aadhaar authentication on
ePoS (electronic Point of Sale) devices.
 This scheme would be beneficial for the numerous migrant beneficiaries such as labourers, daily
wagers, blue-collar workers etc.
About Ration cards

Ration card is an official document issued by the State Governments for identification of the
beneficiaries eligible to purchase subsidized food grain under NFSA (under PDS previously) and
serves as a proof of nationality.
Before ONOR scheme, applicability of the ration cards was limited to the respective states.
Before NFSA ration cards were categorised into: Above Poverty Line (APL), Below Poverty Line
(BPL) and Antyodaya (AAY) ration cards.
After NFSA, categories of ration cards were updated into: Non-priority, Priority and Antyodaya
(AAY) ration cards.
53 | Economy
14. Market Intervention Scheme
Why in news: Government extended the market intervention scheme for apple growers in J&K till
March 2020.
About Market Intervention Scheme

Implemented by: Department of Agriculture & Cooperation
Objective: to protect farmers from making distress sale and provide them remunerative prices for
horticultural/agricultural commodities in the event of bumper crop and price fall.
The Scheme requires at least 10% increase in production or 10% decrease in the ruling rates over the
previous normal year, to get implemented.
Scheme is implemented for the procurement of perishable and horticultural commodities, on the
request of State Governments.
Requesting Government/UT Administrations must be willing to share the loss with Central
Government on 50:50 basis (75:25 in case of North-Eastern States).
15. PARTICIPATORY GUARANTEE SCHEME (PGS)
Why in news: According to chairperson of the Food Safety and Standards Authority of India
Participatory Guarantee Scheme is expected to raise levels by bringing in more farmers.
About PGS
 Participatory Guarantee System is a process of certifying organic products which ensures
agriculture production process in accordance with the standards laid down for organic products
and that desired quality has been maintained.
 The certification to the organic products is provided in the form of a documented logo or a
statement.
 A decentralised Participatory Guarantee System –India (PGS-India) has been implemented to
enable small and marginal farmer to have easy access to organic certification and to promote
domestic organic market growth.
 It is a quality assurance initiative that is locally relevant with active participation of stakeholders
including producers/farmers, traders and consumers in certification system.
 Paramaparagat Krishi Vikas Yojana (PKVY) scheme is supporting this system.
 As this system supports domestic demand for organic produce, it is outside the framework of
third-party system of certification, which is a pre-requisite to enter export market of organic
produce.
 If a growers wishes to go for export, this system prepares him to opt for third party certification.
16. National Animal Disease Control Programme
Why in news: Government launched the National Animal Disease Control Programme (NACDP) to
control and eradicate the Foot & Mouth Disease (FMD) and Brucellosis amongst the livestock.
About programme About Brucellosis

 It is a 100% centrally funded programme, with a Brucellosis is a zoonotic infection caused by
total outlay of Rs. 12, 652 crore from 2019 to 2024. the bacterial genus Brucella, localize in the
 Aims: To control Foot and Mouth Disease and reproductive organs of host animals.
Brucellosis by 2025 with vaccinating over 500 It can be transmitted from animals to
Million livestock and eventual eradication by humans through direct contact, or animal
2030. products or by inhaling airborne agents.
 Livestock that will be covered are cattle, buffalo, The majority of cases are caused by
sheep, goats and pigs. ingesting unpasteurized milk or cheese and
 Under it, 36 million female bovine calves would causes flu-like symptoms, including fever,
also be vaccinated annually to fight against weakness, malaise and weight loss.
Brucellosis disease.
54 | Economy
17. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
Why in news: In budget 2020, budgetary allocation in to MGNREGA has been reduced by 13. 4 per
cent
About MGNREGA
MGNREGA 2. 0
Implemented by: Ministry of Rural Development (MRD). The term has been used for the
stage when coverage of the
It was enacted in 2005 to address the causes of chronic poverty scheme expanded to include
through the 'works' (projects) for ensuring sustainable 30 new works related to
development. it covers all districts of the country with the agriculture, watershed,
exception of those that have a 100% urban population. livestock, fisheries, flood
management and irrigation
Objective: to enhance livelihood security by guaranteeing 100 and aligned with a national
days of wage employment per year to every household whose sanitation campaign.
adult members volunteer to do unskilled manual work.
Key features of the act:

Legal right: Act provides legal right to Some of the initiatives taken by government:
employment for adult members of rural  Implementation of Direct Benefit Transfer
households, of which at least one third (DBT) and linking it Aadhar linked Payments
beneficiaries have to be women. Wages to be (ALP).
paid under program as per Minimum Wages  It leveraged the Jan Dhan, Aadhaar and Mobile
Act, 1948. (JAM) trinity to credit wages directly into
MGNREGS workers’ bank accounts.
Time bound guarantee of work: Work must  NREGAsoft is a local language enabled work
be provided, within 15 days of employment flow based e-Governance system to capture all
being demanded. If authorities fail to the activities under MGNREGS.
provide work within specified time period,
‘unemployment allowance’ must be provided.
The prime responsibility of planning, implementation and monitoring of the works is of Panchayati
Raj Institutions (PRIs).
Facilities such as crèches, drinking water and first aid should be provided at all work places.
To enable the community led monitoring, Social audits are conducted by gram sabhas.
Centre and the states share the expenditure. Central government will be responsible for:
 100% of the cost of unskilled labour,
 75% of the cost of semi-skilled and skilled labour,
 75% of the cost of materials and
 6% of the administrative costs
The wages under MGNREGA are linked to Consumer Price Index (Agriculture Labour) or CPI (AL).
18. RASHTRIYA GOKUL MISSION
Why in news: Rashtriya Gokul mission is being implemented throughout the country to complement
and supplement the efforts made by the States and Union Territories for enhancing milk production.
About Mission
The Rashtriya Gokul Mission was launched in December 2014 under National Programme for Bovine
Breeding and Dairy Development.
55 | Economy
Mission will be implemented by State Implementing Agency (SIA viz Livestock Development
Boards).
Objective:
a) development and conservation of indigenous breeds
b) undertake breed improvement programme for indigenous cattle breeds so as to improve the
genetic makeup and increase the stock;
c) enhance milk production and productivity; Gokul Gram
d) upgrade nondescript cattle using elite GGs will act as Centres for development of
indigenous breeds like Gir, Sahiwal, Rathi, Indigenous Breeds and a dependable source
Deoni, Tharparkar, Red Sindhi and for supply of high genetic breeding stock to
e) distribute disease free high genetic merit bulls the farmers and will be established in
for natural service. 1. the native breeding tracts
2. near metropolitan cities for housing the
Funds under the scheme are allocated for: urban cattle
 Establishment of Integrated Indigenous Cattle The Gokul Gram will maintain milch and
Centres viz “Gokul Gram”. unproductive animals in the ratio of 60:40
 Establishment of Field Performance Recording and will have the capacity to maintain about
(FPR) in the breeding tract. 1000 animals.
 Assistance to Institutions/Institutes which are
repositories of best germplasm.
 implementation of Pedigree Selection Programme for the Indigenous Breeds with large
population;
 Establishment of Breeder‟s Societies: Gopalan Sangh.
 Incentive to farmers maintaining elite animals of indigenous breeds, in the form of Gopal Ratna
award to farmers and Kamdhenu award for Breeders‟ Societies.
 organization of Milk Yield Competitions for indigenous breeds and
 organization of Training Programme for technical and non-technical personnel working at the
Institute/Institutions engaged in indigenous cattle development.
19. DRAFT MODEL TENANCY ACT, 2019
Why in news: The Ministry of Housing and Urban Affairs has drafted a ‘Model Tenancy Act’, 2019.
About the act
Model Act, 2019, drafted by the government, seeks to address the distortions in India’s rental markets
and could help modernise it. It envisages to balance the interest and rights of both the owner and
tenant.
Applicability: The Act will be applicable to premises let out for residential, commercial or
educational use, but will not cover the premises let out for industrial use and hotels, lodging houses,
inns, etc.
Security deposits: It proposes to cap the security deposit to a maximum of two months of rent in case
of residential properties and a minimum of one month’s rent in case of non-residential properties.
Rent increase: Rent can only be increased:

 according to the terms and conditions mentioned in the agreement or
 By a notice in writing three months before the revised rent comes into effect.
In this case, tenant can either accept the increased rent or give notice for termination of the agreement.
But if he fails to reply he shall be deemed to have accepted the increase.
Rent agreement and information filing: within two months of entering into a rental agreement, a
form for information of tenancy need to be filed with the Rent Authority. This information shall be
taken as evidence of facts related to the tenancy.
56 | Economy
Penalty on failure to vacate: The act proposes heavy penalty on tenants who do not vacate on time i.
e. compensation equal to double the monthly rent for two months and four times the monthly rent
thereafter to the landowner.
Grievance redressal: A robust grievance redress mechanism comprising Rent Authority, Rent Court
and Rent Tribunal to be set up to settle disputes within 60 days.
20. Zero Budget Natural Farming (ZBNF)
Why in news: Finance Minister Nirmala Sitharaman in her maiden Union Budget speech, hailed
ZBNF as an innovative model.
About ZBNF
 ZBNF, originally promoted by noted agriculturist Subhash Palekar, is a unique chemical-free
method that relies on agro-ecology.
 ZBNF promotes the application of jeevamrutha — a mixture of fresh cow-dung, urine of aged
cows, jaggery, pulse flour, water and soil — on farmland.
 This is a fermented microbial culture that adds nutrients to the soil, and acts as a catalytic agent to
promote the activity of microorganisms and earthworms in the soil.
 About 200 litres of jeevamrutha should be sprayed twice a month per acre of land; after three
years, the system is supposed to become self-sustaining.
 A similar mixture, called bijamrita, is used to treat seed.
 For insect and pest management, concoctions using neem leaves and pulp, tobacco and green
chillis are prepared.
Some other benefits of ZBNF includes,

 soil aeration, minimal watering, inter-cropping, bunds and top soil mulching, and discourages
intensive irrigation and deep ploughing.
 Since farmers are not required to buy any inputs, the cost of production in ZBNF is reportedly
zero.
Difference between ZBNF and Organic farming

 ZBNF relies on cow dung and cow urine for plant nutrition and does not use any purchased
inputs, whereas Organic farming uses all the inputs of the regular farming minus chemicals e. g.
manure and compost along with herbal and mineral additives.
 ZBNF as the name suggest is much more cost-effective due to non-usage of any outside inputs,
whereas in organic farming farmers need to purchase organic fertilizers & manure.
21. Pashmina Products Receive BIS Certification
Why in news: Bureau of Indian Standards (BIS) has published an Indian Standard for identification,
marking and labelling of Pashmina products to certify its purity.
Certification will help curb the adulteration of Pashmina and also protect the interests of local artisans
and nomads who are the producers of Pashmina raw material.
It will also assure the purity of Pashmina for customers and will ensure better prices for the goat
herding community in Ladakh as well as for the local handloom artisans
About BIS
 In the mid-1980s it was felt necessary to confer a statutory status to ISI’s (Indian Standards
Institution) functioning which led to the enactment of the BIS Act 1986.
 ISI was renamed as the Bureau of Indian Standards (BIS), to promote harmonious development of
standardization, and quality certification of goods, with a clearly defined statutory powers.
 The Act has now been revised as BIS Act, 2016 and establishes BIS as the National Standards
Body.
57 | Economy
About Pashmina
 Pashmina is a type of fine cashmere wool.
 Textiles made out of it were first woven in Kashmir.
 Pashmina comes from the Persian word for “made from wool”.
 It was first called “cashmere” because westerners first encountered it in Kashmir.
 The wool is taken from various breeds of Cashmere goat.
 Ladakh produces 50 MT of the finest grade of Pashmina in the world (12-15 microns).
About Pashmina goat

 The Changthangi or Pashmina goat, is a special breed of goat indigenous to the high-altitude
regions of Ladakh in Jammu and Kashmir.
 They are raised for ultra-fine cashmere wool, known as Pashmina once woven.
22. Araku Valley Coffee gets GI tag
Why in news: Araku Valley Coffee has been accorded the prestigious ‘Geographical Indication’ (GI)
tag along with four other varieties of Indian coffee. Others are Coorg Arabica Coffee, Chikmaglur
Coffee and Bababudangriris Arabica Coffee of Karnataka and Waynad Robusta Coffee.
Grasp the Important facts
Araku Valley is a hill station and valley region in the southeastern Indian state of Andhra Pradesh.
It's surrounded by the thick forests of the Eastern Ghats mountain range.
Araku Valley coffee plantation is

GI tags of 2019 in India
located 2, 985 feet above sea level,
 Palani Panchamirtham, a 'prasadam' or religious
spread across hilly terrain growing
offering in temples: Palani Town, Tamil Nadu
under the shade of towering silver
 Tawlhlohpuan, is a fine quality fabric woven: Mizoram
oaks.
 Mizo Puanchei, essentially a shawl, is considered the
most colourful textile: Mizoram
Uniqueness of coffee lies in the fact
 Tirur betel vine valued for its medicinal and cultural
that it is organic (green manures and
usages: Malappuram district of Kerala
organic pest management practices
are being used) and cultivated by  'Odisha rasagola', for the delectable eastern sweet:
Adivasi farmers in 10 mandals of the Odisha
region through the ‘integrated coffee  Kandhamal Haladi-Agricultural-Odisha
development project’.  Kodaikanal Malai Poondu-Agricultural-- Tamil Nadu
 Pawndum-Handicraft-Mizoram
The climate of the Araku valley that  Ngotekherh-Handicraft-Mizoram
lends the coffee its rich aroma and  Hmaram-Handicraft-Mizoram
intensity is characterised by Hot days  Gulbarga Tur Dal-Agricultural-Karnataka
and cool nights, coupled with  Khola Chilli-Agricultural-Goa
naturally iron-rich soil.  Idu Mishmi Textile-Handicraft-- Arunachal Pradesh
Araku Valley Coffee has a good  Dindigul Locks-Manufactured-- Tamil Nadu
market in countries like France,  Kandangi Saree-Handicraft-- Tamil Nadu
Sweden and Switzerland.  Srivilliputtur Palkova-- Food Stuff- Tamil Nadu
 Kaji Nemu-Agricultural-- Assam
Benefits of GI tag
 The GI tag will result in identification of unique flavour of Indian coffee varieties and also
increase their popularity.
 It provides legal protection and prevention from unauthorised use of a Registered Geographical
Indication by others.
 It will also provide a better price for the same variety to the adivasis of Araku.
58 | Economy
About GI tag
 It is an indication that originates from a definite geographical territory, used to identify
agricultural, natural or manufactured goods.
 To receive a get a GI tag, manufactured goods with a special quality or reputation or other
characteristics, should be produced or processed or prepared in that territory.
 GI tag is Approved by the Geneva-headquartered World Trade Organization.
 In India, GI tags are registered under Geographical Indications of Goods (Registration and
Protection) Act, 1999. The act is administered by the Controller General of Patents, Designs and
Trade Marks.
 A GI Tag is valid for a decade, after which it can be renewed for another 10 years.
 Darjeeling tea became the country’s first product to bag a GI tag.
23. KISAN CREDIT CARD SCHEME
The model was developed by National Bank for Agriculture and Rural Development, with the aim of
providing short-term formal credit to farmers, scheme was launched in 1998.
Scheme is being implemented by Regional Rural Banks, Cooperative Banks and Commercial Bank.
Under this scheme banks issue Kisan Credit Cards (KCC) to farmers on the basis of their holdings for
uniform adoption to enable them to purchase agriculture inputs such as seeds, fertilizers, pesticides
etc. and draw cash for their production needs.
Kisan Credit Card Scheme aims at providing adequate and timely credit support from the banking
system under a single window to the farmers for their cultivation & other needs as indicated below:
(a) To meet the short-term credit requirements for cultivation of crops
(b) Post-harvest expenses
(c) Produce Marketing loan
(d) Consumption requirements of farmer household
(e) Working capital for maintenance of farm assets and activities allied to agriculture, like
(f) dairy animals, inland fishery etc.
(g) Investment credit requirement for agriculture and allied activities like pump sets, sprayers, dairy
animals etc.
Beneficiaries:
1. Farmers - individual/joint borrowers who are owner cultivators;
2. Tenant farmers, oral lessees & share croppers;
3. Self Help Groups (SHGs) or Joint Liability Groups (JLGs) of farmers including tenant farmers,
share croppers etc.
Banks may determine the validity period of KCC and its periodic review. The review may result in
continuation of the facility, enhancement of limit or cancellation of the limit/withdrawal
Revised scheme
 The Government has extended the facility of Kisan Credit Card (KCC) to the farmers practicing
animal husbandry and fisheries related activities.
 All processing fee, inspection and all other services charges have been waived off for fresh
renewal of KCC.
 Collateral free loan limit for short term agri-credit has been raised from Rs. 1. 00 lakh to Rs. 1. 60
lakh.
 KCC will be issued within 14 days from the receipt of completed application.
59 | Economy
Infrastructure and energy 12

