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Vivek Singh: BUDGET 2021-22
Vivek Singh: BUDGET 2021-22
15th FC 2021-2026
by
VIVEK SINGH
/VivekSingh_Economy
Budget 2021-22
(Budget is based on nominal figures rather than real)
Fiscal Deficit 9.5% (18.5 lakh cr) 6.8% (15.0 lakh cr)
Revenue Deficit 7.5% (14.6 lakh cr) 5.1% (11.4 lakh cr)
Effective Rev Deficit 6.3% 4.1 %
Primary Deficit 5.9% 3.1%
Budget Highlights
1. Total financial support of all Aatma Nirbhar Bharat (ANB) packages (ANB 1.0, ANB 2.0 and
ANB 3.0) including measures taken by RBI is estimated to be about Rs. 27.1 lakh crores
which amounts to more than 13% of GDP.
Taking a holistic approach to health, Govt. will focus on strengthening three areas:
Preventive, Curative and Wellbeing.
To strengthen nutritional content, delivery, outreach, and outcome, Govt. will merge the
Supplementary Nutrition Programme and the Poshan Abhiyan and launch Mission
Poshan 2.0
The Jal Jeevan Mission (Urban) will be launched. It aims at universal water supply in
all 4,378 Urban Local Bodies with 2.86 crores household tap connections, as well as
liquid waste management in 500 AMRUT cities.
Urban Swachh Bharat Mission 2.0 will be implemented with a total financial allocation
of Rs. 1.42 lakh crores
A voluntary vehicle scrapping policy will be launched to phase out old and unfit
vehicles.
The budget outlay of Health and Wellbeing is going to be Rs. 2.24 lakh crores for 2021-
22 as against Rs. 94,000 crores in 2020-21 which is an increase of 137%.
For a $5 Trillion economy, out manufacturing sector has to grow in double digits on a
sustained basis for which our manufacturing companies need to become an integral
part of global supply chains, possess core competence and cutting-edge technology. To
achieve the above, Govt. has launched Production Linked Incentive (PLI) scheme to
create manufacturing global champions for 13 sectors with an outlay of Rs. 1.97 lakh
crores in the next five years.
To enable the textile industry to become globally competitive, attract large investments
and boost employment generation, a scheme of Mega Investment Textiles Parks
(MITRA) will be launched (in addition to the PLI scheme) under which 7 Textile Parks
will be established over 3 years. This will create world class infrastructure with plug
and play facilities to enable create global champions in exports.
To finance The National Infrastructure Pipeline (launched in Dec 2019) Govt. has
proposed three ways:
1) Infrastructure Financing – Development Financial Institution (DFI)
Govt. will introduce a Bill to set up a DFI named National Bank for Financing
Infrastructure and Development (NaBFID) with Rs. 20,000 crores. Initially
Govt. will own it but later on it will reduce its stake/ownership to 26%. It will be
regulated by RBI.
2) Asset Monetization
Monetizing operating public infrastructure assets is a very important financing
option for new infrastructure construction. A “National Monetization Pipeline”
of potential brownfield infrastructure assets will be launched which can be
sold/monetized in future.
Railways will monetize Dedicated Freight Corridor assets for operations and
maintenance, after it becomes operational in June 2022. (it means Govt. will give
it to private party in return for some one time money for operation & maintenance).
The next lot of airports will be monetized for operations and maintenance.
Other core infrastructure assets that will be monetized are NHAI operational toll
roads, Transmission assets of PGCIL, Oil and Gas pipelines of GAIL, IOCL,
HPCL, Sports stadium etc.
Indian Railways have prepared a National Rail Plan for India – 2030. The plan is to
create a ‘future ready’ Railway system by 2030. It is expected that Western Dedicated
Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022.
Govt. will raise the share of public transport in urban areas through expansion of metro
rail network and augmentation of city bus service.
Two new metro technologies i.e. ‘MetroLite’ and ‘MetroNeo’ will be deployed to
provide metro rail systems at much lesser cost (as compared to present metro) with
same experience, convenience and safety in Tier-2 cities and peripheral areas of
Tier-1 cities.
