Agriculture and rural industry could be India’s strength post COVID-19.

Do you agree? Substantiate your response.
Introduction:
India is predominantly a rural country. As per the 2011 Census, 68.8 per cent of country’s
population and 72.4 per cent of workforce resided in rural areas. Rural economy constitutes
46 per cent of national income. Despite the rise of urbanization more than half of India’s
population is projected to be rural by 2050. Thus growth and development of rural economy
and population is a key to overall growth and inclusive development of the country in post
COVID-19 India.
Body:
Criticality of the rural sector in the economy:
 As per NITI Aayog report, more than half of Indian industrial production comes
from the rural areas. Rural construction also accounts for nearly half of the total
building activity in the country. The value of rural services is about a quarter of
the total services output. 
 Agriculture has accounted for less than half of total rural output since the turn of
the century. On the other hand, National Sample Survey Office (NSSO) data
shows that more than one-fifth of rural households with self-employment in
agriculture have income less than the poverty line.
 Agriculture labour productivity in terms of gross value added (GVA) in India is
less than a third of that in China and 1% of that in the US. Rural sector is net
importer vis-e-vis urban areas which indicate outward flow of money. 
Agriculture and Rural industry as engine of economic recovery:
 Renewed focus on NREGA: The government’s commitment to provide an
additional Rs. 40,000 crore allocation for the Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) for FY21 will help to spur rural
demand. 
 Investment in farm infrastructure: NABARD will facilitate Rs 1 lakh crore
finance for funding Agriculture Infrastructure Projects at farm-gate and
aggregation points like Primary Agricultural Cooperative Societies, Farmers
Producer Organizations, Agriculture entrepreneurs, Startups, etc. Local initiative
for building community infrastructure, like water harvesting, canal irrigation
network, huts for community market centers etc. may generate employment
opportunities. 
 Opportunity for Indian agriculture to tap world markets: As the global supply
chains for agricultural products remains paralyzed in global market, Indian
product can make headways as Indian rural sector is not as badly affected as the
North American or European rural sector. 
 If there is no universal access to a Covid-19 vaccine for another 18-24 months,
then businesses in safer sectors and locations are likely to do well, here rural
sector might act as net gainer. 
 In rural India, where it is naturally easier to have physical distancing and outdoor
work. This may shift the focus from urban markets to rural markets, for both
demand and production.
 Surplus labour: Livestock, fisheries, dairy, vegetables, fruit and food processing
are more labour-intensive and high value-yielding. After many decades of neglect
in research and development, lack of market access, on-off policies for exports,
and market distortions, the present adversity may be a timely opportunity for this
 sector. Recently, Finance Minister informed allocation of Rs 20,000 crore for
fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY). This will
include Rs 11,000 crore for activities in marine, inland fisheries and aquaculture
while Rs. 9000 crore to be spent on developing fishing Harbours, cold chain,
markets etc.
 Self reliant rural sector: Local production of items of local requirement, the local
weavers, artisans and craftsmen may establish micro enterprises and form local
community marketing cooperatives. Finance minister announced Rs 10,000 crore
scheme for the formalization of Micro Food Enterprises (MFE). This will help
nearly 2 lakh MFEs to achieve technical up-gradation to attain FSSAI food
standards, build brands and marketing.  
 There may be community campaigns for buying local products, as far as possible,
replacing some of the items coming from urban industrial sectors.
However, rural employment has shrunk after 2005 while the urban areas have not been able
to absorb the millions who are leaving the farm. Rural India is incapable of absorbing the
estimated 23 million interstate and intrastate migrant labours who might return home from
urban areas due to the COVID-19 lockdown.
It would need support of a suitable policy framework and reforms in pricing policy, tax,
market access, credit and rural infrastructure, like warehouses and cold storage. The next two
years or so of how we learn to live with corona virus can redesign the economy towards safer
and more sustainable production and consumption, with agriculture and the rural economy as
its strength, rather than its weakness.
Conclusion:
In this economic pandemic, the lifeline of Indian economy lies in the transformation of the
rural sector into a matrix of local economies, striking a balance between their diversified
local production for local needs and surplus trading.

 The mass exodus of migrant labourers and the resulting economic slump
have brought in focus the need to create robust institutions that can handle
such crises with more deft and compassion. Discuss.
Introduction:
The COVID-19 crisis for India has also become a humanitarian one involving inter-State
migrants on return journeys home racked by pain and suffering and no surety of any income
going ahead. For a majority of migrant labourers, migration is either a livelihood
accumulation strategy or survival risk reducing strategy whichever way we define the nature
of migration. 
Body:
Field studies indicate that the lead source States of internal migrants are Uttar Pradesh, Bihar,
Rajasthan, Madhya Pradesh, Andhra Pradesh, Chhattisgarh, Jharkhand, Odisha, Uttarakhand
and Tamil Nadu, whereas key destination areas are Delhi, Maharashtra, Gujarat, Haryana,
Punjab and Karnataka. According to a UNESCO study, Surat at 58% has the highest
percentage of migrant labour population in India, while the percentage of migrant population
is 43% for Mumbai and Delhi.
Need of more deft and compassion towards migrant labourers:
 Lack of robust data about migrants in real time: According to the Census of India,
2011, more than 450 million Indians (37%) are internal migrants who change their
residence within a country’s national borders. About 30% of the migrants are
youth aged 15-29 years and another 15 million are children. Women migrants are
 less represented in regular jobs and more likely to be self-employed than non-
migrant women. 
 Casual and informal nature of work: Domestic work has emerged as an important
occupation for migrant women and girls. Facing relentless bouts of gender
discrimination at home, and on the farms as wage workers, these migrant women
are forced into various forms of servitude in the domestic spaces of affluent city
dwellers. 
 Lack of social security benefits: In between migration and settlement for
employment and livelihoods, footloose army of migrants are often denied welfare
rights in their destination place and imposed debilitating transaction costs in case
they decided to negotiate their citizenship rights.
 Second class citizen: Lack voting rights, own home, fear son of soil politicians
and casual nature of work make them second class citizen. A long pending issue is
portability of migrant workers’ voting rights. The Election Commission of India is
already working, so time has come to empower migrant workers so that they
gather better bargaining power and political voice in the system. 
 Food and job security: Another urgent issue is portability of the public
distribution system (PDS) for migrant labourers and also allowing migrant
labourers to use their NREGA job cards in any part of the country. This
portability of NREGA will be a great relief, if any migrant labourer is in crisis
like the pandemic, he or she can take up NREGA work at the destination site
rather than returning home.
Reforms for institutional framework for migrant labourers:
 The Inter-State Migrant Workmen (Regulation of Employment and Conditions of
Service) Act, 1979 is largely a regulatory law failing to incorporate welfare rights
of the migrant labourers. 
 The most urgent revision is to introduce a National Migrant Workers Commission
at the Central level backed up by State level Migrant Workers Commissions.
Also, we need to expand the definition of migrant labourer and include next
generation skills like IT, mobile repair, financial services related works. Act needs
to include provisions for State-supported skill training services for migrant
labourers. 
 The proposal to establish the Migration Commission must interface with and build
upon the National Migrant Information System, set up by National Disaster
Management Authority, to create a robust and dynamic database for labour
mobility in India.
 The commission must take up the registration of migrants as an urgent task. The
lack of a unique worker identification number has prevented frequently mobile
inter-state migrants from accessing existing social welfare mechanisms such as
the Building and Other Construction Workers board (BOCW). Shramik cards
used by states for identification of such workers have provided limited success. A
coordinated single national ID for access to multiple benefits could introduce
fiscal efficiencies as well.
 Migration Commission should have powers to coordinate among multiple
ministries of the government of India. Deliberations of the Working Group on
Migration, which submitted its report in 2017, revealed the importance of inter-
ministerial coordination in resolving critical issues. 
 The Migration Commission must also act as a hub for inter-state negotiations in
creating protocols for the safe mobility of labour back to worksites, designing
 portability features in social welfare and reconciling fiscal issues that arise from
portability.
 Other laws relating to workers must be synergised with the Inter-State Migrant
Workmen Act. For instance, the Building and Other Construction Workers
(Regulation of Employment and Conditions of Services) Act, 1996 should be
integrated into the Inter-State Migrant Workmen Act. And it needs to be
implemented by the Secretary of the Migrant Workers Commission.
 In this digital age, we must stress more digital administrative techniques such as
smart cards and leverage JAM— Jandhan/Aadhaar/mobile payment infrastructure
for portability of all.
Conclusion:
Migrant labourers are a formidable force in India’s economic life. The government must look
beyond the lure of political gestures that pacify hurt migrants and those voters outraged on
their behalf. Instead, a Migration Commission is an opportunity to craft a well-planned long-
term system to manage labour mobility in India.

The recession induced by the ongoing COVID-19 pandemic is different

from the economic crisis of 2008. Do you agree? Critically comment.  
Introduction:
The global economy is already in a recession due to health emergency of COVID-19
pandemic and subsequent lockdowns, shut downs of economies across the world. According
to the IMF, this recession triggered by the Great Lockdown will be more intense and more
extensive than the Great Recession in the wake of the global financial crisis (GFC).
Body:
Differences between the recessions of COVID-19 pandemic and 2008 financial crisis also
known as Global Financial crisis:
COVID-19 Pandemic recession Global Financial crisis

 The GFC originated in the financial

sector as banks and financial
intermediaries got carried away by
 Origin and Transmission: It originated outside financial
irrational exuberance and recklessly
sector. It broke supply chains from china then multiple
piled on risk. It unfolded in rich
lockdowns and economy shutdowns, demand slumped. The
countries. As people lost their
ensuing distress in the real economy led to distress in the
wealth and savings in the financial
financial system.
meltdown, demand collapsed and
growth slumped. Transmitted from
financial sector to real economy. 
  To restore faith in the financial
system, this meant rescue and
 Challenge: central challenge is to beat the pandemic, and rehabilitation of banks and other
that solution has to come from science. Only when there is financial institutions. Once that task
public confidence that the incidence of the pandemic has in the financial sector was
been brought down to a low-level equilibrium, will there be accomplished, repair of the real
a resolution in both the real and financial economies.  economy fell in place. Demand
came back; supply resumed and
growth picked up.

 Restoring financial stability in the

US was necessary, and for the most
 Asymmetry of the solutions: Every country needs to control part, a sufficient condition for
the pandemic within its borders. But that is not sufficient restoration of financial stability
because the virus can hit back from across the border. In everywhere. Other countries
other words, rich countries are not safe until poor countries returned to normalcy eventually as
are safe too. And no country is safe until every country is by-product.  Solutions in the
safe. The effort to contain the pandemic is exacerbating the financial sector and in the real
challenges in both the real economy and the financial economy reinforced each other.
sector. The more stringent the lockdown to save lives, the E.g., RBI cut rates to stabilise the
more extensive the loss of livelihoods. Managing this financial system, intervened in the
tension is by far the biggest dilemma for governments forex market, government extended
battling the crisis. special concessions for housing and
real estate sectors to provide
stimulus in the real economy. 

 China and India were less affected

even as all rich countries were in a
financial meltdown. In fact, one of
 Impact: It is more widespread than the economic crisis of
the less acknowledged facts of the
2008, almost every country affected badly. 
2008 crisis is that it was the
stimulus provided by China that
kept the global economy afloat.

However, Nature of the crisis or the reason, origin of the crisis may be different but the
burden on the economy is very much similar rather more intense compared to economic crisis
of 2008. The Global Financial Crisis originated in the subprime mortgage sector of the US
and then, rapidly engulfed the world. The current pandemic originated in the Hubei province
of China and rapidly engulfed the world. 
 Uncertainty: Both crises share uncertainty as a key factor once they emerged in
one of the two leading economies and spread globally. Uncertainty is a risk that
cannot easily be traced so that its probability of occurrence and its impact can
hardly be predicted. This applies both to the new non-visible corona virus and to
the subprime virus.
  Debacle of the stock markets across the world is similar link between two events
which often remains sensitive to the disruptions in the financial market.  
 Response of the governments: Stimulus packages announced by the governments
across the world after both calamities. It eventually will increase inflation and
interest rates will hurt the poor most.
As per various studies current recession is much bigger than 2008 financial crisis rather than
different:
 Economic shock of COVID-19 pandemic is not just a demand shock but also a
massive supply shock. Propping up demand may contribute to flattening the
contagion curve by helping people stay locked down, but there is a limit to how
much it can help the economy. Supply chains impaired due to mass exodus of
migrants in India. 
 According to World Bank data, the COVID-19 recession will be the deepest since
1945-46, and more than twice as deep as the recession associated with the 2007-
09 Global Financial crisis along with contractions in annual per capita gross
domestic product (GDP) and the global rate of unemployment will likely climb to
its highest level since 1965.
Conclusion:
There is also ray of hope in V-shape or U-shape recovery predictions of various economic
models which might reduce the time of recovery from current recession as compared to the
2008 crisis at much faster rate. Effective drug to treat the disease even before the
breakthrough of vaccine can save the world from economic downturn.  