1. Dedicated Freight Corridor (DFC) 16. Integrated Road Accident Database
2. Head on Generation (HOG) Technology (IRAD)
3. UDAN -Giving wings to better air 17. Air India disinvestment
connectivity 18. FAME -II scheme
4. India’s ‘first private train’ flagged off 19. India amends rules for U. S. airlines
5. Automotive mission plan 20. Kolkata port renamed
6. Steel scrap recycling policy 21. Railways restructuring
7. Sustainable Alternative towards 22. National Infrastructure Pipeline
Affordable Transportation (SATAT) 23. Web Portal ‘GATI’
8. RUCO initiative 24. Northeast gas grid
9. One Nation One FASTag 25. State Energy Efficiency Index 2019
10. Ethanol blended petrol (EBP) programme 26. Government of India’s UJALA & Street
11. India's longest electrified rail tunnel Lighting National Programme
12. State Rooftop Solar Attractiveness Index 27. PRAKASH portal
(SARAL) 28. Dam Safety Bill 2019
13. India’s no-fly list 29. SAGARMALA project
14. Infrastructure Investment Trust 30. BHARATMALA PROJECT
15. Development Support Services for 31. National Investment and Infrastructure
States/UTs (DSSS) For Infrastructure Fund (NIIF)
Projects
1. Dedicated Freight Corridor (DFC)
Why in news: First Trial Run of Double Stack Train conducted on newly built Rewari-Madar section
of Western Dedicated Freight Corridor (WDFC).
About Dedicated Freight Corridor (DFC) In 2010, 4 more Freight Corridors were also
Need: At present, Passenger trains get priority over announced, i. e.
freight trains. Once DFC is completed, the majority  East-West Corridor (Kolkata-Mumbai)
of freight trains will be transferred to it, which will  North-South Corridor (Delhi-Chennai)
help in the timely movement of cargo.  East Coast Corridor (Kharagpur-
Vijaywada)
 Southern Corridor (Chennai-Goa)
Implemented by: Ministry of Railway through a Special Purpose Vehicle (SPV) ‘Dedicated Freight
Corridor Corporation of India Limited’ (DFCCIL).
Aim: to provide a safe and efficient freight transportation system.

In 2006, the railways announced plans to build two dedicated tracks along India’s eastern and
western flanks.
Funding: Funding will be acquired through a combination of debt from bilateral/multilateral

agencies, equity from Ministry of Railways, and public-private partnership agreements.
60 | Economy
Eastern Dedicated Freight Corridor

The route of the Eastern DFC running from Ludhiana to Dankuni passes through Asansol, Gomoh,
Sonnagar, Mughalsarai, Kanpur, Khurja, and Saharanpur.
The Corridor will pass through Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand, and West Bengal.
Construction of eastern corridor is being partially funded by the World Bank.
Western Dedicated Freight Corridor

It will connect a distance of 1, 504 km, from JNPT (Jawaharlal Nehru Port Trust) in Mumbai to Dadri
in UP. It will pass through Haryana, Rajasthan, Gujarat, Maharashtra and Uttar Pradesh.
Construction of the western corridor is being fully funded by the Japanese International Cooperation
Agency (JICA).
Source: PMO
2. Head on Generation (HOG) Technology
Why in news: Railway Ministry announced that it would be upgrading all existing Linke Hofmann
Busch (LHB) coaches with the Head on Generation (HOG) technology from the existing End on
Generation (EOG) technology.
After the purchase of technology from the German manufacturer Linke Hofmann Busch in 1996, the
LHB coaches have been built in India at the Asansol-based Chittaranjan Locomotive Works (CLW).
These coaches were originally designed to operate on the End on Generation (EOG) principle.
About EOG and HOG systems

Under the EOG system, the train’s ‘hotel load’ (the load of air conditioning, lights, fans, and pantry,
etc. ) is provided with electricity from two large diesel generator sets.
As opposed to the older EOG system, the HOG system runs the hotel load by drawing electricity from
the overhead electric lines through the pantograph, with only one emergency generator car attached.
Benefits of HOG system

 Pollution level will be reduced from the Trains as the HOG system would bring down yearly CO2
and NOx emissions. It will help railway accrue carbon credits, and trade them on the
international market.
61 | Economy
 Extra space vacated by the generators could be utilised for LSLRD (LHB Second Luggage, Guard
& Divyaang Compartment) meaning more passengers can be accommodated.
 HOG technology is also very cost effective. The cost of power in HOG system is ₹6 per unit as
compared to EOG system, in which cost of power is ₹22 per unit.
 The power generator cars which used to make huge noise and emit fumes will no more be there.
In place of two such generator cars there will be one standby silent generator car to be used for
emergency.
3. UDAN -Giving wings to better air connectivity
About UDAN
UDAN which refers to ‘Udey Deshka Aam Nagrik’ focuses on making flying affordable for the
people who want to travel to and fro the Tier 2 and Tier 3 cities of the country.
This scheme is a part of the National Civil Aviation Policy (NCAP) and is funded jointly by the GoI
and the state governments. The following are its salient features:
 Under this scheme, the airfare between Tier 2 and Tier 3 cities will be made Rs. 2500 per hour of
travel. and for the helicopter, the fare will be Rs. 5000 per hour.
 In a flight, around 50% of the total seats will be reserved for the UDAN scheme.
 The airport that will be renovated under this scheme will be chosen after referring to the
respective State government.
 Airlines participating in UDAN are selected through a competitive bidding process
 The Central government will provide the following:
o Subsidy to cover Viability Gap funding (VGF) for participating airlines
o Concessional GST on tickets booked using the scheme
o Code sharing for flights under the policy
 State Governments will extend the following measures:
o GST reduction to 1% for 10 years
o Coordination with oil companies to facilitate refueling facilities
o Provide land for airport and ancillary development
o Trained security personnel
o Utilities at subsidised rates
o 20% of VGF
International UDAN scheme

It is an extension of the domestic UDAN scheme by the Ministry of Civil Aviation (MoCA).
Aim: Promotion of international tourism and investments in small cities.
Salient features:
 The scheme seeks to make use of India’s open skies agreement with other Asian countries that
allow an unlimited number of direct flights to and from these nations to 18 Indian destinations.
 Under this scheme, smaller cities will be directly connected to some key foreign destinations of
the neighboring countries.
 State Governments will identify the list of routes to be connected and will also provide financial
support for flights for 3 years, under the scheme.
 Only Indian carriers with a capacity of 70 seats or more, can participate in the international
UDAN scheme.
4. India’s ‘first private train’ flagged off
Why in news: UP CM flagged off India’s first private semi-high-speed train, Tejas Express, on the
Lucknow-Delhi-Lucknow corridor.
62 | Economy
About Tejas express

 The train will run by the Indian Railway Catering and Tourism Corporation (IRCTC).
 The Express cuts the time traveled between the two cities to 6. 15 hours from the 6. 40 hours taken
by the Swarn Shatabdi.
 All passengers of the Tejas Express will be provided free insurance of up to Rs 25 lakh by the
IRCTC and will also be allowed to use the executive lounge of the New Delhi Railway Station.
5. Automotive mission plan
Why in news: Automotive Mission Plan, 2026 has been finalized.
Background
AMP, 2026 has been prepared against a backdrop of largely successful AMP- 2006-16 taken up jointly
by Government of India and the India automotive industry.
During AMP 2006-16, India has exceeded its investment target of Rs. 1, 57, 500 crores, of which
significant quantum of investments came from global and local original equipment manufacturers
(OEMs) as well as component manufacturers.
The Automotive industry has achieved the target of incremental employment creation of 25 million
jobs over the period.
India has now emerged from just an automobile producing hub to designing and development hub as
well.
About AMP, 2026

Time period of AMP 2026 is 2016-26 and this plan also has been finalized jointly by the Government
of India and Indian automotive industry.
The AMP 2026 is aimed at:

 bringing the Indian Automotive Industry among the top three of the world, in engineering,
manufacture and exports of vehicles & components;
 growing in value to over 12% of India GDP and
 generating an additional 65 million jobs.
The objective of the Automotive Mission Plan 2026 includes:

1. To propel the Indian Automotive industry to become the engine of the “Make in India”
programme.
2. To make the Indian Automotive Industry a significant contributor to the “Skill India”
programme.
3. Promote safe, efficient and comfortable mobility for every person in the country, with an eye on
environmental protection and affordability through both public and personal transport options.
4. To seek increase of net exports of the Indian Automotive industry several fold.
5. Promote comprehensive and stable policy dispensation for all regulations impacting the industry.
6. Steel scrap recycling policy
Why in news: Ministry of Steel has issued the Steel Scrap Recycling Policy.
About Policy
Issues by: Ministry of Steel Vehicle Scrappage Policy
 Proposed Vehicle scrappage policy is an
Objectives effort by the government to boost
The major objectives of the steel scrap policy are: automobile demand by removing old,
 To promote a circular economy in the steel polluting vehicles off the roads.
sector. Towards the aims of decongesting  The policy calls for financial incentives to
Indian cities from End of Life Vehicles or the owners of vehicles to get them to scrap
waste vehicles and reduction of dependency outdated models and replace them with
newer vehicles.
63 | Economy
on imports, use, re-use and recycling of steel scrap has become very crucial.
 To develop a globally competitive steel industry by creating 300 Million TPA Steel production
capacity by 2030 with a contribution of 35-40% from EAF/IF route.
 To create a mechanism for treating waste streams and residues produced from dismantling and
shredding facilities in compliance with Hazardous & Other Wastes (Management &
Transboundary Movement) Rules, 2016.
 To promote 6Rs principles of Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture
through scientific handling, processing, and disposal of all types of recyclable scraps.
An Inter-Ministerial Coordination Committee has been set up with the mandate of:
 Considering Policy changes required for creating an organized steel scrapping ecosystem;
 Monitoring the operationalization and enforcement of relevant laws/regulations in this regard.
7. Sustainable Alternative towards Affordable Transportation (SATAT)
Why in news: Government has launched SATAT initiative to promote Compressed Bio-Gas (CBG) as
an alternative, green transport fuel for efficient management of biomass and organic waste.
More about the initiative Compressed Bio-Gas can be naturally

As part of the SATAT scheme, Indian Oil produced through anaerobic decomposition
Corporation Limited, Bharat Petroleum from various bio-mass/waste sources,
Corporation Limited, Hindustan Petroleum including agricultural residue, municipal
Corporation Limited, Gail (India) Limited and solid waste, sugarcane press mud, distillery
Indraprastha Gas Limited had launched an spent wash, cattle dung, and sewage
Expression of Interest (EoI) for procurement of treatment plant waste.
CBG from the entrepreneurs at an assured price.
The other waste streams that can be used for
CBG further, shall be sold to automobiles as a Biogas generation are rotten potatoes from
clean fuel in a similar way to CNG and can also be cold storages, rotten vegetables, dairy plants,
sold to domestic, industrial and commercial chicken/poultry litter, food waste,
consumers which are using LPG and other fuels. horticulture waste, forestry residues and
treated organic waste from industrial effluent
treatment plants (ETPs).
Mechanism
 Compressed Bio-Gas plants would be set up by independent entrepreneurs.
 CBG produced at these plants will be transported through cascades of cylinders to the fuel station
networks of OMCs for marketing as a green transport fuel alternative.
 The entrepreneurs would be able to separately market the other by-products from these plants,
including bio-manure, carbon-dioxide, etc. , to enhance returns on investment.
Benefits
 It would benefit both vehicle-users as well as farmers, entrepreneurs, and the environment.
 SATAT will help address environmental problems arising from stubble burning.
This significant move has the potential:

 to boost the availability of more affordable transport fuels.
 to better use of agricultural residue, cattle dung, and municipal solid waste.
 to provide an additional revenue source to farmers.
 To create a buffer against crude oil/gas price fluctuations.
 to support national commitments in achieving climate change goals.
64 | Economy
About Bio-gas
 Biogas is produced naturally through a process of anaerobic decomposition from waste / bio-
mass sources like agriculture residue, cattle dung, sugarcane press mud, municipal solid waste,
sewage treatment plant waste, etc.
 After purification, it is compressed and called CBG, which has a pure methane content of over
95%.
 Compressed Bio-Gas is exactly similar to the commercially available natural gas in its
composition and energy potential.
GOBAR-DHAN (Galvanising Organic Bio-Agro Resources)

 To convert cattle dung and solid waste in farms to CBG and compost, the GOBAR-DHAN scheme
has been launched.
 The scheme proposed to cover 700 projects across the country in 2018-19.
 The program will be funded through the Solid and Liquid Waste Management (SLWM)
component of Swachh Bharat Mission-Gramin (SBM-G).
8. RUCO initiative
Why in news: FSSAI launches RUCO (Repurpose Used Cooking Oil) Initiative: Cooking Oil to Fuel.
About Initiative
 RUCO (Repurpose Used Cooking Oil) initiative has been launched by FSSAI to enable the
collection and conversion of used cooking vegetable oil to bio-diesel.
 It will also prevent adverse health effects takes place due to using the same cooking oil for
repeated frying.
 FSSAI has fixed a limit for Total Polar Compounds at 25 percent beyond which the vegetable oil
shall not be used.
 Total Polar Compounds (TPC) are formed on repeated frying. The toxicity of these compounds is
associated with several diseases such as hypertension, atherosclerosis, Alzheimer’s disease, liver
diseases.
Recently food delivery service Zomato and biodiesel manufacturer BioD Energy have inked a
partnership to collect used cooking oil from restaurants around the country so that it can be converted
into biodiesel.
9. One Nation One FASTag
The government recently implemented “One Nation One FASTag” scheme
About “One Nation One FASTag” scheme

 It is the flagship initiative of Ministry of Road Transport and Highways (MoRT&H) and National
Highways Authority of India (NHAI).
 It is a pan India initiative based on passive Radio Frequency Identification (RFID) technology
aimed to remove bottlenecks and ensure seamless movement of traffic and collection of user fee
digitally.
 Accordingly, all lanes of fee plazas on National Highways have been declared as “FASTag lanes”
from 1st December 2019 (Extended later to 15 January 2020).
 MoUs have been signed with the state governments to accept FASTags on their state highway
tolls.
 NHAI had started a cashless digitized system of toll collection under the name of the National
Electronic Toll Collection (NETC) system.
 Indian Highways Management Company Ltd. (IHMCL) has been created to manage the NETC –
FASTag system.
65 | Economy
About ‘FASTag’
 FASTags are stickers affixed to the windscreen of vehicles enabling digital and contactless
payment of tolls through the use of RFID technology.
 These tags are connected to the bank accounts or any other payment system. The amount is
automatically deducted, as soon as the car crosses toll plaza.
 The existing FASTags under various jurisdictions of states and agencies would be enabled under
this scheme
 The validity of these tags is 5 years.
10. Ethanol blended petrol (EBP) programme
Why in news: A higher procurement price for ethanol purchased by oil marketing companies has
been approved by the government, for the ethanol-blended petrol (EBP) programme.
Grasp the facts and concepts
About Ethanol
 Ethanol can be produced from products having high starch content like sugarcane, maize, wheat,
etc.
 In India, it is being produced mainly produced through the fermentation of sugarcane molasses.
 Due to the Oxygen content in ethanol, it helps in complete combustion of the fuel by the engine,
resulting in lower emission.
T The National Policy on Biofuels-2018
About Ethanol Blended Petrol (EBP) programme approved by the Government
Ethanol Blended Petrol (EBP) Programme was launched by envisages an indicative target of
the Government in 2003. 20% blending of ethanol in petrol
As of now, this programme has been extended to the whole and 5% blending of bio-diesel in
of India except the Union Territories of Andaman Nicobar diesel by 2030.
and Lakshadweep islands.
Aim: To reduce import dependency of India for energy To achieve this, OMCs are to
requirements, increase value addition in the sugar industry procure ethanol derived from C
and to promote the use of alternative and environment- heavy molasses, B heavy molasses,
friendly fuels. sugarcane Juice, sugar, sugar
The Central Government has scaled up blending targets in syrup, damaged food grains unfit
petrol from 5% to 10%. for human consumption, surplus
For the procurement of ethanol, the Government has fixed food grains.
remunerative prices based on raw material utilized for
ethanol production.
Recently, the government has reduced the GST rate on ethanol meant for EBP Programme from 18%
to 5%.
11. India's longest electrified rail tunnel
Why in news: Andhra Pradesh gets India's longest electrified rail tunnel.
Salient features of the tunnel:

 It is India’s 1st electrified tunnel built using the New Austrian Tunneling Method (NATM) in a
'horseshoe' shape.
 This 6. 6-km long tunnel is situated between Cherlopalli and Rapuru stations of Andhra Pradesh
as a part of the Obulavaripalli-Venkatachalam railway line.
 The tunnel would reduce the traveling time by 5 hours.
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12. State Rooftop Solar Attractiveness Index (SARAL)
Why in news: Ministry of New and Renewable Energy launched the State Rooftop Solar
Attractiveness Index–SARAL.
Findings of the index