The distribution companies across the country are monopolies, either government or
private. There is a need to provide choice to consumers by promoting competition. A
framework will be put in place to give consumers alternatives to choose from among
more than one Distribution Company.
The viability of Distribution companies is a serious concern. A revamped reforms-based
result-linked power distribution sector scheme will be launched.
Govt. will launch National Hydrogen Energy Mission for generating hydrogen from green
power sources.
Major Ports are presently owned and operated by Govt. of India. Govt. will give the
management and operation of these ports to private partners under PPP model.
An independent Gas Transport System Operator will be set up for facilitation and
coordination of booking of common carrier capacity in all-natural gas pipelines on a
non-discriminatory open access basis.
Insurance Act 1938 will be amended to increase the permissible FDI limit from 49% to
74% in insurance companies.
Seeing the high level of bad debts in the bank books, an Asset Reconstruction Company
and an Asset Management Company would be set up to consolidate and take over the
existing stressed/bad debt and then manage and dispose the assets to potential
investors. Mostly it will be funded by public and private sector banks.
Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance cover
of Rs. 5 lakhs which means if a bank goes bankrupt, your deposits up till Rs. 5 lakhs
will be protected. Now Govt. has proposed that DICGC Act 1961 will be amended so
that if a bank is temporarily unable to fulfill its obligations, the depositors of such a
bank can get easy and time-bound access to their deposits to the extent of deposit
insurance cover. This would help depositors of banks which are currently under stress.
For the benefit of Start-ups and Innovators, Govt. proposes to incentivize the
incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any
restrictions on paid up capital and turnover and allowing their conversion into any
other type of company at any time.
Govt. will launch data analytics, artificial intelligence, machine learning driven MCA21
Version 3.0 which will have additional modules for e-scrutiny, e-Adjudication, e-
Consultation and Compliance Management. [MCA21 is an e-Governance initiative of
Ministry of Corporate Affairs (MCA) that enables an easy and secure access of
the MCA services to the corporate entities, professionals and citizens of India.]
Govt. will privatize two public sector banks and one General Insurance Company in
2021-22. Govt. will also bring IPO of LIC.
Govt. will set up a Special Purpose Vehicle to monetize the non-core assets of Govt.
ministries/Departments and PSUs which mostly consist of surplus land.
Policy features
Policy covers existing CPSEs, Public Sector Banks and Public Sector Insurance
Companies.
In strategic sectors, there will be bare minimum presence of the public sector
enterprises. The remaining CPSEs in the strategic sector will be privatised or merged or
subsidiarized with other CPSEs or closed.
Agricultural credit target has been enhanced to Rs. 16.5 lakh crores in FY 2021-22 and
there is more focus on credit flows to animal husbandry, dairy and fisheries.
Agriculture Infrastructure Fund will be made available to APMCs for augmenting their
infrastructure facilities
Seaweed farming is an emerging sector with potential to transform the lives of coastal
communities which will provide large scale employment and additional incomes. To
promote seaweed cultivation, Govt. will establish Multipurpose Seaweed Park in Tamil
Nadu.
For the first time globally, social security benefits will be extended to gig and platform
workers. Minimum wages will apply to all categories of workers.
More than 15000 schools will be qualitatively strengthened to include all components of
the National Education Policy.
100 New Sainik Schools will be set up in partnership with NGOs/private schools/States
National Language Translation Mission (NTLM) will be launched. This will enable the
wealth of governance-and-policy related knowledge on the Internet being made available
in major Indian languages.
Deep Ocean Mission will be launched which will cover deep ocean survey exploration
and projects for the conservation of deep sea bio-diversity.
The forthcoming census will be the first digital census in the history of India
9. Fiscal Position
The fiscal deficit in 2020-21 is 9.5% which is supposed to come down to 6.8% in 2021-
22. Govt. plans to continue the path of fiscal consolidation and intend to reach a fiscal
deficit level below 4.5% of GDP by 2025-26. This consolidation will be achieved by first,
increasing the buoyancy of tax revenue through improved compliance, and secondly, by
increased receipts from monetisation of assets, including Public Sector Enterprises and
land.
The Contingency Fund of India is being proposed to be augmented from Rs. 500 crores
to Rs. 30,000 crores through Finance Bill.
In accordance with the views of the 15th FC, Govt. has allowed a normal ceiling of fiscal
deficit of States at 4% of GSDP for 2021-22. Additional borrowing ceiling of 0.5% of
GSDP will also be provided subject to conditions. States will be expected to reach a
fiscal deficit of 3% of GSDP by 2023-24, as recommended by 15th FC.
Extra Budgetary Resources – These are borrowing by Govt. agencies (PSUs) towards
funding Govt. of India schemes but repayment burden is on Govt. For example Govt.
asks FCI to borrow from National Small Savings Fund (NSSF) to implement food
subsidies under the NFSA 2013. Govt. has said that it will discontinue the NSSF loan to
FCI and Govt. will directly provide the funds to FCI. And for this Govt. may have to
borrow more which has already been factored into 9.5% fiscal deficit for 2020-21.
FRBM Act 2003 will be amended to include the deviations in the fiscal deficit (9.5% in
2020-21 and in future years) as it mandates a ceiling of 3% fiscal deficit.
In 2019-20, direct tax return filers have dramatically increased to 6.48 crore from 3.31
crore in 2014.
In direct tax administration, Govt. has already introduced Faceless Assessment and
Faceless Appeal. The next level of income tax appeal is the Income Tax Appellate
Tribunal. Govt. has proposed to make this Tribunal also faceless and shall establish a
National Faceless Income Tax Appellate Tribunal Centre. All communication between
the Tribunal and the appellant shall be electronic. Where personal hearing is needed, it
shall be done through video-conferencing.
Earlier Govt. came out with Direct Tax Vivad se Vishwas Scheme to give taxpayers an
opportunity to settle long pending disputes. Under the scheme over one lakh ten
thousand taxpayers have already opted to settle tax disputes of over Rs. 85,000 crores.
To further reduce the litigation for small taxpayers, Govt. has proposed to constitute a
Dispute Resolution Committee for them which will be faceless to ensure efficiency,
transparency and accountability. Anyone with a taxable income up to Rs. 50 lakhs and
disputed income up to Rs. 10 lakhs shall be eligible to approach the committee.
Senior Citizens above 75 years of age have been exempted from filing income tax
returns whose income is only from pension and interest. The paying bank will deduct
the necessary income tax.
Govt. has reduced the time limit for re-opening of assessment to 3 years from the earlier
6 years. (If Govt. realizes that someone has paid less tax or avoided tax then it reopens
the tax return (assessment) and verifies it). (Minimum government maximum governance)
Govt. is overhauling the customs duty structure to achieve the twin objective of
promoting domestic manufacturing and helping India get onto global value chain and
export better. The thrust has now been on easy access to raw materials and exports of
value added products.
The changes in Customs/Import duty have been made in line with our philosophy of
Aatma Nirbhar Bharat and promote more domestic value addition. The raw materials
customs duty rate has been reduced and has been kept at low rate. The Intermediate
products have been kept at intermediate level of duty. And for the finished goods which
are being manufactured in India or we want the Indian companies to manufacture, the
customs duty has been kept at a higher rate, but only up to a certain level and not at a
very higher level. This has been the broad philosophy for most of the items.
Customs duty has moderately been increased on some parts of mobile phones and
chargers.
To encourage domestic production, customs duty has been increased on solar invertors
from 5% to 20%, and on solar lanterns from 5% to 15%%.
To benefit farmers customs duty on cotton has been increased from nil to 10% and on
raw silk and silk yarn from 10% to 15%.
Govt. has proposed Agriculture Infrastructure and Development Cess (AIDC) on a small
number of items like petrol, diesel, gold and some imported agricultural products.
With effect from Sept. 2020, Govt. has implemented a new procedure for administration
of Rules of Origin. This has helped in putting a check on misuse of FTAs.
Economic Survey 2020-21
(Volume I)
Chapter 1
1. Lockdown in response to the Covid-19 pandemic resulted in supply shock which
disrupted the productive capacity of the economy. This also resulted in lack of demand
in the economy (underheating). But once the lockdown was removed in a staggered
manner, the capacity had to be strengthened to meet the pent up demand. A simple
reflating (stimulating the economy through fiscal or monetary measures) of the economy
would have led to runway inflation (very high inflation) given the inherent supply-side
constraints in India’s food economy. Therefore India initiated a slew of multi-sectoral
supply-side structural reforms to lend flexibility and resilience to supply chains as a
part of Aatma Nirbhar Bharat Mission. India is the only country which undertook
structural reforms on the supply-side at the initial stages of the pandemic. This will
generate productivity gains in the medium to long term. The following are the structural
reforms implemented by the Govt. during pandemic under Aatma Nirbhar Bharat
Mission. (details regarding the reforms will be covered in the book)
Chapter 2
2. Debt sustainability depends on the “interest rate growth rate differential” (IRGD) i.e. the
difference between the interest rate and the growth rate in the economy. “If the interest
rate paid by the Government is less than the growth rate, then the intertemporal
(relationship between past, present and future events) budget constraint facing the
Government no longer binds”. In the Indian context, growth leads to debt sustainability
but not necessarily vice-versa (i.e. lower debt may not support higher growth). This is
because the interest rate on debt paid by the Indian Government has been less than
India’s growth rate by norm, not by exception.
3. As the IRGD is expected to be negative in the forseeable future for India, a fiscal policy
that provides an impetus to growth will lead to lower, not higher, debt to GDP ratio.
This is the reason Eco Survey has demonstrated counter-cyclical fiscal policy to enable
growth during economic downturns like Covid-19.
4. In general, fiscal policy must be counter-cyclical to smooth out economic cycles instead
of exacerbating them.
6. Most of the studies concur that fiscal policies are considerably more effective in
recessions than in expansions.
7. Studies have established that following a pro-cyclical fiscal stance leads to lower
economic growth, higher volatility in output and higher levels of inflation. In contrast a
counter-cyclical fiscal policy stance with policy actions against the cycle acts as a
stabilizer by reducing output volatility and keeping growth on a steady path. It has also
been established that industries have grown faster both in terms of output and
productivity in economies where fiscal policy has been more counter-cyclical.
8. This year survey’s call for more active, counter-cyclical fiscal policy is not a call for
fiscal irresponsibility but it is a call to break the intellectual anchoring that has created
an asymmetric bias against fiscal policy
9. Evidence over the last two and a half decades demonstrates clearly that in India, higher
GDP growth causes the ratio of debt-to-GDP to decline but not vice-versa.
10. In India and other emerging market economies, evidence shows that the direction of
causality between the two variables is: higher growth leads to lower public debt as
measured by their debt-to-GDP ratios but not vice-versa. In contrast, when the GDP
growth rate is low, no such causal relationship is reflected between growth and public
debt. (This is because higher growth enables the IRGD to be negative and thereby
ensuring debt sustainability).
11. The relationship between debt and growth exhibits a clear direction of causality: Higher
growth lowers debt-to-GdP ratios but lower debt does not necessarily lead to higher
growth.
12. The phenomenon of crowding out of private investment is based on the notion that
supply of savings in the economy is fixed. Therefore, higher fiscal spending may
increase the demand for loanable funds and hence exert an upward pressure on
interest rates, thereby discouraging private investment.
13. Recent research puts further doubt on the phenomenon of crowding out in rapidly
growing economies by showing that the supply of savings is not fixed but expands
with income growth. In an economy operating below full capacity, the supply of savings
may grow from greater government spending through demand creation and thereby
greater employment. This is because, as highlighted by recent research, favourable
demographics – in the form of a large population of working age – would enhance
savings through meaningful jobs.
14. During economic crises, a well-designed expansionary fiscal policy stance can
contribute to better economic outcomes in two ways. First, it can boost potential
growth with multi-year public investment packages that raise productivity. The multi-
year nature of public investment would contribute to credibly lifting growth
expectations. With the National Infrastructure Pipeline (NIP) already laying out the
agenda for ambitious public spending, fiscal policy catering to funding NIP in the first
few years can boost growth and thereby be self-financing. At a time of excessive risk
aversion in the private sector, which is characteristic of any economic crisis, risk taking
via public investment can catalyze private investment and unleash a virtuous circle. It
will crowd in private investment, rather than crowd it out. Second, there is a risk of the
Indian economy falling into a low wage-growth trap, as has happened in Japan during
the last two decades. Implementing the NIP via front-ended fiscal spending could
generate higher-paying jobs and boost productivity.
Chapter 3
15. Credit ratings map the probability of default and therefore reflect the willingness and
ability of borrower to meet its obligations. India’s willingness to pay is unquestionably
demonstrated through its zero sovereign default history. India’s ability to pay can be
gauged not only by the extremely low foreign currency denominated debt of the
sovereign but also by the comfortable size of its foreign exchange reserves that can pay
for the entire stock of India's external debt including that of the private sector. India’s
forex reserves stood at $590.00 billion as of January 29, 2021, greater than India’s total
external debt (including that of the private sector) of $556.2 billion as of September
2020.
16. [India is rated BBB-/Baa3 by S&P/Moody’s]. India’s sovereign credit ratings do not
reflect its fundamentals. Within its sovereign credit ratings cohort/group (countries
rated between A+/A1 and BBB-/Baa3 by S&P/ Moody’s) India is a clear outlier (a
person or thing differing from all other members of a particular group) on several
parameters, i.e. it is rated significantly lower than mandated by the effect on the
sovereign rating of the parameter. These include GDP growth rate, inflation, general
government debt (as per cent of GDP), cyclically adjusted primary balance/deficit (as
per cent of potential GDP), current account balance (as per cent of GDP), political
stability, rule of law, control of corruption, investor protection, ease of doing business,
short-term external debt (as per cent of reserves), reserve adequacy ratio and sovereign
default history. This outlier status remains true not only now but also during the last
two decades.
17. Despite ratings not reflecting fundamentals, they can however be pro-cyclical (favour
the boom/recession) and can affect equity and debt FPI flows of developing countries,
causing damage and worsening crisis. It is therefore imperative that sovereign credit
ratings methodology be made more transparent, less subjective and better attuned to
reflect economies’ fundamentals.
Chapter 4
18. By examining the correlation of inequality and per-capita income with a range of socio
economic indicators, including health, education, life expectancy, infant mortality, birth
and death rates, fertility rates, crime, drug usage and mental health, the Survey
highlights that both economic growth (as reflected in the income per capita) and
inequality have similar relationships with socio-economic indicators (for example
birth and fertility rates both decline with increase in inequality and growth). Thus,
unlike in advanced economies, in India economic growth and inequality converge in
terms of their effects on socio-economic indicators (and hence there is an absence of
a trade-off between economic growth and inequality).
19. Furthermore, economic growth has a far greater impact on poverty alleviation than
inequality. Therefore, given India’s stage of development and knowing that our growth
potential is high (and absolute level of poverty is also high), India must continue to
focus on economic growth to lift the poor out of poverty by expanding the overall pie.
Note that this policy focus does not imply that redistributive objectives are
unimportant, but that redistribution is only feasible in a developing economy if the size
of the economic pie grows.
Chapter 5
20. The recent COVID-19 pandemic has emphasized the importance of the healthcare
sector and its inter-linkages with other key sector of the economy. The ongoing
pandemic has showcased how a healthcare crisis can get transformed into an economic
and social crisis.
21. Given its potential to provide healthcare access in remote areas, telemedicine (it allows
health care professionals to evaluate, diagnose and treat patients at a distance using
Information & telecommunications technology) needs to be harnessed to the fullest by
especially investing in internet connectivity and health infrastructure.
22. National Health mission (NHM) has played a critical role in mitigating inequity as the
access of the poorest to pre-natal and post-natal care as well as institutional deliveries
has increased significantly. Therefore, in conjunction with Ayushman Bharat, the
emphasis on NHM should continue.
23. An increase in public spend from 1 per cent to 2.5-3 per cent of GDP – as envisaged in
the National Health Policy 2017 – can decrease the Out-Of-Pocket Expenditures from 65
per cent to 30 per cent of overall healthcare spend
Chapter 6
24. It is not possible to have complete regulations in a world which has uncertainty as it is
not possible to account for all possible outcomes. The evidence, however, shows that
India over-regulates the economy. This results in regulations being ineffective even with
relatively good compliance with process.
25. The root cause of the problem of over-regulation is an approach that attempts to
account for every possible outcome. This is illustrated by a study of the time and
procedures needed to voluntarily close a company in India, even when there is no
outstanding dispute or litigation and all paperwork is complete, it takes 1570 days.
26. The problem is that policymakers, by default, tend to favour prescriptive regulation over
supervision. Unlike supervision, regulation can be easily measured. After all,
regulations provide criteria or checklists, making it easier for regulators to follow and
reduce their accountability later on. In contrast, it is difficult to quantify the amount
and quality of supervision.
27. The optimal solution is to have simple regulations combined with transparent decision
making process. Having provided the government decision maker with discretion, it is
important then to balance it with three things- improved transparency, stronger
systems of ex-ante accountability (such as bank boards) and ex-post resolution
mechanisms
28. Both economic theory and evidence shows that in an uncertain and complex world, it is
not possible to write regulations that account for all possible outcomes. This makes
discretion unavoidable in decision-making. The attempt to reduce discretion by having
ever more complex regulations, however, results in even more non-transparent
discretion. The solution is to simplify regulations and invest in greater supervision
which, by definition, implies willingness to allow some discretion.
Chapter 7
29. Regulatory Forbearance: Forbearance means tolerance. Regulatory forbearance is the
action of refraining from exercising a legal right, especially enforcing the payment of a
debt by the regulator. So, regulatory forbearance occurs when a regulatory body is
showing tolerance and not very strict in enforcing rules/regulations and giving a lot of
relaxations.
30. Zombie (firms): Zombies are typically identified using the interest coverage ratio which
is the ratio of a firm’s profit after tax to its total interest expense. Firms with interest
coverage ratio lower than one are unable to meet their interest obligations from their
income and are categorized as zombies.
31. Ever-greening of Loans: It is a practice whereby banks extend even more loans to debt-
laden companies to help them repay previous loans.
34. The prolonged forbearance policies following the GFC thus engendered the recent
banking crisis that brought down investment rates and thereby economic growth in the
country. The lesson for policymakers is to treat emergency measures as such and not to
extend them even after recovery: when an emergency medicine becomes a staple diet, it
can be counterproductive
Chapter 8
35. The Global Innovation Index (GII) is co-published by Cornell University, INSEAD, and
the World Intellectual Property Organization (WIPO). It seeks to assist economies in
evaluating their innovation performance.
36. India entered the top 50 innovating countries for the first time in 2020 since the
inception of the Global Innovation Index (GII) in 2007, by improving its rank from 81 in
2015 to 48 in 2020.
37. The seven pillars of Global Innovation Index (GII) 2020 are Knowledge & technology
output, Market sophistication, Business sophistication, Human capital & research,
Institutions, Creative outputs, Infrastructure.
38. India has been able to effectively translate investments in innovation inputs to produce
a higher level of innovation outputs. This implies that India stands to gain more from its
investments into innovation than many other countries. With higher investments, it
may be possible that this relationship between innovation inputs and innovation
outputs becomes even more favourable for India and there is greater “bang for the
buck” as regards India’s investments in innovation.
39. India must focus on improving its performance on institutions and business
sophistication innovation inputs. These are expected to result in higher improvement in
innovation output.
40. India needs greater thrust on innovation to catapult itself to a higher growth trajectory
and become the third largest economy in GDP at current US$ in the near future. This
requires boosting gross expenditure on R&D (GERD) from 0.7 per cent of GDP
currently, to at least the average level of over two per cent which is in other top ten
economies.
41. Despite heavy lifting by the government sector in GERD of almost three times the
average of other top ten economies, India’s GERD remains low. Therefore, India’s
business sector needs to rise to the occasion and significantly ramp up its GERD.
42. Indian residents’ share in total patents filed in the country stands at 36 per cent. This
lags behind the average of 62 per cent in other largest economies. Resident share in
patent applications must rise for India to become an innovative nation.
Chapter 9
43. The Economic Survey observes that, relative to states that did not implement Pradhan
Mantri Jan Arogya Yojana (PMJAY) (for example West Bengal), States that adopted it
experienced greater penetration of health insurance, experienced a reduction in infant
and child mortality rates, realized improved access and utilization of family planning
services, and greater awareness about HIV/AIDS.
Chapter 10
44. The “basic needs” approach to economic development focuses on the minimum specified
quantities of basic necessities such as food, clothing, shelter, water and sanitation that
are necessary to prevent ill health, and undernourishment. Poverty is a failure to
achieve certain minimum basic needs or capacities. Poverty can also be defined as the
deprivation of material requirements for the minimum acceptable fulfillment of basic
needs. “Bare Necessities Index (BNI)” has been developed by the Survey to quantify
this approach to economic development using the data from National Statistical Office
(NSO).
45. The BNI measures access to “the bare necessities” for households in rural areas, urban
areas and at the all India level. These necessities are measured using 26 comparable
indicators on five dimensions viz., water, sanitation, housing, micro-environment,
and other facilities.
46. The Sustainable Development Goals (SDGs) also focus on providing “the bare
necessities” to all: Goal 6 focuses on access to clean water and sanitation to all while,
goal 7 inter alia aims to provide universal access to electricity and clean cooking fuel.
47. The “bare necessities” of housing, water, sanitation, electricity and clean cooking fuel
are jointly consumed by all the members of a household. They, therefore, touch the life
of every member in the household. As these are durable assets, they deliver services to
the household over long periods of time. Access to clean drinking water, safe sanitation
and clean cooking fuel also have direct linkages with health of the members in the
household. Access to these saves time for a household, which they can utilize in
productive activities such as education and learning.
48. In order to improve access to “the bare necessities,” successive governments have made
constant efforts. The network of schemes designed to deliver these necessities include
inter-alia the Swachh Bharat Mission (SBM), National Rural Drinking Water Programme
(NRDWP), Pradhan Mantri Awaas Yojana (PMAY), Saubhagya, and Ujjwala Yojana.
49. Survey finds that improved access to “the bare necessities” has led to improvements in
health indicators as well as it correlates with future improvements in education
indicators.
50. Compared to 2012, access to “the bare necessities” has improved across all States in
the country in 2018. Access to bare necessities is the highest in the States such as
Kerala, Punjab, Haryana and Gujarat while it is the lowest in Odisha, Jharkhand, West
Bengal and Tripura.
51. Access to “the bare necessities” has improved disproportionately more for the poorest
households when compared to the richest households across rural and urban areas.
Chapter 1
1. India’s real GDP growth is estimated to contract 7.7% in FY 2020-21 and is projected to
grow at 11% in FY 2021-22.
2. Agriculture is set to cushion the shock of the Covid-19 on the Indian economy in 2020-
21 with a growth of 3.4% - resulting in an increase in its share in GDP to 19.9% in
2020-21. Industry is estimated to contract by 9.6% and Services is estimated to
contract 8.8% in 2020-21.
3. Global economic output is estimated to fall by 4.4% in 2020, the sharpest contraction
in a century.
4. In the five years period from 2015-2020, Indian economy grew at an average growth of
6.7%.
5. The pandemic has been a unique economic shock that has triggered both supply and
demand side shocks simultaneously across economies around the world. Increased
uncertainty, lower confidence, loss of incomes, weaker growth prospects, fear of
contagion, curtailment of spending options due to closure of all contact-sensitive
activities, the triggering of precautionary savings, risk aversion among businesses and
resultant fall in consumption and investment – led to the first order demand shock. The
supply chain disruptions caused by closure of economic activity and restricted
movement of labour led to the first order supply shocks.
6. The first order supply side disruptions potentially created second round effects on both
demand and supply. The initial supply shock, resulting in wage and income loss, could
impact aggregate demand and impair productive capacity leading to supply shocks.
These effects were further amplified through international trade and financial linkages,
dampening global activity and pushing commodity prices down. The feedback loops of
demand and supply generated potential hysteresis effects - when households demand
less, firms get reduced revenues, which feeds into reduced activity by firms, and thus
reduced household income.
Chapter 2 to 10
These chapters include those things (Fiscal developments, money supply, inflation, Agriculture,
Infrastructure, Services etc.) which have already been covered in detail in my Indian Economy
Book 5th Edition which will come in Feb 2021. It would be better to read all these topics from the
book as everything has been arranged properly topic wise and easier to understand with
updates from the survey. Reading these things from Survey may be burdensome for students and
they may not be able to retain facts/figures. Some miscellaneous details from the Survey will
also be covered through the ECO MCQ PDF which will be released in April 2021.
Fifteenth Finance Commission (1st April 2021- 31st March 2026)
The 15th Finance Commission has recommended the following two kinds of transfers:
1. As percentage share of central taxes (this is called vertical devolution), which will be 41% of
the divisible pool of Central taxes and will be distributed among 28 States. This never
becomes part of the Consolidated Fund of India and is untied grants which mean no
restriction is imposed on States on how to spend.
(No UT either with or without Assembly gets this vertical devolution, hence J&K and Ladakh
will also not get from this 41%. UTs are allocated funds by the Central Government from
Budgetary Resources through Ministry of Home Affairs)
The pool of tax resources of the Union Govt. to be shared with the States is called the
“Divisible Pool” and it excludes the following items from the gross tax revenue:
Cost of collection of taxes
Cess and Surcharge
Tax Revenue of the Union Territories
National Calamity Contingency Duty
The parameters for distribution of taxes among the states (horizontal distribution) are:
Income Distance (45%),
Population (2011 Census) (15%),
Demographic Performance (12.5%),
State Area (15%),
Forest and Ecology (10%),
Tax and fiscal effort (2.5%)
2. As per article 275 of the Constitution, the Finance Commission should recommend ‘Grants-
in-Aid’ for the states out of the Consolidated Fund of India. The Fifteenth Finance
Commission (FFC) has recommended the following five types of grants in aid:
In light of the urbanization and future needs of the cities to act as engines of growth,
the ratio of inter se distribution of the grants recommended for rural and urban local
bodies gradually moves from 67.5:32.5 to 65:35. For the inter se distribution of grants
among the States, the weightage is 90% on population and 10% on area
Total States allocation for State Disaster Risk Management Fund (SDRMF) will be
subdivided into State Disaster Response Fund (SDRF) which will get an allocation of
80% and State Disaster Mitigation Fund (SDMF) which will get an allocation of 20%.
Total grants for the five year period is Rs. 10.33 lakh crore
Defence and Internal Security
In keeping with the terms of reference (ToR), the FFC examined the need and urgency to step
up outlay on the capital requirements for defence and internal security and after examining all
the aspects, FFC has recommended the constitution of a dedicated Modernisation Fund for
Defence and Internal Security by the Union Government to bridge the gaps between the
projected budgetary requirement and budget allocation for capital expenditure on defence and
internal security. This may be called Rashtriya Suraksha Naivedyam Kosh or any other
appropriate name.
The proceeds of the fund will be utilised for the following three purposes:
Capital investment for modernisation of defence services
Capital investment for CAPFs and modernisation of state police forces as projected by
MHA
A small component as welfare fund for our soldiers and para-military personnel
The fund shall have the standard notified rules for its administration, public reporting, and
audit by the CAG.
The 5th edition of the “Indian Economy” book by Vivek Singh sir will
be released on 18th Feb 2021 covering all the
conceptual/static/current updates from the telegram channel and
Budget/Economic Survey/FFC report.