Examine the significance of internal migration for the economy. How is the
current exodus of migrants hurting the economy? Explain.  
Introduction:
The COVID-19 crisis for India has also become economic as well as humanitarian involving
inter-State migrants on return journeys home racked by pain and suffering and no surety of
any income going ahead. For a majority of migrant labourers, migration is either a livelihood
accumulation strategy or survival risk reducing strategy whichever way we define the nature
of migration.
Body:
According to the Census of 2011, there were 139 million interstate migrants who moved for
all manner of reasons ranging from education to marriage, not just employment. The data
reconfirm the dominance of Uttar Pradesh and Bihar as well as other Hindi-speaking states as
main source states, while Maharashtra, Delhi, Gujarat, Uttar Pradesh and Haryana absorbed
half of the migrants.
According to the Centre for Monitoring Indian Economy (CMIE), an estimated 122 million
people lost their jobs in April alone and three-quarters of these were small traders and wage
labourers majority part of internal migrants. 
Significance of internal migration for the economy: 
 Dependence of multiple industries: Major sub-sectors using migrant labour are
textiles, construction, stone quarries and mines, brick-kilns, small-scale industry
(diamond cutting, leather accessories, etc.), crop transplanting, sugarcane cutting,
rickshaw-pulling, fish and prawn processing, salt panning, domestic work,
security services, sex work, small hotels and roadside restaurants/tea shops and
street vending. Calculations based on these estimates indicated that the economic
contribution of migrants was around 10% of India’s gross domestic product
(GDP) as per study of Priya Deshingkar.
  Demand of casual work and better income: Internal migration is major force for
unskilled work in industry and daily wage sector of informal economy. E.g. Daily
wages in state like Odisha is 100 to 120 for unskilled work whereas it is as high as
600-800 in state like Kerala.  
 Income source for poorer region: Internal remittances in India totalled $7.485
billion in 2007-08, highlighting the poverty and inequality reducing potential of
internal migration as the money flows directly to families in poorer parts of the
country.
 Interstate male migrants often move alone which became part of cheap labour
force on which Indian economy capitalise to attract foreign direct investment. E.g.
out of 11 million migrant population registered under census 2011 in south Delhi
only around 27000 are female. Left over families in rural area reduces the cost of
living in the urban centres which help them to survive and send remittances in
comparatively satisfactory wages.
 On the other hand, internal migration increases homogeneity of Indian society
with more cosmopolitan cities helps in increasing national integrity. 
Impact of migrant exodus on the economy:
 Collapse of mini-economies: Mini economies which sustain labour supply in
urban centres as well as add to the aggregate demand in the overall economy
faced major blow due to exodus. E.g. Tea shop outside private offices which
catered demand in the urban centre generated demand in the distant rural areas by
remittances of money, which completely closed due to exodus. 
 The establishment of local ancillary service economies is not automatic. They rely
on a critical mass of migrant workers in order to ensure profitability. If there is
enough number of customers, then the street vendor finds it profitable to sustain
his service. After the reverse migration, their incomes would be adversely
affected.
 High cost of labour in comparatively industrialised and manufacturing states: The
networks of migrant labour supplemented local workforce and plugged regional
resource gaps to expand the productive capabilities of the region. Without them,
this ostensibly demands problem might turn into a supply bottleneck too. 
 High input cost in manufacturing states will wipe out profits of businesses which
will reduce the export potential eventually. 
 Production delay: The aggregate growth in GDP relied on high growth industrial
or trade centres which spearhead production and generate momentum for the rest
of the economy. The lockdown strips these centres of their capability and
threatens India’s overall macroeconomic stability.
 Stress on MSMEs: Now parts of the economy which seemed to have the capacity
to pause during the lockdown would experience a strain eventually due to their
linkages with the SME’s. Unable to obtain ancillary inputs, the larger enterprises
will end up with a clogged value chain. This is the domino effect of an
unanticipated demand drop which permeates into a general adverse effect on the
overall economy.
 Socio-economic inequality: when the poor become poorer, there can be serious
long-term impacts on economic growth. Studies have shown that one of the main
mechanisms through which inequality affects growth and development is by
limiting educational opportunities for children from poorer backgrounds, reducing
their prospects for social mobility and breaking out of caste-based
occupations. With remittances no longer flowing to rural areas, for the time being,
 the poor will struggle to invest in education and other ways of enhancing their
children’s life chances.
However, governments should better plan the reverse migration because market forces might
work with a lag under uncertain economic environment due to the pandemic.
Conclusion:
The mass exodus of migrants now becomes a significant barrier and acceleration to maintain
the $2.7 trillion economy needs planned policy for reverse migration along with reduction in
development deficit to increase opportunities in source states. Otherwise it will be difficult in
the foreseeable future to realise dream of $5 trillion economy.

 Is boycotting Chinese products a viable strategy to counter Chinese

aggression? Critically examine. 
Introduction:
After Prime Minister Narendra Modi’s call for ‘atmanirbharta’ gave self-reliance the status of
a national mission, the outrage has been particularly pronounced on social media, with hash
tags like Boycott China trending on Twitter. Engineer Sonam Wangchuk’s initiative on micro
blogging site has been quite successful. Recent violent face-off in the Galwan valley
intensified the strategy of boycotting Chinese product further.  
Body:
Rationale of boycott Chinese goods and services:
 Pandemic of COVID-19: Given the source of coronovirus in China and its
mishandling of outbreak in earlier phase has increased animosity of world towards
China and demands for reparations has been increased. 
 Violent face-off on the border: Latest scuffle between soldiers of Indian army and
People’s liberation army in the Galwan valley which led to death of 20 Indian
soldiers has angered the common sentiments of Indian population.
 Predatory pricing: China has adopted the ruse of manufacturing goods at such low
prices that industries in other countries are unable to compete. Keeping a tab on
what is in demand in the market and delivering it in large numbers quickly and
cheaply has become China’s forte.
 Wide trade deficit: India’s trade deficit with China stood at $51.68 billion
between January-November 2019. Bridging this trade gap alone is a matter of
concern. 
 Comparatively Lesser Investment: Of all FDI inflows to India, Chinese
investments have only been 0.52 percent since 2000. The biggest increase has
been in the acquisition of shares in existing businesses, including pharmaceuticals
companies—a source of concern during corona virus-related medical supply chain
fears. Chinese investment has also been directed toward technology start-ups.
According to a study, 18 out of 30 Indian “unicorn” companies have significant
Chinese investment. E.g. Paytm, Ola, Flipcart. 
 Data Security: China’s increasing stakes in Indian start-ups and other technology
companies also raise major concerns over the protection of intellectual property
rights, data privacy, and national security. E.g. Alibaba is the single largest
shareholder in Paytm, which handles the daily financial transactions of millions of
Indians. 
 Global concerns: India isn’t the only country concerned about the Chinese
government’s influence over private technology companies’ foreign activities.
E.g. opposition to Huawei in US and EU. 
  Given the world wide wave of protectionism, India should focus on building its
own supply chain and occupying its domestic market.
 Indian government has shown its intent by scrutinising Chinese
investment. According to the Indian Ministry of Commerce, tighter restrictions on
Chinese investment became necessary in order to prevent “opportunistic
takeovers” of Indian companies.
However, there are concerns voiced by commentators that boycott china might hurt India
more. 
 Globalisation: We live in a world which, despite many recent setbacks to
globalization, is inextricably interlinked, with the supply chains of companies
spanning various geographies. 
 Complex nature of sourcing: Products made by Indian firms contain components
that come from China or use Chinese machinery to make them. Small and
medium businesses, the focus of attention currently for their fragility in the face of
pandemic-induced lockdowns, extensively use low-cost Chinese machinery and
capital goods, besides trading in many finished products from that country. 
 Large Indian companies like Dr. Reddy’s Laboratories, Mahindra & Mahindra
and Sundram Fasteners have manufacturing units in China that cater to markets
abroad as well as in India. In several segments, the fate of an entire industry could
be in jeopardy if its China links are severed. 
 Vital capital needs of Indian industry and start ups: Commentators have also
pointed out how any such call to boycott Chinese goods sits uncomfortably with
the billions of dollars of Chinese investment in local start-ups that are routinely
held up as role models of Indian ingenuity.
 More loss to Indian exports in reciprocal action: India is a large market for
Chinese goods, accounting for 3% of China’s exports and adding up to $75 billion
in 2019. But here’s the thing: India’s $17 billion of exports to China account for a
much-higher 5.3% of our total exports. Any trade war with China would hurt
India, too.
Though, it is also debatable how much effect a politically-motivated boycott can have.
 India’s aspiration of global power from regional power: One global power cannot
have regressive restrictive trade practices against other. Such policies or initiatives
might hurt India’s economic development by loosing market of large country like
china. 
 Sustainable development: India is heavily dependent on China when it comes to
achieving its renewable energy target. India’s import dependence for meeting its
solar equipment demand was over 90 percent in past three financial years, Power
and New & Renewable Energy Ministry said in a written reply to the Lok Sabha
last year. India is third largest economy in the world on the basis of purchasing
power parity, there should not be trade boycott between first and third largest
economy for the sake of sustainable development of world.
 Middle income trap concerns: Free trade and open economy has helped India in
rapid progress of Economy from around $296 billion in 1989 to around $2.80
trillion in 2019. India is still in need of globalisation to come out of middle
income trap.  
 Compromised quality: Excessive protection of domestic firms might reduce
competitiveness of Indian product in international market and would create
another foreign exchange crisis. 
Conclusion:
Many times clamour for boycott is due to geopolitical reasons however diplomatic and
military rivalry can go on with continuation of trade outside strategic domain exemplified in
flourished trade between US-China. Instead of boycotting Chinese goods, we should
negotiate with Beijing to open China’s market further to Indian services as well as more
finished goods without compromising on territorial integrity and sovereignty. 

Improving the job landscape in the rural sector is imperative to provide the
much-needed fillip to the economy. Comment. 
Introduction:
India is predominantly a rural country. As per the 2011 Census, 68.8 per cent of country’s
population and 72.4 per cent of workforce resided in rural areas. Rural economy constitutes
46 per cent of national income. Despite the rise of urbanization more than half of India’s
population is projected to be rural by 2050. Thus growth and development of rural economy
and population is a key to overall growth and inclusive development of the country in post
COVID-19 India.
Body:
Rural sector as driver of Economic fillip:
 If there is no universal access to a Covid-19 vaccine for another 18-24 months,
then businesses in safer sectors and locations are likely to do well, here rural
sector might act as net gainer. 
 In rural India, where it is naturally easier to have physical distancing and outdoor
work. This may shift the focus from urban markets to rural markets, for both
demand and production.
 As per NITI Aayog report, more than half of Indian industrial production comes
from the rural areas. Rural construction also accounts for nearly half of the total
building activity in the country. The value of rural services is about a quarter of
the total services output.
 Surplus labour: Livestock, fisheries, dairy, vegetables, fruit and food processing
are more labour-intensive and high value-yielding. 
 Infrastructure investment: Local initiative for building community infrastructure,
like water harvesting, canal irrigation network, hubs for community market
centers etc. may generate employment opportunities. 
As migrants returned to source states, agriculture may face overcrowding and cannot sustain
surge of labourers. It is possible that eventually reverse migration will took place and urban
centres will return to economic growth with reduced supply chain constraints. Rural
employment has shrunk after 2005 while the urban areas have not been able to absorb the
millions who are leaving the farm. Rural India is incapable of absorbing the estimated 23
million interstate and intrastate migrant labours who might return home from urban areas due
to the COVID-19 lockdown. However to reduce the plight of migrant exodus witnessed
during forced lockdown indicates necessity to address root cause of such crisis which lies in
the developmental deficit.
Need to improve job landscape in rural sector of India:
 Agriculture has accounted for less than half of total rural output since the turn of
the century. On the other hand, National Sample Survey Office (NSSO) data
shows that more than one-fifth of rural households with self-employment in
agriculture have income less than the poverty line.
 Agriculture labour productivity in terms of gross value added (GVA) in India is
less than a third of that in China and 1% of that in the US.  Rural sector is net
 importer vis-e-vis urban areas which indicate outward flow of money, which
highlights critical need of new jobs.
 About MGNREGA: Need to increase the number of days per household from 100
to 200 days for this year. Another approach would be to let families work as much
as they wanted to – even if the number of days exceeded 100 – as long as the state
average of labour days per household did not cross 100. 
 Food processing sector: After many decades of neglect in research and
development, lack of market access, on- off policies for exports, and market
distortions, the present adversity may be a timely opportunity for this sector.
 Entrepreneurship: Local production of items of local requirement, the local
weavers, artisans and craftsmen may establish micro enterprises and form local
community marketing cooperatives. 
 Agri-tech start ups will be crucial for developing innovative digital solutions to
maximise productivity, improve market linkages, increase supply chain efficiency
and provide greater access to inputs for agri-businesses. 
 E-commerce platform for local products: On the lines of Amazon India initiative
for tribal products of Telangana, rural crafts can be availed on major e-commerce
sites with authentic branding with the help of state governments.    
These measures or innovations need support of a suitable policy framework and reforms in
pricing policy, tax, market access, credit and rural infrastructure, like warehouses and cold
storage. The next two years or so of how we learn to live with corona virus can redesign the
economy towards safer and more sustainable production and consumption, with agriculture
and the rural economy as its strength, rather than its weakness.
Conclusion:
In this economic pandemic, the lifeline of Indian economy lies in the transformation of the
rural sector into a matrix of local economies, striking a balance between their diversified
local production for local needs and surplus trading.