The State of Karnataka has been placed at the first rank in the Index that evaluates Indian states based
on their attractiveness for rooftop development.
Telangana, Gujarat and Andhra Pradesh have got 2nd, 3rd, and 4th rank respectively.
About Index
The index aims to objectively assess states based on several The Ministry of New and Renewable
parameters critical for establishing strong solar rooftop Energy (MNRE) has set a target of
markets. SARAL currently captures five key aspects – 175 GW of renewable energy
1. robustness of policy framework capacity by 2022, of which 100 GW
2. implementation environment solar power is to be operational by
3. investment climate March 2022, of which 40 GW is
4. consumer experience expected to come from grid-
5. business ecosystem connected solar rooftops.
This exercise is likely to create a more conducive environment for solar rooftop installations,
encourage investment and lead to an accelerated growth of the sector. the index serves as an
important tool to:
• Benchmark development and deployment of solar rooftop in states.
• Identify states that require more hand holding in terms of policy and investment push.
• Identify investment opportunities.
• Recognize the states that need financing support for development of solar rooftop.
• Gradually, establish a knowledge sharing platform where the progressive states can share their
experiences with the other states.
13. India’s no-fly list
Why in news: A stand-up comedian Kunal Kamra was banned by Four airlines in India — IndiGo,
SpiceJet, Air India, and GoAir —from taking their flights.
Background
Unruly behavior onboard aircraft has been declared an offense and is a punishable act by Directorate
General of Civil Aviation (DGCA).
About no-fly list

Issues in 2017 by government, guidelines are aimed at preventing disruptive behavior by air
travelers. As per the rules:
Pilot-in-command Complaint will be
Committee will
need to file a probed by internal
decide the matter in
complaint of unruly committee to be set
30 days.
behaviour. up by the airline.
During the probe,

concerned airline
can impose a ban on
the passenger.
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Unruly behavior has been categorized into 3 categories:

Level 1: involves verbally unruly behavior, and calls for debarment up to three months.
Level 2: Involves Physically unruly behavior and call for the passenger to be debarred from flying for
up to six months.
Level 3: Involves life-threatening behavior and calls for minimum debarment of 2 years.
Grievance redressal: Any aggrieved person, upon receipt of communication of a ban from the airline,
may appeal within 60 days from the date of issue of the order, to an Appellate Committee constituted
by the Ministry of Civil Aviation.
14. Infrastructure Investment Trust
Why in news: Nationwide Highways Authority of India (NHAI) through its maiden Infrastructure
Investment Trust (InvIT) offering, targets to mobilize ₹15, 000-20, 000 crore.
Background
 Given the magnitude of the Bharatmala program (₹5. 35 trillion), NHAI would need adequate
funds to complete the projects within the prescribed timelines.
 Recent trends have suggested the declining private sector interest in the build, operate and
transfer (BOT) model, where the entire initial cost is borne by them.
 Amid this background, Government recently authorized the NHAI to set up InvIT. This step will
be helpful to monetize the completed national highways with toll collection record of at least one
year.
 It is a part of the government plan to tap alternative sources of financing to boost public spending
in the roads and infrastructure sector.
About Infrastructure Investment Trust (InvITs)

Regulated by: SEBI under SEBI (Infrastructure Investment Trusts) Regulations, 2014.
It is set up as a trust. Real Estate Investment Trust
Infrastructure Investment Trust (InvITs) is an institution like a (REIT)
mutual fund that facilitates investment by pooling the small These are mutual fund like
amount of money from the masses into the infrastructure trusts, facilitating investment in
sector, in return of a small portion of the income as a return. real estate sector.
InvITs can invest in infrastructure projects, either directly or Once listed, these funds can be
through a special purpose vehicle (SPV). In the case of Public- traded on stock exchange.
Private Partnership (PPP) projects, such investments can only The money collected is deployed
be through SPV. in income-generating real estate.
InvITs are very much similar to the REITs (Real Estate This income gets distributed
Investment Trusts) in structure and operations but with minor among the unit holders.
differences i. e. InvITs are directed towards roads or highways
and takes a bit longer time to generate steady cash flow.
15. Development Support Services For States/UTs (DSSS) For Infrastructure Projects
Why in news: NITI Aayog entered into a memorandum of understanding (MoU) with Ladakh to
support its administration through Development Support Services to States for Infrastructure Projects
(D3S-i) ’.
Vision: to achieve transformational, sustained delivery of infrastructure projects with state of art
capacity disseminated at all levels of governance.
The DSSS Infrastructure initiative involves providing project-level support from Concept plan until
financial closure to State Governments / UTs.
16. Integrated Road Accident Database (IRAD)
Why in news: The government has launched a central accident database management system that
will help in analyzing the causes of road crashes and in devising safety interventions to reduce such
accidents in the country.
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Developed by: Indian Institute of Technology-Madras (IIT-M).
Implemented by: National Informatics Centre.

First to be piloted in the six States with highest fatalities from road crashes — Karnataka, Madhya
Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Uttar Pradesh.
Need for database

the largest number of road fatalities in the world take place in India.
As per government sources, More than 1. 5 lakh people lost their lives in road crashes in the country
in 2018.
Of the total people killed in road crashes in 2018, 48% were between 18 years and 35 years old, and
more than 60% of such fatalities were due to overspeeding. Necessary
How would it function?
17. Air India disinvestment
Why in news: Government has recently indicated that Air India’s

disinvestment process may take some more time. Union government
has now invited bids for 100% stake sale of Air India (AI) and transfer
of management control.
The government is also looking to sell a 50% stake in Air India SATS
Airport Services Pvt. Ltd, a joint venture between Air India and
Singapore Airport Terminal Services.
It is the government’s 2nd attempt, its previous attempt in 2018 failed
to receive a single bid.
Grasp the facts and concepts

Disinvestment means the sale or liquidation of assets by the
government, usually Central and state public sector enterprises,
projects, or other fixed assets.
Is it different from privatization? In some cases, disinvestment is

targeted at the privatization of assets. However, not all
disinvestments are privatization.
The government, whenever it so desires, may sell a whole enterprise,
or a majority stake in it, to private investors. In such cases, it is known
as privatization, in which the resulting ownership and control of the
organization do not rest with the government.
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Disinvestment mechanism in India

Department
In 1999, the Department of Disinvestment was set up as a separate department, which was later
renamed as the Ministry of Disinvestment from 6th September 2001.
From 27th May 2004, the Department of Disinvestment is one of the Departments under the Ministry
of Finance.
The Department of Disinvestment has been renamed as Department of Investment and Public Asset
Management (DIPAM) from 14th April, 2016 with the mandate including:
 As per the Allocation of Business rules:
 management of Central Government investments in equity including disinvestment of equity in
CPSEs
 All matters relating to the sale of Central Government equity through an offer for sale or private
placement or any other mode in the erstwhile CPSEs.
 Advice on the recommendations of Administrative Ministries, NITI Aayog, etc. for disinvestment
including strategic disinvestment.
 Advise the Government in matters of financial restructuring of the Central Public Sector
Enterprises and for attracting investment in the said Enterprises through the capital market.
Disinvestment targets are set under each Union Budget, and every year the targets change. The
government takes the final decision on whether to raise the divestment target or not.
Recently the government has announced its disinvestment target at Rs 1. 05 trillion for 2020, up from
Rs 90, 000 crore projected in Interim Budget 2019-20 in February.
Approaches for disinvestment
Disinvestment through minority stake sale: Under this approach, the Government will retain
majority shareholding, i. e. at least 51 percent of the shareholding and management control of the
Public Sector Undertakings. Examples of minority sales via Offer for Sale include issues of Power
Grid Corp. of India Ltd. , Rural Electrification Corp. Ltd. , NTPC Ltd. , NHPC Ltd. , etc.
Strategic disinvestment: Strategic disinvestment along with transfer of management includes sale of
a substantial portion of Government shareholding in identified CPSEs up to 50 per cent or more.
Cabinet Committee on Economic Affairs takes the final decision in this regard.
A few CPSEs approved for strategic disinvestment includes BPCL, Air India, Container Corporation
of India Ltd.
National Investment Fund (NIF) was constituted in November 2005, into which the proceeds from
disinvestment of Central Public Sector Enterprises were to be channelized.
 The corpus of NIF will be maintained outside the consolidated fund of India and of permanent
nature.
 The corpus will be used as follows:
o 75% of the fund to finance selected social sector schemes, which promote education, health,
and employment.
o 25% of the fund to meet the capital investment requirements of profitable and revivable PSUs.
However, later on, NIF was restructured, with effect from the fiscal year 2013–14, disinvestment
proceeds are being credited to the existing ‘Public Account’ under the head NIF and they would
remain there until withdrawn/invested for the approved purpose. Now the NIF corpus to be used
for:
 Subscribing to the shares issued by the CPSEs including PSBs and Public Sector Insurance
Companies, to ensure the 51% ownership of government in strategic industries.
 Preferential allotment of shares of the CPSE so that Government shareholding does not go down
below 51% in all cases where the CPSE is going to raise fresh equity.
 Recapitalization of public sector banks and public sector insurance companies.
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 Equity infusion in various Metro projects;

 Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.
 Investment in Indian Railways towards capital expenditure.
18. FAME -II scheme
An outlay of ₹10, 000 crores has been announced by the government for FAME 2 to boost the number
of electric vehicles in India.
FAME India (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) scheme
Fame India scheme was notified by the government in 2015 as a part of the National Electric Mobility
Mission Plan to support hybrid/electric vehicles market development and Manufacturing eco-system.
Phase-I of this Scheme was initially launched for 2 years, but later subsequently extended from time
to time.
The scheme was launched with the focus areas like Technology development, Demand Creation, Pilot
Projects and Charging Infrastructure.
About 90 percent of the vehicles that availed incentives under the FAME I scheme were electric
scooters.
FAME II scheme
Phase II of the scheme will be implemented with effect from 1st April of the present year for three
years with an outlay of Rs 10, 000 crore.
The scheme will apply to vehicles with ‘advanced batteries’ and will exclude the vehicles with lead-
acid batteries.
The center has sanctioned ₹8, 596 crores for incentives, of which ₹1, 000 crores has been earmarked for
setting up charging stations for electric vehicles in India.
Incentives will be provided to the commercial vehicles including electric buses, three-wheelers and
four-wheelers.
The scheme will also cover Plug-in hybrid vehicles and those with a sizeable lithium-ion battery and
electric motor.
Incentives: Fiscal support will be dependent upon the size of the battery. The center plans to roll out
an incentive of ₹10, 000 per kilowatt (kW) for two-, three- and four-wheelers, based on the size of their
batteries.
19. India amends rules for U. S. airlines
Why in news: Government has provided in-principle approval that would allow designated foreign
airlines - from the US to manage their own ground-handling, which would include security functions.
Background
The step has been taken to resolve the escalating tensions with the US over ground handling rules
that would have potentially resulted in the Ban on Air India flights to the US.
US argued that regulations are in contravention of the “open skies” bilateral agreement 2005, which
allowed self-handing.
What are the rules?

 It makes an exception to its ground handling regulations for US airlines.
 Notably, regulations prohibit international carriers from operations beyond the check-in area and,
 foreign carriers had to enter into an agreement with an Indian airline for performing these
activities.
 However, these exceptions are subject to satisfaction of 2 conditions:
1. airlines will have to allow a security audit by Indian agencies, and
2. ensure that Indian employees are tasked with sensitive operations.
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What are the provisions to be amended?

Clause 2 of ground handling regulations: It allows airlines to perform passenger and baggage
handling, but bars them from security functions performed beyond the check-in area at airports
Clause 3 of ground handling regulations: It imposes similar restrictions on international cargo
airlines.
20. Kolkata port renamed
Why in news: Recently Prime Minister Narendra Modi on Sunday announced that Kolkata port will
be renamed as Syama Prasad Mukharjee Port.
Significance of Kolkata port

 Kolkata Port is the only riverine Major Port in India, situated 232 km. up-stream.
 The river Hooghly, on which it is located, has many sharp bends and is considered a difficult
navigational channel.
Background
 The Portuguese, for the first time in the 16th century, used the present port location to anchor
their ship. They didn’t move inside the Hooghly river as they found beyond Kolkata upper
reaches of Hooghly river unsafe for navigation.
 After the abolition of slavery in the British Empire in 1833, this port was used to ship lakhs of
Indians as ‘indentured laborers’ to far-flung territories throughout the Empire.
 On the demand of merchants in the city, the colonial government formed a River Trust in 1866,
but the idea was failed, the government, later on, took over the administration.
 Finally, in 1870, the Calcutta Port Act (Act V of 1870) was passed, creating the offices of Calcutta
Port Commissioners.
 During World War II, the port was bombed by Japanese forces.
21. Railways restructuring
Why in news: Cabinet approves transformational Organisational Restructuring of Indian Railways.

Vision behind: making Indian Railways the growth engine of India's vikas yatra.
Restructuring includes:
 Unification of the existing eight Group A services of the Railways into a Central Service called
Indian Railway Management Service (/RMS).
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o Currently, the Indian Railways is organised into departments such as traffic, civil,
mechanical, electrical, signal & telecom, stores, personnel, and accounts.
 Re-organisation of Railway Board on functional lines headed by CRB (Chairman Railway Board)
with four Members and some Independent Members
 The existing service of Indian Railway Medical Service (IRMS) to be consequently renamed as
Indian Railway Health Service (IRHS).
Unification of services has been recommended by various committees for reforming Railways
including –
 the Prakash Tandon Committee (1994),
 Rakesh Mohan Committee (2001),
 Sam Pitroda Committee (2012) and
 Bibek Debroy Committee (2015).
22. National Infrastructure Pipeline
Why in news: A report on National Infrastructure project has been release by govt.
About NIP
 It is estimated that India would need to spend $4. 5 trillion on infrastructure by 2030 to sustain its
growth rate. The endeavor of the National Infrastructure Pipeline (NIP) would be to make this
happen efficiently.
 To achieve the GDP of $5 trillion by 2024-25, India needs to spend about $1. 4 trillion (Rs. 100 lakh
crore) over these 5 years on infrastructure in 18 states.
 Towards this endeavor, Recently, a Task Force was constituted to draw up the National
Infrastructure Pipeline (NIP) for each of the years from FY2019-20 to FY2024-25.
 The task force identified ₹102 lakh crore projects in 18 States as part of a National Infrastructure
Pipeline.
 Fund sourcing: Centre, States and the private sector to share the capital expenditure in a 39:39:22
formula.
 Funds allocation: Fund will be allocated for both Economic infra sectors such as Energy (24%),
Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital
expenditure and social infrastructure such as Education, health, sports etc.
23. Web Portal ‘GATI’
Why in news: Web portal ‘GATI’ recently launched by Union Minister for Road Transport &
Highways
Created by: National Highway Authority of India (NHAI) on the lines of PRAGATI Portal used by
PMO.
About portal
 any project related issues can be raised by contractors, concessionaires on it.
 It can be accessed either directly or by the NHAI website.
 All issues raised will be monitored daily by NHAI
 Official and will be reviewed by senior officers of NHAI and the Ministry of Road Transport and
Highway.
About PRAGATI (Pro-Active Governance And Timely Implementation)

It is a multi-purpose and multi-modal platform that is aimed at addressing common man’s
grievances.
Aim: starting a culture of Pro-Active Governance and Timely Implementation
73 | Economy
24. Northeast gas grid
Why in news: The Cabinet Pradhan Mantri Urja Ganga Project:

Committee on Economic Implemented by: GAIL
Affairs (CCEA) approved Rs. Aim: developing a gas-based economy and linking Eastern India
5, 559 crore viability gap to the country’s Natural Gas Grid.
funding for the proposed It will pass through five states, i. e. Uttar Pradesh, Bihar,
northeast gas grid. Jharkhand, Odisha, and West Bengal.
This is only the second The total length of pipeline under Pradhan Mantri Urja Ganga
instance of the government Project is approx. 3, 384 km.
directly funding a gas pipeline National Gas grid
towards the goal of raising the Authorised by: Petroleum and Natural Gas Regulatory Board
share of natural gas in the (PNGRB)
country’s energy mix to 15% Aim: An interconnected National Gas Grid has been envisaged to
by 2030 from the current 6. 2%. ensure the adequate availability and equitable distribution of
The VGF amount is 60 percent natural gas in all parts of the country.
of the estimated project cost At present, there are about 16800 km long Natural Gas pipeline
and will not be linked to network which is operational in the country. About 14, 239 Km
project cost escalation gas pipelines are being developed.
The share of natural gas in India’s energy basket is 6. 2%.
Grasp the concepts and facts
About Viability Gap Funding

