BYJU’S IAS

UNIT TEST 2021-22

 Unit Test 2022: Economy-2

1. What is MSP (Minimum Support Price)? What are the issues related to MSP?
(10 Marks, 150 Words)

Approach:

Introduction
● Relate to current goings on related to MSP.
● Define MSP.

Body
● Establish the objectives it sets out to achieve.
● Briefly provide the steps in the declaration of MSP.
● Briefly discuss the factors considered by CACP while calculating MSP.
● List out broad based issues related to MSP.

Conclusion
● Suggest a way forward on the MSP issue.

Answer:

Introduction:
The recent farmer protests have brought the spotlight firmly on the issue of
Minimum Support Price (MSP). The Minimum Support Price is an intervention
on the part of the government, in the form of price support, to insure farmers
against any sharp fall in farm prices. MSP ensures guaranteed offtake price which
is also remunerative for the farmers.

Body:
The key objectives of MSP are to protect farmers from distress sale and to procure
foodgrains for the Public Distribution System. By ensuring assured income to the
farmers, MSP intends to encourage investments in Modern Technologies for
farming.
● The MSP is declared by the Government of India on recommendations of the
Commission for Agricultural Costs and Prices (CACP) - a statutory body -
which submits separate reports recommending prices for kharif and rabi
seasons. It is declared for 23 crops including rice, wheat, pulses, etc., and is
declared before the sowing season.
● The CACP submits its recommendations to the government in the form of Price
Policy Reports each year, separately for five groups of commodities namely
kharif crops, rabi crops, sugarcane, raw jute and copra.
● After considering the report and views of the state governments and also
keeping in view the overall demand and supply situation in the country, the
Central government takes the final decision.

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Factors considered by CACP while calculating MSP
The commission takes into consideration (apart from a comprehensive view of the
entire structure of the economy of a particular commodity or group of
commodities) multiple factors before declaring the MSP, some of which are:
● Cost of Production
● Changes in input prices
● Input-output price parity
● Trends in market prices
● Demand and supply
● Inter-crop price parity
● Effect on industrial cost structure
● Effect on cost of living
● Effect on general price level
● International price situation
● Parity between prices paid and prices received by the farmers
● Effect on issue prices and implications for subsidy

The Commission makes use of both micro-level data and aggregates at the level
of the district, state and the country.

Over the years, MSP has become a key facet of government support to the farmers.
MSP has brought considerable benefits.
● It has ensured food security for the citizens.
● It has ensured that PDS functions efficiently.
● It has provided assured cash flow to the farmers.
● It has helped in averting price fluctuations of food crops.

However, multiple concerns have emerged with MSP over the years.

Issues pertaining to Minimum Support Price:

● Mismatch in Farmers’ demand for MSP against Government’s formula for
MSP
Government declares MSP based on the formula A2+Family labour (FL),
where A2 = Input costs (Seed, Fertilizer, Machinery, Labour, etc.)
Farmers’ demand is 1.5 times of C2, which is equal to Government MSP +
Cost Imputed on rent and interest on owned land
○ In this context, the National Commission on Farmers, commonly known as
M S Swaminathan Committee, had recommended a formula for MSP
similar to the farmers’ demands. Implementation of the Swaminathan
Committee formula remains a key issue.
● MSP has distorted cropping patterns ensuring water guzzling crops such as
rice have pre-eminence over traditional crops such as pulses, millets, etc.
● MSP has an open-ended procurement mechanism. Therefore, a majority of
produce procured through MSP leads to short supply in the open markets.
Consequently, a shift in consumption to non-cereals is underway leading to
issues related to nutrition.
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● Over Procurement under MSP leads to wastage of produce due to lack of
proportional storage facilities.
● According to the Shanta Kumar Committee report on Reorienting the role and
Restructuring of the Food Corporation of India, only 6% farmers gain from
selling wheat and paddy directly to any procurement agency. Despite the
figure being disputed, it puts in context a huge disparity in access to MSP
across regions.
● On an international level, MSP has been a cause of consternation between India
and the developed world at the World Trade Organisation (WTO). MSP is
included in the Amber box as a subsidy that distorts production and must be
brought down.
● MSP has also discouraged the participation of the private sector in Agriculture.
Therefore, the benefits private endeavour could have brought have been
missed.

Conclusion:
MSP was ideated as a safety net for the farmers. However, despite its noble
intentions, the concerns around it have only enlarged. There is considerable need
for reforms in implementation of MSP. The recent Farm Reforms have initiated a
debate on the same. The grievances of farmers should be addressed while evolving
the policies for MSP reforms.

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2. How are Micro, Small and Medium Enterprises (MSMEs) classified in India?
What are the challenges MSMEs face in India?
(10 Marks, 150 Words)

Approach:

Introduction:
● Discuss the importance of MSMEs to the Indian Economy.

Body:
● Discuss about the classification of MSMEs
● Discuss the changes brought from earlier classification
● List out the challenges faced by MSMEs

Conclusion:
● Mentioning a few steps by the GoI for MSMEs’ growth, conclude

Answer:

Introduction:
MSMEs stand for Micro, Small and Medium Enterprises and are a bedrock of the
Indian economy. According to the Annual Report (2020-21) of the Ministry of
Micro, Small and Medium Enterprises, Government of India, the MSME sector
provides approximately 30% (2018-19) contribution to India’s overall GDP. Also,
approximately 20% of the MSMEs are owned by Women. In addition, it was also
pointed out in a recent speech by the Union Minister of Road Transport &
Highways and MSMEs that they contribute 49% to India’s exports.

Recently, as part of the Atma Nirbhar Package, it was announced that a change in
the criteria for classification of MSMEs would be brought to encourage the sector
and increase its contribution to the Indian economy.

Body:
MSMEs were classified under the MSME Development Act, 2006, which had
differing criteria for Manufacturing and Services industries and was based
primarily on investments made. As part of the Atma Nirbhar package, the criteria
have been enhanced for Turnover and Investments will now be a part of the new
classification. In addition, the differentiation between manufacturing and service
sector MSMEs was removed.

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New Criteria:

Industry Investments (In Rs Cr) Turnover (In Rs Cr)

Micro <1 Cr < 5 Cr

Small 1-10 Cr 5-50 Cr

Medium 10 - 50 Cr 50-250 Cr

The new classification has been done keeping in mind the existing prices and
realities on ground. It would also exclude exports from being counted as part of
turnover. Thus, the changes are aimed at incentivizing growth in the MSME sector
and at stimulating export growth.

However, considerable challenges continue to beset the sector, some of which

are discussed below:
A. Financial challenges:
● Lack of access to capital disincentivizes growth of MSMEs.
● Working Capital issues due to delayed payments, non payments lead to
winding up of enterprises.
● COVID 19 pandemic induced lack of business has also hurt the industry
badly.
B. Regulatory Challenges:
● Twin shocks of GST Implementation and Demonetization have increased
the cost of business of MSMEs, hampering their growth.
C. Manpower related challenges:
● Considerable handholding is required for scaling up of MSMEs due to lack
of expertise on the part of the entrepreneur as well as the employees.
● Lack of Technical skills for improved technology adoption.
● Due to the informal nature of most MSMEs, a lack of social security for
workers also acts as a disincentive for workers to contribute more.
D. Structural Challenges:
● As pointed out by Economic Survey 2018-19, incentives by the government
without a sunset clause incentivize MSMEs to become Dwarf Firms rather
than grow into bigger entities.
MSMEs are considered the Growth Engines of the Indian economy. The Union
MSME Minister recently declared his objective of increasing its contribution to
GDP from 30% to 60% and its contribution to exports from 49% to 60%. However,
the bottlenecks must be cleared first to ensure the objectives are met.

Conclusion:
Several steps have been taken by the Indian government to encourage MSMEs
with schemes such as inclusion in Priority sector lending, Mudra Schemes for
increased capital access, Priority procurement from MSMEs (Minimum 25%) on
Government e-Marketplace (GeM) Portal, MSME Sambandh portal to address
payment delays. These steps bode well for the sector which is poised to take off.

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3. Foreign direct investment plays an important role in the economic growth of a
developing country. Analyze.
(10 Marks, 150 Words)

Approach:
● Define Foreign Direct Investment.
● Discuss how FDI is important for economic growth for a country like India.
● Briefly mention some of the concerns related to FDI.
● Conclude with positive statements with some suggestions.

Answer:

A foreign direct investment (FDI) is an investment made by a firm or individual

in one country into business interests located in another country. Generally, FDI
takes place when an investor establishes foreign business operations or acquires
foreign business assets in a foreign company. However, FDIs are distinguished
from portfolio investments in which an investor merely purchases equities of
foreign-based companies. The Indian government’s favourable policy regime and
robust business environment have ensured that foreign capital keeps flowing into
the country.

Advantages of FDI
● FDI is not just the inflow of money, but also the inflow of technology,
knowledge, skills, and expertise/know-how which is necessary for any
developing country to build up industries. For example, India has not been
able to develop the defence and aviation industry due to a lack of technology.
● FDI creates a more competitive business environment in the country which
forces domestic industries to improvise.
● Foreign direct investment has a great impact on growth by raising total factor
productivity and income growth in host countries.
● FDI helps in diversifying the economy which is very important for developing
countries to grow faster. Generally, developing countries lack the complexity
of the economy which means there is a presence of basic industries.
● While domestic investments add to the capital stock in an economy, foreign
direct investment plays an important role in overall capital formation and in
filling the gap between domestic savings and investment.
● Another advantage is that foreign direct investment is a non-debt-creating
source of extra external finances.

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Disadvantages of FDI:
● Foreign direct investment can occasionally hamper domestic investment, as it
focuses on resources elsewhere.
● Sometimes as a result of foreign direct investment exchange rates will be
affected, to the advantage of one country and the disadvantage of the other
nation.
● Foreign direct investment may be capital-intensive from the investor's point of
view, and therefore sometimes high-risk or economically non-viable.
● The rules governing foreign direct investment and exchange rates may
negatively affect the investing country.
● May prevent innovation within the country due to overdependence on FDI.

Indian government’s effort on opening more and more sectors reflects the
importance of FDI for the country. India should address some concerns like
infrastructure and labour reforms to attract more FDI while keeping the interests
of domestic industries in mind.

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4. What is the Green Revolution? How did it affect the ongoing Land Reforms in
India?
(10 Marks, 150 Words)

Approach:

Introduction:
● Discuss the Green revolution.
● Explain why it was launched.

Body:
● Explain the components of Green Revolution
● Explain the impact on land reforms

Conclusion:
● Conclude identifying whether the impact was for good or for bad

Answer:

Introduction:
Green revolution was initiated in India in the late 1960s to address the issue of lack
of physical access to food for the Indian population. It envisaged increased use of
technology to address the concerns of Indian agriculture. The first crop harvested
under the Green revolution was wheat. Subsequently, in the 1970s, rice also
became a part of the Green Revolution.

Body:
The Green Revolution was aimed at making India self-sufficient in food grain
production. Thus, various improvements to inputs were made to increase crop
productivity. Key components of the Green Revolution included:
● Use of High Yielding Varieties of seeds
● Increased use of chemical fertilizers
● Improved irrigation facilities with steady supply of water
● Increased use of pesticides, herbicides, insecticides and weedicides
● Easier and cheaper credit availability
● Improvements in storage facilities, capacity and distribution network through
World Bank soft loans
With the success of the Green Revolution, India became food sufficient and
subsequently became food surplus. However, the revolution has had multiple
undesired impacts, one of which is impeding the ongoing land reforms during the
time.

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Land reforms were a key tenet of redistributive justice in India with the stated
objectives of:
● Eradication of Rural Poverty and Hunger
● Increase production to address food insecurity

There were 3 key components of Land Reforms in India:

● Abolition of Intermediaries such as Zamindars and jagirdars to improve the
status of farmers.
● Tenancy Reforms for
○ Security of tenure to tenants
○ Land to the tillers
○ Rent regulation for the lands
● Reorganisation of Agriculture through
○ Land Ceiling laws
○ Cooperative Farming

The Green revolution had considerably different designs to the ongoing land
reforms and in the process resulted in setbacks for the reforms. Ways in which
it affected land reforms are:
● Land Ceiling laws suffered a setback since the Green Revolution involved
land consolidation. This was the opposite of the desired result of increased
land fragmentation through land ceilings.
● Land to the tillers remained unimplemented since larger land holdings were
required.
● Since the Green revolution addressed food security concerns, it had
considerable international backing. This stemmed the implementation of land
reforms.
● The lobbies opposed to Land ceilings under the reforms were satisfied with the
Green Revolution since it only consolidated lands and didn’t break it up
further.
● Finally, achieving food security was deemed more important than achieving
social justice as a result of the Green revolution.

Conclusion:
The tentative implementation of land reforms was a reality even before the Green
revolution. The Green Revolution helped in institutionalizing technological
changes in the Indian agricultural sector and helped in achieving food security.
However, it has had unintended consequences, one of which has been stifling the
pace of land reforms in India.

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5. Discuss the impact of Economic Reforms of 1991 on the Indian Economy.
(10 Marks, 150 Words)

Approach:

Introduction:
● Discuss the underlying conditions for Economic Reforms.
● What constituted Economic Reforms

Body:
● Discuss the objectives of Economic Reforms
● Discuss the impacts of Economic reforms

Conclusion:
● Conclude identifying whether the impact was for good or for bad

Answer:

Introduction:
The Economic Reforms of 1991 mark a watershed moment in the economic
history of India. These reforms were necessitated by a multitude of factors,
some of which are:
● An impending Balance of Payments crisis exacerbated by the 1st Gulf war led
crude oil price rise
● Unsustainable nature of Fiscal deficits at the time
● Very high rate of inflation
● Loss of remittances inflow due to Gulf War of 1990
To overcome the challenges afflicting the economy, the New Economic Policy was
brought in, with Liberalization, Privatization and Globalization as the central
tenets to the policy.

Body:

The objectives of the economic reforms were twofold:

● Create a more competitive environment in Indian economy
● Remove entry barriers and roadblocks for the growth of business entities
The Economic reforms had both short and long term policy measures with focus
on stabilizing the economy along with structural reforms to bring in greater
efficiency.

Liberalization implied the end of regulatory restrictions and gradual opening up

of various sectors of the economy. The ways in which liberalization was
implemented are:
● Deregulation of Industrial Sector
● Scrapping of MRTP Act
● Foreign Exchange Reforms by devaluing the currency
● Liberal Trade and Investment regime
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Privatization implies the transfer of management and control of Government
enterprises to the private sector. It is done through Disinvestment and
incentivizes the flow of forign capital to drive growth.

Globalization implies greater integration and interdependence among different

countries in the world. Outsourcing of employment opportunities along with
WTO led rules based trade regimes were the drivers of globalization.
NEP marked a major shift in the Indian economy and therefore, it has had a
profound impact, especially in social and economic fields. Some of the major
economic impacts are discussed below:
A. Impact on Economic Growth:
● India’s GDP has drastically increased since 1991.
● By 2018, India’s budget size grew 19 times of what it was in 1991.
B. Macroeconomic impact:
● Per Capita Income has increased 5x since 1991
● Inflation has been reined in from 16.7% in Aug '91 to 2-5% under RBI’s
supervision.
● FDI inflows have considerably increased from $100Mn in 1991 to $82bn in
2020.
● Fiscal Deficit has become relatively stable.
● Greater integration in global value chains especially in industries such as
Automobiles, Pharmaceuticals, Iron & Steel, etc)

However, the reforms have also led to some unforeseen concerns, namely:
● Inequality has considerably increased. The Oxfam Report of 2020 asserts the
same in rating India as one of the most unequal countries in the world with the
top 1% holding 77% of national wealth.
● The Incidence of Multidimensional poverty in India is one of the highest in
the World. The Oxford Poverty and Human Development Initiative led Global
Multidimensional Poverty Index 2020 ranked India 62nd out of 107 countries
in the world.
● The opening up of the economy favoured expansion in the services sector
predominantly, leading to stagnant industrial growth. This has exacerbated the
problem of unemployment as the industrial sector has been unable to absorb
the increased flow of semi and unskilled workers.
● The reforms have led to casualization of workers without a credible social
security net. The issue came to the fore in the recent COVID induced migrant
crisis.

Conclusion:
As discussed above, the New Economic Policy has spelled a period of accelerated
growth for India, catapulting it to the 6th largest economy in the world. However,
the concerns emerging require immediate addressing so that it doesn’t continue
being a double edged sword.

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6. Briefly explain the energy basket of India. What are the major challenges
affecting renewable energy in India? What are the Government steps to
overcome these challenges?
(15 Marks, 250 Words)

Approach:

Introduction:
● Discuss in detail the distribution of energy in India

Body:
● Enlist the key challenges to the renewable energy sector
● List out the steps undertaken by the government to aid the sector

Conclusion:
● Conclude basing the argument on the outlook of the sector

Answer:

Introduction:
As per the International Energy Agency, India is a developing country with the
3rd largest energy consumption requirement. Consequently, It also has an
expanding need for energy to sustain its growth. The energy basket of India is a
mix of both Conventional and alternative sources of energy. According to the
Power Ministry, the basket is also almost equally represented by Public (51.9%)
and Private generators (48.1%), as of August 31, 2021.

Body:
● As of August 31, 2021, India’s installed capacity stands at 388.1GW.
Conventional sources of energy contribute to 60.4% of the installed capacity
while renewable energy contributes 37.9% of installed capacity. 1.7% is
contributed by Nuclear Energy.
● India has the 5th largest solar installed capacity and 4th largest wind
installed capacity. Recently, India crossed 100GW in installed renewable
capacity. In line with the global outlook, the mix of sources is getting more
skewed towards renewable sources.

However, the renewable energy sector is faced with a multitude of challenges,

some of which are discussed below:
● Renewable energy plants, especially wind plants and solar parks are highly
land intensive. Land acquisition is a concern.
● Dearth of quality long term data is a concern especially for wind energy
exploitation.
● Issue of integration of renewable power in existing transmission networks
has been a concern.
● Long term contracts with conventional power generators has led to inefficient
utilization of renewable capacity.
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● Tendency of state governments to renegotiate Purchase Power Agreements
has been a deterrent as well.
● The tariff realization in India hasn’t been a result of market forces but that of
competitive bidding. This has led to stressed bottom lines and further
investments in R&D.

The Government of India (GoI) has identified the concerns and accordingly
taken steps to encourage the adoption of renewable energy. Some of the steps
undertaken are:
● 100% FDI is allowed in the sector to encourage foreign investors with
technology and financial wherewithal.
● Priority Sector lending status to renewable sources of energy to ease access to
capital.
● The recently launched Production Linked Investment Scheme (PLIS)
incentivizes expanding capacities for solar PV modules and to strengthen
domestic renewable players.
● National Solar Mission, National Biomass Mission and National Wind
Mission have been launched to encourage the renewable energy sector.
● Must Run status has been provided to renewable plants for increased
utilization of their capacity.
● A Green Energy Corridor pilot project for integration of renewable energy in
conventional energy grid connectivity has been initiated.
● Various other schemes such as the PM KUSUM Scheme for solar pumps, Solar
Rooftop Installation incentives and Canal Bank and Canal Top schemes have
been launched to encourage solar energy production.
● Under the Paris Agreement, India remains committed to 175 GW of installed
renewable capacity by 2022 and 450 GW installed capacity by 2030.

Conclusion:
Thus, the Indian government has shown strong intent in accelerating the transition
towards renewable energy. The National Hydrogen Mission and PLIS for
Advanced Chemistry Cells for storage of such energy are poised to become the
game-changers in the transition. It is time the concerns of the sector are addressed
such that the commitments made by India at the global level are reached.

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7. What is Inclusive Growth? What are the challenges in achieving inclusive
growth in India?
(15 Marks, 250 Words)

Approach:

Introduction:
● Define Inclusive Growth.
● Discuss different facets to it.

Body:
● Discuss the challenges in ensuring inclusive growth.
● Enlist the steps by the government to ensure economic growth.

Conclusion:
● Conclude emphasizing the need for inclusive growth for overall growth and
development of the country.

Answer:

Introduction:
Inclusive growth refers to the economic growth that benefits all the sections of the
society regardless of their class, sex, caste, creed, region or religion.

Inclusive growth seeks to achieve the following:

● Reduction of vertical as well as horizontal income inequalities
● Reduction in regional disparities
● Balanced growth across the economic sectors

Body

Challenges in achieving inclusive growth in India:

● Scale of the issue: According to the Pew Research Center, the estimated
number of poor in India now stands at about 134 million. Bringing so many
people out of poverty is not an easy task.
● Poor governance: Corruption, lack of competence, red tapism among other
things has led to poor governance, denting the agenda of inclusive growth.
● Lack of education: Education is said to be a great equaliser. However,
inadequate public spending on education, poor infrastructure etc has become
a stumbling block.
● Backwardness of agriculture: Agriculture sector which employs the majority
of Indian population lacks modernisation due to which it suffers from
disguised unemployment, poor productivity among other things. This hinders
development.
● Social backwardness: Social backwardness and divisions in society is a major
factor that hinders development as social capital is an essential ingredient of
inclusive growth.
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● Regional disparities: Only few states/regions have been able to reap the
benefits of development due to various factors ranging from geographical
location/resource endowment to failure of government policies on this front.
● Jobless growth: Jobless growth in India since the economic reforms of 1991 has
widened the income inequality.

The government has taken several initiatives like Mahatma Gandhi National Rural
Employment Generation Act, PM Employment Generation Scheme, Mudra Yojna,
Stand Up India, Start Up India etc. in order to overcome these challenges.

Conclusion:
Inclusive growth is not just an aspiration for a rising India, it is a necessity for any
kind of sustainable growth and development. The government must incorporate
the ideal of inclusiveness in all its policies and actions so as to achieve the stated
goal of ‘Sabka Sath - Sabka Vikas’.

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8. Enumerate the objectives and achievements of the World Trade Organization
(WTO). Also discuss the challenges WTO is faced with in the present scenario.
(15 Marks, 250 Words)

Approach:

Introduction:
● Discuss the origin of WTO

Body:
● Mention its objectives and achievements
● Briefly explain the challenges besetting WTO

Conclusion:
● Conclude with the prevalence of Regional FTAs in absence of a functioning
WTO

Answer:

Introduction:

The World Trade Organisation (WTO) was established in 1995, as a result of the
Uruguay Round of Multilateral Trade Negotiations. Its objective was to ensure
that the rules of International trade are correctly applied and enforced. Its
precursor, the General Agreement on Trade and Tariffs only dealt in trade in
goods. Increased trade in services, agriculture as a result of globalization rendered
GATT inefficient and necessitated the need for establishing WTO.

Body:

Objectives and Achievements of WTO:

The WTO is a multilateral organization based on the following principles:

● Free and Fair Trade
● Special and Differentiated Treatment
● Transparency and Predictability of Trade

WTO has considerable achievements in its stated and implicit objectives, some
of which are:
1. World Trade has grown 4 times in value and 2.7 times in volume in the first 25
years of WTO’s existence.
2. Average Global Tariffs have come down by almost half to 6.4%.
3. Global GDP, as a result of increased trade, has increased by 2 times in the first
25 years of the existence of the WTO.
4. Global Value Chains have been established resulting in disaggregated
manufacturing and production.
These achievements though have been offset by emerging faultlines at WTO
leading to a number of challenges besetting its functioning.
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Challenges faced by WTO:
● Market Access concerns due to the imposition of Non Tariff barriers such as
Sanitary and Phytosanitary measures.
● Concerns have come up in domestic support provided in developing countries
through subsidies - Most subsidies in developing countries are in the
Amber/Blue box while the developed countries’ subsidies fall in the Green
box.
● IPR concerns have come up between developing and developed countries. For
example, Pharmaceuticals in India have been beset with IPR concerns raised.
● The tag of Developing country is voluntary at WTO. The USA has argued the
use of the tag by countries such as China and India which are among the Top
6 economies in the world.
● The Appellate Tribunal in the Dispute Settlement Mechanism at the WTO has
been hamstrung by the USA, blocking new appointments to ensure a quorum
of 3 is maintained.

Conclusion:
In light of the emerging issues at WTO, a wider rift between the developing and
the developed world can be seen. The result of a non-functional WTO has been a
proliferation of Regional Free Trade Agreements. The consensus based decision
making at WTO also has imperilled its functioning. The Doha Rounds have been
stuck owing to the same. Therefore, considerable reforms in its functioning are
required. A functional approach to problem solving will go a long way in
addressing the concerns around WTO.

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9. What is Multidimensional Poverty? How is Poverty measured in India? Discuss
the steps undertaken to address the challenges posed by poverty.
(15 Marks, 250 Words)

Approach:

Introduction:
● Define Poverty.
● Define Multidimensional poverty. Explain the Multidimensional Poverty
Index.

Body:
● Poverty measurement in India: Discuss the Tendulkar and Rangarajan
committee findings on poverty.
● Enlist the government steps to overcome the challenges of Poverty.

Conclusion:
● Conclude suggesting the multidimensional nature of poverty requires an
integrated multidimensional approach.

Answer:

Introduction:
Poverty is usually measured in terms of deprivation of income. However,
international consensus on social, political, environmental aspects to poverty
along with economic deprivation has grown considerably. In this context, the
concept of Multidimensional poverty provides for a comprehensive view of
deprivations the poors face on a daily basis:
● Health issues
● Lack of Education
● Poor standards of living
● Environmentally hazardous place of dwelling
● Poor sanitation

The Oxford Human Development Index along with the United Nations
Development Program have come up with the Multidimensional Poverty Index
which broadly classified Multidimensional poverty in 3 dimensions:
1. Health - Measured through Nutrition levels and Child Mortality
2. Education - Measured through School Attendance and years of schooling
3. Standards of Living - Measured through access to cooking fuel, electricity.
Assets, sanitation, housing and drinking water.

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Body:
Measuring poverty in India has been a tedious affair. Different committees set up
have had different observations. The Alagh Committee in 1979, Lakdawala
Committee in 1993 were the early proponents of the methodology for measuring
poverty.

Poverty Measurement in India in the 21st century:

Since 2000, two committees have had an important role in shaping the policies
related to poverty measurement. The Tendulkar Committee, in 2005, estimated
the poverty line based on consumption expenditure on food, education, health,
electricity and transport. This marked a shift from the earlier calorie-based
approach followed by the Planning Commission to identify the income for
defining the poverty level. Different poverty lines for rural and urban populations
were provided for. It suggested ~22% of India’s population was below the poverty
line.
In 2011, the Rangarajan Committee was set up to review the methodology for
poverty reduction. It incorporated certain behavioural non-food expenses along
with other consumptive expenditures. The method also included certain
normative levels of adequate nourishment, clothing, house rent, conveyance,
education and also behavioral determination of non-food expenses. It also
considered average requirements of calories, protein and fats based on Indian
Council of Medical Research norms differentiated by age and gender.
Consequently, the percentage of the population below the poverty line increased
to 29.5%.

Steps undertaken by the Government for poverty reduction are:

1. MGNREGA for ensuring fixed days of employment during the year.
2. National Rural and Urban Livelihoods Missions have been launched to
encourage employment opportunities.
3. PM Kaushal Vikas Yojna was launched for skill development of fresh labour
entrants.
4. The National Social Assistance Program has been launched for income support
to widows, old age persons, etc.
5. The National Food Security Act was introduced for a rights-based claim of the
public on food. The Antyodaya Anna Yojana to benefit the poorest of the poor
has been launched.
6. Self employment opportunities have been encouraged through various
schemes such as MUDRA Yojna, Stand Up India, Startup India, PM
Employment Generation scheme.

Conclusion:
As discussed above, poverty has an increasingly complex character manifesting
itself in multiple dimensions. Therefore, a multidimensional approach to poverty
alleviation is required. Various steps by the government point to the charting of
the right path to alleviate poverty. Efficient implementation will ensure the targets
are met in a time bound manner.

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10. What are the objectives of NITI Aayog? How does it improve upon the erstwhile
Planning Commission?
(15 Marks, 250 Words)

Approach:

Introduction:
● Discuss the formation of NITI Aayog

Body:
● List down the key objectives of NITI Aayog
● Enumerate the responsibilities of the erstwhile Planning Commission.
● Discuss the concerns with Planning commission
● Discuss the advantages of NITI Aayog over the Planning Commission.

Conclusion:
● Conclude suggesting the improvements need to be reinforced by effective
policy making.

Answer:

Introduction:
The National Institution for Transforming India (NITI Aayog) is a premier policy
think tank of India. It is headed by the Prime Minister and is a recommendatory
body. It was formed on 1st January, 2015.

Body:

The objectives of the NITI Ayog are:

Figure: NITI Aayog main functions

Source: niti.gov.in

● Fostering Cooperative Federalism between the states and the Centre.

● Evolving a shared vision of national development.
● Revolutionizing planning with a bottom-up approach including aggregation
of village-level plans.

20
● Providing the Government with specialised inputs for improving policy
making.
● Building a repository of specialised domain expertise.
● Ensuring constant monitoring and evaluation of policies and their impact.

NITI Aayog has effectively replaced the Planning Commission which was
established in 1950 by Government resolution. The erstwhile Planning
Commission had the following responsibilities:
● Formulation of 5 year plans
● Setting out economic growth targets and strategies to achieve those
● Recommend grants for Central Sector Schemes
● Advising on key economic policy matters

The Planning Commission oversaw twelve 5-Year Plans and had considerable
achievements in the development story of India along with many shortfalls.
However, certain concerns gripped the Planning Commission which led to
reduced efficiency of the same, they are:
1. Top Down approach to development.
2. It couldn’t address the lack of balanced regional growth.
3. The Planning Commission had responsibility without accountability to the
parliament.

As a result of the emerging concerns with respect to the functioning of the

Planning Commission, NITI Aayog was formed to address those concerns. The
advantages of NITI Aayog over the Planning Commission are:
● It will have a Bottom Up approach to planning.
● By aggregating the village level plans, it will ensure a relatively more balanced
regional growth.
● It will set up a Development Monitoring and Evaluation Office for real-time
performance monitoring.
● It will make states equal stakeholders through Cooperative and Competitive
Federalism promotion.
● It will focus on policy inputs and coordination rather than actual
implementation unlike the erstwhile Planning Commission.
● It will focus on ushering in an innovation ecosystem across the country in line
with present day requirements.

Conclusion:
The early policy inputs of NITI Aayog have been readily accepted and
implemented by the Government of India. The Aspirational Districts Program is
a flagship scheme with a competitive federalism approach to development. The
Atal Innovation Mission led incubation centres and Atal Tinkering labs are
building a conveyor belt of aspirational, innovative minds. Many such policy
designs have been laid down by the NITI Aayog which suggests that the start is
as per the design to improve upon the Planning Commission’s contribution to
policy making. This must continue to be reinforced for sustained results.

21
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