 Will it make sense to put an additional tax burden on the super-rich to

mobilise revenue at the time of COVID-19 pandemic? Substantiate your
views.
Introduction:
IRS association paper, Mission Jai Hind in India proposed by economists and activists
suggested ideas of raising tax burden on super-rich to fight the impacts of COVID-19. There
have been demands of additional tax on super rich to deal with unprecedented fall of revenue
of government inspired from Peru’s proposed ‘solidarity tax’ to mitigate the economic impact
of the COVID-19 pandemic.
Body:
In late-March, the government announced an economic package of $22 billion (amounting to
0.8% of GDP). In second week of May, a second economic package was announced, which
amounts to nearly 10% of India’s GDP. It includes the first economic package and a slew of
credit guarantees and liquidity enhancing measures that hardly qualify as fiscal stimulus.
Case for solidarity tax on super-rich: 
 India desperately needs solidarity and wealth taxes to boost direct tax revenues
that would decline drastically this year due to lockdown and social distancing
measures implemented in response to COVID-19. 
 Need of fiscal stimulus: Given the magnitude of humanitarian and economic
disaster in India, the government should not worry about fiscal deficit numbers.
This is the right time to abandon fiscal fundamentalism as India badly needs a
 strong fiscal stimulus to mitigate COVID-19 shocks which need additional
revenue.
 There is no denying that India has the potential of greater domestic resource
mobilisation by imposing wealth, inheritance, and estate taxes, in addition to
raising the income tax slab for the super-rich.
 Quantity of ultra super-rich: While India is still home to 180 million poor people,
the country has the world’s fastest-growing population of millionaires. According
to a report by Credit Suisse Research Institute, there are 7,59,000 dollar
millionaires in India. According to Hurun Global Rich List 2020, India occupies
the third position globally (after China and the US) with 137 dollar billionaires.
 In 2016, government abolished the wealth tax introduced way back in 1957. The
wealth tax was replaced with an extra 2 percent surcharge on the super-rich
individuals with a taxable income of over Rs 10 million. In the 2019-20 Union
Budget, the Finance Minister proposed enhancing the super-rich’s surcharge but
soon withdrew it. Last year, the government slashed the maximum corporate tax
rate from 30 percent to 22 percent. The revenue foregone on reduction in
corporate tax would be Rs 1.45 trillion annually, not an insignificant amount.
 Despite experiencing higher growth rates over the past two decades, India’s tax-
GDP ratio is abysmally low primarily due to low direct tax base, parallel
economy, and unorganised sectors of the economy. India’s tax-GDP ratio
(excluding states’ share in taxes) was 10.9 percent in 2019, far lower than the
average OECD ratio of 34 percent. According to official statistics, only 14.6
million individuals (less than 2 percent of the population) paid income tax in India
last year. On the other hand, indirect taxes (such as excise taxes) impose a greater
burden on poor people, thereby aggravating the already high degree of inequality
in India. In recent years, there have been frequent demands to reform India’s
regressive tax system and to make it more equitable.
 A policy paper quickly withdrawn due to huge criticism; ‘Fiscal Options and
Response to Covid-19 Epidemic’, submitted to the Central Board of Direct Taxes
(CBTD), recommendations include enhancing the income tax rate to 40% for
those earning over Rs 10 million; re-introduction of wealth tax for those with a
net wealth of Rs 50 million; a one-time COVID-19 cess of 4% on taxable income
of over Rs 1 million; and increasing the surcharge on foreign companies operating
in India.
However, Prime minister in his one of the Independence Day speech highlighted the
importance of wealth creators and honour to wealth creators; he stressed point of wealth
creation as necessity for wealth distribution.
 Targeting: Typically only a small number of individuals often salaried bear the
additional tax and/or cess, while another sizeable segment of the super-rich is
believed to unfairly evade such tax burdens. 
 Tax harassment rather tax terrorism: Repeatedly imposing new cess/surcharge on
a small group of captive tax-payers is not only unfair to them and acts as an
disincentive, but also goes against the principle of lowering the tax rate along with
broadening the tax net adopted since the economic liberalisation in 1991 (when
the highest income tax rate including surcharge used to be as high as 56%).
 Fewer rich people: high marginal rates of taxation on income and wealth would
produce adverse incentives to work which would reduce the overall size and
growth of the national pie.
  Against fundamental economic principles:  Laffer Curve’ suggests that, as tax
rates go up, initially tax revenue increases but eventually at some ‘very high’ rates
of tax, tax collection begins to fall. For instance, 97% rate (the top tax rate,
including surcharges, in Indira Gandhi’ s Budget of 1970-71) is generally
regarded as ‘too high’ as tax payers in that bracket would either prefer not to earn
extra income or make all kinds of efforts to evade paying taxes, including sending
capital abroad or migrating to countries with lower taxes.
 Era of digital economy and tax heaven countries: In today’s scenario technology
allows capital and income to fly from one destination to other  in few seconds,
competition of tax heaven countries could foil attempts to increase additional
taxes on super rich. 
Even though, there is no denying fact that in time like this, the so-called super-rich have a
higher obligation towards ensuring the larger public good. This is for multiple reasons – they
enjoy a higher capacity to pay with significantly higher levels of disposable incomes
compared with the rest, they have a higher stake in ensuring the economy springs back into
action, and their current levels of wealth itself is a product of the social contract between the
state and its citizens. 
Most high-income earners still have the luxury of working from home, and the wealthy can
fall back upon their wealth to cope with the temporary shock. In view of several European
economists, taxing the wealthy would be the most ‘progressive fiscal tool’, as wealth is far
more concentrated than income and consumption.
Conclusion:
Even capitalist countries like United States during emergency time of World War 2 increased
taxes up to 90% for significant period of times. However, policy makers should think of other
sustainable innovative measures to raise resources and additional tax burden can be last
resort. 

 Overemphasis on achieving high economic growth can often ignore the

need for equity and lead of disparities. Elucidate. 
Introduction:
Economic growth has raised living standards around the world, but modern economies have
lost sight of the fact that the standard metric of economic growth, gross domestic product
(GDP), merely measures the size of a nation’s economy and doesn’t reflect a nation’s
welfare. Yet policymakers and economists often treat GDP as an all-encompassing unit to
signify a nation’s development, combining its economic prosperity and societal well-being.
Body:
The debate between growth and equity and redistribution is one of the oldest in economic
development. The common citizens of any country care more about the real  impact of
growth in terms of improvement in their standard of living, provision of basic facilities such
as electricity, drinking water, healthcare systems etc. 
Focusing exclusively on GDP and economic gain to measure development ignores the
negative effects of economic growth on society, such as climate change and income
inequality. It’s time to acknowledge the limitations of GDP and expand our measure
development so that it takes into account a society’s quality of life.
Fallacy of GDP growth as indicator national progress:
 Ineffective trickle down of benefits earned from economic growth. There is
increasing disconnect between economic growth and social development. As per
popular development economist Jean Dreze, India’s high economic growth has
 failed to bring about any significant improvement in the quality of life of the
common people.
 GDP cannot differentiate between an unequal and an egalitarian society if they
have similar economic sizes. As rising inequality is resulting in a rise in societal
discontentment and increased polarization.
 Despite the high growth rates in India, almost half of the children younger than 5
years are stunted due to improper nutrition and sanitation. As of 2018, more than
163 million Indians do not have access to safe drinking water. Over the decade
ending 2011, water availability reduced by 15% and it is estimated that India will
become water-scarce by 2050. As per the Tendulkar methodology, 22% of Indians
live on less than $1.25 a day.
 Economic growth of lower strata should be faster than the affluent class; however
India has experienced one of the highest rates of growth of inequality. As per
OXFAM survey India’s richest 1% holds four times of the wealth held by 70% of
bottom population which is around 1 billion. Certainly in GDP growth fails to
account pie of growth of shared by different sections of society which makes it
ineffective indication of national progress. 
Though, it is necessary to generate wealth in the first place to redistribute it, however
overemphasis on high growth rate may create huge inequality and disparity. 
 Labour reforms: Time of the crisis is often used by rulers as opportunity to push
unpopular policy decisions in democratic countries. Recent labour reforms pushed
by UP, MP may create inequality faster than growth. It  reduces the bargaining
power of labour via different conditions like contract labour, ability to hire and
fire, relaxation on working hours, lesser inspection from government officials for
working conditions ultimately making lives of unskilled and lower skilled
population worse for high economic growth for so called stress on cheap labour as
ease of doing business indicator. 
 Regressive tax system: Where rich pay lower taxes as compared to poor. 
Increased efficiency of indirect taxes with the coming of GST which is burdened
by larger base rather than stress on improving direct tax efficiency. Higher
proportion of indirect taxes in overall tax collection, absence of wealth tax or
inheritance tax indicates regressive taxation. 
 Lack of universal education and Health: Lack of universal free college education
makes it impossible to generate equal opportunity for students from poorer section
to achieve high skill set in new technologically advanced economic models and
journey towards industrial revolution 4.0. Out of pocket expenditure on health is
one of the major reasons for chronic poverty in India, despite of which high
economic growth has failed to improve health infrastructure or provide universal
healthcare.  
 Financial sector reforms: Privatisation, increased focus on fiscal consolidation,
more scrutiny of loans for lower sections like farmers, labourers. Financial sector
reforms often designed in way to squeeze cash from lower section to higher level
of pyramid. 
Overemphasis on GDP growth ignore account of inequality, 
 India’s National Indicator Framework Baseline Report, 2015-16 for measuring
progress towards Sustainable Development Goals shows India has not developed
most of the indicators required to measure and mitigate inequality.
  The National Indicator Framework Baseline Report reveals that India does not
have data to measure growth rates of household expenditure per capita among the
bottom 40% of the population or the total population.
 The government of India has no data on the proportion of people living below
50% of median household expenditure. The report further reveals that no national
indicator has yet been developed to ensure equal opportunity and reduce
inequalities of outcome.
India need alternative metrics to complement GDP in order to get a more comprehensive
view of development and ensure informed policy making that doesn’t exclusively prioritize
economic growth. Bhutan’s attempt to measure Gross National Happiness, which considers
factors like equitable socio-economic development and good governance, and UNDP’s
Human Development Index (HDI), which encapsulates health and knowledge apart from
economic prosperity.
As a step in this direction, India is also beginning to focus on the ease of living of its citizens.
Ease of living is the next step in the development strategy for India, following the push
towards ease of doing business that the country has achieved over the last few years. 
Conclusion:
Covid-19 pandemic has brought in sharp focus the extent of income inequality, especially in
poor countries like India. The economic philosophy of “growing the pie” followed by
successive Indian governments has turned India into a 1% economy. Moving away from GDP
numbers and collecting and publishing data on the income, wealth and wages, by decile and
centile, will be the first step towards creating a model of equitable growth. The end goal
should be more just and equitable society that is economically thriving and offering citizens a
meaningful quality of life.

Reforms in the agricultural sector are an important prerequisite for

ensuring inclusive growth. Discuss. 
Introduction:
The central government recently introduced major agricultural market reforms. It will allow
farmers to sell their produce outside mandies on platforms of e-trading, lifting restrictions on
key commodities such as cereals, pulses, onion and potato and freedom to enter into
agreement with private players. 
Body:
Inclusive growth is economic growth that is distributed fairly across the society and creates
opportunities for all, as per OECD report. 
 Agriculture in India is largest private profession and largest informal labour
market; reforms in such huge sector will certainly benefit large sections of society
and recent measures of quantum jump through ordinances are right steps in that
direction. 
 Reforms were brought through three ordinances: The Essential Commodities
(Amendment) Ordinance 2020, The Farming Produce Trade and Commerce
(Promotion and Facilitation) Ordinance, 2020, and The Farmers (Empowerment
and Protection) Agreement on Price Assurance and Farm Services Ordinance,
2020.
Need of reforms in agriculture sector:
 At the time of independence, the share of agriculture in total GDP was more than
55 per cent and about 70 per cent of the population was dependent on the
agriculture sector for their livelihood. 
  In the post independence era, stagnant production, low productivity, traditional
technology, and poor rural infrastructure were the major challenges for the
Government. 
 According to the agriculture census 2015-16, the real income of farmers doubled
in almost 20 years from 1993-94 to 2015-16. As the target to double farmers’
income by 2022 is nearing, reforms on land, market, price, and to ameliorate
supply side constraints were necessary.
 Almost 44 per cent of the country’s labour force is engaged in agriculture. The
average annual growth rate in real terms in agriculture as well as its allied sectors
has remained static in the last six years, in turn impacting farmer’s income, as per
the Economic Survey 2019-20. 
 The annual growth rate in real terms in agriculture and its allied sectors was 2.88
per cent from 2014-15 to 2018-19, according to the Survey. The estimated growth
rate in 2019-20 is 2.9 per cent. Economic Survey Report 2020 also emphasised
the importance of sustainable agricultural practices to support small and marginal
farmers, who constitute 87 per cent of India’s peasants.
 National Sample Survey Office (NSSO) data shows that more than one-fifth of
rural households with self-employment in agriculture have income less than the
poverty line.
 Agriculture labour productivity in terms of gross value added (GVA) in India is
less than a third of that in China and 1% of that in the US.  Rural sector is net
importer vis-e-vis urban areas which indicate outward flow of money.
 Women in agriculture are affected by issues of recognition and in the absence of
land rights, female agricultural labourers, farm widows, and tenant farmers are left
bereft of recognition as farmers, and the consequent entitlements. According to
Oxfam (2013), around 80 per cent of farm work is undertaken by women in India.
However, they own only 13 per cent of the land. Women constitute over 42 per
cent of the agricultural labour force in India, but own less than two per cent of
farmland. 
 According to the Food and Agricultural Organization (FAO, 2011), empowering
women through land and ownership rights has the potential of raising total
agricultural output in developing countries by 2.5 to 4 per cent and can reduce
hunger across the world by 12-17 per cent.
 According to the National Crime Records Bureau, farmer protests increased from
628 in 2014 to 4,837 in 2016, making evident the disenchanted and displaced
agricultural workforce of the country.
Inclusive growth through reforms:
 Livestock wealth is much more equitably distributed than wealth associated with
land. Livestock producers, including traditional pastoralists and smallholders, are
both victims of natural resource degradation and contributors to it. Livestock
rearing is a key livelihood and risk mitigation strategy for small and marginal
farmers, particularly across the rain-fed regions of India.
 Livestock rearing at the household level is largely a women-led activity, and
therefore income from livestock rearing and decisions related to management of
livestock within the household are primarily taken by women. 
 Need to Increase focus on reforms with national mission on sustainable
agriculture.
 There are some emerging land issues such as increase in demand for land for non-
agricultural purposes including special economic zones, displacement of farmers,
 tribals and others due to development projects. There is a need for careful land
acquisition. Land alienation is a serious problem in tribal areas.
 Agriculture reforms and Greening rural development will contribute to inclusive
growth by enabling the target growth rate of agriculture of 4 percent, which is
important due to agriculture’s multiplier effects and due to the continued
dependence of 58 percent of India’s rural population for livelihoods on
agriculture, regenerating common land and water bodies, which offer sustenance
to the rural poor through provisioning of goods and ecosystem services,
‘crowding in’ private investment in green businesses:  renewable energy
generation, organic input chains and advisory services, green product supply
chains, production of environment-friendly construction materials.
 As reiterated in the past, the Agricultural Developmental Council (ADC) in line
with the GST Council is a dire need to make agricultural reforms more expressive
and representative. For better income distribution, there is also a need to revisit
regional crop planning and the agro-climatic zone model at the highest possible
level so as to make agriculture the engine of sustainable economic growth in India
2.0 by 2022.
However, on positive side during the first year (2019-20) of the second term of government,
gross value added (GVA) in agriculture and allied sectors registered a growth of 4 per cent.
This is commendable, especially when juxtaposed with the growth of overall GVA of the
economy at 3.9 per cent, and overall GDP (including net taxes) at 4.2 per cent. 
Conclusion:
Despite of impact of COVID-19 is on full display in current financial year 2020-21, and
when the GDP may register a negative growth of as high as -5 per cent, agriculture may still
surprise with a positive growth of 2.5 per cent, as per CRISIL’s recent forecast. Path of
economic recovery goes through the agricultural sector and reforms in such time will have
multiplier effect.

 What are the accountability and oversight measures in the budgeting

processing of the Central Government? Explain.
Introduction:
India has been placed at 53rd position among 117 nations in terms of budget transparency
and accountability, according to the Open Budget Survey. The survey, conducted by
International Budget Partnership (IBP), has provided India’s Union Budget process a
transparency score of 49 out of 100, which is higher than the global average of 45.
Body:
The expenditure of the central government has increased from Rs 3.3 lakh crore in 2000-01 to
Rs 30 lakh crore in 2020-21. With the objective of improving the quality of life of citizens,
these public funds are spent across various sectors such as defence, security, agriculture,
health, social welfare, education, and infrastructure.
Members of Parliament (MPs) have a core role in examining how this money is being raised,
how it is planned to be spent, and whether such spending would lead to desired outcomes.  
Accountability and Oversight through the Union Budget:
 Parliamentary oversight of public funds broadly involves two functions,
scrutinising and sanctioning the government’s expenditure and taxation proposals
through the Union Budget; and examining the utilisation of funds that have been
allocated for various activities, through parliamentary committees. 
 Legislative control over the budget can be exercised through the General
discussion on the budget, after it is presented in the Parliament. Discussion at this
 stage is limited to general examination of the budget and proposals of the
government.  At the end of the discussion, the Finance Minister gives a reply.  
 After which, parliamentary standing committees which has both members of Lok
Sabha and Rajya Sabha a examine detailed estimates of expenditure of all
ministries, called Demands for Grants.
 One of the functions of Standing Committees is to scrutinise the allocation of
funds to the ministries under their supervision.  At present, there are 24 Standing
Committees that together oversee the work of all the ministries.  For instance, the
Standing Committee on Defence scrutinises the Demands for Grants of all
departments under the Ministry of Defence. Budgeted expenditure for defence
stands at 4.71 lakh crore which is higher by 5% than revised estimates of 2019-
20. 
 These Committees examine the amount allocated to various programmes and
schemes under the Ministry, and trends of utilisation of the money allocated to the
Ministry.  
 In doing so, officials of the Ministry are required to depose before the Committee
to respond to queries and provide additional information in connection with the
Demands for Grants being examined.  While examining a ministry’s expenditure,
the Committees may consult or invite views from experts. 
 Committee’s report to parliament creates condition for informed debate on the
budget involving Cut Motions and Voting on Demands for Grants, prior to the
beginning of the next fiscal year.
 Passing of the Finance Bill and the Appropriation Bill without which the
Government will not have the constitutional authority to collect tax revenue and to
spend money from the Consolidated Fund.
 Parliamentary Committees dealing with the financial affairs of the government,
viz. The Public Accounts Committee, the Estimates Committee, and the
Committee on Public Undertakings.
However, Budget transparency and accountability assumes greater significance during the
times of the COVID-19 pandemic,
 As a sizable chunk of public expenditure is likely to get financed by higher
magnitudes of government borrowing not just in the current fiscal but in the
subsequent couple of years too.
 Union Government should also publish a Pre-Budget Statement, which can be
scrutinised by the legislators and the public at large before the annual budget is
presented.
 Creating an integrated budget and expenditure information architecture at every
district headquarter and enabling the District Development Coordination and
Monitoring Committee to use this information to enforce accountability of the
executive for budget implementation, will substantially improve budget
transparency and accountability at the district level in the country.
Conclusion:
The Union Budget is perhaps the most important and comprehensive platform for the Central
Government to implement its economic policies. It affects almost every sector of the
economy as well as every section of the population. The policies driving the budget and
implementation of the budget proposals are therefore of direct relevance to the entire
population which needs to be reformed to bring accountability and stringent parliamentary
oversight.
What do you understand by fiscal targeting? What is its significance for the
economy in general? Illustrate.  
Introduction:
Fiscal targeting assumes more importance as many countries adopted stimulus measures to
deal with economic slowdown. However, excess liquidity may carry a high social cost.
Beyond the usual fears about debt and inflation, there is also good reason to worry that the
excess cash in banks will be funnelled toward financial speculation, leading to still more
precautionary behaviour, and discouraging both consumption and the investment needed to
drive the recovery.
Body:
Fiscal targeting: 
 Fiscal deficit targeting is also known as fiscal targeting to achieve objective of
fiscal consolidation. India follows obligation under FRBM act to limit its fiscal
deficit in prescriptive manner and adopt various strategies to deal with fiscal
deficit. 
 The FRBM Act, aimed at establishing financial discipline, provides for a trigger
mechanism for a deviation from the estimated fiscal deficit on account of
structural reforms in the economy with unanticipated fiscal implications.
 Fiscal targeting resolves around judicious and balanced call keeping in mind the
need to support the economy on one hand and the sustainable level of fiscal deficit
that is consistent with macroeconomic and financial stability on the other.
 Centre’s fiscal deficit in 2020-21, as things stand now, could be 1.7-1.8
percentage points higher than the 3.5% of GDP, which was targeted in the Budget,
said Chief Economic Advisor Krishnamurthy Subramanian in June. Assumption
of Fiscal deficit to be 5.2 -5.3% of GDP is based on 10% nominal GDP growth,
which would have been tough without COVID-19 outbreak.
However, the Indian economy seems caught between tight fiscal targets prescribed under the
FRBM (Fiscal Responsibility and Budget Management) review and a government which
treats them as cast in stone, even at a time when the economy is reeling under the impact of
the COVID-19 crisis.
Significance of fiscal targeting for economy:
 In the absence of fiscal targeting, higher fiscal deficit for an economy means
increased government borrowing, which in turn implies higher interest burden.
India has a debt-to-GDP ratio of 70%, which is the highest among its emerging
market peers. 
 Even though, Most of India’s government debt is internal (from domestic market),
implying less external vulnerability. Nevertheless, high government debt implies
high interest burden and the threat of economic instability.
 Many of the developed economies like the US and Japan have much higher debt-
to-GDP ratio. However, their interest burden is much less as their governments
are borrowing at much lower interest rates. 
 The other disadvantage of a high debt-to-GDP ratio is that it has an impact on the
country’s credit ratings and investor sentiments.
 Higher government borrowing crowds out private investment in the economy. 
 While there is no doubt that the government should be fiscally prudent, what is
being increasingly debated is whether our fiscal management should be counter-
cyclical. This means that when economic growth is above potential, policymakers
should reduce fiscal deficit. Similarly, when economic growth is poor, fiscal
 deficit should be allowed to expand (within a ceiling) in order to support
economic growth.
 While it is ideal to have a rule-based fiscal consolidation path, experience shows
that there are threats of genuine disruptions. Like present COVID-19 pandemic
recession following a fiscal deficit target under present circumstance could result
in adverse impact on developmental expenditure.
 However there is need to be more prudent in not allowing unproductive
expenditure on populist measure. 
Conclusion:
In the present COVID-19 pandemic induced slowdown, governments have to consider
paradox of thrift and spend more. However, all measures should be well targeted to optimise
the outcome. There is need to maintain balance between expansionary austerity and fiscal
slippage. 

The government’s recent ordinance on contract farming is a win-win for

farmers, buyers and even traders. Comment. 
Introduction:
The ordinance on contract farming is part of the new legal framework for agricultural
markets. It is in addition to the other two ordinances that amend the Essential Commodities
Act and reduce the power of APMCs, with the aim of setting up a national market for food.
Body:
Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services
Ordinance Benefits:
Farmers: 
 Market access: Framework for farmers to enter into direct contracts with those
who wish to buy farm produce. So far, in most of the country, a farmer cannot
directly sell his produce to consumers or food processing companies; he has to go
through a licenced trader. E.g. If a certain kind of potato was needed for potato
chips, or a specific variety of oranges was more suited to making juice, or a
restaurant chain needed a large quantity of mushrooms or asparagus, It could  get
into a contract with farmers to grow that particular item and buy it later at prices
already agreed upon. Farmers are no longer at the mercy of the traders.
 Complex structure of APMCs: Solving the problem of APMC laws Which are
outdated in several states. Traders find it easy to form cartels in these markets and
offer low prices to farmers. Farmers are also left to the vagaries of daily price
changes. However, the ordinance states that APMC market laws will only apply in
the physical space of the market, and will not govern transactions outside the
market. No taxes or fees associated with any APMC can be levied on such
transactions.
 More liberty and freedom: Farmers can lock in prices and buyers for their produce
even before the harvest, and intermediaries can be assured of supply and price at
the time of harvest. 
Buyers:
 Reduction in intermediaries will reduce the cost of farm produce which will help
common buyers to manage their monthly budget.
 Buyers like the food processing industry will get a more secure and flexible
environment for procurement of raw materials directly from farmers or farmer
producer organisations.
  Similar models have already benefited farmers in selling their poultry livestock
and few agriculture commodities to industrial players directly.
Traders:
 Competition to traders: While intermediaries play an essential role in meeting
supply and demand, It does not prohibit intermediaries or discourage them in any
manner. It does not do away with APMCs. However, from now on, they have to
compete with other buyers to provide better services or prices.
 Expansion of storage capacity in the private sector: Since the ordinance in
addition to other ordinance on the Essential Commodities Act exempts
intermediaries from stock limits for contract farming, it will give comfort to large
organisations to participate in contract farming. It may also encourage smaller
traders to expand capacity.
The idea of contract farming is not new; some states like Punjab have attempted to encourage
it through state legislation. Even today, in spite of multiple legal hurdles, the small scale of
contract farming in India is playing a positive role for farmers. The agriculture ministry had
released a model law to govern contract farming in 2018, but it was a little too prescriptive,
the ordinance allows contract farming in any agricultural product, leaves pricing to the
parties, and allows for a central e-registration of contracts.
However, the ordinance is a positive move towards freedom of contracting,
 So far, modern retail has been largely purchasing perishable produce from
mandis. Since the volumes of fresh produce are still low for modern retail and it
has to compete with roadside vendors, it has been reluctant to invest in backend
infrastructure.
 Instead of using the regular judiciary for dispute resolution between parties, the
ordinance delegates dispute resolution to the executive (sub-divisional
magistrate), who will not be bound by rules of procedure. This gives the
government more powers than the parties in the case. That would not happen if
disputes were required to go to the judiciary.
 The ordinance also creates a window for reintroducing government interference
by giving the executive powers to adjudicate disputes through suo motu cases.
This violates a fundamental principle of contract law: If the parties to a contract
are not complaining, third parties should not interfere in the contractual
relationship. 
 Violating this principle undermines the commercial relationship between the
parties. If the government intervenes in contract farming agreements frequently,
buyers may back out.
 Big buyers like processors, exporters, and organised retailers going to individual
farmers are not a very efficient proposition. They need to create a scale, and for
that, building farmer producer organisations (FPOs), based on local commodity
interests, is a must. This will help ensure uniform quality, lower transaction costs,
and also improve the bargaining power of farmers vis-à-vis large buyers.
The 1991 reforms saw a fundamental shift in the legal approach to industry and services. A
whole host of laws of the licence, permit and inspection raj were withdrawn, and more
freedom was given to the participants. 
Conclusion:
Agriculture sector was long waiting for reforms. The participants in this sector still live in the
old legal regime. The ordinances are a welcome step in giving freedom to farmers to sell their
produce without restrictions.
Even though, there is a broad agreement on the numerous benefits of
having a free market economy, government intervention is essential in
certain fields/ sectors.  Elucidate. 
Introduction:
The free market economy is an economic system based on supply and demand with little or
no government control. Free markets are characterized by a spontaneous and decentralized
order of arrangements through which individuals make economic decisions.
Body:
Free Market Economy:
 In a free market economy, firms and households act in self-interest to determine
how resources get allocated, what goods get produced and who buys the goods.
 Ideally, there is no government intervention in a free market economy (“laissez-
faire“). However, no truly free market economy exists in the world.
 Post-1991 India has adopted free market policies. However government
frequently intervenes through mechanisms like social sector schemes, regulatory
mechanisms to ensure equitable economic growth.
Benefits of free market economy:
 The producers are more incentivized to produce their best goods and services due
to the feature of the profit motive and the ability to hold private property.
 Since all resources and factors of production are under private ownership they are
used in the most productive manner. This results in optimum utilization of
resources.
 Consumers also benefit in a free market economy. Firstly they have the freedom
to choose whichever products or services they wish to buy. Also, the competition
is high and the producers are motivated to make their best products in large
quantities at reasonable prices.
 Free market economy also promotes fundamental rights of freedom and choice for
both the consumer and the producers.
Despite the broad agreement on the above mentioned benefits of free market economy
government intervention is essential in certain fields/sectors due to following reasons:
 One disadvantage of a free market economy is that some producers are driven
exclusively by their profit motives. Such an objective should not be prioritized
over the needs of workers and consumers. 
 Put simply, a Construction company should never compromise the safety of its
workers or disregard environmental standards and ethical conduct just so it can
make supernormal profits. Hence, government intervention is necessary to protect
the rights of worker, citizens and to protect environment through laws and
regulations. Recently the Maharashtra government enacted “The Real Estate
Regulatory Authority Act (RERA)” which  will review and issue resolutions on a
regular basis regarding real estate sector.
 Unethical behaviour: In 2010, the Deepwater Horizon oil spill, which is one of the
biggest environmental disasters in the United States, happened because the
company used substandard cement and other cost-reducing measures. In this
regard Government of India has already enacted acts like, Environment
(Protection) Act, 1986 etc.
 Market failures: At times, a free market economy can spin out of control, causing
dire consequences. Good examples of market failure include the Great Depression
of the 1930s and the real estate market crash that happened in 2008. Market
 failures can lead to devastating outcomes such as unemployment, homelessness,
and lost income.
 Due to the fiercely competitive nature of a free market economy, businesses will
not care for the disadvantaged like unorganised sector workers. This leads to
higher income inequality. We can observe this in the market  where in a big coffee
shop a person can buy a coffee for nearly  250 Rs. but at the same time a small
tea/coffee vendor can sell a  coffee for nearly 15 Rs..
 With respect to agricultural sector government intervention is in form of subsides,
interest free loan (NABARD). i.e. Government intervenes in these sectors to
reduce the hardships of farmer
 Also, there are certain specific fields where governments intervenes not because
of necessity but because of responsibility i.e. in the fields of Nuclear energy
(Atomic Energy Regulatory Board -AERB), Defence (DRDO) etc.
But the coin has other side too:
 Wide scale government intervention may result in market being toy in the hands
of Politicians.
 Lack of incentives to improve the quality and performance may result in stagnant
growth trajectory of certain sectors. Recently to rejuvenate BSNL government
needed to announce 70000 Cr. bailout package.
Conclusion:
Our constitution is based on the principle of just, equal society-economy. Hence, it becomes
imperative for the government to intervene in certain sector/fields of free market economy
when it seems necessary but it should not lead to politicization of those sectors so that India
can achieve its target to be a 5 trillion $ economy by 2024.
How do different market regulators ensure fairness and equity? Illustrate
with the help of suitable examples. 
Introduction:
In India, the different markets  are regulated with the help of independent regulators,
associated with the field of insurance, banking, commodity market, and capital market and
also the field of pension funds.
Body:
Post 1990, Privatisation saw the advent of the ‘Indian Regulator’ that became the ‘nurturer’
and ‘parent’ of its sector. Over a period of time, a number of regulatory bodies, ranging from
RBI, SEBI, IRDA, PFRDA to TRAI, electricity regulators, CCI, FDA have been set up in
India.
Ensuring fairness and equity:
 Regulators have been empowered to set the policy agenda, outline regulations,
punish non-compliance and garner resources to manage their affairs. e.g. Prompt
Corrective Action plan of RBI 
 Control Fraud: Market regulators put systems in place to prevent fraud as
financial customers aren’t always sophisticated enough to do so themselves. e.g.
Time to time guidelines given by RBI to ensure fairness in Banking Sector. 
 Promote Fairness: Regulators aim to reduce profits that insiders could extract
from the markets. Laws against insider trading, for instance, help to level the
playing field. e.g. In India, SEBI under the “SEBI (Insider Trading) Regulation,
1992”  intends to curb and prevent the menace of insider trading in securities.
 Set Mutually Beneficial Standards: Regulators help analysts to easily compare
companies by requiring compliance with accounting standards set by them. e.g. In
India it is done by The Institute of Chartered Accountants of India (ICAI). So,
 here ICAI ensures fairness and equity by maintaining transparency for  every
player in market.
 Prevent Excessive Risk: Regulators require financial firms to maintain minimum
levels of capital so that the firms honour their commitments and ensures firm’s
owners have some “skin in the game.”
              e.g. The CRR and SLR standard set by RBI for Nationalised banks and Private   
                      banks.             
 Ensure Liabilities are Funded: Regulators watch over insurance companies and
pension funds to ensure adequate reserves are maintained to cover liabilities
because managers of these entities tend to underestimate long-term liabilities
especially when there is an incentive not to do so.
              e.g. Time to time circulars issued by IRDAI and PFRDA in this regard.
 In this COVID-19 crisis when big insurance companies were offering COVID-19
insurance, which in turn gave a tough competition to small insurance companies.
Here, IRDAI intervened & mandated all general and health insurers to offer to
have a COVID-19 specific product, addressing basic health insurance needs of
insuring public related to the pandemic and have a standard product with common
policy wordings across the industry. It ensured fairness and equity.
Hindrances to ensure fairness and equity:
 Politicisation in Regulatory bodies – As economic agents inherently intend to
maximise profits, market misconduct happens in every domain. Policy makers go
overdrive and frame restrictive policies and denounce regulators.
 Non- experts to lead: The selection of non-experts to lead the regulatory bodies
may bring lack of efficiency in the functioning of such bodies. Recently, this issue
was raised when the former Finance secretary was appointed as RBI chairman.
 Many regulatory bodies causes overlapping of powers, Recent Controversy
between SEBI and IRDAI over Unit Linked Insurance Policy.
Way forward for more effective regulatory regime:
 Appointment of persons to head regulatory organisations should be attempted in a
far more transparent manner. Which in turn ensure no interference of any political
nature.
 “Regulatory Impact Assessments” are adopted by OECD countries to assess the
performance of regulatory bodies. India can also mandate such techniques through
legislation and thereby preserve economic value.
 Financial sector legislative reforms commission(FSLRC) recommended to merge
those regulatory bodies whose functions overlap. A multiplicity of regulatory
agencies has created scope for regulatory arbitrage, apart from making it difficult
to protect consumer interest. It will help to improve the quality of regulations by
simplifying regulatory process. e.g. Merging of SEBI,PFRDA & IRDA is
recommended by FSLRC. 
Conclusion:
Regulatory bodies have played a very crucial role in post liberalization era to have a level
playing field and thereby contributed in the sector specific growth by ensuring fairness and
equity. But, over the period of time new challenges  emerged. Hence, to tackle these
challenges regulatory bodies need to be empowered to ensure fairness and equity in different
markets.

 The government’s decision to introduce long-pending agricultural reforms

will help in better price discovery for farmers. Comment. 
Introduction:
In order to revive the Indian economy, the Central government has announced the Atma
Nirbhar Bharat Abhiyan. Agricultural reforms are part of the third tranche of the economic
package announced under Atmanirbhar Bharat Abhiyan to counter Covid-19 pandemic which
may yield better income for farmer in coming days.
Body: 
The central government introduced major agricultural market reforms through three
ordinances: 
 The Essential Commodities (Amendment) Ordinance 2020. (ECA)
  The Farming Produce Trade and Commerce (Promotion and Facilitation)
Ordinance, 2020.(FPTC)
  The Farmers (Empowerment and Protection) Agreement on Price Assurance and
Farm Services Ordinance, 2020.
Need to Introduce these  Reform:
 India has surplus production in most agri-commodities but farmers have been
unable to get better prices due to lack of investment in necessary infrastructure
such as Ware house, Cold Storage etc.
 The imposition of the curbs on stocking of farm produce and regulation of the
prices of commodities, etc. under Essential Commodities Act (ECA) are some of
factors responsible for less interest of entrepreneurs hence, less investment in the
farm sector.
 There are restrictions for farmers in selling agri-produce outside the notified
Agricultural Produce Market Committee (APMC) which in turn put less money in
the hands of farmer.
 The farmers are also restricted to sell the produce only to registered licensees of
the State Governments, which restricted farmers option to explore new markets.
 Further, barriers exist in free flow of agriculture produce between various States
owing to the prevalence of various APMC legislations enacted by the State
Governments.
A window of opportunity amidst eclipse of COVID-19:
 The amendment to ECA would deregulate the commodities such as cereals, edible
oils, oilseeds, pulses, onions and potatoes. It will help to lessen the fears of private
investors of excessive regulatory interference in their business operations.
 Any limits under ECA over these commodities will be imposed only in
exceptional circumstances such as war, famine, extraordinary price rise and
natural calamity.
 The freedom to produce, hold, move, distribute and supply will lead to harnessing
economies of scale and attract private sector/foreign direct investment into the
agriculture sector.
 It will help drive up investment in cold storages and modernization of the food
supply chain.
 An amendment to FPTC will create an ecosystem where the farmers and traders
would enjoy freedom of choice of sale and purchase of agri-produce.
 It will also promote barrier-free inter-state and intra-state trade and commerce
outside the physical premises of markets notified under State agricultural produce
marketing legislations.
 It empowers farmers for engaging with processors, wholesalers, aggregators, large
retailers, exporters etc. and thus eliminating intermediaries resulting in full
realization of price.
  Farmers have been provided adequate protection. Sale, lease or mortgage of
farmers’ land is totally prohibited and farmers’ land is also protected against any
recovery.
 It also provides an effective dispute resolution mechanism with clear timelines for
redress.
 These reforms are expected to build necessary agrarian infrastructure in the
country which will lead to build “One India, One Agriculture Market”
Though these kind of reforms are the most awaited reforms since Independence. There are
some pitfalls too as  pointed out by some experts:
 These reforms have kept away the state from its limited revenue resources. 
 Clearly, the move is to promote free trade under the slogan of one nation one
market.
 The peasantry at large will be at the mercy of the Agri Business Corporations
since there will not be any arrangements for price support and price stabilisation
for crops. 
Despite the above mentioned pitfalls, many agriculture experts opined:
 The country got Independence in 1947 but farmers are going to get freedom after
the promulgation of this ordinance.
 These steps have been advocated by agriculture economist Ashok Gulati for
decades and he welcomed the steps. “What the government is doing with these
reforms is that, it is creating alternative channels for farmers to sell their produce.
So, they will have more choices”. Which will yield better prices discovery for
farmers.
Conclusion:
These newly introduced  reforms are the most awaited reforms since the Independence of
India in 1947. It has opened up a new window to improve the farmers income by  better price
realisation. In the long run it will help India to  achieve its  target to double farmers income
by 2022.
What purpose does the merger of government owned banks and PSUs
serve? Discuss. 
Introduction:
With the motive to  strengthen the banking sector, expand the national presence and global
reach of these banks and PSU’s  government announced merger of 10 public sector lenders
into four bigger and stronger banks. Earlier to this  the Oil & Natural Gas Corporation
(ONGC) and Hindustan Petroleum Corporation Ltd (HPCL) merged together, resulted in
ONGC buying up the 51% government stake in HPCL.
Body: 
As the merger came in to effect there are 12 PSUs – six merged banks and six independent
public sector banks.
Purpose Behind the Merger Plan
 Merger was proposed through a ministerial panel called “Alternative
Mechanism”  headed by Finance Minister.
 Economic Survey (2015-16) pointed out that constant failure of banks to lend
credit to both emerging as well as existing industries has resulted in stagnation in
the economic growth of the nation.
 Economic Survey (2015-16) also pointed out that Problem of credit lending,
based on the twin balance sheet crisis, can be checked by the formation of bigger
banks.
  To keep pace with the growing economy, there is a need for big banks that can
lend to big industries & entrepreneurs that require large amounts of credit.
 As per banks’ prudential norms, banks take risks only for those entities that are
appropriate as per banks’ size. 
 Banks usually avoid investing in a single entity or business. Also to protect weak
PSBs from loss – thereby securing customers and financial system.
 Hence to invest in large projects, banks with huge lending capacity were needed
which can also lend to PSU’s.
 Banks also need large credit, better customer service & connect in order to invest
in mega projects through lending.
 Larger banks can invest in standardizing these processes in larger set of customer-
facing entities through technology up gradation, fraud detection, etc.
 Bigger banks would also be able to adhere to BASEL III norms.
 Bigger banks & large PSU’s with diverse portfolios have lesser chances of failure
since it is unlikely that different sector of an economy will face a crisis at a same
time.
Impact of Merger:
 Large banks will have large balance sheets which can lend to different sectors of
economy as per  need in turn lead to  growth of Indian economy.
 The large banking entities & PSU’s will be able to absorb financial shocks better.
It will also build capacity in PSBs to raise resources without depending on the
state exchequer.
 Consolidated banks will have a better ability to raise resources from the market.
 Large PSU’s can work in synchronous with the government policies.
 A synergistic relationship would efficiently use one another’s network, customer
base, better managerial efficiency ,and it will also improve Operational
Efficiency.
 Stronger and globally competitive banks would provide increased choices to the
stakeholders.
 Because of consolidation capital allocation, performance assessment, and steering
would become easier for the government.
Former RBI Governor has warned that while creating large banks one might end up with a
big weak bank. Hence, challenges posed by these merger exercises can’t be blindsided:
 There is a concern among employees that amalgamation may lead to
rationalization of bank branches & employees.
 The merger also sends out poor signals about banking & PSU’s governance 
which will affect trust of customers in banking system.
 A strong banks merger with a weaker and under-capitalized PSB would stall the
bank’s recovery efforts as the weaknesses of one bank may get transferred and the
merged entity may become weak.
 Same scenario can be seen in PSU’s merger.
 For instances, a weak Dena Bank (under Prompt Corrective Action) may impact
stronger banks like Bank of Baroda & Vijaya Bank.
 Bigger banks & PSU’s may monopolise market economy.
Conclusion:
Merged larger banks & PSU’s offer more resilience to the banking & PSU’s sector but
blindsiding experts opinions like twin balance sheet problem, NPA’s ,and risk control system
would not be helpful to give boost to banking & PSU’s sector. Hence, strong foundation of
PSBs needed so that banking & public undertakings sector in Indian economy becomes
strong enough to achieve the target of $5 trillion GDP  economy by 2024.

Can a market driven economy ensure the welfare of citizens, especially the
poor populations, during times of distress? Critically comment. 
Introduction
As the coronavirus continues its march around the world, governmental measures to stop the
virus have severed the flow of goods and people, stalled economies, and in the process have
raised questions on market economy’s role in welfare of citizens, especially the poor sections
during such times of distress.
Body
 A market economy, also known as a free market or free enterprise, is a system in
which economic decisions, such as the prices of goods and services, are
determined by supply and demand.
 The forces and the flaws that threaten the market economy arise within a complex
and dynamic socio-political system which generates positive and negative
feedback loops. 
 This feedback loop is disrupted during times of distress like one’s induced by
external factors to market economy like present Covid-19 crisis or like one’s
induced by internal forces in market economy like the 2008 financial crisis.
A market driven economy can ensure the welfare of citizens, especially the poor populations,
during times of distress in the following manner:
1. Unlike other types of economies, a market economy increases the efficiency of
government. Their limited role promotes increased efficiency of government in
critical roles, especially during emergency situation. Eg- Governments focusing on
basic essential services to citizens during lockdowns due to COVID pandemic.
2. Increased productivity is also associated with a market economy. Such a
phenomenon helps during times of distress as the surplus helps in fighting off the
pressures of the situation. Eg- Increase in manufacture of PPE kits in India during
the times of COVID.
3. A country with a market economy also has increased innovation. Consequently,
such an innovative attitude is essential during times of distress for improved ability
to fight off the problem. Eg- Innovative new ways of manufacturing ventilators as
well as new solutions to problems due to pandemic like work from home.
4. Market economies also foster an environment of growth and innovation of wide
ranging products which become effective tools in fighting a common global
problem for welfare of citizens as well as poor populations. Eg- Cheaper tests
during the ongoing pandemic.
But at the same time, market economies also become a hindrance in the measures towards
welfare of citizens, especially poor populations, due to the following factors:
1. Asymmetric information, also known as “information failure,” which typically
manifests when the seller of a good or service possesses greater knowledge than the
buyer. During times of distress, a market economy has comparatively lesser
avenues towards tackling such issues where invariably the poor are worst affected.
2. Wealth inequality is a recurring issue in market economies where workers don’t
earn enough to save for a rainy day. Compounding the problem is that workers
often need to work to earn the money necessary to survive and support themselves
and their families. In times of distress like during the COVID pandemic, lockdown
led to closing of all revenue earning sources for workers.
 3. Given the policy response of the national lockdown to arrest the spread of the virus,
it is plausible to assert that children from the poorest strata will succumb to dietary
shock both in terms of quantity as well as quality. These shocks can be possible
weight-loss among children of the poorest households, including casual labourers. 
4. Currently, it is estimated that the COVID-19 pandemic has created the largest
disruption of education systems in history, affecting nearly 1.6 billion learners in
more than 190 countries and all continents. Here, poor populations are most
affected as they lack alternative tools for learning.
Way Forward- 
 Directing the policy focus towards the poorest section is recommended as they are
most vulnerable to these shocks and economic distress. 
 Ensuring smooth and uninterrupted supply of nutritious meals and food
supplements is particularly imperative to maintain the nutritional status of poor
children. 
 Measures such as direct cash benefits/transfers to those from the lowest economic
strata, as done by the government a few months ago, may need to be extended. 
 Enabling ground-level functionaries (ASHA, AWWs) to maintain their active
participation in preserving ongoing nutrition efforts will also be critical.
Conclusion
Effective disaster risk financing instruments and strategies can be developed by joining hands
with other market economies. Thus, a well-designed social insurance scheme can become a
permanent feature in market economy which can assist the poor in times of distress,
alleviating poverty and increasing prosperity by safeguarding development gains.

What is the present policy of disinvestment being pursued by the

Government? What are your views on this policy? Is it healthy for the
economy in general? Critically comment.  
Introduction
Disinvestment means sale or liquidation of assets by the government, usually Central and
state public sector enterprises, projects, or other fixed assets. It introduces competition and
market discipline and helps to depoliticize non-essential services. This policy has undergone
wide ranging changes during recent times in India.
Body
 Disinvestment in India is aimed at reducing the financial burden on the
government due to the inefficient and poorly functioning PSUs (called sick units)
and to improve public finance.
 The government in its interim budget 2019, set the disinvestment target for FY
2019-20 at Rs. 90,000 crore, higher than the Rs. 80,000 crore budgeted for the
ongoing year that it said would be exceeded.
 The present policy of disinvestment being pursued by the Government can be seen
from the below given salient features:
1.
1. Public Sector Undertakings are the wealth of the Nation and to ensure
this wealth rests in the hands of the people, promote public ownership
of CPSEs.
2. While pursuing disinvestment through minority stake sale in listed
CPSEs, the Government will retain majority shareholding, i.e. at least
51 per cent of the shareholding and management control of the Public
Sector Undertakings.
 3. Strategic disinvestment by way of sale of substantial portion of
Government shareholding in identified CPSEs up to 50 per cent or
more, along with transfer of management control.
 In February 2018, the cabinet had cleared the institutional framework for
monetisation of identified non-core assets of the CPSEs under strategic
disinvestment.
 As per the Department of Investment and Public Asset Management (DIPAM),
the current policy on strategic sale entails that the Niti Aayog will identify CPSEs
for strategic disinvestment and it will also advise on mode of sale, percentage of
shares of the CPSEs to be sold and method for valuation.
 Strategic disinvestment is the transfer of the ownership and control of a public
sector entity to some other entity (mostly to a private sector entity). Unlike the
simple disinvestment, strategic sale implies a kind of privatization.
Some of the views on Disinvestment can be seen as given below:
1. Disinvestment assumes significance due to the prevalence of an increasingly
competitive environment, which makes it difficult for many PSUs to operate
profitably. This leads to a rapid erosion of the value of the public assets making it
critical to disinvest early to realize a high value.
2. Disinvestments can be seen as necessary to diversify the ownership of PSU for
enhancing efficiency of individual enterprise as well as raise funds for
technological up gradation, modernization and expansion of PSUs.
3. Public sector companies can only be on an equal footing with the private sector if
their shareholders give them the desired flexibility. Therefore, the public good is
the best served if the government focuses on providing a stable, clear and effective
regulatory system and gets out of the business of running industries.
Disinvestment and Economy:
The Good- 
 In the context of macroeconomics, time has shown us how countries like Chile,
UK, China, New Zealand, and Poland successfully used disinvestment to achieve
new economic heights. Disinvestment allows government to have much better
control over the market economy without upsetting norms of market behaviour.
 Many countries used disinvestment as a sure means of restoring budgetary
balance & to revive growth on a sustainable basis after facing economic crisis in
80s.
 Disinvestment is extremely positive for the Indian equity markets and the
economy. It will draw lot of foreign and domestic money into the markets. It will
allow PSU to raise capital to fund their expansion plans and improve resource
allocation in the economy. 
 Disinvestment will allow the government to stimulate the economy while
resorting to less debt market borrowing. Private borrowers won’t be crowded out
of the markets by the government and will have to pay less to borrow from the
open market. 
The Bad-
 Sale of profit-making and dividend paying PSUs would result in the loss of
regular income to the Government and also affects labour forces’ social security.
 There would be chances of “Asset Striping” by the strategic partner. Most of the
PSUs have valuable assets in the plant and machinery, land and buildings, etc.
 Strategic and National Security Concerns: Strategic Disinvestment of Oil PSUs is
seen by some experts as a threat to National Security since Oil is a strategic
 natural resource and possible ownership in the foreign hand is not consistent with
our strategic goals.
 Using funds from disinvestment to bridge the fiscal deficit is an unhealthy and a
short term practice. It is said that it is the equivalent of selling ‘family silver’ to
meet short term monetary requirements.
Way forward-
 Caution against undervaluation: The government, however, must ensure that it is
not taken for a ride. 
 Asset creation from the proceeds: Instead of using the proceeds from the
disinvestment to fund revenue deficit the proceeds must be utilized strictly for
new asset creation.
 To allay concerns of cronyism, the strategic sale process needs to be fair and
transparent with a minimum reserve price that does justice to the valuable assets
being auctioned off. 
Conclusion
Disinvestment may be a magic solution to raise revenues, but it is a tamed tiger—the
performance depends on how to tame it in accordance to the sectoral policies, strength and
presence of the public sector, etc. With the COVID-19 pandemic, it is time to reflect how to
develop a symbiotic relationship between competent public and private sectors to foster
India’s potential as an industrial powerhouse.

What economic benefits have accrued in the last three decades with the
progressive liberalisation of different sectors? Illustrate. 
Introduction
Economic liberalization refers to a country “opening up” to the rest of the world with regards
to trade, regulations, taxation and other areas that generally affect business in the
country. There has been a revolutionary change in Indian Economy since the espousal of the
New Economic Strategy in 1991. When a nation becomes liberalised, the economic effects
can be intense for the country. 
Body
In this regard, the economic benefits of liberalisation in the last 3 decades can be seen as
given below:
1. Major goals of economic liberalization are the free flow of capital between
countries and the effectual allocation of resources and competitive advantages. This
is generally done by decreasing protectionist strategies such as tariffs, trade laws
and other trade barriers.
2. In general, when a country becomes liberalized, stock market values also rise. Fund
managers and investors are always on the lookout for new opportunities for profit.
The situation is similar in nature to the anticipation and flow of money into
an initial public offering (IPO).
3. Liberalization reduces the political risk. These are areas that support and foster a
willingness to do business in the country, such as a strong legal foundation to settle
disputes, fair and enforceable contract laws, property laws, and others that allow
businesses and investors to operate with confidence.
4. Impact on Agriculture: In the area of agriculture, the cropping patterns has
undergone a huge modification, but the impact of liberalisation cannot be properly
measured.
5. Banking: In banking sector, liberal policies have great impact in Indian economy.
Since improvements, there have been three rounds of License Grants for private
 banks. Private Banks such as ICICI, HDFC, Yes Bank and also foreign banks,
raised standards of Indian Banking Industry.
6. Telecom Sector: Usually, Telecom sector was a government owned domination and
therefore service was not very efficient. But after reforming polices, private
telecom sector reached zenith of success. Indian telecom companies are progressing
at global scale. 
7. Small scale industry exists and still remains strength of Indian Economy. It
contributes to major portion of exports and private sector employment. But overall
value addition, product innovation and technology adoption remains miserable and
they exist only on back of government support. Their products are challenged by
cheaper imports from China.
8. Industrial Growth Rate: Barring few years, industrial growth rate has not been so
much inspiring. Share of Industry still remains stagnantly low at 25%. It is
discouraging that India has transitioned to be a service led economy, directly from
an agrarian one. 
9. Impact on Services Sector: Due to historic economic inequality between two
groups, human resources have been much cheaper in developing economies. This
was further aided by information technology revolution and this all culminated in
migration of numerous jobs from developed countries to developing countries.
Economic reform is a continuing process and not a one-time action. The present
dispensation– which recently opened the defence and aviation sector for 100 percent foreign
investment – is carrying forward the legacy of the 1991 reforms. 
Conclusion
Economic liberalization is generally thought of as a beneficial and desirable process for
emerging and developing countries. The underlying goal is to have unrestricted capital
flowing into and out of the country to boost growth and efficiencies within the home
country. 

We are in the 7th year of the Make in India programme. What is your
assessment of the effects of this flagship initiative? Has the programme
been able to meet the intended objectives? Critically examine. 
Introduction
Make in India is a major national programme of the Government of India designed to
facilitate investment, foster innovation, enhance skill development, protect intellectual
property and build best in class manufacturing infrastructure in the country.
Body
 The Make in India programme is very important for the economic growth of India
as it aims at utilising the existing Indian talent base, creating additional
employment opportunities and empowering secondary and tertiary sector. 
 The Make in India slogan clearly points to the government’s aim to make India a
global manufacturing hub. This signals a paradigm shift in focus, from tertiary to
manufacturing. 
 The three major objectives were: 
o to increase the manufacturing sector’s growth rate to 12-14% per
annum in order to increase the sector’s share in the economy; 
o to create 100 million additional manufacturing jobs in the economy
by 2022; and 
o to ensure that the manufacturing sector’s contribution to GDP is
increased to 25% by 2022 (revised to 2025) from the current 16%. 
  Some of the other effects of Make in India initiative can be seen as below:
o Measures to improve business confidence have led to progressive
improvements in India’s rank in the World Bank’s ease of doing
business rankings from 142 in 2014 to 100 in 2017.
o Five industrial corridors and 21 new nodal industrial cities are being
developed to boost industrial growth.
o The Insolvency and Bankruptcy Code 2016 has consolidated all rules
and laws pertaining to insolvency into one legislation.
The programme’s effectiveness in achieving its objectives can be seen from the points given
below:
1. The ‘zero defect zero effect’ phrase which came with Make in India campaign has
shown positive impact on the Micro, Small and Medium Enterprises (MSMEs) of
India. 
2. The digitization initiative that is part of Make in India has helped make processes
much more transparent and easier to implement. At the ground level, we have
noticed many companies and customers respond positively to the Made in India tag
which was not always the case earlier. Eg- LED lights initiative.
3. According to the data published by Department of Industrial Policy & Promotion
(DIPP) in December 2016, highlighted that the industrial activity rose by 29
percent.  Much of this growth was concentrated in three states- Karnataka, Madhya
Pradesh, and Maharashtra. 
Given that big-ticket projects for grand initiatives such as ‘Make in India’ have long gestation
periods and lag effects, assessments of such initiatives can be premature. Nonetheless,
following points do show the lacunae’s:
1. The last five years witnessed slow growth of investment in the economy. Gross
fixed capital formation of the private sector, a measure of aggregate investment,
declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey
2018-19). 
2. With regard to output growth, we find that the monthly index of industrial
production pertaining to manufacturing has registered double-digit growth rates
only on two occasions during the period April 2012 to November 2019.
3. Regarding employment growth, the crux of the debate has been that employment,
especially industrial employment, has not grown to keep pace with the rate of new
entries into the labour market.
Way forward – 
 Labour laws should be amended in a way that does not overlook the interest of
labour. Progressive labour laws to create more jobs in the market. 
 Revisit the Land Acquisition Act, a robust land acquisition policy which eases the
process of acquisition is essential for Investment in Infrastructure and
Manufacturing.
 Overall re-hauling of transport system through increasing the capacity of railways,
highways and expressways.
Conclusion
Going ahead, the Indian manufacturing sector provide an excellent opportunity to
international investors to collaborate with existing businesses as most of the businesses have
plans to expand through various options which will boost domestic capacity and also help the
manufacturing sector in India to pick up pace which will eventually help in achieving the
target of 5 trillion dollar economy by 2024.
Credit availability is one of the most crucial factors in any industrial policy.
In the light of this statement, examine the status of credit as an enabler and
impediment of industrial growth in India. 
Introduction
The role of credit in development in general and industrial development in particular has
seminal importance where world over financial policies have been designed and adopted as
per the needs of countries to achieve rapid industrialisation.
Body
 Financial liberalisation as a part of the comprehensive reform programme was
introduced in 1991 in India. The essence of the liberalisation programme was to
ensure that the market plays a decisive role in allocating resources especially
credit resources.
 In this regard, credit as an enabler of industrial growth can be seen from following
points:
1.
1. India has a diversified financial sector undergoing rapid expansion,
both in terms of strong growth of existing financial services firms and
new entities entering the market. 
2. The sector comprises commercial banks, insurance companies, non-
banking financial companies, co-operatives, pension funds, mutual
funds and other smaller financial entities.
3. The Government of India has introduced several reforms to liberalize,
regulate and enhance this industry. The Government and Reserve Bank
of India (RBI) have taken various measures to facilitate easy access to
finance for Micro, Small and Medium Enterprises (MSMEs). 
4. These measures include launching Credit Guarantee Fund Scheme for
MSMEs, issuing guideline to banks regarding collateral requirements
and setting up a Micro Units Development and Refinance Agency
(MUDRA). With a combined push by Government and private sector,
India is undoubtedly one of the world’s most vibrant capital markets. 
5. In 2017, a new portal named ‘Udyami Mitra’ was launched by Small
Industries Development Bank of India (SIDBI) with an aim to improve
credit availability to MSMEs in the country. 
6. According to CARE ratings, credit growth has even surpassed the
growth in bank deposits (6.1 per cent), one of the major factors that
constrained liquidity in the banking system in recent months where
Large industries account for more than 80 per cent share in the total
disbursement of credit to industries. This is followed by micro and
small industries (13 per cent) and medium industries at 4 per cent.
But at the same time, since independence the underdeveloped credit sector was perceived to
be the reason behind inadequate financing for industrial sector. Further, its role as an
impediment of industrial growth can be seen from following points:
1. There seems to an asymmetry which is widening both in terms of the nature of
financial requirements of the industrial sector and the financial institutions and
agencies that emerged during the post-liberalisation period in India.
2. The cost of capital plays a key role in the process of industrialisation; as
unavailability of affordable capital has often been identified as a key factor that
causes adverse impacts. The cost of capital affects both the large and the small
firms in different ways where in India the cost of capital has still remained high.
 3. The size and depth of the corporate debt market in India continues to remain small
in comparison to those in developing countries like Brazil and China. It is also
small in comparison to several bank based financial systems like Germany and
Japan.
4. Despite several policy measures to boost the performance of the equity market, the
performance of the primary market has not been up to the desired level.
5. There has been a structural shift in bank credit from the industrial sector to the
retail sector, according to CARE Ratings. The share of industrial sector in total
outstanding credit declined from 40-45 per cent between FY10 and FY16 to nearly
30 per cent at present.
6. This shift, according to CARE, can be attributed to the change in focus of banks to
lend to the retail sector, where the probability of delinquency is lower, compared to
the industrial sector, which has relatively higher levels of non-performing assets
(NPAs).
Way Forward-
 A necessary condition for the process of credit availability is the evolution of a
deep and liquid corporate debt market.
 Harness household savings into risk capital for industrial growth where
institutional intermediaries can be developed to tap these funds.
 For a knowledge-based banking and better management of information, it is
necessary to tailor the new institutional funds to long term investments.
Conclusion
Changes in the economic environment in which banks and businesses operate such as domestic
and cross‐border consolidation of the banking industry have heightened concern about the
availability of credit to businesses. The panacea to the present challenges in industrial financing
hinges on the ability to design an appropriate mix of the bank- and the market based systems of
financing.

Do you think the vision of Atmanirbhar Bharat would be a game changer

for the domestic industries? Substantiate your views. 
Introduction
Recently, the government announced the vision to make India a self-reliant nation
(Aatmanirbhar Bharat) amidst the Covid-19 pandemic, based on the foundation of five pillars
comprising economy, infrastructure, technology driven system, vibrant demography and
demand.
Body
 In order to materialise this vision and provide a liquidity boost to the Indian
economy for recouping with the loss caused due to the ongoing Covid-19
pandemic, the Government of India, has announced a special economic package
of Rs. 20 lakh crores in five tranches
 The first tranche of the Stimulus Package is dedicated to support micro, small and
medium enterprises “MSMEs”. As part of the fourth tranche, the Government
announced reforms to provide impetus to sectors including coal mining, minerals,
defence civil aviation, atomic energy.
In this regard, the vision of Aatmanirbhar Bharat can be considered as game changer for the
domestic industries due to the following factors:
1. A significant part of the economic dimension of “Atmanirbhar Bharat” is on
increasing the competitiveness of Indian production and building connections to
 global value chains (GVCs). This implies a need to turn away from protectionist
policies, while using the lessons from new industrial and trade policy.
2. Further, following measures have also been announced for MSME’s-
o Provision of Rs.3,00,000 crores collateral-free Emergency Credit Line
for Businesses including MSMEs.
o Provision of Rs.20,000 crores of subordinate debt for stressed MSMEs
requiring equity support.
o Equity infusion of Rs.50,000 crores for MSMEs with growth potential
and viability through Fund of funds and encouraging such MSMEs to
get listed on Stock Exchanges.
o Introduction of a revised definition of MSME, thereby eliminating
distinction between the manufacturing and service sector.
3. The changes in defence and government procurement policies are a clear indication.
The obligation to display country of origin on consumer products is another good
step to let the consumer decide.
4. MSMEs will benefit from an array of measures which include easy access to loans
and de-risking the sector with a credit guarantee to help banks draw comfort. 
5. The emphasis on technology-driven systems in administrative reforms, health and
education and privatisation of public sector units except in strategic sectors will
bring the required efficiencies, thus releasing resources over and above what has
been allocated. Opening up of space and atomic energy for the private sector also
entails a positive spill over effect of technology.
6. As the government trains its focus on local manufacturing of solar power
equipment as part of its strategy to make an ‘Atmanirbhar Bharat’, Indian solar
equipment manufacturers are toeing the line and scaling up capacities.
At the same time, the vision of Atmanirbhar Bharat faces following challenges with regards
to domestic industries:
1. Issues Related to Liquidity: The package of Rs 20 lakh crore comprises both fiscal
and monetary measures, where majority of the package is liquidity measures that
are supposed to be transmitted by RBI to Banks and Banks to Citizens. This
transmission wouldn’t be as smooth owing to inefficient transmission of monetary
policy.
2. Lack of Demand: The lockdown has lowered aggregate demand, and a fiscal
stimulus is needed. However, the package, by relying overwhelmingly on credit
infusion to boost the economy, has failed to recognise that investment will pick up
only when people across income segments have money to spend.
3. Lack of Backward and Forward Linkages: Unless the rest of the domestic economy
is revived, the MSME sector may face a shortage of demand, and its production
may soon sputter to a close.
4. Burgeoning Fiscal Deficit: Government claims that the stimulus package is around
10% of India’s GDP. However, financing it would be difficult as the government is
worried about containing the fiscal deficit
Way Forward – 
 To achieve real self-reliance, the country will also need to incentivise innovation,
research and development to keep India at the cutting edge of the industry. 
 These can be achieved either through the setting up of global innovation centres in
India or through partnerships between leading Indian research academic
institutions and their global counterparts.
  Building world-class infrastructure is extremely critical, and this requires huge
investments. A strong framework for collaboration (e.g. contracting) and
financing such investments needs to be established.
Conclusion
By nourishing local manufacturers, supply chain and with diversification in services and
products, the Atmanirbhar Bharat Abhiyan can be made a successful mission where Vocal for
Local becomes a rallying cry towards making Indian industries globally competent.

Evaluate the status of inland waterways in India. How can the untapped
potential of waterways be exploited? What economic benefits would accrue
with the expansion of waterways? Discuss. 
Introduction
The inland water transport is a cheap, fuel-efficient, environment-friendly mode with a higher
employment generation potential and is suitable for heavy and bulky goods. But, the share of
inland water transport in total transport in India is only around 3.5 per cent.
Body
Status of inland water transport:
 The Government of India is working to develop inland waterways as an
alternative mode of transport in the country, which is cleaner and cheaper than
both road and rail transport. 
 There are 111 National Waterways in the country today, after 106 waterways
were declared as National Waterways, adding to the list of 5 existing NW, in
2016. Some of the National Waterways in the country are already
operational/navigable and are being used for transportation. Some of these include
Ganga system, Brahmaputra system, etc.
 The Inland Waterways Authority of India (IWAI) is working on developing the
new National Waterways and enhancing their navigational potential. As per the
feasibility reports completed so far, 36 NWs have been found to be technically
viable. Out of these 36 NWs, developmental activities have been initiated on the
following 8 NWs in 2017-18.
Exploiting the untapped potential:
1. RIS (River Information system) has been implemented in some places where RIS is
a combination of tracking and meteorological equipment with specialized software
designed to optimize traffic and transport processes in inland navigation.
2. Moving a step ahead towards ensuring optimum use of National Waterways, the
Inland Waterways Authority of India (IWAI) also launched a portal LADIS – Least
Available Depth Information System.
3. The Jal Marg Vikas Project (JMVP), for capacity augmentation of navigation on
National Waterway-1 (NW-1), has also been approved.
4. New integrated systems are being developed wherein the waterway will form part
of a larger multi-modal transport network having linkage with the Eastern
Dedicated Rail Freight Corridor and also with the area’s existing network of
highways. 
Economic benefits due to expansion of waterways:
1. A well-coordinated inland waterways network could bring a fundamental alteration
in the logistics scenario of the country. It represents a ready built infrastructure
network, which can be utilised without any further capital investment. 
2. Waterways do not involve challenges associated with land acquisition, which has
always been a sensitive issue, causing time and cost overruns of numerous projects.
 The significant investment which India needs to build its roads/highways
infrastructure network can be conserved through increased utilisation of the
waterways.
3. Waterways are a cheaper mode of transportation vis-à-vis the available alternatives,
significantly reducing the point-to-point cost of goods transportation. As per a
recent study of the Integrated National Waterways Transportation Grid, one litre of
fuel will move 24 tons through one kilometre on road, 95 on rail and 215 kilometres
on inland water transport. 
4. Movement of goods and passengers through inland waterways would necessitate
setting up large number of landing and loading/unloading points. This has the
potential to open up large and accessible hinterland for supply of goods which can
be transported at a lower cost. 
Implementation of the national waterways network is, however, fraught with challenges like
– 
 The channel draft of the national waterways is not uniform at 2 meters throughout
the year, as is required. Some of these rivers are seasonal and do not offer
navigability through the year. 
 Around 20 out of the 111 identified national waterways have reportedly been
found unviable. 
 Further, all the identified waterways require intensive capital and maintenance
dredging, which could be resisted by the local community on environmental
grounds, including displacement fears, thereby posing implementation
challenges. 
Way Forward/ Conclusion
 As every riverine system is unique and presents diverse challenges, separate
studies based on a detailed micro-level review to assess viability need to be done
for each, before taking up implementation. 
 An effective waterways network would necessitate drawing up a well-coordinated
strategy on lines of complementarity between the national network and other
waterways, not declared as such, as well as between waterways and
roadways/railways. 
 The said strategy should closely look into the various undercurrents, including
competing uses/needs, possible local resistance and also work closely and in
coordination with local governments for quick and successful implementation of
this important national project.

Do you support the idea of privatising the operations of railways?

Substantiate your views with the help of suitable examples. 
Introduction
Recently, the Indian Railways initiated the process to allow private firms to operate passenger
trains on its network through 151 new trains. While these trains will form a minuscule portion
of the entire railway network, this marks the beginning of private sector participation in
passenger train operations
Body
Supporting the idea of privatising the operations of railways, we can consider the following
points:
1. The railways has said that 70 per cent of the private trains will be manufactured in
India which will be designed for a maximum speed of 160 kmph. There would be a
reduction in journey time by around 10-15 per cent at 130 kmph and around 30 per
cent at 160 kmph. This will help in both Make in India initiative as well as
efficiency of transportation.
2. The privatization will also help in accommodating the latest technology in railways
coaches, safety and travelling experience. Thereby, it may help Indian Railways to
become a world-class network.
3. Niti Aayog’s strategy for New India @75 envisages many targets in railway
infrastructure such as increasing the speed of infrastructure creation from the
present 7 km/day to 19 km/day, 100% electrification of broad gauge track by 2022-
23. Privatisation will help in this goal.
4. The private sector’s success will depend critically on track operations and station
access granted by the Railways. This will likely lead to insistence on clear
operating procedures, responsibility allocation and high penalties for non-
performance by the Railways.
5. Track access charges will be the key to viability of operations. The Railways will
need to transparently allocate its capital and operating costs for various activities to
enable a clear determination of components of network costs. The process of
transparent cost allocation will help highlight hidden inefficiencies, which can be
addressed in the form of separate projects undertaken by the Railways.
When the railways are viewed as the transport of masses, privatisation becomes even trickier.
It lends credence to views against privatising the operations of railways, which are discussed
below:
1. Increasing passenger trains will adversely affect freight trains where the latter
actually accounts for 67% of Indian Railways’ earnings. Many experts opine that
freight trains will get impacted as the country has limited lines on which we will
see a higher number of trains running after this.
2. Given that a private enterprise runs on profit, thus it may be assumed that the
easiest way of accruing profits in Indian Railways would be to hike fares. This
would render the service out of reach for lower income groups.
3. An advantage of Indian Railways being government- owned is that it provides
nation-wide connectivity to bring regional development. This would not be possible
with privatisation since routes which are less popular may be neglected, thus having
a negative impact on connectivity. For example, regions with rugged terrain and
low population density like Himalayan states and North eastern states can be
rendered inaccessible.
4. Currently, the Ministry of Railways is effectively the policy maker, regulator and
service provider. This, as the Bibek Debroy committee pointed out, is a clear
conflict of interest and would undermine the fair competition between private and
government railway operations and impede the efficient privatisation process of
Indian Railways.
5. Private companies are unpredictable in their dealings and do not share their
governance secrets with the world at large. In such a scenario it would be difficult
to pin the accountability on a particular entity, should there be a discrepancy.
Way Forward –
 Modernization of Railways- There is a need to implement the recommendations
of the Bibek Debroy committee, such as expansion of Indian Railways
manufacturing company, Corporatization of core functions of railways, etc.
 Sustainable Pricing- There is a need to revisit Indian Railways pricing model to
make the passenger and freight segments sustainable. The tariffs should be
competitive with the cost of road transportation.
 Independent Regulator- Setting up an independent regulator will be critical for
creating a level playing field for private players. In this pursuit, there is a need to
expedite the process of establishing the Rail Development Authority, as it is
already approved by the government.
Conclusion
With the success story of privatisation in the aviation industry to refer to, it may be wise to
focus more on robustness of privatization in the world’s 4th largest rail network in the world
by size to avoid pitfalls of other countries privatisation measures and instead ensure a world
class transportation network for citizens of India.

 Airport modernisation has gained much momentum in the last few years.
Why is it important to expand and upgrade the airport networks? Explain. 
Introduction
India’s civil aviation industry aims to become the third-largest aviation market by 2020 and
the largest by 2030 where it is planning development of more than 50 new airports and
expansion of existing airports, giving job opportunities to millions.
Body
 India registered a growth of 14 percent in civil aviation sector during the last
decade. With foreign direct investment (FDI) in air transport during the last
decade touched the mark of $570 million. 
 The Country continues to be a favourite destination for foreign investors in civil
aviation sector. It has been noted that the Indian civil aviation market is growing
at a rapid pace and now ranks third in the world.
 Currently, six international airports have been completed successfully under PPP
mode. The sector is expected to witness investments worth US$ 25 billion by
2027. 
 In November 2018, the Government of India approved a proposal to manage six
AAI airports under public private partnership (PPP). These airports are situated in
Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru.
Importance of expanding and upgrading the airport networks in India:
1. Airports being nuclei of economic activity assume a significant role in the national
economy. The quality of airport infrastructure, which is a vital component of the
overall transportation network, contributes directly to a country’s international
competitiveness and the flow of foreign investment. While cargo carried by air in
India weighs less than 1% of the total cargo exported, it accounts for 35% of the
total value of exports. 
2. Better cargo handling facilities lead to enhanced levels of importation, especially of
capital goods and high-value items. Likewise, 97% of the country’s foreign tourists
arrive by air and tourism is the nation’s second largest foreign exchange earner. 
3. Airports also represent a country’s window on the world. Passengers form their first
impressions about a nation from the state of its airports. They can be effectively
 used as symbols of national pride, if we pay sufficient attention to their quality and
maintenance. 
4. In many remote, hilly and inaccessible areas of the country, air transport is the
quickest and sometimes the only mode of travel available. This is especially true of
sensitive regions on the borders with our neighbours in the west, north and north-
east. Airports need to be integrated with other modes of transport like Railways and
Highways, enabling seamless transportation to all parts of the country.
5. With the increase in traffic for both passenger & cargo aviation services in India,
the government has put in place a program for directing investments in the Airport
infrastructure – through both internal resource mobilization, as well as through
private sector participation in modernizing specific Airports.
6. Air transport serves a time-sensitive market. The surface access to airports should,
therefore, be efficient and city planners should keep the airport-linked requirements
constantly in view while designing surface transport development plans. There is a
special need to emphasise the aspect of rail links with airports, in view of its near
absence in India as contrasted with other countries.
7. Aviation infrastructure also plays a key role in enabling the economic growth of
countries that rely on major hubs such as Singapore and Dubai. In Dubai, for
instance, aviation generates about 28% of the city’s GDP.
8. Better transport linkages enable investment and human capital to flow more freely
across borders, improving returns on investment for some projects.
Conclusion
In our journey towards the New India where the Indian economy is all set to scale new
height’s, the upgradation and modernisation of airport infrastructure and its efficient use have
assumed critical importance. Thus, aviation, far from being a mere mode of transportation for
an elite group, is crucial for sustainable development of trade and tourism.