VGF is government assistance to an economically justified PPP infrastructure project, falling short of
financial viability due to a long gestation period, inability to increase user charges or any other
reason.
The government of India approved the VGF scheme in 2005 to provide financial support to Public-
Private Partnerships in Infrastructure.
Financial support is provided to the eligible projects in the form of grants, one time or deferred.
North-East Natural Gas Pipeline Grid:
Implemented by: Indradhanush Gas Grid Limited under the Ministry of Petroleum and Natural Gas.
Aim: To provide a substitute (Natural gas) for the liquid fuels like kerosene and firewood
traditionally prevalent in the region.
Salient features
 The project is being implemented under the ambitious Urja Ganga Gas Pipeline Project.
 The length of the pipeline is 1, 656-km and it will connect Guwahati in Assam to major cities in
the region such as Itanagar, Dimapur, Kohima, Imphal, Aizwal, Agartala, Shillong, Silchar,
Gangtok, and Numaligarh.
 The pipeline will also be connected to the National gas grid, through Barauni-Guwahati Gas
Pipeline.
 It will be beneficial for all types of consumer i. e. households (piped cooking gas) and
automobiles (CNG), industry (Fuel).
25. State Energy Efficiency Index 2019
Why in news: Union Government released the State Energy Efficiency Index 2019.
About Index
Developed by: Bureau of Energy Efficiency (BEE) in association with Alliance for an Energy-Efficient
Economy.
The first such index was launched in 2018.
74 | Economy
Objectives
It will assist states to contribute towards national goals on energy security and climate action by
 helping drive EE policies and program implementation at the state and local level,
 tracking progress in managing the states’ and India’s energy footprint and
 institutionalizing the data capture and monitoring of EE activities by states.
It tracks the progress made by states towards Energy Efficiency (EE) initiatives based on 97 significant
indicators.
On the basis of the efforts and achievements by states towards energy efficiency implementation, the
Index categorizes states as ‘Front Runner’, ‘Achiever’, ‘Contender’ and ‘Aspirant’ based on their
efforts and achievements
About 2019 Index

The index this year incorporates qualitative, quantitative and outcome-based indicators to assess
energy efficiency initiatives, programs, and outcomes in five distinct sectors i. e. buildings, industry,
municipalities, transport, agriculture, and DISCOMs.
New indicators for this year include the adoption of Energy Conservation Building Code (ECBC)
2017, energy efficiency in MSME clusters, etc.
Findings
 No state has qualified in the ‘Front Runner’ category.
 Haryana, Kerala, and Karnataka are the top-performing states in the State EE Index 2019,
qualified in the ‘Achiever’ category.
 Worst performers Manipur, Jammu & Kashmir, Jharkhand and Rajasthan are in the ‘Aspirant
category’.
26. Government of India’s UJALA & Street Lighting National Programme
Why in news: The Government of India’s UJALA & Street Lighting National Programme (SLNP)
completes five successful years.
SLNP is the world’s largest streetlight replacement program and UJALA is the world’s largest
domestic lighting project.
About UJALA
 Unnat Jyoti by Affordable Lighting for All (UJALA) is a zero-subsidy scheme launched by the
Government in 2015.
 Objective: to promote efficient lighting, enhance awareness on using efficient equipment which
reduces electricity bills and helps preserve the environment.
 Implemented by: Electricity Distribution Company and Energy Efficiency Services Limited (a
joint venture of Public Sector Undertaking under the Union Ministry of Power like NTPC, PFC,
REC, and Power Grid).
 Under the UJALA Scheme:
o 20W LED tube lights along with BEE 5-star rated energy efficient fans are being offered and
distributed to the consumers at a subsidized price.
o Every consumer who is grid-connected with a metered connection can get the LED bulbs
from their respective Electricity Distribution Company at about 40% of the market price.
About Street Lighting National Programme (SLNP)

 Street Light National Programme is an initiative of the Government to promote energy efficiency
in the country.
 Aim: to replace 3. 5 crore conventional street lights with energy-efficient LED lights.
 Implementing agency: Energy Efficiency Services Limited
 Under the program,
o EESL replaces the conventional street lights with LEDs at its own costs, with no upfront
investment by the municipalities, thereby making their adoption even more attractive.
75 | Economy
o Over a period, EESL is repaid through the consequent reduction in energy and maintenance
cost of the municipality.
27. PRAKASH portal
Why in news: Government launched PRAKASH (Power Rail Koyla Availability through Supply
Harmony) portal for transparency and better coordination in coal supplies to power plants.
Released by: Jointly released by Union Minister of State for Power and New & Renewable Energy
(IC) and Skill Development & Entrepreneurship and Union Minister for Coal, Mines and
Parliamentary Affairs
Developed by: NTPC and sources data from different stakeholders such as Central Electricity
Authority (CEA), Centre for Railway Information System (CRIS) and coal companies.
Aim: Bringing better coordination for coal supplies among all stakeholders viz - Ministry of Power,
Ministry of Coal, Coal India, Railways and power utilities.
The Portal is designed to help in mapping and monitoring entire coal supply chain for power plants,
viz –
 Coal Stock at supply end (mines),
 Coal quantities/ rakes planned,
 Coal quantity in transit and
 Coal availability at power generating station.
Portal will make 4 report available for the above purposes:

i. Daily Power Plant Status: for data related to power generation, coal receipt, consumption and
stock.
ii. Periodic Power Plant Status: data related to power generation, coal receipt, consumption and
stock for selected period.
iii. Plant Exception Report: This report gives materialisation and rakes in pipeline through Rail.
iv. Coal Dispatch Report: Report gives coal subsidiary wise dispatch for particular period.
The portal is expected to help coal companies to track stocks and requirement at power stations for
effective production planning as coal cannot be stockpiled beyond a certain quantity without the risk
of catching fire.
28. Dam Safety Bill 2019
Why in news: The Dam Safety Bill of 2019 was introduced in the Parliament.
About the bill

The Bill provides for the surveillance, inspection, operation, and maintenance of all specified dams
across the country.
Dams with height more than 15 metres, or height between 10 metres to 15 metres with certain design
and structural conditions will be covered.
It constitutes 2 national bodies:

1. National Committee on Dam Safety: whose functions include evolving policies and
recommending regulations regarding dam safety standards
2. National Dam Safety Authority: whose functions include implementing policies of the National
Committee, providing technical assistance to State Dam Safety Organisations (SDSOs), and
resolving matters between SDSOs of states or between a SDSO and any dam owner in that state.
It also constitutes two state bodies:

 State Committee on Dam Safety, and State Dam Safety Organisation. These bodies will be
responsible for the surveillance, inspection, and monitoring the operation and maintenance of
dams within their jurisdiction.
An offence under the Bill can lead to imprisonment of up to two years, or a fine, or both.
Dam owners will be responsible for the safe construction, operation, maintenance and supervision of
a dam.
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29. SAGARMALA project
The Sagarmala programme is an initiative by the government of India to leverage the country's
coastline and inland waterways to boost the logistics sector.
The projects aim to accelerate port-led infrastructure development in the country that could create 1
crore new jobs, including 40 lakh direct jobs, in the next 10 years and to provide infrastructure to
transport goods to and from ports quickly, efficiently and cost-effectively.
Components of Sagarmala:
 Port Modernization & New Port Development: De-bottlenecking and capacity expansion of
existing ports and development of new greenfield ports. Government plans to develop six new
ports across five coastal states of India.
 Port Connectivity Enhancement: Enhancing the connectivity of the ports to the hinterland,
optimizing cost and time of cargo movement through multi-modal logistics solutions including
domestic waterways (inland water transport and coastal shipping)
 Port-linked Industrialization: Developing port-proximate industrial clusters and Coastal
Economic Zones to reduce logistics cost and time of EXIM and domestic cargo. The 33 port-linked
industrialisation projects at a projected cost of USD 65 Billion, anchored by the Sagarmala Project
will complement the Make in India vision.
 Coastal Community Development: Promoting sustainable development of coastal communities
through skill development & livelihood generation activities, fisheries development, coastal
tourism etc.
Institutional Framework
National Sagarmala Apex Committee chaired by minister of shipping and the members like
concerned Cabinet ministeries and Chief minister with the functions like
 Overall policy guidance
 High level coordination
 Approve National Perspective Plan
 Review various aspects of planning
 Review and guidance for implementation
Sagarmala Coordination & Steering Committee under the chairmanship of the Cabinet Secretary to
oversee the implementation, coordination and funding related issues.
State Sagarmala Committee chaired by Chief minister/ Minister in Charge of Ports, responsible for
coordination and implementation of individual projects.
30. BHARATMALA PROJECT
Why in news: As per some reports, govt’s Bharatmala project may miss deadline as cost soars 143% to
Rs 13 lakh crore.
About Bharatmala Project

The Government of India launched “Bharatmala Pariyojana”, a new umbrella program for the
highways sector that focuses on optimizing the efficiency of road traffic movement across the country
by bridging critical infrastructure gaps.
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This scheme aimed at development of 24, 800 KM of fresh highways along with 10, 000 km of roads
subsumed from the National Highways Development Project (NHDP), by 2022 at a cost of ₹5. 35 lakh
crore.
Implemented by: Ministry of Road Transport & Highways

The budget for the scheme will be managed by the cess collected on petrol and diesel and the tax
collected at toll booths, apart from the budgetary support provided by the Government.
The components of Bharatmala Pariyojana are:

 Development of Economic corridors – 9, 000 Kms
 Inter-corridor & feeder roads – 6, 000 Kms
 Improving the efficiency of National Corridors – 5, 000 Kms
 Border & International connectivity roads – 2, 000 Kms
 Coastal & port connectivity roads – 2, 000 Kms
 Expressways – 800 Kms
 Balance of NHDP works – 10000 Kms
31. National Investment and Infrastructure Fund (NIIF)
It was set up as an alternative investment fund (AIF) in December 2016 with a planned corpus of ₹40,
000 crore.
It is India’s first-ever sovereign wealth fund (SWF) (Quasi in nature) established to provide long-term
capital to the country’s infrastructure sector.
Alternative Investment Fund (AIF)

 AIFs are defined in Regulation 2 (1) (b) of Securities and Exchange Board of India (Alternative
Investment Funds) Regulations, 2012.
 It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in
the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP),
which are otherwise not coming under the jurisdiction of any regulatory agency in India.
Alternative Investment Funds shall seek registration in one of the three categories:
1. Category I: Mainly invests in startups, SME's or any other sector which Govt. considers
economically and socially viable.
2. Category II: These include Alternative Investment Funds such as private equity funds or debt
funds for which no specific incentives or concessions are given by the government or any other
Regulator
3. Category III : Alternative Investment Funds such as hedge funds or funds which trade with a
view to make short term returns or such other funds which are open ended and for which no
specific incentives or concessions are given by the government or any other Regulator.
Government has 49 per cent stake in NIIF with the rest held by marquee foreign and domestic
investors
NIIF manages $3 billion of capital across its 3 funds i. e.

1. Master Fund: This fund primarily invests in infra-related projects such as roads, ports, airports,
and power.
2. Fund of Funds: A fund focused on anchoring and investing in credible and reputed third party
funds managers with a strong track record across diversified sectors within infrastructure
services and allied sectors.
3. Strategic Fund: Registered as an Alternative Fund II under the Securities and Exchange Board of
India (SEBI), this fund focused on investing in strategic assets and projects with longer term
horizon across various stages of development.
Its portfolio now includes investments in ports and logistics, real estate and renewables.
78 | Economy
Investment models 13
1. Hybrid-Annuity Model (HAM) 2. Power Purchase Agreements (PPAs)
1. Hybrid-Annuity Model (HAM)
Why in news: Government has approved the hybrid annuity model (HAM) for building National
Highways (NH).
Under HAM, National Highway projects worth approximately Rs 10, 000 crore have been approved
with the objective to maximize the quantum of implemented projects within the available financial
resources of the Government.
This model also aims at renewing the interest of private developers in highway projects.
About hybrid annuity model (HAM)

BOT model of PPP
 This model is a variant of PPP and majorly adopted for the
In this model, private partner is
projects not viable in BOT (Design-Build-Operate-Transfer)
responsible to design, build,
mode.
operate (during the contracted
 Project concessionaire is selected through an open
period) and transfer back the
transparent and competitive bidding process.
facility to the public sector.
 Cash construction support of 40% of the project cost is
provided by the government in 5 equal installments linkedP Pvt, Partner will be responsible to
to project completion milestones.
bring in the finances and will be
 Project concessionaire shall have to bear the balance 60% of allowed to collect revenue from
the cost through a combination of equity and debt. The the users.
payment against this cost will be made by the government
in the form of annuity payments along with interest, on the completion of the project.
 Toll fee collection from the highway’s projects developed under the hybrid annuity model is the
responsibility of the Government/Authority.
2. Power Purchase Agreements (PPAs)
Why in news: Long-term power purchase agreements Issues related to Power Purchase
(PPAs) between generators and states could soon go Agreement (PPA)
away or revised due that issue of states not honouring Private electricity generating industries
the pacts. are facing challenges due to cancellation
of PPA by state governments.
About Power Purchase Agreement (PPA)
Power Purchase Agreement (PPA) is a legal contract As per some report, annual corporate
between an electricity generator (provider) and a power PPA renewable additions in the country
purchaser (host). The power purchaser purchases energy, in 2019 will be about 30-35 percent or a
and sometimes also capacity and/or ancillary services, third lower than installations in 2018.
from the electricity generator.
79 | Economy
Seller under PPA typically are independent power producer, or "IPP" as any regulated electricity
seller are highly regulated and no PPA would be necessary.
A PPA allows the IPP to secure a revenue stream from the project, which is necessary to finance the
project.
Under PPA all commercial terms are defined for the sale of electricity between the two parties, which
includes beginning of commercial operation of the project, schedule for delivery of electricity,
penalties for under-delivery, payment terms, and termination.
80 | Economy
Land reforms 14
1. DIGITISATION OF LAND RECORDS
1. DIGITISATION OF LAND RECORDS
Why in news: Rural Development Ministry came up with data on the digitization of land records.
About data on digitisation on land records

 About 90 percent of villages in India have computerized the Records of Right (RoR).
 About 53 percent of cadastral maps showing the boundaries and ownership of land parcels have
been digitized.
 Other than some North-East states, Kerala (43. 24 percent) and Jammu and Kashmir (9. 32
percent) are lagging in digitization.
Record of Rights (RoR) : The RoR is the primary record that shows how rights on land are derived
for the landowner, and records the property’s transactions from time to time.
The first State to computerize land records was Karnataka under the ‘Bhoomi Project, followed by
Andhra Pradesh and Tamil Nadu, afterward, Digital India Land Records Modernisation Programme
(DILRMP) was introduced by the center in 2008.
About Digital India Land Records Modernisation Programme

DILMP seeks to improve the quality of land records in the country, make them more accessible, and
move towards government-guaranteed titles.
It is a Central sector scheme with 100% central grant.
2 Centrally Sponsored Schemes viz. : Computerisation of Land Records (CLR) & Strengthening of
Revenue Administration and Updating of Land Records were subsumed into DILRMP in 2008.
It has been included under the Digital India Initiative.
Aim: To modernize management of land records, minimize the scope of land/property disputes,
enhance transparency in the land records maintenance system, and facilitate moving eventually
towards guaranteed conclusive titles to immovable properties in the country.
Components: The DILRMP has 3 major components

1. Computerization of land record
2. Survey/re-survey
3. Computerization of Registration.
Implementation: The implementation of the program would be undertaken by respective State
Government/UT Administrations with the financial and technical aid of the Department of Land
Resources, Government of India.
The unit of implementation will be the districts where all activities under the programme will
converge.
81 | Economy
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Economy Notes 14 Chapters on Key Economic Concepts

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National Income and

1. Re-basing GDP estimates

About Base year Criterion for selecting base year:

System of National Accounts 2008 (2008 SNA)

2. The issue of Nominal GDP

Grasp the concepts

Real vs Nominal GDP

Other related terms

3. Total Factor Productivity

Grasp the concepts

Total Factor Productivity (TFP)

Significance of High TFP

How can India improve its TFP?

More about RBI’s operation

How interest rates and bond yield are related?

2. Long-Term Repo Operations (LTROs)

Why in news: RBI has announced LTRO, a new liquidity facility.

Reasons Marginal Standing Facility

3. Partial credit guarantee scheme

4. External Benchmark based interest rates

External Benchmark based interest rates

5. Negative Interest rate

About Negative Interest rate

Pros of negative interest rate.

Cons of Negative interest rate

6. Is the Indian economy staring at stagflation?

Grasp the concepts

Factors that led to stagflation debate?

1. DRAFT NATIONAL RESOURCE EFFICIENCY POLICY

The guiding principles of the policy are set as:

EBOOKS & UPSC PRELIMS USPC MAINS VIDEO FOR DAILY

SECUREIAS UPSC PRELIMS UPSC MAINS DELHI CIVILSERVICES

OPTIONAL SUBJECTS BOOKS, STATE PCS, SSC, BANKING

2. NATIONAL STRATEGY FOR FINANCIAL INCLUSION

Reasons for financial exclusion

Figure: Causes of Financial Exclusion

Strategic Pillars of financial inclusion and recommendations

1. Universal Access to Financial Services

Source: RBI doc

2. Providing Basic Bouquet of Financial Services

3. Access to Livelihood and Skill Development

4. Financial Literacy and Education

5. Customer Protection and Grievance Redressal

3. Randomised Control Trials (RCTs)

About Randomised Control Trials (RCTs)

How does it work?

Unemployment & poverty 04

1. Yuwaah Youth Skilling Initiative

Why in news: UNICEF has launched ‘YuWaah’ Generation Unlimited in India.

About Generation Unlimited

2. India Skills Report 2019-20

About report Policy supersedes the 2009 policy on skills

3. Future Skills PRIME

About Future Skills

Future skill PRIME

Launched by: Ministry of Electronics and IT along with NASSCOM

Money and banking 05

Applicability: Guidelines will apply to:

Exclusions  Type I - NBFC-ND not accepting public

2. India International Financial Services Centres (IFSC) Authority Bill, 2019

Functions of authority include: