MK Yadav Sir'S: Mains Booster Series

MK YADAV Sir's
MAINS BOOSTER SERIES

12 Booklets. 600 Pages.
COMPLETE MAINS COVERAGE!
Current + Static Integrated Series

forUPSCCSEMAINS2023/24
MK YADAV SIR’s: MAINS BOOSTER SERIES
Current + Static Integrated
Table of Content
1. ECONOMIC GROWTH, DEVELOPMENT, INEQUALITY, INCLUSIVE GROWTH .......................................... 2
2. PLANNING AND ISSUES RELATED TO IT .............................................................................................11
3. MOBILIZATION OF RESOURCES .........................................................................................................14
4. FISCAL POLICIES ...............................................................................................................................34
5. AGRICULTURE IN INDIA ....................................................................................................................40
6. INDUSTRY AND SERVICES .................................................................................................................94
7. INFRASTRUCTURE .......................................................................................................................... 119
8. EXTERNAL SECTOR AND INDIA’S TRADE .......................................................................................... 146
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1. Economic Growth, Development, Inequality, Inclusive Growth
1. Economic Growth, Development, Inequality, Inclusive Growth
Economic growth: Economic growth

refers to the increase in a country's real
gross domestic product (GDP) over time.
It represents the expansion of the
economy's productive capacity and is
typically measured as the percentage
change in GDP from one period to
another, usually on an annual basis.
Phases of Economic Growth: The

economy moves through different
periods of activity. This movement is
called the “business cycle.” It consists of
four phases:
Inequality and Growth:

Context- As per the World Inequality Report (2022), the Covid pandemic has further exacerbated global
inequalities with the top 1
percentile accounting for 38
per cent of all the additional
wealth accumulated since the
mid-1990s and this trend has
become more pervasive since
2020 with wealth inequality
remaining at extreme levels
world over.
Reasons behind the inequality
in India, including:
Reasons why high growth

may not necessarily lead to a
decrease in inequality
• Unequal Distribution:
High growth often benefits the wealthy more than the less advantaged, widening the wealth gap.
• Labour Market Dynamics: Growth may not provide equal job opportunities, leaving some groups
behind and contributing to income disparities.
• Discrimination and Social Exclusion: Inequality stems from systemic biases and limited access to
opportunities based on race, gender, or other social factors.
• Weak Social Safety Nets: Insufficient redistributive policies and inadequate safety nets prevent
equitable sharing of growth's benefits, perpetuating inequality.
Way Forward
• Progressive Taxation: Fairly tax higher-income individuals and corporations.
• Social Welfare Programs: Expand support for vulnerable populations.
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• Equal Opportunity Policies Enforce anti-discrimination laws and promote equal opportunities.
• Investment in Education: Prioritize accessible and quality education.
• Skills Development: Provide training for improved job skills and employability.
• Strengthen Social Safety Nets Enhance support for the unemployed and vulnerable.
Economic Development
Economic development refers to the process of positive and sustainable change that leads to the
improvement of various aspects of society, including economic, social, and environmental conditions, to
enhance the overall well-being and quality of life for individuals and communities.
Positive aspects and notable achievements of India's development story

• Economic Growth: India has achieved significant economic growth, becoming one of the fastest-growing
major economies globally. India’s is currently the fifth largest economy in the world.
• Technological Advancements: India is a leader in the IT and software industry, with a thriving technology
sector and successful startups. Indian software product industry is expected to reach US$ 100 billion by
2025.
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• Demographic Dividend: India's large and youthful population provides a potential workforce for
innovation and economic productivity. About, 67% of India’s population is between the age of 15 to 64
years
• Space and Nuclear Technology: India has made remarkable strides in space exploration and satellite
technology. For eg, India is one of the only six countries including US, France, Russia, China, and Japan
which have developed their own cryogenic engines.
• Healthcare and Medical Research: India is rightly termed as ‘ pharmacy of world’ with third rank
worldwide for pharmaceutical production by volume and has emerged as a dependable nation when it
comes to health crises.
• Renewable Energy: India has made notable progress in renewable energy, particularly in solar and wind
power, reducing dependence on fossil fuels. This is reflected in important initiatives like the International
Solar Alliance.
Conclusion: India's economy is hindered by many issues. India's full potential and people's well-being depend
on addressing these challenges and pursuing inclusive and sustainable development. India can achieve
balanced development by reducing inequalities, investing in education and infrastructure, promoting
environmental sustainability, and strengthening governance.
Inclusive Growth
The former President of India, Pranab Mukherjee once said, “Inclusive growth should not be a mere slogan
but a fundamental driving force for sustainable development.”
Definition
• The United Nations Development Program (UNDP) defines inclusive growth as “the process and result of
all groups of people participating in the organization of growth and benefiting equally from it.”
• SDG 10 focuses on ensuring equal opportunity and reduce inequalities of outcome, including by
eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and
action in this regard.
Inclusive Growth through Five-year Plans:

• The Eleventh five year Plan (2007-12) in India for the first time gave importance to Inclusive growth.
• The Twelfth Five-year plan (2012-2017) was launched with the slogan “Faster, More Sustainable, and
More Inclusive Growth.”
o The plan observed Inclusive growth should result in lower incidence of poverty, broad-based and
significant improvement in health outcomes, universal access for children to school, increased access
to higher education and improved standards of education, including skill development.
o It should also be reflected in better opportunities for both wage employment and livelihood, and in
improvement in provision of basic amenities like water, electricity, roads, sanitation and housing.
Elements of Inclusive Growth: Skill development, Empowerment of vulnerable sections, Economic growth,
financial inclusion, technology advancement.
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Need for Inclusive growth in India:
Government Initiative to achieve Inclusive Growth in India

• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Jan Dhan
Yojana (PMJDY), Pradhan Mantri Ujjwala Yojana (PMUY).
• Pradhan Mantri Awas Yojana (PMAY): This housing scheme aims to provide affordable housing to urban
and rural poor, with a focus on economically weaker sections and low-income groups.
• Skill India Mission: skill training and entrepreneurship development programs to bridge the skill gap and
promote job creation.
• Digital India: This program aims to transform India into a digitally empowered society and knowledge
economy by promoting digital infrastructure, digital literacy, and digital services accessible to all citizens.
• Beti Bachao, Beti Padhao: This campaign seeks to address gender discrimination and promote the
education and welfare of the girl child, with a focus on improving the sex ratio and enhancing girl's
access to education.
• Swachh Bharat Abhiyan: This nationwide cleanliness campaign focuses on improving sanitation,
constructing toilets, and promoting hygiene practices to enhance health outcomes and quality of life.
• Start-up India: This initiative aims to promote entrepreneurship and innovation by providing support,
funding, and incentives to start-ups, facilitating job creation and economic growth.
• Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): This income support scheme provides direct cash
transfers to farmers to ensure a minimum income and address agricultural distress.
• Atmanirbhar Bharat Abhiyaan
Challenges in achieving inclusive growth in India

• Service Sector Dominance, Social Divisions, Unequal Access to Education and Skills, Rural-Urban
Disparities, Informal Sector Challenges, Governance and Corruption
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Way Forward
• Enhancing education and skills, Promoting financial inclusion, Implementing targeted social welfare
programs, Addressing gender inequality, Investing in rural development and agriculture, Strengthening
governance and accountability and Encouraging public-private partnerships.
Atmanirbhar Bharat Abhiyaan

Context
• Atmanirbhar Bharat Abhiyaan or
self-reliant India campaign is the
vision of new India envisaged by
the Prime Minister to move
towards a self-reliant India.
Objective of Atmanirbhar Bharat

Abhiyaan
Way Forward
• Long-term strategy: Develop a
regional supply chain-focused
approach to ensure future
success.
• Openness to free and fair trade:
Attract investors based on
strengths rather than tariffs,
promoting international business
investment in India.
• Support for innovation: Foster
STEM skills and an innovator-
friendly IP regime to drive
problem-solving and economic
growth.
• Embrace digital and data opportunities: Integrate with major markets, invest in AI and digital tech
for economic advancement.
• Prioritize sustainability Incorporate sustainability and human rights into trade agreements for
environmental protection and poverty alleviation.
• Stimulate demand through infrastructure spending:Invest in greenfield infrastructure to enhance
productivity and benefit daily wage laborers.
Global Economic Recession

Context-
Recently IMF Chief Kristalina Georgieva in an interview mentioned that around one-third of the global
economy will face a recession in 2023, leading to a slowdown in economic growth compared to previous
years. Major economies worldwide are experiencing a decline in growth, contributing to this trend.
Is the world heading towards a global recession? Various viewpoints:
• World Economic League Table - Global economy topped $100 trillion for the first time in 2022 but
will halt in 2023.
• Bloomberg - More than a 1/3 of the world’s economies will collapse (25% possibility that in 2023).
• World Bank - Global economic growth to be 1.7% in 2023 and 2.7% in 2024.
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• World Economic Outlook, 2023 - Advanced economies are expected to see a growth slowdown, from
2.7 percent in 2022 to 1.3 percent in 2023.
Reasons behind current Global Economic Recession

• China Factor: Zero covid policy, crisis of housing market, evolution of especially contagious SARS-
CoV-2 etc. Dependency on China for global supply value chain may cause global economic recession.
• European crisis: EU and Eurozone countries are heading towards a slowdown in the economy.
Increasing inflation brought the citizens to protest.
• American Dilemma: US Federal Reserve has raised its benchmark overnight interest rate to the
5.00%-5.25% range. This signalled that the economy might fall into recession.
• Russia – Ukraine War disrupted global supply chain, pushing towards global recession.
Way Forward
• Fiscal Stimulus Packages: Increased government spending, tax cuts, or subsidies to stimulate
demand and investment to increase consumer spending and encourage businesses to invest.
• Monetary Policy Measures: Reducing the key interest rates, easing borrowing conditions, and
injecting liquidity into the banking system to encourage lending and investment.
• Bank Recapitalization: To ensure that banks have sufficient capital to lend and support economic
growth.
• Infrastructure Development: Investments in infrastructure projects to create spill over impacts on
the employment sector, reviving growth → long-term positive impact on economic growth.
• Multilateral cooperation - on areas of common interest like strengthening global value chains,
improving resilience, easing price pressures, addressing climate change challenge.
Concept of Green Growth
The Ministry of Finance has outlined key priorities for promoting green growth in its budget submission for
the fiscal year 2022-2023.
Green Growth
• It refers to a framework for economic development that promotes sustainable and environmentally
friendly practices.
• It recognizes the interdependence between economic growth, environmental protection, and social
well-being to achieve economic prosperity while ensuring the long-term sustainability of natural
resources, reducing environmental degradation, and mitigating climate change.
Principles and challenges of Green Growth:
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Government Initiatives for Green Growth

• Green Hydrogen Mission: Aims to transition the economy to low carbon intensity.It will help to reduce
dependence on fossil fuel imports.
• Green Credit Programme: The 'green credit programme' under the Environment (Protection) Act will
incentivize environmentally sustainable and responsive actions by companies, individuals and local
bodies.
• PM-PRANAM: A new “PM Programme for Restoration, Awareness, Nourishment and Amelioration of
Mother Earth”. It will incentivize States and Union Territories to promote alternative fertilizers and
balanced use of chemical fertilizers.
• Gobardhan scheme: GOBARdhan supports the villages in safely managing their cattle waste, agriculture
waste and organic waste in Rural areas. It also helps villages convert their waste to wealth, improve
environmental sanitation and curb vector borne diseases
Conclusion
Green growth can help governments, businesses, and communities thrive while reducing environmental
impact. It involves balancing economic growth, environmental sustainability, and social well-being. We do so
to build a resilient, sustainable, and beneficial future.
Financial Inclusion
What is Financial Inclusion?

• Financial inclusion refers to the accessibility and availability of financial services and products to all
individuals and businesses, particularly those who are marginalized or underserved.
Financial inclusion in India: Present status

⚫ As per RBI’s Financial Inclusion Index (FY22), FI stands at 56.4 as against 53.9 for FY21.
⚫ According to working paper by the IMF, India’s household debt is a little less than 10% of the GDP
compared to 150% in the US and 44% in China.
Need of Financial Inclusion

• Poverty reduction, Economic growth and development, Social empowerment, Financial stability and
resilience, Government benefits and social welfare, Innovation and technological advancement.
Challenges to Financial Inclusion

• Limited access: Many people lack physical access to financial services due to inadequate infrastructure.
According to World Bank report, about 190 million adults in India do not have a bank account, making
India the world’s second largest nation in terms of unbanked population after China.
• Low financial literacy: Lack of basic financial knowledge hinders individuals' ability to make informed
decisions. According to a survey, more than 75% of Indian adults do not adequately understand basic
financial concepts & more than 80% women are financially illiterate .
• High costs: Traditional banking services are expensive and unaffordable for many low-income individuals.
o McKinsey estimates that Indians lose more than US$ 2 billion a year in forgone income simply
because of the time it takes travelling to and from a bank.
• Identification requirements: Lack of proper documentation makes it difficult to access formal financial
services.
• Limited credit availability Insufficient collateral and credit history restrict access to loans.
• Technological barriers: Limited technology access and digital literacy impede financial inclusion.
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Government Initiatives
JAM Trinity
⚫ The combination of Aadhaar, PMJDY (Pradhan Mantri Jan Dhan Yojana), and mobile communication has
transformed access to government services and financial inclusion.
◼ As per the RBI’s Financial Inclusion Index, JAM trinity – Jan Dhan, Aadhaar, and Mobile – have
enabled the Indian government to improve financial inclusion from 43.4 in 2017 to 56.4 in 2022.
◼ As of August 2022, out of a total of 46.25 crore PMJDY accounts have been opened.
◼ About 5.4 crore PMJDY account holders receive direct benefit transfer (DBT) from the government.
⚫ e-RUPI: Person and purpose-specific digital payment solution; it is a QR code or SMS string-based e-
voucher that is sent to the beneficiary’s cell phone. Users of this one-time payment mechanism will be
able to redeem the voucher at the service provider without the usage of a card, digital payments app,
or internet banking access.
Promotion of Financial Service in Rural and Semi-Rural areas

• Opening Bank Branches: The RBI and NABARD have facilitated the establishment of bank branches in
remote areas, ensuring accessibility to banking services for rural communities.
• Kisan Credit Cards (KCC): The issuance of Kisan Credit Cards has been instrumental in providing farmers
with a convenient and affordable source of credit.
• Business Correspondents Model to extend banking services to areas were setting up a brick-and-mortar
branch may not be feasible.
• Jan Dhan Darshak: To help citizens locate and view banking touchpoints such as ATMs, bank branches,
bank mitras, post offices and common services centres (CSCs).
Promoting Financial Literacy

• Project Financial Literacy: The project educates students, women, rural and urban poor, defence
personnel, and seniors about the central bank and general banking concepts.
• Pocket Money: SEBI financial literacy programme for schoolchildren. The programme teaches students
about money, saving, investing, and financial planning.
Digital Financial Inclusion:

• It involves the deployment of cost-saving digital means to reach currently financially excluded and
underserved populations with a range of formal financial services suited to their needs that are
responsibly delivered at a cost
affordable to customers and
sustainable for providers.
Issues and Challenges:

The World Bank has observed
following risks with Digital Financial
inclusion:
⚫ Novelty risks for customers due
to their lack of familiarity.
⚫ Agent-related risks due to the
new providers offering services
are not subject to the consumer
protection provisions.
⚫ Digital technology-related risks
can cause disrupted service and
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loss of data, including payment instructions.

⚫ Issues of Cyber security and financial
frauds.
⚫ Regulatory issues like anti-money
laundering and countering financing of
terrorism (AML/CFT) rules, regulation
of e-money, consumer protection.
Way Forward:
⚫ Need to focus on enhancing digital
connectivity and infrastructure
particularly in remote and rural areas.
⚫ Appropriate regulations and
procedures regarding digital
operations.
⚫ Cyber security through adoption of appropriate technologies eg. Tokenization cards in India
⚫ Providing digital skills and training program and awareness creation.
Conclusion: Inclusive growth is crucial for

equitable development, requiring measures
to address inequality, promote social
inclusion, empower marginalized
communities, and embrace sustainable
practices. By fostering an inclusive society,
nations can unlock the full potential of their
citizens and build a more prosperous and
sustainable future for all.
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2. Planning and Issues related to it
2. Planning and Issues related to it
Planning refers to the process of generating long term vision and strategy for the overall economic growth
and development.
Economic Planning in India
• India adopted a system of five yearly planning to address its various socio-economic problems in 1951.
• Some of the great architects of Indian planning include Jawaharlal Nehru, P.C Mahalanobis, V.R Gadgil,
V.K.R.V Rao.
• After becoming the first prime minister of independent India, Nehru established the Planning Commission
in 1950.
• The major function of the Planning Commission was to formulate plans keeping in view the resources of
the country and suggesting the best methods to utilize them effectively and in a balanced manner.
• Planning commission prepared the first five-year plan (FYP) for the period 1951-1956. By 2014, India has
already experienced more than sixty years of planning and 12th 5-year plan ended in 2017 after the
formation of NITI Aayog.
Achievements of planning in India:

1. Achievements in Economic Growth:
To achieve growth it is necessary to
achieve an increase in national
income and per capita income as
well as increase in production of
agricultural and industry sectors.
• Achieved above the target
growth rate-First five-year plan
was a success as it achieved a
growth rate of 3.6 per cent
against a target of 2.1 percent
growth rate in national income.
• Agricultural development: Food
grain production increased from
51 million tonnes in the first plan
to 257.4 million tonnes in 2011-
12.
• Industrial development: a major achievement has been the diversification of Indian industries.,
expansion of transport and communications, growth in generation and distribution of electricity etc
2. Creation of Infrastructure- India has achieved a great deal in the area of creation of infrastructure.
• large expansion roads and railway networks, domestic air travel has increased significantly.
• Expansion of irrigation and hydro-electric projects has given a boost to agricultural production.
• Increase in urban infrastructure-There has been growth in establishment of towns and cities due to
increase in urban infrastructure.
• Communication networks: in the form of mobile telephony, internet has expanded tremendously.
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3. Development in Education
• Gross enrolment rate has been increased to over 98%.
• Literacy rate has increased from 18% in 1950s to 74.04 per cent as per the Census 2011.
4. Development of Science and Technology -

• Increase in technical and skilled manpower.
• Pioneering Space research like Chandrayaan, Mars Orbiter Mission, private sector taking roots in the
space sector.
• Impetus to nuclear and other renewable energy-it is now able to send technical experts to many
foreign countries in the middle east, Africa etc.
5. Expansion of Foreign Trade-
• Due to industrialization in the country, India’s dependence on import of capital goods has declined.
• India’s overall export crossed $750bn from being negligible at the time of independence.
Drawbacks of planning in India:

Besides the achievements as told above, there are many unfulfilled tasks which the planning in India is yet to
achieve completely.
1. Failure to Remove Poverty and Inequality completely: 21. 9 % population under poverty in 2011 as per
last official estimates. Just 5 per cent of Indians own more than 60 per cent of the country’s wealth
(OXFAM 2023 report).
2. Problem of Unemployment Persists:
• Huge backlog of unemployment: lack of creation of required number of jobs every year.
• Lack of skillful population: Only around 5% of the workforce
• Female labour force participation was just around 25.1% in 2020-21
3. Sluggish Industrial development:
• Despite major focus on industrialisation in the 5-year plans, contribution of industry to the GDP is
less than 25%
• Lack of development of labour-intensive sector due to strict labour laws leading to unemployment
and poverty.
4. Failure to Curtail Corruption and Black Money:
• Rampant corruption and red tapism. Corruption perception index- 85/180.
• Black money in the system is around 50% of the GDP, according to the IMF, which is also the root
cause of inequality in distribution of income.
Planning Commission of India

Planning commission was a non-constitutional and non- statutory organization set up by government
resolution on 15th March 1950 which was given the authority to formulate the five-year plans for economic
growth.
It had the following functions Achievements of the planning Issues with the Planning
• Assessing capital, commission commission
material, and human • Invested in infrastructure and • Plans formed usually had a “one
resources for growth. capital to grow. Heavy industry size fits all” approach.
• Investigate resource ex-investment • Overcentralized decision-
enhancement options. • Brought out new concepts for making, ignoring local
• Draft a plan for effective growth. Ex- green revolution. governance
utilization of resources • Helped India achieve • Lack of regular state
• Allocate resources for agricultural self-sufficiency, engagement in planning.
every step of plan reducing imports and • Weak implementation,
implementation preserving foreign policy. monitoring and evaluation of
• Review progress and • Made great emphasis on social money spent and the outcome
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propose changes as justice, poverty alleviation, achieved.

needed. health etc. • Land reforms were not properly
• Make suggestions for its • LPG reforms opened the implemented.
duties, policies, and economy, creating a • After the LPG reforms, people
economic issues. sustainable foreign reserve and were more unequal.
private sector competition. • Weak think tank and expert
network for creative problem-
solving.
NITI Aayog
NITI Aayog (National Institute for Transforming India) was established as a successor of the Planning
Commission as an extra-constitutional body created by an executive resolution. It has been created as a
premier policy think tank of the government providing both directional and policy inputs.
Achievements of NITI Aayog

• Strategy and vision depicted under action
agenda beyond 12th five-year plan- 7-year
strategy document and 3-year action agenda.
• Reforms in agriculture-
o Through Model land leasing act 2016 to
recognise rights of tenant and safeguard
interest of landowners
o Agricultural Marketing and Farmer Friendly
Index—to sensitise states to market reforms,
land lease, forestry, etc.
• Reforming Medical education- Recommended
scrapping the Medical Council of India and
proposed National Medical Commission making
it more representative and accountable.
• Digital Payment Movement- To promote
financial inclusion:
o Recommended cashback and referral
bonuses through BHIM UPI.
o Launched Digi Dhan Vyapar Yojana to
promote digital payments.
• Promoting innovation- Atal Tinkering Labs
and Incubation Centres launched to foster
youth innovation and entrepreneurship.
• Indices Measuring states’ performances in
health, education and water management- to
foster competitive federalism like Healthy
states, progressive India index
Way forward:
• The NITI Aayog need to function as an independent think tank without any political interference.
• It needs to be empowered with adequate financial powers.
• Making the NITI Aayog answerable to the Parliament would make it more accountable.
• The NITI Aayog need to focus and strengthen the aspects of decentralized planning and development.
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3. Mobilization of Resources
3. Mobilization of Resources
Introduction: Resource mobilisation refers to the process through which the potential of the resources are
unlocked and are utilised for achieving the developmental agendas of the country. It is the identification,
organisation and utilisation of the available resources so that the economic growth is maintained.
Components of resource mobilization
Types of resources
1. Natural resources- Naturally occurring substances that are considered valuable in their natural form. It
could be further divided into: -
• Abiotic resources- Sunlight, water, soil etc
• Biotic resources- Forests, animals etc
• Mineral resources—Coal, oil, iron—require processing before use. India has over 20,000 mineral
deposits
2. Human resources- The economy's workforce turns natural resources into valuable resources using skill,
knowledge, and technology. Indians are 60% working-age.
3. Financial resources- Economic resources measured in terms of money for its utilization in improving the
production capacity of the economy. Ex- Bank deposits, disinvestment, FDI etc.
Need of Resource Mobilization

• Unlock the potential of the resources available- Ex- Monetisation of assets for unlocking the potential of
the unused asset like land, buildings etc
• Fulfil the developmental needs of the country- Ex.
• Crucial for the sustenance of the economy- Resource mobilisation helps in maintaining a level of
economic growth required to deal with issues like poverty, hunger etc
• Improvement of the available services- Ex- Increased investment on digital transaction would ensure
financial inclusion.
• To fulfil the goals defined under the budget- Ex- liberalising FDI norms are required for the development
of various sectors and generate employment.
• Ensures justice for all- optimum utilisation of resources are necessary so that it could be accessible to all.
Ex- increased taxation on the upper class so that the benefits could be percolated downwards.
• Deal with contemporary issues like climate change, pandemics etc. Ex- exploration of lithium resources
to promote EV so that pollution could be reduced.
• Minimising dependencies on others- Ex- shortage of semiconductor during the pandemic
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Sources of resource mobilization-

1. Public sector mobilises resources through following ways-
• Tax revenues- which includes direct tax (taxes paid by households and companies like income tax
and corporate tax) and indirect tax (taxes paid via a third party like GST).
• Non tax revenues- dividends from PSUs, fines, examination fees etc.
• External sources- through Foreign Direct Investment and Foreign Institutional investors, Sovereign
borrowings etc.
• Mobilising human capital through education, skilling etc
2. Private sector mobilizes resources through following ways-
• Borrowings from financial institutions, cooperatives, credit union etc
• Angel investors, venture capital fund etc
• Capital market like IPO, debentures etc
• Borrowing from international trade financing companies like External Commercial Borrowings etc
Issues regarding resource mobilization

1. Limited utilisation of domestic public resources- especially in natural resources, where administrative
barriers, land acquisition issues, development-displacement conflicts, and Lack of technology.
2. Weak taxation and fiscal policies- taxes are not broad-based
• Major incidences of tax evasion leading to generation of black money and corruption→ unaccounted
money
• Very low (4%) tax base in the country.
• Revenue forgone due to various exemptions provided like non taxation of agriculture.
3. Lack of proper financial inclusion -Inaccessible areas are devoid of bank branches, Digital divide between
urban and rural India
4. International tax evasion
• Through e-commerce - Base Erosion and Profit Shifting
• Fugitive economic offenders dilute the tax coverage.
• Parking of illicit funds in tax- haven countries.
5. Lack of investment in human capital
• Investment in education still forms only 4% of the GDP (Target- 6%)
• Governments eexpenditure on health is hovering around 2.1% of GDP in FY 2023
• Expenditure on R&D- around 0.67%
6. Inefficient administrative mechanism- Subsidy leakage, Unidentified beneficiaries, Bureaucratic delays
and project start-up, Implementation lacks innovation.
Steps needed for effective resource mobilization

1. Building human capital- through skill development, apprentice training, building ITIs, aligning STEM
education with industry needs, encouraging women to work, digital education through digishiksha, etc.
2. Attaining resource efficiency- through adoption of latest technology, investment in R&D, collaboration
with international organisations for technology transfer, expediting documentation, land titling, etc.
3. Promotion of circular economy- by utilising lifecycle approach of the products to reduce wastage of
essential resources.
4. Industrial cluster development- for savings, simplifying connectivity, and lower consumer prices.
5. Tax reforms- end-to-end digitisation and tax loophole management. Financial literacy education.
6. Agreement with international organisation for tax valuation (ex-Global Minimum Tax Rate) and
extradition of economic fugitives.
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Banking Sector in India
Introduction: The Indian economy has benefited greatly from the evolution of the banking sector. The
history of banking begins in the ancient world. What began as a straightforward barter system and gift
economy has evolved into an internet-based, technology-driven, globalised banking system.
Recent developments in Banking sector-

• Post 2014, new initiatives were launched to achieve financial inclusion like PM Jan Dhan Yojana, PM
MUDRA yojana, etc.
• Introduction of Insolvency and bankruptcy code in 2016.
• Monetary policy committee formed after Urjit Patel committee recommendations.
• Two types of niche bank- Small Finance Banks and Payment Banks came up after Nachiket Mor
committee recommendations.
• Mergers- 10 PSBs have been merged into 4 banks in 2019. India now has 12 Public sector banks.
• Emergence of new forms of banking systems like neo banks, digital banks etc.
Functions of the Banking Sector:

The banking sector is an essential part of every country’s financial system. It affects the country’s economy
by providing credit, infrastructure, and investment.
Indian banking has a big role in the growth of the economy of India. Every country’s economy lies in the
banking system. When the bank functions well, only then it benefits in nation-building.
1. Business Growth: Indian banks facilitate trade and commerce. It offers payment facilities to various local
and international businesses.
2. Financial Stability: RBI being the central regulator helps in bring stability to the system through various
methods, the most important among it is monetary policy recommendations.
3. Advancement of Credit and Cash Management-It permits banks to provide money transfers and quick
cash and people with different services.
4. Crowding in of private sector- It helps banks handle the money transfer carried out for many industrial
units and various business houses.
5. Financial Security: Offering loans at competitive rates, paying reliable remittance services, etc.- to
improve savings.
6. Manage Assets: such as gold, silver, diamonds, etc.
7. Agency functions of bank- It includes transfer of money, periodic collection of dividends, salary, pension
etc. Manages the portfolio of its clients
8. Specialized institutions for specialized services- Export and import functions are covered by the EXIM
bank, Agricultural investments and credit is looked upon by NABARD etc
9. Promoting social justice and act as harbingers of change
Banking sector of a country has the ability to maintain a sustainable level of economic growth if properly
governed by the regulator as well as the central government. Thus, giving the banks flexibility to grow and
bring grass root revolution would bring progress in the long run.
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Non - Banking Financial Institutions (NBFCs)
Introduction
• NBFCs are company registered under the Companies Act and provide various financial services and
products, including loans, insurance, and asset management, but do not have a banking license.
• Business areas: Business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable
securities of a like nature, leasing, hire-purchase, insurance business, chit business
• Does not include: Institution whose principal business is that of agriculture activity, industrial activity,
purchase or sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property.
• Regulator: By RBI under RBI Act, 1934.
Types of Non-banking financial institutions

1) Non-banking financial company
a. Micro Finance institutions
b. Asset finance companies
c. Factoring companies
d. Infrastructure finance companies
e. Core investment companies
f. Infrastructure debt companies
2) Mutual Benefit financial companies, ex.-Nidhi Companies
3) Miscellaneous Non-banking companies, ex.-Chit funds
Significance of NBFCs Issues with NBFCs

• Financial Inclusion: By providing lending and financial • Multiple regulatory bodies: regulatory
services to under-represented population segments, bodies differ according to the type of
NBFCs promote financial inclusion. NBFCs. Ex- NHB, SEBI, IRDAI etc.
• Engine of Growth: NBFCs are key financer to MSMEs, • Asset- liability mismatch: funds
infrastructure projects and are driven by significant borrowed for short term and lending
growth in rural, small scale and unbanked sectors. takes place for long tenures like 10-15
• Credit access: Provide credit to various population yrs → liquidity crunch in the short term.
segments, including individuals, small and medium • IL&FS crisis: crisis led to decreased
enterprises (SMEs), and large corporations. They are reliability on NBFCs→ investors reluctant
more flexible than banks in terms of lending criteria, to lend to NBFCs > Liquidity squeeze for
and they can provide credit to those who may not the entire NBFC segment.
meet the stringent requirements of traditional banks. • Less cautious credit habit: NBFCs have
• Mobilize Savings from different sources, such as retail grown their portfolio of small and micro
investors, high-net-worth individuals (HNIs), and loans where there are risks of high NPAs
institutional investors, and these savings are utilised to and also unsecured loan segment is on a
finance various activities. rise.
• Provide investment services: Such as portfolio • Delayed projects: due to delayed
management, investment advisory, and distribution of statutory approvals, land acquisition
financial products. delays, environmental clearance delays
• Provide payment services: Issuing debit and credit etc.
cards, electronic fund transfers, and mobile banking. • Unsecured deposits of the lenders
unlike banks.
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Way Ahead
• FSLRC recommendations: creating a body to monitor risk cutting across the sector.
• Timely project clearance: reducing bureaucratic hurdles in infrastructural projects, plug and play
facilities, infrastructure clusters, corridors etc.
• Allowing large NBFCs to seamlessly become banks by bringing consistency in regulations like similar CAR
requirements.
• A coordinated and consultative approach to address infrastructural credit issues.
• RBI has proposed
o Creation of a 4 layers regulatory framework. The degree of regulation depends on the perception of
risk in every layer.
o Classification of NPAs of base NBFCs from 180 days to 90 days overdue.
Conclusion
The need of the hour is the holistic reboot of the oversight mechanism of banks and NBFCs to retain public
confidence and financial stability.
Non -Performing Assets (NPA) Crisis in India

Non-Performing Assets are assets that stop paying investors for a set time (NPA). India's public sector banks
hold 90% of NPAs. Due to long-term operations, infrastructure generates most NPAs.
As per the recent data by RBI, the Scheduled commercial banks' net non-performing assets (NPA) ratio fell to
a 10-year low of 3.9 per cent in March 2023.
Possible reasons behind NPAs- Impacts of NPAs-

• Diversification of funds to unrelated business/fraud. • Lenders suffer a lowering of profit
• Business losses due to changes in business/regulatory margins.
environment. • Stress in the banking sector causes less
• Due to long-term operations, infrastructure money available to fund other projects→
generates most NPAs. Gross NPA in India is 5.9%, negative impact on the larger national
down from 11% two years ago. economy.
• The Indian economy slowed after 2011 and NPAs • Higher interest rates by the banks to
grew faster. maintain the profit margin.
• Unplanned expansion of corporate houses during the • As investments get stuck, → may result in
boom period and loan taken at low rates later being unemployment.
serviced at high rates→ NPAs. • Poor public sector bank health means
• Due to mal-administration by the corporates, for poor shareholder returns and lower
example, wilful defaulters. dividends for the Indian government.
• Severe competition in any particular market • Balance sheet syndrome→ Both the
segment. For example, the Telecom sector in India. banks and the corporate sector have
• Delay in land acquisition due to social, political, stressed balance sheet →halting of the
cultural and environmental reasons. investment led development process.
Government steps-
1. Debt Recovery Tribunals (DRTs) 1993→ To decrease the time required for settling cases.
2. Credit Information Bureau - A good information system is required to prevent loan falling into bad
hands and therefore prevention of NPAs.
3. SARFAESI Act 2002 – Banks/Financial Institutions can recover NPAs without court involvement by
acquiring and selling secured assets in NPA accounts with an outstanding amount of Rs. 1 lakh or
more.
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4. Asset Reconstruction Companies -These firms extract value from troubled loans. Before this law,
lenders could only enforce security interests through courts, which took time.
5. Corporate Debt Restructuring – 2005 It is for reducing the burden of the debts on the company by
decreasing the rates paid and increasing the time the company has to pay the obligation back.
6. Joint Lenders Forum 2014 - It was created by the inclusion of all PSBs whose loans have become
stressed. It is present so as to avoid loans to the same individual or company from different banks.
7. Mission Indradhanush 2015 - The Indradhanush framework for transforming PSBs is the most
comprehensive reform effort since banking nationalisation in 1970 to improve PSB performance
through governance reforms, accountability, recapitalization, etc.
8. Asset Quality Review 2015 - Classify stressed assets and provision them to protect banks and early
identify and prevent stressed assets.
9. Sustainable structuring of stressed assets (S4A) 2016 - It has been formulated as an optional
framework for the resolution of largely stressed accounts
10. Insolvency and Bankruptcy code Act-2016 - This law consolidates and amends the laws on
reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals in a
timely manner to maximise asset value and promote entrepreneurship, credit availability, and
stakeholder interests.
Need of the hour-

• Technology and data analytics to identify the early warning signals.
• Mechanism to identify the hidden NPAs.
• Development of internal skills for credit assessment.
• Forensic audits to understand the intent of the borrower
NPA always creating trouble in financial inclusion and also reduces bank efficiency in credit system. Strong
credit management and debt recovery will reduce burden of NPA.
Bad Bank: Addressing Non-Performing Assets (NPAs) for a Resilient Banking System
Introduction
• Bad banks, formally called Asset Reconstruction Companies (ARC), are specialized financial institutions
that buy the stressed and non-performing assets (NPA) of the bank to help clean up their balance sheet.
• Establishment and Regulations of ARC
- Incorporated under the Companies Act and registered with RBI under the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
- Regulated by RBI as a Non-Banking Financial Company (NBFC) under RBI Act, 1934.
New Bad Bank Structure

• Announced in Budget 2021-22 – It proposes the following
dual structure of the New Bad Bank: • Security Receipts (SR) means a receipt
1. National Asset Reconstruction Company Ltd (NARCL) – Set or security, issued by an ARC to any
up as an Asset Reconstruction Company (ARC) to acquire Qualified Buyers (QBs) on purchase or
stressed assets worth Rs 2 lakh crore from various acquisition of an undivided right, title
commercial banks. or interest in the financial asset.
o Incorporated under the Companies Act & has been set • Qualified Buyers (QBs) include entities
up by the banks. Public Sector Banks (PSBs) to maintain like Financial Institutions, Insurance
51% ownership in it. companies, Banks, ARCs, AMCs etc.
o It will acquire bad debts from the lead bank and pay 15% that invest on behalf of mutual funds,
upfront in cash, and issue the balance 85% as pension funds, FIIs, etc.
government-guaranteed tradable security receipts (SR).
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2. India Debt Resolution Company Ltd (IDRCL) – Set up as an Asset Management Company (AMC) to then
sell stressed assets in the market.
o IDRCL is a service company to manage the asset and engage market professionals and turnaround
experts. PSBs & Public Financial Institutions - 49% stake; Private sector lenders - 51% stake.
• Role of Government Guarantee - Government guarantee will be invoked if the bad bank is unable to sell
bad loan, or sells it at a loss. Government will not hold any equity in the Bad Bank.
Benefits of a Bad Bank

• Provides additional option - Existing ARCs have helped in resolution of NPAs for smaller value loans. But
considering the large stock of legacy NPAs, NARCL will enable resolution of large NPAs above ₹500 crore
• Reduced Burden on Banks: As the bad bank sells these "assets" in the market, commercial banks can
resume lending.
• Quicker resolution - The aggregation of bad assets at one place will make it easy for the buyer to deal
with one unified ARC rather than dealing with multiple lenders, improving the chances of resolution.
• Solving Economic Aftershocks of the Pandemic: After the COVID-19 pandemic, a private-lender-backed
bad bank can manage NPAs and their economic impact.
• Multiplier impact – With the existing undercapitalized ARCs reluctant to take up NPAs, the New Bad
Bank aims to fill this void, entailing several economy wide benefits:
o Improved banks’ liquidity, free up management bandwidth to focus on core business etc. ➔
enhanced lending to productive sectors to ‘jump start’ economy & employment ➔ accelerates bank
recovery.
Concerns with Bad Bank
• Governance concerns & Implementation delays – No clarity on exactly how the new bad bank will be
structured and how its functioning will be governed.
o There is a concern that bad banks may prioritize easily recoverable loans and neglect critical loans
that are difficult to recover.
• No sunset clause - It is not clear whether the bad bank has a finite end date.
- For e.g., in the US, the bad banks had a sunset clause and worked with a finite timeline (a reason for
their success).
• Uncertainty over the secondary market - Banks will have the freedom to sell the security receipts, but
secondary market for such securities is not yet evolved.
• Does not address core issue - The bad bank will not help in preventing future NPAs, nor does it aim to
improve the ‘credit culture’ of the PSBs.
o Former RBI Governor Raghuram Rajan opposed the idea of a bad bank in which banks hold a majority
stake.
• Lack of buyer demand - The success of the bad bank depends on its ability to sell the stressed assets in
the market. However, the current economic distress and lack of liquidity may discourage the buyers.
• PSBs will be both shareholders & customer - It leads to the danger of the bad bank being nothing more
than a means to shift some bad debt from one book to another.
o It also means a mere shift of bad loans from government owned banks (PSBs) to government backed
Bad Bank (NARCL).
• Profitability of Banks: Bad banks' high margins may reduce other banks' profits, affecting their lending.
• Moral Issues: Under the pressure to recover loans, bad banks may resort to unethical practices.
Way forward
• Multi-pronged measures - For the bad bank to work as intended will require strong and impartial
leadership, a high degree of financial expertise, and roping in relevant professionals with right skill set.
• Setting up an NPA transaction platform - that would act as a central repository of data on stressed
assets from participating banks. This will serve to enhance liquidity by making transaction data
standardized & transparent & allowing investors to take informed decisions.
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• Learning from successful international experiences

o Malaysia government-owned Bad bank, Danaharta, established after the Asian crisis in 1998.
o US launched Troubled Asset Relief Program (TARP) just after the Lehman crisis in 2008.
o UBS of Switzerland transferred bad assets to a government fund after the Global Financial Crisis.
• Sunset Clause - After a predefined period, when the company’s operations are no longer deemed
necessary, it should be wound up.
• Holistic reforms - The bad bank is a one-time solution and cannot be in perpetuity. Holistic banking
sector reforms, including improved governance of PSBs, is critical to avert another cycle of bad loans.
Conclusion
Establishing a bad bank can help reduce NPAs and strengthen the banking sector, but public sector banks
need comprehensive governance and lending reforms. A bad bank and other measures can reduce NPAs and
ensure a resilient banking system that supports economic growth.
Microfinance Institutions: Promoting Inclusive Growth and Addressing Challenges
Introduction
The term "microfinancing" was coined during the growth of Bangladesh's Grameen Bank in the 1970s,
founded by Muhammad Yunus.
Microfinance plays a crucial role in providing credit access to rural citizens and small entrepreneurs,
promoting balanced and inclusive growth. To address the issues, the government must step in and support
the sector.
What is Microfinance?
• Microfinance provides small loans and other financial services to poor and low-income households.
• The definition of "small loans" varies, and in India, loans below Rs. 1 lakh are considered microloans.
• Institutional channels - (i) Sscheduled commercial banks (SCBs) (including small finance banks (SFBs) and
regional rural banks (RRBs)), (ii) cooperative banks, (iii) non-banking financial companies (NBFCs), and (iv)
microfinance institutions (MFIs) registered as NBFCs.
• Components of Microfinance: Microcredit, Micro Insurance, Micro Saving
Microfinance sector in India: Present Status

• Contribution to GDP: Around 2 % of India’s GVA in 2018-19.
• Growth: Witnessed growth of over 13 percent in the last quarter of fiscal year 2021-22; year-on-year
(YoY) growth stood at 5 percent.
• SHG-Bank Linkage Programme: Covers around 15 crore families through SHGs (around 87% of which are
women).
• Employment: to 13 million jobs (direct and indirect).
• Portfolio: 78 percent coverage in rural areas and 22 percent in urban areas.
EVOLUTION OF MICROFINANCE IN INDIA (1987-2022)

INITIATION (1992-2002) CONSOLIDATION (2003-2012) INNOVATION (2013- 2022)
• 1992 - NABARD launched • 2006 - NABARD institutes Micro • 2013 - GoI officially
Self-Help Group Bank Enterprise Development Programme launches NRLM
Linkage Program (SHG-BLP). (MEDPs), RBI announces use of Business • 2015 - NABARD
• 1996 - RBI declared SHG-BLP Correspondents and Business launched Livelihood and
as PSL activity. Facilitators (BCBF) Enterprise Development
• 1999- GoI Introduced • 2008 - Centre for Microfinance Research Programmes (LEDPs),
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Swarnajayanti Gram (CMR) was set, NABARD subsidiary SHG-BLP Strategic

Swarozgar Yojana (SGSY) NABFINS established Advisory Board
• 2000-01 - NABARD institutes • 2011 - SGSY restructured as National constituted in NABARD,
a dedicated Micro Finance Rural Livelihood Mission (NRLM), India E-Shakti portal
Development Fund Micro-Finance Equity Fund created (digitisation of SHG
• 2012 - NABARD introduced SHG-2, GoI records), MUDRA
launches Women SHGs Development Scheme.
Fund programme. • 2020 - NABARD
introduces Business
Model Scheme
About Micro Finance Institutions (MFIs)

• The microfinance sector in India has experienced rapid growth,
serving approximately 102 million accounts, including those held
by banks and small finance banks.
• Various providers, including NGOs, cooperatives, banks, and
telecommunication companies, offer microfinance services.
• NBFC-MFIs in India are regulated by the Non-Banking Financial
Company - Micro Finance Institutions (Reserve Bank) Directions,
2011.
• Major Business Models - Joint Liability Group, Self Help Group,
Grameen Model Bank, Rural Cooperatives
Significance of Microfinance
• Credit to Low-Income Borrowers, Collateral-Free Loans, Financial Inclusion, Income Generation, Women
Empowerment, Rural Development, Encourage Self-Sufficiency and Entrepreneurship.
Challenges of Microfinance
• Fragmented Data: While loan accounts have increased, MALEGAM COMMITTEE ON MICROFINANCE
data on MFI clients' poverty-level improvement remains Recommended-
fragmented, making it difficult to assess microfinance's • Promoting transparency and
impact on poverty reduction. accountability in microfinance operations.
• Limited outreach - Penetrating remote rural regions with • Enhancing consumer protection and
financial services remains a challenge due to inadequate ensuring fair and transparent practices by
infrastructure, connectivity, and low levels of financial MFIs.
literacy. • Providing a more supportive environment
o For Ex. MFI outreach in India is extremely low, at only for microfinance institutions.
8%, compared to 65 percent in Bangladesh. • Strengthening the regulatory framework
• Higher Rate of Interest than Mainstream Banks – for MFIs.
According to a report by the Reserve Bank of India (RBI),
average interest rate charged by microfinance institutions (MFIs) in India ranged from 20% to 26%, which
is higher than the rates charged by traditional banks (8-12%).
• Impact of Covid-19: The MFI sector has been affected by the pandemic, with collections initially declining
and disbursals facing challenges.
• Overlooking social objectives: In pursuit of growth and profitability, some MFIs may overlook their social
objective of improving the lives of marginalized communities.
• High operational costs: Study conducted by the Reserve Bank of India, it was found that operational
expenses constituted around 25-30% of the total expenses for MFIs.
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• Over indebtedness: Borrowers taking loans from multiple microfinance institutions (MFIs) and informal
sources can lead to a debt trap.
o For Ex. Andhra Pradesh microfinance crisis in 2010 occurred due to aggressive lending practices and
coercive recovery methods, leading to borrower distress.
• Loans for Non-income generating purposes: Loans used for non-income-generating purposes may
exceed the regulatory limit of 30%, trapping borrowers in debt.
• Financial illiteracy: Lack of awareness about various MFIs and their services due to financial illiteracy
hampers the participation of the economically disadvantaged.
• Inability to generate funds: MFIs face difficulty raising sufficient funds due to their not-for-profit nature,
limiting access to private equity investors and other market-based sources.
• Heavy dependence on banks: Around 80% of the Microfinance institution's funds came from
commercial banks.
Way Forward
• Regulation: Establishing a comprehensive regulatory framework for the Microfinance sector instead of
reactive initiatives is essential due to its significant expansion.
• Strengthen Credit Assessment and Risk Management: To mitigate the risk of over-indebtedness and
ensure that loans are provided to borrowers who can repay them.
• Interest Rate Transparency: MFIs should transparently inform borrowers about interest rates and
additional charges levied on loans.
• Encourage Microfinance Penetration: Providing financial assistance to MFIs to open new branches in
areas with low Microfinance penetration will increase outreach.
• Expand Product Range: MFIs should provide all financial products and non-financial services to
underserved populations.
• Use of Technology: Adopting new technologies, IT tools, and applications can help MFIs reduce
operational costs.
• Diversify Funding Sources: To finance their loan portfolios, MFIs should consider becoming a for-profit
company (NBFC).
Conclusion: Microfinance institutions support marginalised people and inclusive growth. To maximise
impact, establish comprehensive regulations, ensure interest rate transparency, encourage expansion in
underserved areas, diversify product offerings, leverage technology, and explore diverse funding sources.
Privatization of Banks: Opportunities and Challenges
Background
In 1969, 14 banks were nationalised and in 1980, another 14. The goal was to expand financial services and
boost economic growth, but it was already failing. Private banks emerged after reforms of 1991.
12 public sector banks and 21 private sector banks control 70% of the market. The Union Budget 2021-22
aimed at privatizing two public sector banks.
Opportunities
• Effective Regulations- Government ownership makes it difficult for RBI to regulate the sector, according
to NCAER.
• Credit growth- According to economic survey 2020, PSB credit growth has declined since 2013 while new
private banks had significant credit growth (between 15 percent and 29 percent).
• Complacency followed by recapitalization- Government controls all PSB operations. This implies bank
liability bailout.
o The ex-government recapitalized PSBs with 3.1 lakh crore capital infusion over five years, burdening
the state exchequer.
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• Decreased risk Appetite- PSB officers are subjected to scrutiny by CVC and CAG making them wary of
taking risks
• Strengthening banks –Effective management through private sector participation would create big banks
as economic survey suggests India should have at least 6 banks in global top 100 based on its size.
• To deal with banking frauds – PSBs commit 92.9 percent of corporate lending fraud due to poor
screening and monitoring.
• Effective management of NPAs – India's banking system's NPAs were 80% PSBs in 2019. 14.6% of loans
are gross NPAs.
• More market value- Private banks fetch five times as much value as that of a rupee invested in PSBs.
Challenges
• Against financial inclusion objectives- Under PM JDY-as of July 2022, more than 45cr beneficiaries have
been covered and 78% of these accounts were in PSBs
• Resilience – Indian PSBs were more resilient during the 2008 subprime lending crisis and have also fared
well during the Covid crisis.
• Unemployment- Uncertainty in employment prospects of the already employed in PSBs, fear of possible
retrenchment might lead to protest from the labour unions.
• Socialistic objectives- PSBs' ATMs in rural areas are twice as many as private banks.
• Labour cost efficiency - PSBs produced more with less labour, according to RBI's recent report.
• Public sector banks played a major role in boosting public confidence due to government guarantees.
• Long history of failures in private banks - EX- RBI had to rescue YES bank by pumping capital by other
entities to save the bank.
Way Forward
• NCAER suggested that the banks chosen for privatization must be the ones with the highest returns on
assets and equity and the lowest NPAs in the last 5 yrs.
• Research paper by RBI suggested for a more gradual approach towards privatization instead of full exit
• Economic survey suggested that the efficient of the PSBs could be increased by adopting fintech
technology across all banking functions and employee stock ownership across all levels.
• P J Nayak committee recommended that government must reduce its stake in PSBs to less than 50%,
establishment of bank investment company to run PSBs.
• Effective usage of data analytics like geo tagging of collateralized assets, connecting lenders all across
the banking system through legal identifier system.
• Using credit analytics for prevention of large proportion of NPAs.
• Economic survey suggested for creating a PSB network on line with GSTN for recognizing credit patterns,
screening the corporate for fresh loans etc.
Initiatives taken for banking sector reforms-
• Mission Indradhanush: - for revamping the functioning of the public sector banks to enable them to
compete with the private sector banks and reduction of political interference in its functioning.
• 4R approach: Recognize NPAs, resolve bad loans, recapitalize to meet Basel norms and credit growth,
and reform for effective governance.
• Improving governance architecture by introduction of non-executive chairmen and strengthening of
board committees.
• Setting up of NARCL: with an objective to construct a bad bank to house bad loans worth 500 crores
• Introduction of CBDC : To provide stability in digital currency transactions
• NaBFID: have been set up as DFI for long term infrastructure financing.
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Conclusion
According to RBI's report, privatisation isn't a cure-all, so a more nuanced approach to bank privatisation is
needed to promote economic growth and welfare.
Bank Recapitalization
Recapitalizing banks helps them meet Reserve Bank of India capital adequacy requirements. Since 2016-17,
the Union Budget includes bank recapitalization. The Centre injected Rs.3.31-lakh crore into banks between
FY17 and FY21.
Need- Benefits-
• Tackle NPAs- High NPAs around 11% in • It will help in increasing the investment in the
2020-21. economy by bring down the interest rate and asset
• Meet regulatory norms like capital building
adequacy ratio of around 11% • It will help improve the financial risk profile of the
• To maintain the virtuous cycle of banks.
investment, credit growth and • Cushion against the expected rise in the NPAs
employment generation • Global financial crisis influences in providing lending
• Give stimulus to the economy by hand to the state-run banks which form 70% of
decreasing lending rate and increasing banking system.
investment. • Improves the credit rating of the economy and make
the economy investor friendly.
Impact of the previous recapitalization exercise Challenges-

• The average capital adequacy ratio for PSBs is at about • Increased government spending in
15 per cent, which is among the highest we have seen in saving banks→ increased fiscal
the last decade. deficit→ decreased spending on capital
• Aggregate CRAR of 46 major banks has been projected expenditure and welfare.
to slip from 15.8 per cent in September 2022 to 14.9 per • Apprehensions that there might be no
cent by September 2023 but it stays well above the change in governance.
minimum capital requirement, including capital • It might impact the work culture in
conservation buffer (CCB) requirements (11.5 per cent). terms of leniency in checking the credit
• Deposit growth is also keeping pace-The incremental score.
deposits in the last 10 months of the current fiscal is • Issues in achieving the accountability
Rs.12.53 trillion against Rs.9.2 trillion in FY22. of the PSBs.
• Banks are well poised to grow at approximately 15 per
cent over this fiscal and next, with limited need for
incremental capital to maintain regulatory levels.
Way ahead-
• Reskilling and recruitment of specialists as advisors.
• PSBs should be given adequate operational flexibility.
• Effective monitoring of the intended objective
• Creation of Bank Investment Company for professional management of PSBs.
• Decreasing bureaucratic interference.
Conclusion-
Union budget 2023-24 does not set a bank recapitalisation target due to bank efficiency. While Bank
Recapitalisation was necessary during the banking crisis, more attention should be given to improving work
culture and making banking staff equal stakeholders for the banks' proper functioning, which requires an
administrative overhaul.
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Insolvency and Bankruptcy Code (IBC)
Introduction: The GN Bajpai committee recently recommended that the Insolvency and Bankruptcy Board of
India (IBBI) create a standardised framework for the five-year-old IBC (IBC). This framework needs a real-time
data bank with time, cost, recovery rates, and macroeconomic indicators. To evaluate and improve law
implementation.
Objectives of IBC: The committee emphasizes that resolving distressed assets remains the primary objective
of the IBC. It is followed by promoting entrepreneurship, ensuring credit availability, and balancing the
interests of stakeholders.
Understanding Insolvency and Bankruptcy Code, 2016

• Introduced in 2015 and implemented in 2016, the Code aims to provide a unified framework for
resolving insolvency and bankruptcy cases in India.
• Insolvency refers to the inability of individuals or organizations to fulfil their financial obligations.
Insolvency Resolution Process

• For individuals, the insolvency resolution process differs from that of companies. Either the debtor or the
creditors can initiate these processes.
• Resolution process for companies and limited liability partnerships:
o Must be completed within a maximum of 180 days from case registration, with a possible 90-day
extension upon agreement by 75% of financial creditors.
o Involves negotiations between debtors and creditors to draft a resolution plan.
o Concludes when a resolution plan is agreed upon by the majority of creditors and submitted to the
adjudicating authority or when the negotiation period expires
• Resolution process for individuals and partnerships:
o Debtors may apply for debt forgiveness if their assets fall below a limit set by the central
government. This process must be completed within six months.
o Insolvency resolution negotiations between debtors and creditors are supervised by insolvency
professionals.
o If negotiations succeed, a repayment plan approved by the majority of creditors is submitted to the
adjudicator. Failure leads to bankruptcy resolution.
Need for Insolvency and Bankruptcy Code (IBC) in India

1. Delay in insolvency resolution: As of 2015, Indian insolvency resolution averaged 4.3 years. This is much
higher than the UK (1 year) and US (1.5 years).
2. Scattered laws relating to insolvency and bankruptcy: Before IBC, India had many insolvency and
bankruptcy laws. The resolution process was delayed and ineffective. SARFAESI, RDDBFI, and Companies
Acts are examples.
Recent Amendment in IBC

1. Representative of financial creditors: During the insolvency resolution process, a Committee of Creditors
(CoC) is formed to make decisions through voting. Representatives of financial creditors participate and
vote on their behalf.
2. Undischarged insolvents, willful defaulters, convicted criminals, and Companies Act-disqualified directors
are ineligible. Prohibited selling defaulter's property to such individuals during liquidation.
3. Lower voting threshold for routine decisions: The voting threshold for routine decisions by the CoC was
reduced from 75% to 51%.
4. Recognition of homebuyers as financial creditors: Homebuyers who have paid advances to a developer
are now considered as financial creditors.
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5. Withdrawal of resolution application: With 90% CoC approval, the amendment lets the NCLT withdraw a
resolution application.
6. Applicability of the Code to MSMEs: Micro, Small, and Medium Enterprise resolution applicants are
exempt from NPA and guarantor ineligibility criteria (MSMEs).
7. Time-limit for resolution process: The Code requires insolvency resolution to be completed within 180
days, extendable by 90 days.
• This Amendment adds that the resolution process must be completed within 330 days. This
includes time for any extension granted and the time taken in legal proceedings in relation to the
process.
8. Additional threshold for initiating resolution process: Added a threshold for certain financial creditors,
including real estate project allottees. At least 10% or 100 must start the process together.
9. Continuation of critical goods and services supply: Empowered resolution professionals to require
suppliers to continue providing essential goods and services during the insolvency resolution process.
• Suppliers must receive payment for their current dues to continue supplying.
10. Liability protection for new owners: If management or control changes, a company in insolvency
resolution is not liable for prior offences.
Proposed amendments in 2022

• Appointing Common Resolution Professional
• Redesigning Fast-Track Corporate Insolvency Resolution Process (FIRP)
• Special framework for resolution of real estate to limit IBC proceedings to insolvent projects.
• Electronic platform.
• Empowering IPs to transfer ownership of property.
• Extension of pre-packaged insolvency resolution framework to larger entities.
• Multiple resolution plans for single stressed firm.
How IBC benefits

1. For debtor: It promotes entrepreneurship, as IBC framework facilitates easy exit for loss making
companies.
• Maximization of the value of assets of corporate persons.
• It helps in reviving the company in a time-bound manner.
2. For creditors: It protects the interest of creditors, and consequently increases the credit supply in the
economy
• Timely recovery procedure helps banks/financial institutions to reduce their NPAs
3. For Government: Helps in reducing number of time-consuming litigations
4. Simplifying procedure: It consolidates and amends all existing insolvency laws in India, hence simplify
and speed-up the Insolvency and Bankruptcy proceedings.
Successes of IBC
1. High recovery rate: Before enactment of the IBC, the recovery mechanisms available to lenders were
through Lok Adalat, Debt Recovery Tribunal and SARFAESI Act.
• According to a World Bank statement, IBC has improved the recovery rate of stressed assets to 48%
in two years from 26% in the pre-IBC era
2. Higher credit realization: Till June 2020, 250 companies had been rescued and 955 others referred for
liquidation. According to IBBI, the resolution plans yielded about 191% of the realizable value for
financial creditors
3. Improvement in ease of doing business ranking: IBC played an indisputable role in improving India’s
Ease of Doing Business (EODB) ranking from 130 in 2016 to 63 in 2020.
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Issues
1. Poor compliance to timelines: Despite the extension, resolution plans continue to cross the deadline.
On average, it takes 380 days for resolution plans to reach a conclusion.
2. Institutional issues
- Limitation of DRTs/NCLT – Inadequate manpower (50% posts in NCLT lying vacant), sluggish disposal
of cases, huge pending cases, inadequate infrastructural facilities etc.
- Poor & insufficient infrastructure of the Information Utilities (IU) that provides access to credible
and transparent evidence of default.
- Inadequate number of Insolvency Professionals (IPs) to manage the rising number of cases.
- Underdeveloped Secondary asset market – To find buyers for stressed assets.
3. Complex nature: IBC process also involves a number of stakeholders with competing interests, which
further makes resolution complex and time-consuming.
4. Issue in order of priority to distribute assets during liquidation: Unsecured creditors have priority over
trade creditors, and government dues will be repaid after unsecured creditors.
5. Fragmented information in multiple IUs: Code provides for the creation of multiple IUs. However, it
does not specify that full information about a company will be accessible through a single query from any
IU.
6. Performance bond: The Joint Committee of Parliament, which examined the Code, noted that requiring
a performance bond may deter IPs and IPAs from entering the sector.
7. Conflict of interest in IPAs: Code allows for multiple IPAs to operate simultaneously, which could enable
competition in the sector.
8. Accountability of Committee of creditors (CoC) – Even though the CoCs have significant discretion in the
resolution process, there is no mechanism to ensure accountability and transparency of its decisions.
9. Burden for small creditors: All operational creditors must submit financial information to IUs, which
may be difficult for small creditors to do.
Way Forward
1. Adopting recommendations of the GN Bajpai committee: Setting up specialized National Company Law
Tribunal benches to hear only IBC matters
• Digitalizing IBC platforms in order to make the resolution process faster and maximise the realisable
value of assets.
2. Enhance institutional capacity of the NCLT benches: There is a need to increase the number of
appointments of judicial members/experts.
3. Overcoming pendency: Provide funds and functionaries to DRTs and NCLT for timely disposal of cases.
- Leveraging greater expertise by appointing judicial members of NCLT at least at the level of High
Court judges & Specialised NCLT benches to hear only IBC matters.
4. Background checks in terms of conflict and integrity should be done for insolvency professionals, with
timelines being set to complete proceedings
5. Encouraging pre-packaged insolvency - to streamline resolution process and reducing burden on NCLT.
6. Capacity Building - Training of the lawyers, IPs, IPAs, and IUs to implement the law in its letter & spirit.
7. Robust technological infra & data collection – End-to-end digitization of processes & improved data
gathering by IUs to make the resolution process faster, and maximise the realisable value of assets.
8. Draft Framework for Cross Border Insolvency, recently published by Min. of Corporate Affairs, based on
UN Commission on International Trade Law (UNCITRAL) Model Law, to be expeditiously finalised.
9. Other reforms – Continuous review of IBC, holistic banking sector reforms etc.
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GN BAJPAI COMMITTEE: KEY RECOMMENDATIONS

• Establishing the ‘Priority order’ of IBC Objectives – (1) Resolution of the distressed asset, (2)
Promotion of entrepreneurship, (3) Availability of credit, (4) Balancing the interests of stakeholders.
• Designing a standardised framework to track the outcomes of insolvency and bankruptcy regime.
• Capturing reliable real-time data which is essential to assess the performance of the insolvency
process.
• Tracking both quantifiable and nonquantifiable outcomes of the Code.
• Survey to calculate exact cost of Insolvency process - on the lines of the World Bank’s ease of doing
business.
Digital Banks: A Proposal for Licensing & Regulatory Regime for India
"Digital Banks: A Proposal for Licensing & Regulatory Regime for India" by NITI Aayog emphasises the need
for digital banks and a comprehensive regulatory framework. This proposal seeks to improve credit
penetration among MSMEs and advance financial inclusion.
Digital Bank
The proposed definition of a digital bank within the Banking Regulation Act, 1949, emphasizes its unique
characteristics:
• Separate Legal Existence: A digital bank will possess its own balance sheet and legal identity.
• Compliance with Prudential and Liquidity Norms: Digital banks must adhere to prudential and liquidity
norms similar to those imposed on existing commercial banks.
• Objective - To provide maximum services with minimum infrastructure, digitally without involving any
paperwork.
Rationale for Digital Banks
The establishment of digital banks is driven by the following factors:
• Credit Gap: Despite digital payments, India's micro, small, and medium businesses still need credit.
• Reliance on Digital Channels: Digital banking channels empower under-banked small businesses and
build retail consumer trust.
• Challenges Faced by existing Neo-Bank Models like revenue generation and long-term viability.
Digital Banking Units (DBUs)
Overview of DBUs
• Digital Banking Units (DBUs) are
set up by the Scheduled
commercial banks .
• DBUs provide digital
infrastructure for digital banking
products and self-service
financial products.
• In DBU, the products and
services are offered to
customers in two modes:
o Self-Service Mode (available
on 24*7*365 basis)
o Digital Assistance Mode
• Objective - To ensure the
benefits of digital banking reach
every nook and corner of the
country.
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Benefits of DBUs
• Improved Accessibility: DBUs enable individuals without Information and Communications Technology
(ICT) infrastructure to access banking services digitally.
• Assistance for Non-Tech Savvy: DBUs support individuals who are not technologically proficient in
adopting digital banking.
Differentiating DBUs from Traditional Banks
• 24/7 Digital Banking Services: DBUs provide round-the-clock banking services, including cash deposits
and withdrawals.
• Digital Service Delivery: DBUs offer services exclusively through digital platforms.
• Paperless Transactions: DBUs allow individuals without connectivity or computing devices to conduct
banking transactions in a paperless manner.
• Assisted Banking: Bank staff is available at DBUs to assist and guide users in their banking transactions.
• Promoting Digital Literacy: DBUs contribute to digital financial literacy and raise awareness of digital
banking adoption.
Difference between Digital Banks & Digital Banking Units (DBU)
Basis Digital Banking Units (DBUs) Digital Banks
• DBUs do not have legal personality and are • Digital Banks have a balance sheet
not licensed under the Banking Regulation and legal personality and are
Legal Status Act, of 1949. proposed to be duly licensed banks
• These units are equivalent to banking outlets under the Banking Regulation Act, of
or branches legally. 1949.
• DBUs improve existing channel architecture ⚫ The licensing and regulatory

by offering regulatory recognition to digital framework for Digital banks is more
channels. enabling along with competition and
Innovation and • The DBU guidelines expressly state that only innovation dimensions.
Competition existing commercial banks may establish
DBUs.
• Thus, the competition and innovation are
comparatively less.
Significance of Digital Banking

Enhanced Rural Credit Flow, Greater Access for the Poor, Cost-Effective Solution, Enhanced Technical
Support, Reduced Manpower Requirement, Steady Profits for Banks, Enhancing Digital Literacy.
Challenges of Digital Banking
• Low Awareness and Internet Penetration: Low internet penetration and awareness make digital banking
difficult in lower-tier cities.
• Vulnerabilities and Hacks: Phishing, pharming, identity theft, and keylogging can affect digital banking
platforms.
• Technological infrastructure: Ensuring uninterrupted availability, managing technological upgrades,
limited internet connectivity, preventing system failures, and protection against cyber threats.
• Lack of Financial Literacy: According to the National Centre for Financial Education (NCFE) survey of 2019
only 27 % of adults in India are financially literate.
• Regulatory Compliance: Adhering to know-your-customer (KYC) requirements, anti-money laundering
(AML) regulations, and data privacy laws.
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Way Forward
• Infrastructure Development: Improving internet connectivity, digital infrastructure in both urban & rural
areas,
• Enhance Customer Experience: Prioritize seamless and user-friendly interfaces, personalized services,
and efficient customer support.
• Embrace Technological Advancements: Forge partnerships and collaborations with fintech companies,
payment processors, e-commerce platforms, and other ecosystem players, conduct workshops, training
sessions, and awareness campaigns.
• Financial Inclusion: Collaborate with governments, NGOs, and other stakeholders to address the digital
divide, expand access to affordable digital devices, developing user-friendly interfaces, simplifying
processes.
• Ensure Regulatory Compliance: Adhere to RBI guidelines, maintain strong relationships with regulatory
bodies, and stay updated on evolving regulations.
• Prioritize Cybersecurity: To build trust and reduce cyber risks, implement strong security, audit regularly,
and protect customer data.
Conclusion
Digital banks and units can revolutionise Indian banking. These banks serve underserved rural and remote
populations. India can lead the fintech industry and empower all with the right strategies and partnerships.
Neo banks
Neo banks are online only financial technology companies that have no traditional bank branch.
Features
• Partners with incumbent licensed banks to offer specific banking services such as deposits, cards and
payments etc.
• They are not present physically.
• Customers can easily sign up for accounts on their website/App and use their services.
• Gets investment adviser licenses for wealth management.
• No formal regulatory license for neo banks in India.
Difference between traditional bank and Neo banks

• Digital- As mentioned earlier, Neo banks are completely digital, while traditional banks have physical
branches coupled with online banking services.
• Licensing- Traditional banks are fully licensed and chartered, while very few neobanks have banking
licenses. To ensure their products, neobanks usually partner with traditional banks.
• Low cost- Neobanks charge very low fees for their services while traditional banks tend to overwhelm
customers with various types of complicated fees.
• Services- Neobanks typically offer checking and savings accounts, money transfer and payment services,
and some financial education tools (e.g., budgeting apps). Traditional banks offer more services,
including lines of credit, financial advisors, credit cards, investing, and more.
• Relationships- Traditional banks place a greater emphasis on building deep, long-lasting relationships
while neo banks tend to have mostly flexible, short-term contracts and relationships.
Benefits
• Better consumer experience- Neo-banks ensure a seamless online experience by incorporating a digital
and experiential layer on top of traditional banking.
• Tech-driven- customers can easily sign up for accounts on their website/App and use their services.
• Enhanced service experience-Neo-banks bridge the gap between traditional bank services and digital
customer expectations.
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• Lesser transaction costs-Since they're online only, customer fees are much lower.
• Customer focused solutions-Customer-focused neo-banks offer personalised technology-powered
services.
• Data analytics-They can track and analyse neo-banking customer activity better due to their advanced
platforms.
• Quick International Payments: Traditional banks may not issue global debit cards. Neo-banks makes
cards compatible.
• Manage finances-Neo-banks lets you track your spending and set a savings goal. This improves financial
management.
• Business friendly- Easy business loan payment and disbursement without complicated processes.
Issues
• Poor data architecture—disintegrated data storage requires consolidation to improve user experience.
• Organizational resistance—it may threaten traditional banking.
• No cutting-edge technology = no R&D investment.
• Digital divide—53% rural broadband coverage—may neglect rural market.
• No branches—customers may have trouble getting help.
• Financial data theft, cyberattacks, etc.
Conclusion: Neobanking can enhance financial inclusion efforts. Neo Banks have the potential to disrupt
banking and financial services, but to become profitable, they must convince traditional banks to invest in
new technology and re-engineer processes to provide seamless and fast customer experiences.
Card Tokenization
Introduction: Card Tokenization is the process of replacing original card details with an alternative code
called a "token" that should be unique and provides an additional degree of protection for customer credit
card details. Recently, RBI has made tokenization mandatory for all credit and debit cards used in online, POS
and in-app transaction.
Features-
• It involves giving each payment method a
special token that is unique to it.
• The customer is not required to pay any
fees in order to use this service for
tokenization and de-tokenization.
• Actual card data, token and other relevant
details are stored in a secure mode by the
authorized card networks.
• Token requestor cannot store Primary
Account Number (PAN), i.e., card number,
or any other card detail.
• The customer may use any card registered with the token requestor app to complete a transaction, and
they are also free to set and change daily and per-transaction quotas for tokenized card transactions.
• Tokens will also be a 16-digit number but consumers do not have to remember these.
• Merchants need to create a token reference number so that fraud could be detected and eliminated in
the specified time.
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Benefits-
• Safer-Since the actual card data are not given to the merchant during transaction processing, tokenized
card transactions are regarded to be safer.
• Speed-Aids merchants in delivering a consistent user experience and higher transaction approval rates
with speed and security.
• Consumer experience-Lowers hassle in the checkout process as consumers will no longer be required to
repeatedly enter their card information once a token has been issued.
• Innovation- along with UPI, it is inculcating advanced innovation in payment system providing impetus to
digital India.
Challenges-
• Inadequate user awareness
• Apprehensions that it may reduce online card payments and may give fillip to wallet transactions.
• Major hit on the provisions of instant pay outs and cashback given in credit card transactions.
Conclusion- In India, tokenization is a fundamental shift that requires all the stakeholders in the payment
ecosystem – acquirers, issuers, card networks, banks, and fintech’s, among others – to do their part to help
ensure a secure digital payment environment.
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4. Fiscal Policies
4. Fiscal Policies
Asset Monetization
• Asset monetisation is the process of creating new sources of revenue for the government and its entities
by unlocking the economic value of unutilised or underutilized public assets.
• A public asset can be any property owned by a public body, roads, airports, railways, stations, pipelines,
mobile towers, transmission lines, etc., or even land that remains unutilized.
• As a concept, asset monetization implies offering public infrastructure to the institutional investors or
private sector through structured mechanisms.
• In India, the idea of asset monetisation was first suggested by a committee led by economist Vijay
Kelkar in 2012 on the roadmap for fiscal consolidation. The committee had recommended that the
government should start monetisation to raise resources for further development and financing
infrastructure needs.
Asset Monetization is not same as Privatization:

• Monetization is different from ‘privatization’, in fact, it signifies ‘structured partnerships’ with the private
sector under certain contractual frameworks.
• Asset monetization has two important motives:
o Firstly, it unlocks value from the public investment in infrastructure, and secondly, it utilises
productivity in the private sector.
o Asset monetization aims to tap the private sector investment for new infrastructure creation.
Objectives of Asset Monetization: Benefits of asset monetisation
• Unlock the value of the unused public • Utilisation of assets for beneficial purposes,
infrastructure PSUs could use the revenue for reinvestment
• Taps private sector efficiency in resource and modernisation and trim their market
utilisation borrowings, saves up the maintenance cost,
• New source of revenue Promote balanced regional development,
Private industrial expansion
Challenges
• Administrative issues: Asset register not well maintained, Lack of proper land titling, Delayed clearances,
Lack of inter departmental coordination and Corruption and political influence.
• Difficult to assess the real value of the assets,
• Lack of independent regulator,
• Ensuring accountability of private sector for citizens as India is a welfare nation
• Inefficient dispute resolution mechanism,
• Federal issues- taking states into confidence.
National Monetisation pipeline

National Monetisation pipeline has been introduced as a part of Union Budget 2021-22 to evolve a road map
for monetisation of core assets.
• NMP is a roadmap for identifying potential monetization- Ready projects across various infrastructure
sectors.
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• Strategic Objective - To unlock value in brownfield public sector projects by tapping private sector
capital and efficiencies, transferring to them revenue rights but not ownership in the projects, and using
the funds so generated for greenfield infrastructure creation across India.
• Assets to be monetized - Core assets of the Central Government
- Monetisation through disinvestment & monetisation of non-core assets are not included under
NMP.
• Framework:
- De-risked assets - These brownfield assets have been de-risked
Core Assets - Assets which are
from execution risks & have stable revenue streams. central to the business objectives of a
- Monetization of ‘Rights’ NOT ‘ownership’ public entity/ statutory body/
✓ Primary ownership continues to be with the Govt. Government body and are used for
✓ The private players will be taking on the operational risks delivering infrastructure services to
and the assets will be handed back to the public authority the public/ users are considered as
at the end of transaction life (Thus, it is not a case of Core Assets.
Privatization). - Monetisation of Core Asset -
• Period of NMP: Co-terminus with National Infrastructure steered by NITI Aayog
Pipeline (NIP) – 4 years (2022-25). Non-Core Assets - The other assets,
• 5 sectors (by estimated value) capture ~83% of the aggregate which generally include land parcels,
pipeline value, including Roads (27%) followed by Railways real estate, and buildings.
(25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%). - Monetisation of non-Core asset
• Instruments to be used in roll out of NMP: – to be steered by National Land
- Direct contractual instruments such as public private Monetisation Corporation
partnership concessions. (NLMC) – [read ahead]
- Capital market instruments such as InvIT or REIT.
• Implementation & Monitoring Mechanism: An empowered Core Group of Secretaries on Asset
Monetization (CGAM) under the chairmanship of Cabinet Secretary has been constituted.
- Real time monitoring through the asset monetisation dashboard.
• The top 5 sectors (by estimated value) capture ~83% of the aggregate pipeline value. These top 5
sectors include: Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and
Telecom (6%).
Key Objectives of NMP are

1. Serve as a medium-term roadmap for the line ministries and agencies.
2. Provide medium-term visibility to investors on infrastructure assets pipeline.
3. Provide a platform for ministries to track asset performance.
4. Bring in greater efficiency and transparency in public assets management
Challenges
Structural challenges- Regulatory challenges Financial challenges

• Administrative inefficiencies, • Lack of independent • Lack of identifiable revenue
bureaucratic delay, huge paper sectoral regulator streams in assets.
work burden. • Chances of corruption, • Issues regarding making the
• Legal uncertainty regarding land favouritism etc asset package attractive to
titling, measurement of correct investors.
value of asset. • Private sector dominance-
• Inefficient Dispute redressal higher consumer prices for
mechanism. goods and services.
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Way ahead:
⚫ Former NITI Aayog CEO recommends focusing on three areas to boost monetization. First,
implementation must be relentless. Second, brownfield models and frameworks will speed things up.
Finally, driving states and collaborating on structured monetisation.
⚫ According to experts, if the government achieves to collect the targeted money, then NMP will be
marked among the biggest and boldest reforms initiated in the infrastructure sector of all times.
⚫ This initiative aims to enable "Infrastructure Creation through Monetisation," where the public and
private sectors work together to boost socio-economic growth and quality of life.
FDI Policy in India
Foreign Direct Investment means investment through capital instruments by a person resident outside India
in an unlisted Indian company; or in ten per cent or more of the post issue paid-up equity capital on a fully
diluted basis of a listed Indian company.
FDI routes in India:

⚫ Foreign Direct Investments (FDI) can be made under two routes—Automatic Route and Government
Route.
o Under the Automatic Route, the foreign investor or the Indian company does not require any
approval from RBI or the Government of India for the investment.
o Under the Government Route, prior approval of the Government of India, Ministry of Finance,
Foreign Investment Promotion Board (FIPB) is required.
Evolution of FDI Policy in India since 1991:

Liberalization Phase (1991-2000)
⚫ In 1991, up to 51 % FDI was allowed in the automatic route in 35 high priority industries requiring
large investments and technology.
⚫ Foreign Investment promotion Board was constituted for processing FDI proposals.
Globalization Phase: 2000-2014:
⚫ In 2000, except for small negative list all activities were placed under automatic route.
⚫ Consolidation of existing FDI regulations to a single document for ease of reference.
Radical Liberalization: since 2014
⚫ Make in India Consolidated FDI policy 2016
⚫ FDI in pharma sector up to 74% under automatic route.
Current Policy: The currently effective Consolidated FDI Policy Circular was issued by Department for
Promotion of Industry and Internal Trade (DPIIT) on October 15, 2020.
⚫ Under the new policy, up to 74% of FDI under Automatic is allowed in the defence sector.
⚫ 100% FDI is allowed in Exploration activities of oil and natural gas fields
Foreign Trade Policy, 2023

Aims at:
• Enhance competitiveness of Indian exports in the global market (India’s overall exports are about to
reach US $760 billion in 2023).
• Promote sustainable development of the country’s trade sector.
• Make India a leader in specific sectors such as pharmaceuticals, engineering goods, and textiles.
• Promote a digital economy and leverage technology to enhance the competitiveness of Indian
exports.
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Four Pillars of FTP – 2023

• From incentive to Tax Remission
• Greater Trade Facilitation through technology, automation and continuous process re-engineering
• Export promotion through collaboration, exporters, states, districts
• Focus on emerging areas such as e-Commerce Exports, Developing Districts as Export Hubs,
Streamlining SCOMET Policy
Status of FDI in India:

⚫ Foreign Direct Investment (FDI) is considered as a major source of non-debt financial resource for the
economic development. FDI flows into India have grown consistently since liberalization.
⚫ The total FDI inflows received in the last 9 years (April 2014- March 2023) was $ 595.25 bn which
amounts to nearly 65% of total FDI inflow in last 23 years.
⚫ According to the World Investment Report 2022, India was ranked eighth among the world's major FDI
recipients in 2020.
⚫ Mauritius (26%), Singapore (23%), USA (9%), Netherland (7%) and Japan (6%) emerge as top 5
countries for FDI equity inflows into India FY 2022-23.
⚫ Top 5 sectors receiving highest FDI Equity Inflow during FY 2022-23 are Services Sector (16%), Computer
Software & Hardware (15%), Trading (6%), Telecommunications (6%) and Automobile Industry (5%).
Issues:
⚫ Fluctuations in the flow of FDI negatively affects the industry: For instance, FDI inflows fell by 16% in
during 2022 due to weak global economic situation. This is the first such fall in a decade.
⚫ The UNCTAD’s Global Investment report has warned that investor uncertainty and risk aversity
could put significant downward pressure on global FDI.
⚫ Regional Disparity: FDI flow is mostly concentrated in few developed states of India. For instance, major
recipient states of FDI Equity inflow are Karnataka (53%), Delhi (17%) and Maharashtra (17%) during FY
2021-22.
⚫ Sectoral concentration: For e.g. Computer Software & Hardware’ has emerged as the top recipient
sector of FDI Equity inflow during FY 2021-22 with around 25% share followed by Services Sector (12%)
and Automobile Industry (12%) respectively.
⚫ Tax haven like Mauritius as top FDI sources.
Current initiatives promoting FDI in India:
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Way forward:
⚫ As per UNCTAD’s World Investment report despite slowdown in FDI flows India remains an attractive
market for the FDI.
⚫ According to Deloitte, India must enact more reforms to ensure FDI flows not only continue but also play
a meaningful role in attaining the US$5 trillion economy target.
⚫ India must continue to enact reforms and initiatives that drive improvement, building confidence in and
enhancing the competitiveness of India’s economy.
⚫ FDI In Manufacturing: To endure higher gross capital formation India needs to increase FDI flows in the
manufacturing sector.
⚫ Need for Diversification of Source: India needs to diversify its sources of foreign capital besides current
partners the US and the UK. Diversification of source of FDI will provide a broad-based networking and
access to technology and help to mitigating geopolitical risks.
Disinvestment
Disinvestment or divestment is when the government sells its assets or a subsidiary, such as a Central or
State public sector enterprise.
• Minority disinvestment, majority disinvestment, and complete privatisation are the three main
approaches to disinvestment.
• On fruition of minority disinvestment, the government retains a majority in the company,
typically greater than 51%, thus ensuring control over the management.
• In the case of majority divestment, the government hands over control to the acquiring entity
but retains some stake in the enterprise.
• In complete privatisation, 100% control of the company is passed on to the buyer.
• Strategic disinvestment- giving up majority stake as well as management control to the private
sector.
• The Union Finance Ministry has a separate department for undertaking disinvestment-related
procedures called the Department of Investment and Public Asset Management (DIPAM).
Evolution of disinvestment policy in India:

Period from 1991-92 - 2000-01:
⚫ The idea of disinvestment was first introduced in the 1991 interim Budget by the then Finance
Minister as the country was going through LPG reforms.
Period from 2001-02 - 2003-04:
⚫ This was the period when maximum number of disinvestments took place.
⚫ These took the shape of either strategic sales (involving an effective transfer of control and
management to a private entity) or an offer for sale to the public, with the government still retaining
control of the management.
Period from 2004-05 - 2008-09:
⚫ The issue of PSU disinvestment remained a contentious issue through this period.
Period from 2009-10 to 2020-21:
⚫ A stable government and improved stock market conditions initially led to a renewed thrust on
disinvestments.
⚫ This period saw disinvestments in companies such as NHPC Ltd., Oil India Ltd., NTPC Ltd., REC, NMDC,
SJVN, EIL, CIL, MOIL, etc. through public offers.
Objectives of Disinvestment:
⚫ Improve corporate governance.
⚫ Realize the productive potential of CPSEs through improved efficiency and profitability.
⚫ CPSE's wealth should rest in the hands of the people.
⚫ Raise resources for the Government.
38
Current Status and Targets of Disinvestment:
Strategic Disinvestment Policy 2021:

Fulfilling the governments’ commitment under the
Atma Nirbhar Package of coming up with a policy
of strategic disinvestment of public sector
enterprises,
1. Existing CPSEs, Public Sector Banks and Public
Sector Insurance Companies to be covered
under it.
2. Two-fold classification of Sectors to be
disinvested:
(a) Strategic Sector: Bare minimum presence
of the public sector enterprises and remaining
to be privatized or merged or subsidiarized
with other CPSEs or closed.
Current Disinvestment Targets

⚫ In the Union Budget for 2023-24, the government has set a disinvestment target of ₹51,000 crore, the
lowest target in seven years.
Issues and challenges:

According to Finance Ministry in its annual report that stake
sale process in FY 23 were stalled by global as well as
domestic issues
⚫ Global Challenges: COVID-19 pandemic seriously
impacted transactions in 2020 and 2021, followed by
the Ukraine conflict last year, which hurt minority as
well as strategic stake sales.
⚫ Domestic Issues: Strategic disinvestment transactions
have to deal with matters such as resolving land title,
lease and land use issues with State government
authorities, disposal of non-core assets, excess
manpower and labour unions, protection of process
and functionaries etc.
⚫ Frequent use of Exchange Trade Funds: Between
2016-17 and 2019-20, the government had raised almost ₹99,000 crore from ETFs with underlying
shares of CPSEs.
⚫ Lack of clarity in policies: For instance, the privatization of BPCL in 2022 was stalled after two bidders
walked out over issues such as lack of clarity in fuel pricing.
Conclusion: Divestment should not be viewed as a short-term budgetary solution but rather as a long-term
strategy to increase India's output of products and services. The regulatory structure that supports efficient
market conditions needs to be enhanced by the government.
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5. Agriculture in India
5. Agriculture in India
India is a global agricultural powerhouse. It is the world’s largest producer of milk, pulses, and spices, and has
the world’s largest cattle herd (buffaloes), as well as the largest area under wheat, rice and cotton. It
manages to handle 65% rainfed area effectively.
It is the second largest producer of rice, wheat, cotton, sugarcane, farmed fish, sheep & goat meat, fruit,
vegetables and tea.
Current scenario of agriculture

• Over 70 per cent of the rural households depend on agriculture. It contributes about 18.8% to the
total GDP.
• Accounting for 18.8% (2021-22) in Gross Value Added (GVA) of the country registering a growth of 3.6%
in 2020-21 and 3.9% in 2021-22.
• Indian agriculture sector has been growing at an average annual growth rate of 4.6 per cent during the
last six years.
• The NSSO's latest annual Periodic Labour Force Survey (PLFS) report for 2021-22 (July-June) shows the
farm sector's share in the country's employed labour force at 45.5%.
• Animal husbandry output constitutes about 30% (202021)of the country’s agricultural output. The
contribution of this sector to the total GDP during 2006-07 was 5.26%.
• Feminisation of agriculture: In India, 85% of rural women are engaged in agriculture, yet only about
13% own land. The situation is worse in Bihar with only 7% women having land rights.
Major Crops and Cropping Pattern in India

India is a country with an agrarian economy, with over 54% of the country’s land classified as arable and
agriculture industry comprising half of labour market. India's climate varies from humid and dry tropical in
the south to temperate alpine in the northern reaches. This diverse climate supports a variety of crops.
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Major crops in India
CROPS CHARACTERISTICS CLIMATE Issues

RICE India 2nd largest producer in It is Kharif crop which Loss in the productivity due
World. requires high temperature to repeated areas under
West Bengal is the largest (above 25) and high the same crops.
producer in India. humidity with annual Depletion of nutrients from
Other major producers are Uttar rainfall above 100 cm soils .
Pradesh and Punjab.
WHEAT India is the 2nd largest Wheat Rabi crop requires a cool Imbalance in the use of
producer. growing season and 50- fertilizers especially
Important Wheat growing 60cm rainfall nitrogen fertilizers.
regions – Ganga – Satluj in North Low water use efficiency,
West and black soil region of problems of soil
Deccan degradation.
Second most important cereal
crop
SUGARCANE Second largest producer after It is tropical as well Depletion of Ground Water
Brazil. subtropical crop grows well resources, soil degradation
Major producers arehot and humid climate
Maharashtra, Uttar Pradesh, with temperature of 21-27
Karnataka,Tamil Nadu and annual rainfall
between 75-100cm.
Cotton India got 1st place in the world It is tropical crop grows Heavy use of pesticides,
in cotton acreage with 120.69 well in hot and humid pest infestation, rising cost
Lakh Hectares area under cotton climate with temp of 21-27 of seeds, farmer
Cultivation. ℃ and annual rainfall indebtedness-suicides.
Gujarat is currently the leading between 75-100cm.
producer of cotton in India
followed by Maharashtra.
MAIZE Both used as food and fodder. Kharif crop which requires High input cost, pest
Third most important food crops temp between 21-27 ℃ infestation e.g. Fall Army
after rice and wheat. and grows well in old Worm
Andhra Pradesh (20.9 %), alluvial soil. Poor weed management.
Karnataka and Rajasthan are
major producers
MILLETS India is the largest producer of They are rainfed crops Droughts and erratic
(coarse millets in the world. grown mostly in moist rainfall
grains) Jowar, Bajra and Ragi are areas which hardly needs Lack of irrigation facilities
important millets. irrigation. Attack of pest and
Major producers: Rajasthan, diseases, low price
Karnataka, Maharashtra, Uttar realization by famers
Pradesh
PULSES India is the largest producer, Grown both as kharif and
importer and consumer of rabi crop.
pulses. Needs less moisture and Lack of high yielding
Rajasthan, Madhya Pradesh, survives even in dry varieties of seeds, attack of
Maharashtra are the major condition. pests and diseases,
producers. Arhar (Tur), Urad unfavorable prices
(Blackgram) and Moong
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(Greengram) are major produce

of pulses in India.
OILSEEDS Major oil seeds are Mustard, Almost 72% of the total
soybean, sesamum. oilseeds area is confined to Soil acidity problem,
India is the 4th largest producer rainfed farming cultivated particularly in North east,
in the World. mostly by marginal and lack of mechanization of
small farmers. operations
Cropping Pattern
Cropping Pattern
Cropping Pattern: Cropping pattern is defined as spatial representation of crops rotations, or the
proportion of land under cultivation of different crops at different times of the year. Cropping pattern
mainly determined by the rainfall, temperature, climate and soil types.
Cropping Pattern and Cropping System

• Cropping pattern: It is the proportion of area under various crops at a point of time in a unit area. It
includes yearly sequence and spatial arrangement of crops and fallow on a given area.
• Cropping system: Cropping pattern and its management to derive benefits from a given resource base
under specific environmental conditions is called cropping system. It is location specific, so it changes
when place and environment are changed.
Types of Cropping system
• Mono cropping- It is a system of growing the same crop or a single crop on the same land year after
year. It is also called monoculture or single cropping. Cropping intensity is thus always 100%.
• Multiple cropping: - It is defined as cultivation of two or more crops on the same field in a year without
deteriorating soil fertility.
• Inter-cropping: It is the practice of growing two or more crops simultaneously on the same piece of land
in a fixed ratio or with a definite row arrangement, e.g., Wheat + mustard = 9:1
• Sequence/Sequential cropping: It can be defined as growing of two or more crops in quick succession on
the same piece of land in a farming year.
• Relay cropping: Growing two or more crops simultaneously during the part of life cycle of each.
Succeeding crop is planted before the harvesting of preceding crop.
Factors affecting cropping pattern
Physical factors: Soil, Climatic, Temperature
Technological factors
• Irrigation facilities: For Ex. Punjab and Haryana emerged as rice growing states due to irrigation facilities
• Quality seed: For Ex. Bt seeds in Vidarbha altered cropping pattern towards cotton-based economy.
• Green house technology: Vegetable based and horticulture based cropping pattern.
• Processing technology: Ketchup industry in Maharashtra, Tomato cropping.
• Storage technology: More toward perishable crops like flavour savour tomato.
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Economic factors
⚫ Availability of credit by institutional and non-institutional factors. Ex., Sugarcane based in western
Maharashtra.
⚫ Landholdings size of land of farmers helps in choice and cropping patterns.
⚫ Inputs- Ex., credit and loans for input directly affect area under different crops.
Government policies
⚫ Minimum Support Price (MSP): For Ex. higher MSP for rice and Wheat have resulted in higher area
under cultivation of these crops.
⚫ Subsidies on farm inputs eg. subsidies on power leads to adoption of water intensive crops like
sugarcane.
⚫ Export import policies of government Ex. Area under onion and sunflower in 2022 got affected by
government policies
Social factors: Food habits, For eg,

preference of Wheat/rice over
traditional millets in India has
resulted in decrease in area under
Millets cultivation.
Issues with the Current Cropping

Patterns
Refer diagram →→→
Remedies to current issues in

cropping pattern:
1. Crop diversification
Crop diversification is a strategy
applied to grow more diverse
crops from shrinking land
resources with an increase in
productivity in the same arable land.
Approaches
⚫ Vertical Crop Diversification: Vertical crop diversification stresses upon the development of allied
sectors and shift of burden from cultivation to allied activities e.g., animal husbandry, horticulture,
floriculture, food and fruit processing etc.
⚫ Horizontal Crop Diversification: It stands for
inclusion of more and varied crops in the cropping
system, using multiple cropping techniques, rather
than concentrating on repetition of few crops.
Measures of Crop diversification
Benefits
• Maximisation of income- 84% of farmers in India
are small and marginal. With small landholding
profit maximisation can be possible with crop
diversification.
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• Mitigate natural calamities – Mixed cropping is useful to fight sudden erratic rainfall, increased
temperature, climate change etc.
• Increase economic stability- Crop subsidisation with more economical crops helps farmers in
maintaining economic stability of farming system.
• Environment conservation: Iimproves soil fertility, minimizes water stress, decreases soil pollution
leading to reduced chances of pest attack.
• Food and nutritional security as it enables farmers to grow surplus produce.
Challenges
• Overuse of resources: like land, water may amplify resource consumption degrading the sustainability of
agriculture.
• Over-dependence on Monsoon: Around 55% of Cultivable Land is Rain-fed with heavy dependence on
monsoon resulting in adverse impact on crops as some crops may not be able to survive in the prevailing
environmental conditions.
• Inadequate infrastructure for improving cropping pattern such as road, market, supply chain, post-
harvest handling technology ,irrigation practice.
• Lack of technology: Inadequate trained human resources, modern technology & mechanization of
agriculture, illiteracy of farmers etc.
• Research: Climate specific varieties, drought resistant varieties of different crops need to be done.
• Linkages: Inadequate forward and backward linkages due to inadequate infrastructure and modern
mechanisms.
Govt measures for encouraging crop diversification:
Conclusion: Crop diversification is demand driven, need based situation specific and national goal seeking
dynamic and iterative concepts that incorporate spatial, temporal and value addition and resource
complementary techniques. That will ensure food security of Indian and provide sustainable solutions for
agricultural problems.
Northward shift of sugarcane industries

Six sugarcane-producing northern Indian states saw a 42 per cent increase in their output value between
2011 and 2020 while that of five states from the south declined 32.4 per cent during the same period,
according to the latest National Statistical Office (NSO) report.
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Reasons of northward shift

⚫ Climate: With the changing climate patterns, the traditional sugarcane-growing regions in the south are
becoming drier and hotter, making it difficult to grow sugarcane.
⚫ Soil: The northern regions have fertile alluvial soils that are suitable for sugarcane cultivation.
⚫ Water availability: Sugarcane require huge quantities of water for growth, and the northern regions
have better irrigation facilities compared to the southern regions.
⚫ Government policies: The government has been promoting sugarcane cultivation in the northern
regions by providing subsidies and other incentives to farmers.
⚫ Market demand: The demand for sugarcane is increasing due to the growth of the sugar industry in the
northern regions.
Impact of northward shift

• Change in cropping pattern: Rice based to wheat based
• Soil pollution: Degradation of
• Ground water depletion; EX., PUNJAB CASE
• Non judicious fertiliser use; EX., HARYANA AND MADHYA PRADESH.
Government initiatives for Sugarcane farmers:

⚫ Fair and Remunerative Price (FRP): It is the minimum price that the sugar mills have to pay to farmers.
It is determined based on recommendations of the Commission for Agricultural Costs and Prices (CACP)
and after consultation with State Governments and other stakeholders.
⚫ Ratooning: In this method, during the first harvest, the sugarcane is cut, leaving a little bit of the stalk in
the soil with the roots. The stem soon puts out new shoots or ratoons.
⚫ Sustainable sugarcane initiative: It is an innovative credit-plus approach of NABARD, which helps
integrate the twin drip irrigation system with resource-efficient sugarcane agricultural practices.
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Climate Smart Agriculture

⚫ An integrated approach to managing landscapes to mitigate climate change impacts, adapt to climate
variability, and promote sustainable development.
⚫ Encompasses range of techniques and approaches that optimize productivity, resilience, and
sustainability of agricultural systems in the face of climate change.
⚫ It pursues the triple objectives of sustainably increasing productivity and incomes, adapting to climate
change and reducing greenhouse gas emissions where possible; however, it does not necessarily result
into “triple wins” at every location.
3 Pillars of CSA
Sustainable agriculture: Climate adaptation Climate mitigation
• This involves the use of • This involves the use of • This involves the use of
sustainable farming practices strategies to increase the strategies to reduce
such as conservation tillage, resilience of agricultural greenhouse gas emissions
crop rotation, intercropping, systems to climate change. from agriculture.
agroforestry, and integrated • These include the use of • These include the use of
pest management. drought-resistant crops, renewable energy sources,
• These practices help to improved water management such as solar and wind
conserve soil moisture, reduce techniques, and the power, and the adoption of
soil erosion, and improve soil development of early practices that reduce
fertility, which enhances warning systems for extreme emissions from livestock and
agricultural productivity. weather events. fertilizer use.
Overall, CSA aims to promote sustainable and resilient agricultural systems that contribute to food security
and mitigate climate change.
Significance of CSA
Agricultural Ecological Economical
• Increases resilience for climate • Reduces chances of soil pollution • Increase productivity
tragedy • Reduces eutrophication • Stabilize farm income
• Increased productivity • Reduces land degradation • Increases chances of
• Reduces soil pollution • Increases soil microbial capacity. employment.
• Increases resource use • Reduces climate impact on • Allied technologies
efficiency & support agriculture increases economic
diversification values.
Government initiatives for promoting CSA

The Indian government has launched several initiatives to promote climate smart agriculture in the country.
1. National Innovation on Climate Resilient Agriculture (NICRA): To enhance the resilience of agriculture to
climatic variability through development and application of improved production and risk management
technologies.
2. Pradhan Mantri Fasal Bima Yojana (PMFBY): For reducing vulnerability to climate-related risks.
3. Soil Health Card Scheme: to promote sustainable agriculture practices by providing farmers with
information on soil health and nutrient management.
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4. National Mission for Sustainable Agriculture (NMSA) is a flagship program that aims to promote
climate-resilient farming practices such as conservation agriculture, agroforestry, and integrated farming
systems.
National Innovations in Climate Resilient Agriculture (NICRA)
• It is a program launched by the Indian government in 2011 to enhance the resilience of Indian
agriculture to climate change.
• Aim- The program aims to address the challenges of climate change by promoting sustainable and
climate-smart agricultural practices, developing technologies and tools for climate risk management.
• It is implemented by ICAR in collaboration with state agricultural universities, research institutions,
and other stakeholders.
• Objectives:
⚫ To enhance the resilience of Indian agriculture which covers crops, livestock and fisheries
⚫ To demonstrate site-specific technology packages on farmers’ fields
⚫ To enhance the capacity building of scientists and other stakeholders in climate-resilient
agricultural research and its application
Key facts
• An increase in temperature by 1.5° C and decrease in the precipitation of 2 mm, reduces rice yield by 3
to 15 percent.
• While global emissions from deforestation dropped, emissions from forest degradation (logging, fires
etc) increased from 0.4 to 1.0 Gt CO2 per year between 1990 and 2015.
Horticulture sector
It is the science of the development, sustainable production, marketing and use of high-value, intensively
cultivated food, and ornamental plants.
Horticulture sector in India: Present Status

• It contributes about 35% to Agricultural GDP, from just 16% of the total cropped area, and supports 20%
of the agriculture labour force.
• Production has more than doubled from 146 million tonnes in 2001-02 to 340 mt in 2021-22.
• Significant Expansion in Acreage (18%) Vis A Vis Foodgrains (5%) – (2010 – 2015).
• Global Position - India is the 2nd largest producer of fruits and vegetables in the world (after China).
India has emerged as world leader in the production of a variety of fruits like mango, banana, guava,
papaya, etc.
Government Measures:
⚫ Mission for Integrated Development of Horticulture (MIDH): For holistic growth of the horticulture
sector covering fruits, vegetables, root & tuber crops, mushrooms, spices, flowers, aromatic plants,
coconut, cashew, cocoa and bamboo.
⚫ Institutional Support: National Horticulture Board (NHB), Coconut Development Board (CDB), Central
Institute for Horticulture (CIH), etc.
⚫ Rastriya Krishi Vikas Yojana supports horticulture activities.
⚫ Mission Organic Value Chain Development in North Eastern Region: Ginger, Turmeric, King Chilly,
Pineapple & Lemon are being exported from India to Swaziland, Australia, USA, UK & Dubai.
Challenges:
• Low Productivity - Due to small, segregated farms with low per-hectare yields, lack of access to quality
seed materials.
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• Multiplicity of Intermediaries leads to high consumer prices on one hand, and low-price realization by
farmers on the other.
• Distress Sale faced by excess production, and difficulty in access to markets produce to contain losses.
• High Post-harvest Losses - Due to perishable nature of the produce, lack of market support and paucity
of the post production infrastructure for distribution, storage and value-addition.
• Lack of institutional finance for investments in micro-irrigation systems, construction of green houses
and grading and packaging.
• Lack of private investment due to problem of land leasing & contract farming and cooperative farming.
• Impact on Exports – Low exportable surplus, poor quality produce, gap in market intelligence, high
tariff/non-tariff barrier etc. affect market access for export of horticultural commodities.
• Climate change – Drought, flood, high temperature, salinity and new pathogens.
• Marketing issues leading to fluctuations in prices (Cobweb phenomenon)
Way ahead:
• Ensuring availability of quality seeds/planting material for better quality and yield of produce.
• Strengthening of horticulture support industry like food processing, logistics, packaging, etc
• Diversification of horticultural crops along with other activities viz. bee keeping, backyard poultry etc.
• Popularisation of cooperative farming in horticultural crops for round the year supply.
• Infusion of recent Scientific Advances on Crop Production Technologies – to improve operational
efficiency and reduce costs ➔ Promote Technologies at grassroot level.
• Promote Sustainable farming practices such as organic farming, drip irrigation etc.
• Stable policy regime to prevent violent price fluctuations.
• Promotion of horti-tourism in states like J&K, HP, Uttarakhand, and north-eastern state
Conclusion: The development of horticulture sector in India holds importance in ensuring food and nutrition
security and doubling farmers’ incomes.
Millets
Millets, popularly called “mota anaj” in Hindi, are a collective group of small seeded annual grasses that are
grown as grain crops, primarily on marginal land in dry areas of temperate, subtropical, and tropical regions.
India has a rich tradition of consumption of millets.
Year 2023 marks the celebration of the Iinternational Year of Millets 2023. Recognizing the enormous
potential millets, which also aligns with several UN Sustainable Development Goals in terms of being climate
resilient, nutritious, and water efficient crops, the government of India has been prioritizing millets.
Types of millets
⚫ Major Millets- sorghum(jowar), pearl millet (bajra), finger millet (ragi/mandua)
⚫ Minor Millet- foxtail millet (kangani/kakun), proso millet (cheena), kodo millet,barnyard
⚫ Pseudo millet –Buckwheat (kuttu)and amaranth (chaulai)
Production of millets: Data

• India is the largest producer of millets as of 2021, with total share of 41% followed by Niger (12%) and
China (8%).
• India is poised to become the global hub for millets with a production of more than 170 lakh tn which
makes for more than 80% of the millets produced in India.
• Per capita availability of millets in 2021 was appx 12.3 kg of millets.
• India’s average yield of millets (1239 kg/ha) is also higher than global average yield of 1229 kg/ha.
• Rajasthan contributed to 36% of the total area for millet cultivation in India and production with 26%.
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Importance of millets
• Nutritional benefits –Storehouse of nutrition as they are good sources of calcium, zinc, magnesium,
phosphorus, copper, vitamins. They are gluten free and also considered good for celiac patients.
• Climate friendly crop- Millets are resilient to climate change as they are pest free, adapted to a wide
range of temperatures and moisture regimes.
• Low water footprints. Requiring minimum rainfall for even sustain in drought prone areas.
• Viable options for small farmers: Low investment needed for production of millets.
• Multiple uses - as Food, fodder and feed, biofuels etc. For eg. Jowar & Bajra based biofuel can help in
achieving target of 20% ethanol blending with petrol by 2025.
• Aligned with International commitment
• Focus on Millet production is in line with India’s commitment to SDG goals of eradication of hunger
& UN Decade of Action on Nutrition from 2016 to 2025.
Case study-
Popularising millets in Telangana
Komaram Bheem Asifabad is a tribal district under the project SAMPOORNA focused on ensuring the
availability of traditional and local food like millets. Under decentralized Millet Village Circular Economic
Model, millets are grown ,procured , processed, packaged and sold locally to villagers at cheaper price.
International year of millets

• The United Nations General Assembly has declared the year 2023 as a “International Year of Millets”.It
will help in creating awareness throughout the world about the significant role of millets in sustainable
agriculture and its benefit as smart food and superfood.
• IYM aims to contribute to the UN 2030 Agenda for sustainable Development ,particularly SDG 2 (zero
hunger)SDG 3(good health and wellbeing), SDG 8 (decent work and economic growth) SDG 2
(responsible consumption), SDG 13 (climate action) and SDG 15 (life on land).
Challenges to the Millet economy

• Reduced area under millet cultivation: Millet's area under cultivation decreased from 35 bn ha to 15 bn
ha.
• Unavailability of the market and very little share in the processing sector.
• Lower shelf life - Processed Millets (like millet flour) have poor shelf life due to its intrinsic enzyme
activity that causes rapid development of rancidity and bitterness.
• Consumer perception: Millets are increasingly seen as “poor person’s food”, thus, lower demand with
rise in incomes and urbanization (rice and wheat seen as ‘aspirational foods’).
- According to NSSO household consumption expenditure survey, less than 10% of rural and urban
households reported consumption of millets.
• Other Challenges - low remunerative prices, lack of input subsidies and MSP, yield variability, weak
supply chain linkages & marketing, subsidised supply of fine cereals PDS system etc.
Maharshi initiative (Millets and Other Ancient Grains Initiative)

In news- Recently G20 MACs meeting (meetings of agriculture chief scientists) 2023 in varanasi under India’s
presidency launch the MAHARSHI (Millets and Other Ancient Grains Initiative)
Objective-To promote research and awareness about agro-biodiversity, food security and nutrition in line
with the international year of millets 2023.
• MAHARSHI secretariats shall be housed at Indian Institute of Millets Research (IIMR), Hyderabad
with technical support from ICRISAT.
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Conclusion: Millet farming still needs ecosystem-level interventions. Millets promote women farmers and
their farming knowledge. Millets can be revived in India by educating farmers and the public about their
many benefits.
Jute sector
• India is the largest producer of jute followed by Bangladesh and China.
• According to the third advance estimates released by the Union ministry of agricultures and Farmers
welfare in May 2022, area under jute production has fallen by over 13% in the past decade.
• West Bengal leads in jute cultivation, along with Bihar, Assam, Orissa, Andhra Pradesh, Tripura, and
Meghalaya.
Issues in Jute sector of India

• Lower yields due to high production costs and insufficient capital supply. Average yield per hectare is 1.3
tonnes in India (Bangladesh - 1.62 tones, China- 1.78 tones, Taiwan - 2 tonnes).
• Competition from synthetic fibres (are cheaper, more durable, and easier to produce than jute).
• Iinfrastructural constraints related to retting, farm mechanisation, lack of availability of certified seeds
and varieties suitable for the country’s agro-climate.
• Other issues: Poor quality jute due to impacts of climate change, heavy reliance on monsoon, lack of
modernization in the sector, low labour productivity, fluctuations in demand etc.
Government initiatives
• ISAPM (Incentive scheme for acquisition of plants and machinery) for modernisation of technology in
the existing jute industry.
• JID (jute integrated development)- to provide basic and advanced training cum production centre
• JRMB (Jute raw material bank)- to supply raw jute materials to MSME units and artisans who are
engaged in producing jute.
• EMDA (Export market development assistance) – to register agri exports for participation in
international fairs.
• Central research institute for jute and allied sectors under ICAR developed a model resting tank with
slow moving water.
Way ahead
• Diversification: For eg, Jute can be popularized as an alternative to Plastic and innovating new products
such as Jute Geo Textiles made through special treatment & weaving processes.
• Modernization: This will require collaboration between the government, private sector, and
international organisations to provide funding and technical assistance.
• Sustainability: This includes reducing pesticide use, improving water management, and promoting
organic farming practices.
• Implementing recommendations of Tariff commission report to reduce the losses of the mill owners
and prevent their closure.
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Organic farming
Genetically Modified Crops

Recently the government had cleared the ‘environmental release’ of a genetically modified (GM) variety of
mustard, DMH-11, developed by the Centre for Genetic Manipulation of Crop Plants (CGMCP) at Delhi
University.
GM CROPS: Genetically modified organisms (GMOs) can be defined as organisms (i.e., plants, animals or
microorganisms) in which the genetic material (DNA) has been altered in a way that does not occur naturally
by mating and/or natural recombination. The technology is often called “modern biotechnology” or “gene
technology”.
GM crops in India
• GM crops in India: BT cotton, BT Brinjal, DMH 11 Mustard.
- Till now (except DMH-11) no GM food crop has ever been approved for commercial cultivation in
the country.
- BT cotton is the only genetically modified (GM) crop that has been approved for commercial
cultivation in India.
Regulation
• India is a signatory of Cartagena Protocol on Biosafety.
• Regulation for biotechnology products was started in 1982 and converted into the Department of
Biotechnology (DBT) under the Ministry of Science and Technology in 1986.
• MoEF drafted and notified ‘the rules for the manufacture, use, import, export and storage of hazardous
microorganisms, genetically engineered organisms or cells in 1989.
• The Genetic Engineering Appraisal Committee (GEAC) is the highest body constituted in the Ministry of
Environment, Forest and Climate Change under the Environment Protection Act, 1986.
ADVANTAGES OF GM CROPS CHALLENGES ASSOCIATED WITH GM CROPS

• Climate change resistant: GM crops are • Health Concerns: Various studies have shown relation
disease and drought resistant plants that between GM crops and birth defects, cancers, kidney
require fewer environmental resources injury, diabetes, autism, and Alzheimer etc.
(such as water and fertilizer). • Antibiotic Resistance: Incorporation with antibiotic-
• Faster Growth & Less resources: Less use resistant genes to make crops grow stronger might
of pesticides aided with faster growing contribute to developing antibiotic-resistant bacteria.
plants and animals. • Reduction in Diversity: Can decrease species diversity
• Higher Production: Increased supply of by harming insects that are not the intended target
food with reduced cost and longer shelf leading to destruction of that particular insect species
life. DMH-11 has an average of 20-25% • Violation of Natural Law: Mixing animal genes in
more yield than the currently used plants is against the natural order.
mustard seeds. • Allergic Reactions: There is a concern that GM Crops
• Enhanced Quality: Food with more might play a part in increasing allergic reactions.
desirable traits and high nutritional value, • No concrete evidence of higher productivity: Many
such as potatoes that produce less of a food analysts raise the issue of claim over higher
cancer-causing substance when fried. productivity of GM crops.
• Medicinal Benefits: Medicinal foods that • Monopoly of seed manufacturers: In case of BT
could be used as vaccines or other cotton, Monsanto has created monopoly control over
medicines. the seed market.
• Longer self-life: And hence less wastage.
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Conclusion: "Strengthening of plant breeding programmes including the use of new genetic technologies
such as GE technology is important for meeting emerging challenges in Indian agriculture and ensuring food
security while reducing foreign dependency
Natural Farming
PM Modi bats for natural farming, calls it basis for economic success, he said the mass movement to adopt
natural farming will be widely successful and the sooner farmers join this change, the more they will reap its
benefits
Understanding the concept of natural farming:

• Natural Farming is a chemical-free farming system rooted in Indian tradition enriched with modern
understanding of ecology, resource recycling and on-farm resource optimization.
• It is considered as an agroecology based diversified farming system which integrates crops, trees and
livestock with functional biodiversity.
• It is roughly estimated that around 2.5 million farmers in India are already practicing regenerative
agriculture.
• In the next 5 years, it is expected to reach 20 lakh hectares- in any form of organic farming, including
natural farming, of which 12 lakh hectares are under Bhartiya Prakritik Krishi Paddati- NITI AAYOG
Benefits of natural farming

• Improved yield- As per a new study, Zero Budget Natural Farming (ZBNF) in Andhra Pradesh has led to
significantly higher crop yield compared to organic or conventional farming.
• Employment generation - Across the agricultural value chain, from production, distribution, and retail of
natural mixtures to market linkages for such produce.
• Environmental sustainability - Reduced chemical pollution, enhanced soil fertility and structure,
preservation of biodiversity, conservation of water resources.
• Healthier food - No pesticide residues, higher nutritional value, reduced risk of chemical exposure.
• Economic viability - Reduced input costs in the long term, strengthened resilience to market fluctuations,
improved farm profitability and sustainability.
• Climate change mitigation - Carbon sequestration, reduced greenhouse gas emissions, increased
resilience to climate variability.
• Social advantages - Community health and well-being, Farmer empowerment by increasing their self-
sufficiency and resilience, preserving traditional knowledge.
Issues involved with natural farming

⚫ Lack of scientific validation to support its effectiveness in improving crop yields and soil health.
⚫ Limited scalability: Natural farming practices require a high level of expertise and labor
⚫ Limited access to inputs such as cow dung, compost, and other organic materials required for natural
farming.
⚫ Lack of market demand: which may affect the profitability of farmers practicing this method.
⚫ Certification and Market Access - Meeting the certification requirements for organic farming,
compliance with strict standards, certification costs, and establishing market linkages.
⚫ Climate variability - Water scarcity, extreme weather events, and weather fluctuations, such as
droughts, floods, or extreme temperatures.
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Government initiatives
• Paramparagat Krishi Vikas Yojana (PKVY)- Under this scheme, financial assistance and training are provided
to farmers to convert their conventional farms into organic farms.
• Mission Organic Value Chain Development for North Eastern Region (MOVCD-NER): It provides support for
capacity building, input production, market development, and infrastructure development related to organic
farming.
• National Project on Organic Farming (NPOF): Aims to develop and implement organic farming models,
provide training and technical support, create market linkages for organic produce, and promote organic
certification.
• Promotion of Alternative Nutritious And Agriculture Management (PM-PRANAM) scheme: Aims to check
soil degradation due to excessive use of chemical soil nutrients and also to reduce the rising fertiliser
subsidy.
• Bhartiya Prakritik Krishi Paddati (BPKP), a subscheme under PKVY, was launched in 2021- to promote
natural farming including Zero-Budget Natural Farming.
Zero budget natural farming

⚫ Zero budget natural farming (ZBNF) is a farming method that aims to eliminate the use of synthetic
inputs such as fertilizers and pesticides, and instead relies on natural processes such as crop rotations,
intercropping, and composting.
⚫ It was originally promoted by Maharashtrian agriculturist Subhash Palekar, who developed it in the
mid-1990s as an alternative to the Green Revolution.
⚫ The government has launched a national program to promote ZBNF, with a target of converting 10
million hectares of farmland to this method by 2025.
Pillars of ZBNF
⚫ Jeevamrutha/jeevamrutha
⚫ Bijamrita/beejamrutha
⚫ Acchadana – mulching
⚫ Whapasa – moisture
Challenges in implementation of ZBNF-

⚫ Lack of proper training and capacity
building programs for farmers to learn the
principles and techniques of ZBNF.
⚫ Limited access to organized markets and fair pricing mechanisms for ZBNF produce, making it difficult
for farmers to sell their products at competitive prices.
⚫ Inadequate availability of essential infrastructure such as storage facilities, processing units, and
transportation networks, which affects the post-harvest management of ZBNF crops.
⚫ Challenges in scaling up ZBNF practices to larger agricultural landscapes, as it requires coordination
among multiple stakeholders and sustained efforts.
⚫ Lack of research and development - many of private investment are not ready to invest in natural
farming due to output constraints.
Successes of ZBNF:
⚫ Andhra Pradesh: Farmers in villages like Palempalle have reported significant improvements in soil
fertility, reduced input costs, and increased crop yields.
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⚫ Karnataka: Farmers in village of Shiramagondanahalli have witnessed improved soil health, reduced
water consumption, and decreased dependency on external inputs. This has led to higher profits and
better quality produce.
⚫ Maharashtra: In the village of Niphad, farmers practicing ZBNF have seen a significant reduction in
production costs, increased crop yields and improved soil structure.
Organic Farming
Organic farming, sustainable agricultural system that uses ecologically based pest controls and biological
fertilizers derived largely from animal and plant wastes and nitrogen-fixing cover crops.
Organic farming in India: key facts

• India’s rank in terms of number of organic farmers- 1st (home to 30% of total organic producers in the
world); in terms of world’s organic agriculture land globally - 5th.
• Area under Cultivation: only 2% of net sown area.
• Top 3 states - MP, Maharashtra & Gujarat account for largest area organic certification; in terms of
production - MP, Maharashtra & Rajasthan.
• India’s exports of organic products- USD 1.04 billion during 2020-21.
• Sikkim became the first State in the world to become fully organic and other States including Tripura
and Uttarakhand have set similar targets.
Principles of organic farming
Similarities between organic

farming and natural farming
• Both focuses on using natural
inputs and processes to
improve soil health, reduce
environmental impact, and
produce healthy crops.
• Both avoid the use of synthetic
pesticides and fertilizers and
promote biodiversity by using
native crops and crop rotation.
• Both practices prioritize animal
welfare and aim to produce
food that is free from harmful chemicals.
Difference between organic farming and natural farming
Organic farming Natural farming
Organic fertilizers and manures, such as compost, Natural farming does not use chemical or organic
vermicompost, and cow dung manure, are fertilizers on the soil. In reality, no additional nutrients
utilized and applied to farmlands in organic are put into the soil or given to the plants
farming.
Basic agro practices like ploughing, tilling, No ploughing, tilling and weeding No pesticides, No
weeding is performed herbicides, No pruning
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Organic farming is still costlier due to the Natural agriculture is an extremely low-cost farming
necessity of bulk manures, and it has an method that completely Molds with local wildlife.
ecological footprint on the surrounding.
Challenges of Organic Farming:
Initiatives for the promotion of Organic Farming in India

• National Programme for Organic Production: APEDA, Ministry of Commerce & Industries, Government
of India is implementing the National Programme for Organic Production (NPOP).
• Participatory Guarantee Systems (PGS), as defined by IFOAM, are "locally focused quality assurance
systems.
o They certify producers based on active participation of stakeholders and are built on a foundation of
trust, social networks and knowledge exchange."
• Paramparagat Krishi Vikas Yojana:
o The scheme stresses on end-to-end support to organic
o Post-harvest management support including processing, packing, marketing is made an integral part
of these schemes to encourage organic farmers.
o Under PMKVY, farmers are provided financial assistance of Rs 50,000 per hectare/ 3 years, out of
which Rs. 31,000 (62%) is provided directly through DBT for inputs.
• Regulations for Organic Food Products, 2017 issued by FSSAI.
• Jaivik Bharat/PGS Green logo given by FSSAI to chemical free produce under transition to ‘organic’.
• Organic e-commerce platform www.jaivikkheti.in for directly linking farmers with retail & bulk buyers.
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Agriculture credit
Agriculture Credit in India
Agricultuiral credit scenario: Agricultural credit is critical input to agriculture and helps in creating
environment for the adoption of modern production technology and encouraging private investments on the
farms.
Trends and patterns in agriculture credit

⚫ During 2019-20, the institutional credit flow to the agriculture sector in India was to the tune of Rs.13.93
lakh crore against the target of Rs.13.50 lakh crore.
⚫ NABARD All India Rural Financial Inclusion Survey conducted for 2015-16 also reported that institutional
sources accounted for only 72 percent of the loans taken by an average farm household (HH), and the
remaining 28 percent came from non-institutional sources .
Problems with agriculture credit

⚫ Regional Disparities in Credit Dispensation: The share of Southern Region in the total agriculture credit
flow has increased continuously from the year 2016-17 whereas the share of other regions except
Eastern and Northeast Regions has decreased from 2013-14 to 2019-20.
⚫ Low coverage of Small and Marginal Farmers: Their share in loan disbursed by Commercial Banks is at a
lower level of around 47.3 per cent during 2019-2020.
⚫ Dependency on non-institutional credit- due to the complex and rigid process of the banking sector,
lack of collateral.
⚫ Diversion of loans to non-Agriculturalal purposes due to extra expenditure to other day to day
expenses.
⚫ Red Tapism: Credit institutions are still adopting cumbersome rules and formalities for advancing loan
to farmers which ultimately force the farmers to depend more on costly non-institutional sources of
credit.
Key govt initiatives

⚫ Kisan Credit Card Scheme: To provide adequate and timely credit support from the banking systems to
the farmers for their cultivation and other needs like- Post harvest expense; Produce marketing loan.
⚫ Modified Interest Subvention Scheme (MISS): Under this scheme, farmers are given KCC loan at
interest rate of 7% per annum for loans unto Rs 3 Lakhs.
⚫ Scheme for financing of Joint Liability Groups of Tenant Farmers: It was started by NABARD to give 100
percent refinance support to banks.
⚫ Priority Sector Lending: 18% of loans of commercial banks to agricultural sector.
Way forward
• Widen reach of agriculture credit- by digitization and updating land records, strong and federal
institution like GST for undermining process and implementation of reforms.
• Address regional disparity - by giving more focus and allocation to lagged states.
• Use of FPO and other initiatives to increase risk bearing ability of farmers.
• Credit for small and marginal farmers: It recommended that the lending target for small and marginal
farmers should be revised from the existing 8% to 10% with a roadmap of two years.
• Policies regarding loan waiving - the central and state governments should undertake a holistic review
of agricultural policies and input subsidies in order to improve the overall viability and sustainability of
agriculture.
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Primary agriculture credit societies

The Union Budget 2023-2024 has announced Rs 2,516 crore for computerisation of 63,000 Primary
Agricultural Credit Societies (PACS) over the next five years, with the aim of bringing greater transparency
and accountability in their operations and enabling them to diversify their business and undertaking more
activities.
What is PAC?
• A Primary Agricultural Credit Society (PACS) is a basic unit and the smallest cooperative credit
institution in India. The main aim of PACS is to provide short term and medium term loan to farmers for
various agriculture activities. It works at the grassroots gram Panchayat and village level.
• A report published by the Reserve Bank of India on December 27, 2022 stated the number of PACS at
1.02 lakh. At the end of March 2021, only 47,297 of them were in profit.
Importance of PAC’s:
• Customized Credit Products: They design and offer tailored credit products to address these needs
effectively. For instance, they provide crop loans to support seasonal agricultural operations etc.
• Cooperative Development: Farmers join together to form the PACS and participate in decision-making
→ enables farmers to negotiate better for credit, access markets collectively.
• Collective Bargaining Power: By pooling their resources and forming a cooperative, farmers can
negotiate better terms for credit, purchase agricultural inputs collectively at lower prices etc.
• Risk Mitigation: Provide insurance that safeguard farmers against natural calamities, crop failures etc.
For e.g., a PACS may offer crop insurance to protect farmers' investments in case of adverse weather etc.
• Economic Empowerment: Access to credit allows farmers to invest in farm inputs, modern technologies,
and infrastructure, improving agricultural productivity and income levels.
• Institutional Support: Cooperative banks, such as DCCBs and State Cooperative Banks provide
refinancing and credit linkage support to PACS.
Aim of Digitization of PAC’s:

• Financial inclusion and strengthening service delivery to farmers especially Small & Marginal Farmers.
• Improve Transparency- by seamless process of banking and lack of any form of fraud intermediaries.
• Increase efficiency, and will also facilitate the accounting of multipurpose PACS.
• It is nodal center for various programmes such as DBT, PM FBY, KCC etc which helps to improve
productive and efficient delivery of policies.
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Issues with PAC

• Politicization: Since PACS are cooperative bodies, political compulsions often trump financial discipline.
• Organizational Weakness:
o Inadequate coverage- The rural population covered as members is only 50% of all the rural
households.
o Weak units - inadequate memberships, Inadequacy of credit limits
• Dependence on Refinancing Institutions: Challenges faced by DCCBs and SCBs, such as financial
instability or delayed disbursal of funds, can have a direct impact on the functioning and credit
availability of PACS.
• Inadequate and Restricted Credit: First, the PACS provide credit to only a small proportion of the total
rural population. Second, societies do not provide full credit even for all productive agricultural
activities.
• Limited Outreach: There are still 1.6 lakh Panchayats without PACS, leaving some farmers without
access to formal credit facilities.
Digitization will help to create a strong base to PACS business integrating it with members and thus, become
a real institution of rural development.
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Urban Farming
Urban Agriculture
Also called urban gardening or urban farming, it refers to the practice of cultivating crops, raising animals, or
growing food in urban areas. It involves utilizing available urban spaces such as rooftops, balconies,
community gardens, and vacant lots for agricultural purposes.
Significance
⚫ Food security: Urban agriculture can help to increase
access to fresh, healthy, and locally-grown food.
⚫ Environmental benefits: Urban agriculture can help
to reduce greenhouse gas emissions by reducing the
distance that food needs to travel, helps to mitigate
the effects of urban heat islands.
⚫ Economic Benefits: By creating job opportunities,
supporting small-scale businesses, and stimulating
the local economy by supporting farmers' markets,
urban farm-to-table initiatives, and agri-tourism.
⚫ Health benefits: Urban agriculture can provide
opportunities for physical activity and can also help to promote healthy eating habits.
⚫ Resilience: Urban agriculture can help communities to become more resilient in the face of natural
disasters or other disruptions to the food system.
⚫ Urban Revitalization: By transforming vacant lots into productive and aesthetically pleasing areas. For
eg, Guerrilla gardening initiatives beautify abandoned urban spaces.
Challenges of urban agriculture

⚫ Land Availability and Cost: High land prices and competition for space make it difficult to establish
large-scale farms. For eg, Rising land prices, as seen in the
case of Vadicherla, Telangana, make urban agriculture New Delhi’s Citizen’s Policy For Urban
economically unviable. Agriculture
⚫ Purpose: To promote urban agriculture
⚫ Soil quality: Urban soils may be contaminated with
pollutants, making it difficult to grow healthy crops in the city of Delhi.
⚫ Scope: Applies to all urban agriculture
without proper remediation.
⚫ Access to resources: Access to resources such as water, activities within the city of Delhi like
seeds, and tools, which may be difficult to obtain in urban rooftop gardens, community gardens,
areas. school gardens, and commercial farms.
⚫ Enforcement: Through a combination
⚫ Zoning and regulatory challenges: Urban agriculture may
face zoning and regulatory challenges, such as restrictions of education, outreach, and
on land use or limitations on the sale of produce. enforcement actions.
⚫ Lack of knowledge and skills: Many urban residents may
lack the knowledge and skills needed to start and maintain an urban farm.
⚫ Financial constraints: Urban agriculture may require significant upfront investment in infrastructure and
equipment, which may be a barrier for some individuals or communities.
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Best practices
⚫ "Terrace Farmer Project" in Chennai- Promotes water-wise practices.
⚫ "Namma Bhoomi" initiative of Bengaluru- Converts underutilized government land into community
gardens.
⚫ "Urban Agriculture Policy" of Bengaluru to integrate urban farming into the city's master plan.
⚫ "Raitara Mitra" initiative in Hyderabad- Encourages urban farming through community participation.
⚫ Pune- In 2008, Pune’s civic administration launched a city farming project to train and encourage people
to take up farming on allocated land.

⚫ Tamil Nadu-In 2014, the Tamil Nadu government introduced a “do-it-yourself” kit for city dwellers to
grow vegetables on rooftops, houses and apartment buildings under its Urban Horticulture Development
Scheme.
⚫ Bihar- Since 2021, Bihar encourages terrace gardening in five smart cities through subsidy for input cost.
The growing urban population, climate change, and the scarcity of natural resources are major world-wide
challenges. In the coming years, we must ensure that more food is available to feed Earth’s growing
population and in this urban agriculture would be big saviour.
Irrigation
Irrigation
Irrigation is the practice of applying controlled amounts of water to land to help grow crops, landscape
plants, and lawns. It helps to grow agricultural crops, maintain landscapes, and revegetate disturbed soils in
dry areas and during periods of less than average rainfall.
Agricultural irrigation: present status

• About 80 percent of the current water use is drawn by agriculture.
• Irrigated area accounts for nearly 48.8 per cent of the 140 million hectare (mha) of agricultural land in
India, the remaining 51.2 percent is rainfed.
Types of irrigation system:
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MICRO IRRIGATION SYSTEM

Micro irrigation is a modern method of irrigation; by this method water is irrigated through drippers,
sprinklers, foggers and by other emitters on the surface or subsurface of the land.
Need for Micro Irrigation

• Up to 60% of water used for sugarcane, banana, okra, papaya, bitter-gourd and few other crops could be
saved if drip irrigation system is employed for cultivation (average penetration of micro irrigation stands
at meagre 19% in the country).
• Presently, India has over 2.3 crore pumps drawing water for agriculture with 70 percent of all
groundwater and 80 percent of freshwater in India being used for inefficient flood irrigation and other
irrigation purposes.
• Flood irrigation delivers only 35-40 percent water use efficiency, as opposed to micro-irrigation which
has up to 90 percent efficiency.
Types Of Micro Irrigation

There are majorly 5 types of Micro Irrigation Systems
• Sprinkler Irrigation
• Drip Irrigation
• Spray Irrigation
• Subsurface Irrigation
• Bubbler Irrigation
Benefits of Micro-Irrigation System:

⚫ Increases yield and cost savings: According to ICAR, farmers adopting micro irrigation technology in
wheat crop saved water by 15% and improved yield by 21% as compared to the farmers using flood
irrigation.
⚫ Water use efficiency: water-saving is achieved up to 36-68% over the conventional flow irrigation
systems.
⚫ Improves the quality of crops due to reduced consumption of fertilisers through fertigation .
⚫ Weed control: due to targeted application of water to roots.
⚫ Energy efficient due to reduction in consumption in energy required for lifting water from irrigation
wells.
Challenges /Constraints in Adoption of Micro Irrigation

⚫ High initial investment: According to a study by ICAR: About 55 % non-adopters of the system perceived
that MI required high initial investment.
⚫ Free energy availability discourage the adoption of MI as it fails to incentivize farmers to save energy
and water by adopting efficient technologies.
⚫ High cost of maintenance: Soil particles, algae, or mineral precipitates can clog the emission devices
thus impacting the efficiency.
⚫ Inadequate promotional and information efforts: Lack of information about location specific and crop-
specific irrigation and fertigation scheduling limits scaling up of the MI technology
⚫ Poor integration with farm irrigation system.
Government initiative for irrigation

• Micro irrigation fund- dedicated micro irrigation fund with NABARD.
• Pradhan Mantri Krishi Sinchayee Yojana- Enhance physical access of water on farm and expand
cultivable area under assured irrigation, improve on-farm water use efficiency, introduce sustainable
water conservation practices, etc.
• Rainfed area development program -Focuses on Integrated Farming System (IFS) for enhancing
productivity and minimizing risks associated with climatic variabilities.
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Way forward
⚫ Capacity building program should be an integral part of MIS.
⚫ Awareness and mass contact programs should be a continuous process, so that more farmers can be
brought in ambit of MI.
⚫ The firms supplying the system must be made responsible for the maintenance and supply of spares at
least for five years.
⚫ Region specific demonstration farms may be supported and organized for successful adoption of MI
systems.
Pradhan Mantri Krishi Sinchayee Yojana:

• Launched: In 2015; a Centrally Sponsored Scheme.
• Aim: To cover the remaining rainfed Area with irrigation.
- Ensuring access to water to every farm (“Har Khet Ko Pani”).
- Improving water use efficiency (“Per Drop More Crop”).
• Programme Components
A. Accelerated Irrigation Benefits Programme (AIBP): Under Ministry of Jal Shakti; focuses on faster
completion of ongoing Major and Medium Irrigation including National Projects.
B. Har Khet Ko Paani (HKKP): Under Ministry of Jal Shakti; focuses on Command Area Development
(CAD), Repair, Renovation & Restoration (RRR) of Water Bodies, Surface Minor Irrigation (SMI)
schemes, and Ground Water Development.
C. Per Drop More Crop: Under Ministry of Agriculture; focuses on water conveyance and precision
water application in the farm (Jal Sinchan).
D. Integrated Watershed Management Programme (IWMP): Under Ministry of Rural Development;
focuses on development of rainfed portions and culturable wastelands.
Conclusion:
It is time that India in her concern for the environment, ecology, social/human, and rights relating to water
shifts the subject of water to the concurrent list of the Constitution and frames policy that aims at
transforming the country into a Sujalam [richly watered], Suphalam [richly fruited] and Sasya Shyamalan
[richly harvested].
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Ground Water
• Groundwater is a hidden resource which accounts for 62% of total water and 30% of freshwater on
earth.
• Groundwater is the backbone of India's agriculture and water Security in rural and urban areas.
• Nearly 80% of country's drinking water need satisfied by GW.
• It fulfils almost 2/3rd the need for irrigation.
Groundwater resources in India: challenges

• Unregulated extraction- Availability of cheap electricity shifted farmers’ dependency from surface water
to groundwater. For instance, of the total irrigated area in Punjab, only 26.2% is irrigated by surface
water.
• Declining water tables- Data by CGWB- 30% of Wells have reported decline in GW level mostly in range
0-2 m.
• Groundwater pollution- Water quality data obtained by the Central Ground Water Board shows that
groundwater in as many as 154 districts across 21 states has arsenic contamination.
• Excessive Withdrawal for Irrigation- Irrigation alone accounts for 87% of the total groundwater used in
India today.
• Inadequacy of data on groundwater resources lead to difficulty in groundwater management.
Solution to groundwater depletion in India

⚫ Promote sustainable agriculture practices such as drip irrigation, crop rotation, and use of organic
fertilizers.
⚫ Promote rainwater harvesting to recharge groundwater resources.
⚫ Improve monitoring and regulation by setting up a centralized database of groundwater resources,
implementing stricter regulations on drilling of new wells, and imposing penalties for over-extraction of
groundwater.
⚫ Increase investment in water conservation and management technologies such as water-efficient
irrigation systems, desalination plants, and water recycling systems.
⚫ Raise awareness through campaigns to educate people about the importance of conserving
groundwater resources.
Initiatives taken by government:

By implementing these measures, India can ensure sustainable use of its groundwater resources and prevent
further depletion. It is important for the government to take immediate action to address this issue before it
becomes a major crisis.
Amrit Sarovar Mission

• Mission Amrit Sarovar was
launched on 24th April,
2022 in the 75th year of
Independence as a part of
‘Azadi Ka Amrit
Mahotsav’.
• Objective:
o To construct/
rejuvenate at least 75
Amrit Sarovars in each
district across the country and to overcome the water crisis in rural areas of the country.
o A target of construction of 50,000 Amrit Sarovars was set to be completed by 15th August, 2023.
• ‘Jan Bhagidari’ has been the core of this Mission and involves people’s participation at all levels.
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Storage and Transport and Marketing of Agriculture Produce
Storage of agriculture produce: Storage is a part of agriculture marketing that involves holding and
preserving goods from the time they are needed for consumption.
Storage capacity in India

• The total storage capacity available with Food Corporation of India (FCI) and the State Agencies (both
owned and hired capacity), is 819.19 LMT.
o However, these government agencies use 66% (60 MMT) of India’s total agri storage capacity
which also includes hired capacity of 23 MMT.
• FAO estimates that more than 40% of food produced in India is wasted due to lack of proper cold
storage facilities.
Significance of Storage in Agriculture:

⚫ It ensures a continuous flow of goods in the market, even for perishable products.
⚫ Ensures food security by maintaining continuous supply of food grains in the market, even for perishable
and semi perishable products.
⚫ Helps in price stabilization in the market by adjusting demand & supply of commodities.
Importance of warehouses:
Challenges/issues to agriculture storage

⚫ Inadequate storage infrastructure: With many storage facilities lacking proper ventilation, pest control,
and temperature control.
⚫ Regional Disparity in Storage capacity: More than 60% of storage capacity of FCI located in large
procurement states like Punjab, Haryana, Andhra Pradesh, Uttar Pradesh and Chhattisgarh.
⚫ Poor maintenance: According to CAG 2013, food grains in centre pool in Punjab and Haryana are
damaged due to inadequate, scientific and safe storage.
⚫ Lack of Private Investment resulting in inadequate investment in storage infrastructure and
maintenance.
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Steps taken by the government to improve storage infrastructure

⚫ Negotiable Warehouse Receipt (NWR) system: Warehousing Development and Regulatory Authority
(WDRA), Government of India ensures implementation of the NWR.
⚫ Loans for construction of storage facilities (warehouses, market yards, godowns and silos) are included
under the Priority Sector lending (PSL) norms.
⚫ Private Entrepreneurs Guarantee Scheme to incentivize construction of godowns by the Private players
⚫ Subsidy for the construction of cold storage facilities
Way forward
⚫ Shanta Kumar Committee has recommended Modernization of storage infrastructure by replacing
covered and plinth storage with silo technology and conventional methods.
⚫ Private sector participation to increase competition and improve efficiency.
⚫ Decentralization of storage to reduce transportation costs and minimize spoilage.
⚫ Use of technology such as GPS tracking and remote sensing to monitor food grain storage facilities and
prevent losses.
⚫ Capacity building by training its staff in modern storage practices and management techniques.
⚫ Rationalization of buffer stocks by reducing excess stocks and maintaining only the required minimum
levels.
Apart from all the infrastructure and subsidy support the farmer community needs to be educated to form
cooperatives and organize into larger bodies that would construct storage capacity and various production
pockets.
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Transport and Marketing
Transport of Agriculture Produce

Transport is a critical element in the agriculture marketing concerned with delivering agricultural products
from farms to markets and to cities worldwide. Transport allows farmers to invest more, increase production
and reach the prospective consumers.
Importance of transport:
Issues and challenges in transport
Steps taken by the govt to improve transport infrastructure:

⚫ PM-Gram Sadak Yojana: To improve transport and connectivity in rural India.
⚫ Kisan Rail: First-ever multi-commodity train service to carry vegetables like capsicum, cauliflower,
cabbage, chilies, drumsticks, onion, etc., and fruits like grapes, banana, pomegranate.
⚫ Krishi UDAN 2.0: It facilitates and incentivizes movement of Agri-produce by air transportation.
⚫ Transport and Marketing Assistance (TMA): Aims to provide assistance for the exporting produce to
certain countries in Europe & North America by reimbursing certain portion of freight charges.
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Conclusion: Henry C. Wallace, one of the former Secretaries of Agriculture of the United States, had rightly
remarked, “Agriculture is our greatest industry, transportation our second greatest. These two industries are
dependent upon one another, and the national well-being is dependent on both”.
Marketing of Agriculture Produce

Agriculture marketing refers to the services involved in moving agricultural products from the farm to
consumer. It involves various interconnected processes, including production planning, planting and grading,
harvesting, checking and packaging, shipping, storage, agri food processing & dissemination of market
information.
Main constraints of agriculture marketing in India

⚫ Fragmentation of Markets: Agriculture
marketing is a state subject and every state has
its own Agriculture Pricing Market Committees
Acts (APMCs) which has led to fragmentation of
markets.
⚫ Fragmented supply chain: fragmented with
multiple intermediaries between farmers and
consumers.
⚫ Lack of storage and processing facilities which
limits the ability of farmers to add value to their
products and access higher-value markets.
⚫ Limited market access
and market
information due to a
lack of transportation
infrastructure, as well
as regulatory barriers
and market distortions.
⚫ Price volatility: With
fluctuations driven by
factors such as weather
conditions, government
policies, and market
speculation.
⚫ Limited access to
credit: Due to a lack of penetration of financial institutions in rural areas, as well as regulatory barriers
and high interest rates.
Govt initiatives for agriculture marketing
Refer diagram →
E- NAM:
⚫ National Agriculture Market (e-NAM) is a pan-India electronic trading portal which networks the
existing APMC mandis to create a unified national market for agricultural commodities.
⚫ Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the
aegis of Ministry of Agriculture and Farmers’ Welfare, Government of India.
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Applications:
Constraints in implementing e-NAM

⚫ To implement e-NAM many the states have to make amendments in their APMCs acts. As of Feb 2022,
Currently, 1,000 markets located in 21 states and three union territories (UTs) are integrated into the e-
NAM network.
⚫ A significantly lower share of trade in APMCs takes place on e-NAM. It is the traders themselves who
trade in both online and offline platforms.
⚫ Lack of knowledge and awareness among farmers: Online trading benefits farmers without digital
media knowledge. e-NAM benefits commission agents, not farmers, due to such restrictions.
⚫ Operational Issues: In some states, the e-NAM portal reported inconsistent arrival and traded quantity,
commodity prices (minimum, maximum, and moral values), etc. Thus, e-NAM mandis are computerised
but not fully implemented.
Way forward in making e-NAM successful

⚫ Digital interventions and training services are needed to increase farmers’ integration into e-NAM-
enabled markets.
⚫ Efforts should be taken reduce the role of traders and commission agents (CAs), who take away a major
chunk of the values from the farmers and the mandis.
⚫ The e-NAM should be fully integrated with Artificial Intelligence and the Internet of Things (IoT) to
provide real-time information.
⚫ Efforts should be made to develop a mobile app in the vernacular language which can be used by the
farmer-sellers.
⚫ All information related to mandi timing, online trading timings- opening and closing (commodity-wise, if
it is different) should be standardized and well publicized.
With all these measures, e-NAM would be fully able to achieve the vision of “One Nation One Market” for
Indian farmers. e-NAM has the potential to be their true “inam (reward)”
Model APMC Act 2017:

The Model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 (APLM act)
was proposed in April 2017 to replace the APMC Act (Agricultural Produce Marketing Committee) 2003.As,
this Act aims at developing a state-level unified market through acquisition of at least nine essential areas of
rehabilitation.
Salient features of APMC ACT ,2017

• Abolition of fragmentation of market within the State/UT by removing the concept of notified market
area in so far as enforcement of regulation by Agricultural Produce and Livestock Market Committee
(APLMC) is concerned (State/UT level single market).
• Full democratization of Market Committee and State/UT Marketing Board.
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• Disintermediation of food supply chain by integration of farmers with processors, exporters, bulk
retailers and consumers
• Clear demarcation of the powers and functions between Director of Agricultural Marketing and
Managing Director of State/UT Agricultural Marketing Board.
Scope of improvement
• Speedy uptake of this act is needed at state level.
• Introducing an online platform, which can be done through the pre-existing National Agriculture Market
or e-NAM, would allow better price realisation for farmers for the growth of the agriculture sector.
• Infrastructure creation -the government is needed to create probing, grouping and grading
infrastructure at the mandis.
• To strengthen the markets, the government can adopt Electronic Negotiable Warehouse Receipts (e-
NWRs)
The model APLM Act was enacted in 2017 with an aim to, liberalise agri-market by creating a single agri-
market where with single licence one can trade agri-produce as well as livestock, set up a wholesale market
at every 80 km, end the monopoly of APMC and allow more producers to set up markets and create a
healthy competition so that farmers can accordingly discover prices and sell their produce.
agriculture Produce .
Farmer producer organizations (FPOs)

• A Farmer Producer Organisation (FPO) is a group of farmers who come together to form a company or an
organisation, with the aim of increasing their bargaining power and improving their economic status.
• The Government of India has approved and launched the Central Sector Scheme of “Formation and
Promotion of 10,000 Farmer Producer Organizations (FPOs)” to form and promote 10,000 new FPOs till
2027-28
Role of the Farmer Producer Organisation (FPO)

• Inputs-Provide quality production inputs like seed, fertiliser, pesticides, and other inputs at wholesale
rates that are reasonably lower
• Machinery and equipment -Make production and post-production machinery and equipment, such as
cultivators, tillers, sprinkler sets, combine harvesters, and others, available on a custom hiring basis to
members to reduce per-unit production costs
• Offer value-added services- such as cleaning, assaying, sorting, grading, packing, and farm-level
processing facilities at affordable user charges. Additionally, storage and transportation facilities may be
provided
• complementary activities -Engage in higher income-generating activities like seed production,
Challenges for FPO -

• Lack of technical skills, Weak financial, Lack of professionally trained personnel, Inadequate credit
access,Lack of risk mitigation mechanism, Inadequate access, Inadequate access to infrastructure
FPO has been considered as a way to boost agriculture income and manage the risk and vulnerabilities of
farming and provide them with good bargaining power.
Supply Chain Management

Supply chain management is the management of the flow of goods and services and includes all processes
that transform raw materials into final products. It is crucial for the food industry as it involves the
coordination and management of various activities from food supply to consumption.
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Importance of supply chain management

• Improving efficiency-helps in streamlining processes, reducing waste, and improving productivity
• Reducing Costs and Waste-by optimizing inventory levels, minimizing transportation costs, and
improving supplier relationships.
• Managing Risks-identifying and mitigating risks.
• Competitive Advantage-by enabling them to respond quickly to market changes, innovate faster.
• Better inventory management
• Improved customer service-ensures that products are delivered on time and in the right condition.
Constraints of supply chain management-

• Fragmented supply chain: result in wastage and price escalation.
• Lack of visibility make it difficult to identify bottlenecks, track inventory levels, and monitor supplier
performance.
• Limited resources: such as budget, staff, and technology can limit the ability of businesses to implement
effect.
• Lack of infrastructure: leading to post harvest losses.
• Complexities in global supply chains: multiple stakeholders, complex regulations, and cultural
differences that can make it challenging to manage effectively.
• Unavailability of insurance: to protect goods
• Dependence on external factors: such as weather conditions, geopolitical events, and supplier
performance, which can be unpredictable.
Way forward
• Risk hedging strategies: to reduce cost.
• Profit optimisation: by eliminating non-value-added activities, leading to scale economies.
• Flexible and responsive chain: to meet the changing needs of customers.
• Remove logistics bottlenecks: removed by focusing on road and port development.
• Single point of contact: to ensure that information is neither lost nor deteriorates.
• Market information: for effective flow and monitoring.
E-Technology in agriculture
E-Technology in the aid of Farmers
The prime minister's vision

Modernisation in the field of agriculture is the need of hour. This decade could be the best time for a
multitude of factors including the futuristic vision for agriculture at Apex level in the government of India.
e-agriculture involves designing, developing and applying innovative ways to use information and
communication technologies (ICTs) with a primary focus on agriculture. ICTs that can be harnessed for e-
agriculture may include devices, networks, services and applications.
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Role of ICT in agriculture:
Initiatives taken in India to promote ICT in agriculture:

• Agricultural extension and advisory service: IFFCO Kissan Sanchar Limited (IKSL) offers the farmer access
to a unique Value-Added Service (VAS) platform that will broadcast five free voice messages, based on
farmers’ requirements, on market prices, farming techniques, weather forecasts, dairy farming, animal
husbandry, rural health initiatives and fertilizer availability etc. on a daily basis.
• National e-Governance Plan in Agriculture (NeGPA): For rapid deployment of ICT in agriculture. Some
initiatives include one Stop Window Farmers Portal for dissemination of information on various
agricultural related matters
• Strengthening/Promoting Agricultural Information System (AGRISNET): It is the scheme for
strengthening of IT infrastructure of the Department and its offices.
• Development of Android Apps:
o KISAN SUVIDHA: Weather related information
o PUSA KRISHI APP: solutions to problems of agriculture.
• KISAN CALL CENTRES: To address the queries of famers on a telephone call in their local dialect.
• Sandesh Pathak- The application, developed jointly by C-DAC Mumbai, IIT Madras, IIT Hyderabad, IIT
Kharagpur, and C-DAC Thiruvananthapuram will enable SMS messages to be read out loud, for the
benefit of farmers who may have difficulty in reading.
Successful Models of e-agriculture:

• e-Choupal is an initiative of ITC Limited, a unique web-based page, to link directly with rural farmers via
the Internet.
• RML FARMER- KRISHI MITRA: Developed by a private player, Reuters Market Light, it is useful farming
app where farmers can keep up with the latest commodity and mandi prices, precise usage of pesticides
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and fertilizers, farm and farmer-related news, weather forecasts, and advisory.
• As per the official, users can choose from over 450 crop varieties, 1300 mandis, and 3500 weather
locations across 50,000 villages and 17 states of India.
Issues and challenges:
Way ahead:
• Low-cost technology: Lowering the cost of technology so that it is available and affordable for the
smaller farmers.
• Easily portable hardware: Plug and play hardware (ensuring mobility) has better chances of succeeding
in India due to small farm sizes and prevalence of tenancy.
• Renting and sharing platforms for agriculture equipment and machinery: Due to both limited financial
resources and small farm plots, renting and sharing platforms rather than outright purchase for ICT
equipment.
• Bridging the Digital Divide between the rural and urban India as well as among different sections of rural
society.
• Localization of data and applications: Information in local languages and customized inputs will help in
rapid dissemination of technology.
Conclusion: Digital Agriculture can improve information access and knowledge sharing for farmers and
agrarians. Technology affordability, ease of access and operation, system maintenance, timely grievance
redressal, and policy support should underpin the initiatives.
Agriculture subsidy
Issues related to Direct and Indirect Farm Subsidies
An agricultural or farm subsidy is a financial aid provided by the government to the farmers, agribusiness
owners, and agricultural raw material suppliers.
A survey shows that around 21% income of the farmers per hectare is facilitated by the government
subsidy.
Types of subsidies
• Direct subsidies- Which are provided to farmers directly in cash or kind. Eg . PM KISAN, Farm loan
waiver.
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• Indirect subsidies - Which are provided to farmers by giving discount on agriculture purchase. eg.
fertilizer, irrigation, seeds.
The total subsidy offered to the Indian farmers accounts for 2% of the total GDP of India.
Advantages of subsidies
Direct subsidies Indirect subsidies
• Increase purchasing power of farmers. • Supplying high quality inputs.
• Beneficiaries are free to choose products • Crucial in technological and infrastructure
according to their needs. advancement.
• Prevents misuse of public fund • Ensures food security.
• Reduces government burden • Helps to limit migration from the agriculture
• Reduce excess use e.g., farmer can control sector.
quantity required.
Issues related to subsidies

Direct subsidies Indirect subsidies
• Lack of financial inclusion at rural level eg. banks, • Skewed cropping pattern -eg. due to MSP cereal
ATM centric agriculture.
• Unproductive use of money. • Exploitation of natural resources such as water
• May cause inflation. • Corruption and leakages - PDS
• Lack of market discipline. • Inconsistency with WTO rules on subsidies.
• No identification of real beneficiaries
• No investment on infrastructural advancement.
Measures to deal with issues of farm subsidies:
Fertilizer subsidy in India

The difference between the cost of production and actual amount of fertilizer is the amount of subsidy borne
by the government.
• Urea Subsidy Scheme: At present the Urea is being provided to the farmers at a statutorily notified
Maximum Retail Price (MRP) of Rs.242 per 45 kg bag of urea The difference between the delivered cost
of urea at farm gate and net market realization by the urea units is given as subsidy to the urea
manufacturer/importer by the Government of India. Accordingly, all farmers are being supplied urea at
the subsidized rates.
• Nutrient Based Subsidy Scheme: Fertilizers are provided to the farmers at the subsidized rates based on
the nutrients (N, P, K & S) contained in these fertilizers.
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Issues related to fertilizer subsidy

• Overuse of fertilizers: which can degrade soil quality, harm the environment, and reduce long-term
agricultural productivity. For instance, current NPK ratio is 6.7:2.4:1, which is highly skewed towards
Nitrogen as against the ideal ratio of 4:2:1.
• Inefficient distribution system: distributed through a complex network of intermediaries, which can
result in inefficiencies, delays, and high transaction costs.
• Fiscal burden: fertilizer subsidies are putting extra pressure on the fiscal health. For instance, the subsidy
bill is likely to cross Rs 200,000 crore in 2022-23.
• Black marketing in Urea: Urea is often found to be smuggled for industrial and other purposes
Recent developments/initiatives:
1. One Nation One Fertiliser Scheme:
• The government has introduced a “Single Brand for Fertilizers and Logo” under the fertilizer subsidy
scheme named “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP).
• Under the new “One Nation One Fertiliser” scheme, companies are allowed to display their name, brand,
logo and other relevant product information only on one-third space of their bags.
Rational for the scheme:

• The maximum retail price of urea is currently fixed by the government, which compensates companies
for the higher cost of manufacturing or imports incurred by them.
• To unify fertilizer brands nationwide, regardless of the company that manufactures achieve uniformity in
the fertilizer market and ensure product differentiation under the same type of brand.
• To prevent the interlaced movement of fertilizers and save transit time and cost as a single brand name
will aid in lowering freight costs and guarantee their availability all year long regardless of brand
preferences.
2. Direct Benefit Transfer (DBT) project for fertilizer subsidy payment:

• Department of Fertilizers (DoF) has implemented Direct Benefit Transfer (DBT) project for fertilizer
subsidy payment with a view to improve fertilizer service delivery to farmers. Under the fertilizer DBT
system, 100% subsidy on various fertilizer grades is released to the fertilizer companies on the basis of
actual sales made by the retailers to the beneficiaries.
3. “PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth” (PM-
PRANAM) scheme was announced in Budget 2023-24 with the objective to incentivize the States and UTs to
promote usage of alternative fertilizers and balanced use of chemical fertilizers.
4. Nano Urea: Nano urea is a liquid fertilizer developed by IFFCO. Government of India has recently notified
the specifications of Nano nitrogen under Fertilizer Control Order, 1985.
Way forward
• Need of uniform policy- for all the nutrients which are necessary for crop production.
• Addition of other nutrients and micronutrients which can improve not Only yield but also the health of
soil.
• Revival of the Chemical Fertilizer Plants: to improve the availability of fertilizers in India.
• Other alternatives -Efforts should be made to promote organic farming, biofertilizers etc.
Fertilizers are critical inputs to increase output of agriculture, designing of fertilizer subsidy should be framed
while keeping in mind about health of soil and environmental impacts.
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Direct benefit transfer scheme

What is DBT?
Direct Benefit Transfer (DBT) was introduced on 1 January 2013 with the main aim of improving the
Government's delivery system and redesigning the current procedure in welfare schemes by making the
flow of funds and information faster, secure, and reduce the number of frauds.
Advantages of DBT
• Fast and easy transfer of money- by Aaadhar card payment is getting easy and seamless.
• Better beneficiaries’ identification -Biometric system solves the problem of ghost beneficiaries and
duplication.
• Expanded Coverage - Aadhar to all improved the coverage of banking and telecom sector.
• Improve social security - eg.PM AWAS YOJANA, UJWALA YOJANA
• Equitability- in terms of services such as Aadhar gives everyone the same access.
• Free to choose- beneficiaries got an opportunity to choose what they need.
Limitation of DBT
• Accessibility - to banking facilities and ATM’s
• Unproductive use- diversion of money to another unintented purpose kills the purpose of DBT
• Exclusion - eg, Telangana Rythu Bandhu scheme - exclusion of tenants.
Food Security
Minimum Support Prices

Minimum Support Price is minimum price set by government at which commodities are procured from
farmers by government.
• Government fixes Minimum Support Prices (MSP) for 22 mandated agricultural crops and Fair and
Remunerative Price (FRP) for sugarcane on the basis of the recommendations of the Commission for
Agricultural Costs and Prices (CACP), after considering the views of State Governments and Central
Ministries/Departments concerned and other relevant factors
Factors in determining MSP:

• The CACP takes into account various factors including demand and supply; cost of production; market
trends; a minimum 50% margin over cost of production; and likely implications of MSP on consumers.
• The CACP calculates three types of costs — A2, A2+FL and C2 — for each mandated crop for different
states.
• The lowest of these costs is A2, which is the actual paid-out cost incurred by a farmer. Next is A2+FL, the
actual paid-out cost plus imputed value of family labour.
• The highest of the three costs is C2, defined as ‘Comprehensive Cost including Rental Value of Own Land
(net of land revenue and interest
on value of own fixed capital assets
(excluding land))’.
Objectives of MSP:
Refer diagram → →
Significance of MSP
• Price assurance to farmers- MSP
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provides safety net to farmers and prevent suicides and poverty.

• Food security - can be achieved through stable production. e.g.- India’s foodgrains production touched a
record 315.7 million tonnes in 2021-22
• Protection of farmers from market variability such as unwarranted fluctuations in price.
• Crop diversification - guaranteed MSP to pulses, oilseeds, coarse cereals encourage farmer to cultivate
new crops.
• Alleviation of rural poverty -fixed price for farm produce prevent migration and increase economic
capacity of farmers.
• Agriculture advancement - new technology, improvement is possible due to assured prices.
• Maintain prices of commodity for consumer.
Issues and challenges associated with MSP

• Distortion of cropping pattern - though MSP announced for several crops but procurement is majorly
wheat, rice and sugarcane centric.
• Distort supply demand- due to frequent increase and decrease in MSP.
• Burden on FCI- excessive procurement burden due to cereal and PDS.
• Dependency on middle man- Such as commission agent, APMC officials hence difficult for marginal
farmer to get access.
• Regional imbalance- procurement is more in Northern states like Punjab and Haryana.
• Environment impact- due to monocropping of wheat, rice.
• Low awareness and accessibility - according to Shanta Kumar committee only 6% countries farmers get
benefitted from MSP.
• Challenges in WTO - MSP claimed to be trade distorting and there is pressure from WTO to minimise it.
Legalization of MSP: Legalisation of MSP means legal obligations on the government to buy commodities for
which MSP is announced. After repealing three contentious farm laws farmers had put the demand of
legalising MSP.
Reasons behind demand of legalising MSP

• Limited procurement - procurement is largely limited to only wheat and rice and out of which also only
6% of the farm household sell rice and wheat at MSP to govt.
• Regional disparity - Half of commodities procured are from Punjab and Haryana.
• Less benefits than MSP-MSP has no statutory backing hence many of times farmers get less than MSP.
• MSP for horticulture - MSP should be extended to fruits and vegetables.
• Variable msp according to agro climatic zones- calculation based on varied inputs rates in different agro
climatic zone.
Recommendation of Swaminathan Committee regarding MSP

• To fix minimum support prices (MSP) for crops at least 50% more than the weighted average cost of
production.
• Govt. has announced its decision to ensure that farmers receive MSP = 1.5 times of production cost.
Way forward
• Bridge the price gap - between MSP and market price hence
• Price assurance - assurance regarding MSP, grains procurement and market intervention of government
as and when necessary.
• Market reforms - need for improving market efficiency by strengthening FPOs, cooperative etc.
• Price deficiency payment - differences between MSP and actual price.
• Promotion of cooperative - to increase bargaining power of farmers.
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Rather than legalisation of MSP focus should be on infrastructure development and strengthening
institutions and guarantee farmers to increase their income.MSP provided safety net to the farmers via
market against uncertainties but there is a need to make advancement in the process according to the need.
Recent developments/initiatives:
• The Central government has expanded the procurement of pulses and oilseeds by central agencies.
• PMASHA Scheme which include procurement under:
o Price Support Scheme (PSS);
o Price Deficiency Payment (PDP);
o Private Procurement and Stockists Scheme as a Pilot Scheme;
• State level Initiatives: For example, Bhavantar Bhugtan Yojana of Madhya Pradesh where the
government pays farmers the difference between official Minimum Support Price and the rate at which
they sell their crops
Way forward:
• Agriculture expert Ramesh Chand has suggested three ways to help farmers get fair prices for their
crops: Enabling fair, competitive, and remunerative prices through market mechanisms, public
intervention, and a combination of both.
• NITI Aayog has suggested the 'Price Deficiency Payment' (PDP) system among other reforms.
• Reduce regional imbalance- by decreasing information asymmetry and state level interventions.
• Information and awareness - through Krishi Vidyan Kendra, krushi seva Kendra s.
• Use of modern warehousing infrastructure - modern weighing machienes etc.
Doubling farmers income

• Doubling farmers' income is a government initiative aimed at increasing the income of farmers in India.
• Goal - to double the income of farmers by 2022, which is the 75th year of India's independence.
• Objective -The objective is to ensure that farmers get a fair price for their produce and are able to earn a
sustainable income from farming.
As per the survey results, the average monthly income per agricultural household, from all sources, was
estimated at ₹10,218 when compared to ₹6,426 in 2012-13. In other words, the farm income had risen by
59 per cent till 2019.
The major sources of growth operating within agriculture sector are:

• improvement in productivity
• resource use efficiency or saving in cost of production
• increase in cropping intensity
• diversification towards high value crops
Sources outside Agriculture

• shifting cultivators from farm to non-farm occupation.
• Improvement in terms of trade for farmers.
Strategy
The premise of the strategy for doubling farmers income is based on the following primary principles:
• Increasing total output across the agricultural sub-sectors through realising higher productivity.
• Rationalizing/reducing the cost of production.
• Ensuring remunerative prices in the agricultural produce.
• Effective risk management.
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• Adoption of sustainable technologies.
Why Double Farmers' Income?
From self-sufficient food production to self-sufficient farmer -

• Past strategy for development of the agriculture sector in India has focused primarily on raising
agricultural output and improving food security.
• The net result has been a 45 per cent increase in per person food production, which has made India not
only food self-sufficient at aggregate level, but also a net food exporting country.
• Strategy to promote farmers welfare-
• Farmer poverty, Reason of agrarian distress, Low farm investment
Challenges for doubling farmers income-

• Poor infrastructure-with inadequate irrigation facilities, storage structure, transportation network
results in low return to farmer.
• Fragmentation of land- 86% of India's farmer are small farmers which ask difficult to scale up the
operation.
• Agriculture policies issue- sometimes policies adopted by government are in support of trade and
opening market which hurt Farmer
• Low productivity - low productivity of agriculture compared with other countries.
• Lack of institutional support ,Dependency on monsoon, Climate change, Price fluctuations
Way forward
• The Dalwai Committee in Doubling the Farmers income had recommended substaintial reforms in
Marketing structure including reforms in APMCs, and placing agricultural marketing in the Concurrent list
• Aligning policies-eg. greater procurement of millets instead of cereal centric procurement will help to
increase income.
• Crop diversification - including high value crop which increase farmers income
• Technological innovation - to increase productivity and profitability.
• Extention -to provide farmers with information regarding adoption of new technology.
• Food processing industries - will help farmers to decrease post handling loss and assured prices of
products.
• Integrated farming systems- such as beekeeping, apiculture , sericulture etc.
• Promotion of FPOs- for better risk management and greater bargaining power.
• Diverting the excess manforce - would help to reduce burden on agriculture.
INITIATIVES TAKEN BY GOVERNMENT

• Income support to farmers through PM KISAN.
• Pradhan Mantri Fasal Bima Yojana (PMFBY).
• Institutional credit for agriculture sector-Increased from Rs. 8.5 lakh crore in 2015-16 with a target to
reach Rs. 18.5 lakh crore in 2022-23.
• Fixing of Minimum Support Price (MSP) at one-and-a half times the cost of production
• Micro Irrigation Fund of Rs 5000 crore has been created with NABARD.
• Promotion of Farmer Producer Organisations (FPOs).
It is apparent that income earned by a farmer from agriculture is crucial to address agrarian distress (Chand
2016) and promote farmers welfare. In this background, the goal set to double farmers' income by 2022-23 is
central to promote farmers welfare, reduce agrarian distress and bring parity between income of farmers
and those working in non-agricultural professions.
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Public Distribution System

The public distribution system is a food security system established under ministry of consumer affairs, food
and public distribution. It includes within its fold a government sponsored chain of appx 5.35 lakh fair price
shops entrusted with work of distributing basic food and non-food commodities to needy section of society
at very cheap price.
The responsibility of PDS is jointly shared by central and state governments
• Central government - through FCI, undertake procurement, storage, transportation and bulk allocation of
food grains to the state governments.
• State government - identification of beneficiaries, issues of ration cards, supervision of functioning of
price shops.
Under PDS, presently the commodities namely wheat, rice and kerosene are being allocated to states / UTs
for distribution.
Objective of PDS
• To provide essential consumer goods at cheap and subsidized prices to the consumer.
• To insulate them from the impact of rising prices of these commodities.
• To maintain the nutritional status of our population.
• To put indirect check on the open market price of various items.
Evolution of PDS
• Public Distribution System in 1960s: PDS, with its focus on distribution of foodgrains in urban scarcity
areas, had emanated from the critical food shortages of 1960s. As the national agricultural production
had grown in the aftermath of Green Revolution, the outreach of PDS was extended to tribal blocks and
areas of high incidence of poverty in the 1970s and 1980s.
• Revamped Public Distribution System (RPDS):1992
• With a view to strengthen and streamline the PDS as well as to improve its reach in the far-flung,
hilly, remote and inaccessible areas where a substantial section of the poor live.
• It covered 1775 blocks wherein area specific programmes such as the Drought Prone Area
Programme (DPAP),
• Integrated Tribal Development Projects (ITDP),
• Desert Development Programme (DDP) were being implemented and in certain Designated Hill Areas
(DHA) which were identified in consultation with State Governments for special focus.
• Targeted Public Distribution System (TPDS): 1997
o With focus on the poor families. The scheme, when introduced, was intended to benefit
about 6 crore poor families for whom a quantity of about 72 lakh tonnes of food grains was
earmarked annually.
• Antodaya Anna Yojana (AAY):
o AAY was a step in the direction of making TPDS aim at reducing hunger among the poorest
segments of the BPL population. The scale of issue that was initially 25 kg per family per month
was increased to 35 kg per family per month with effect from 1st April 2002.
National Food Security Act, (NFSA) 2013

• Coverage and entitlement -NFSA covers up to 75% of the rural population and 50% of the urban
population
• Priority households are entitled to 5 kg per person per month to around 82 crores of population.
• One of the guiding principles of the Act is its life-cycle approach wherein special provisions have been
made for pregnant women and lactating mothers and children in the age group of 6 months to 14
years.
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• Entitling them to receive nutritious meal free of cost through a widespread network of Integrated Child
Development Services (ICDS) centers, called Anganwadi Centers under ICDS scheme and also through
schools under Mid-Day Meal (MDM) scheme.
• Pregnant women and lactating mothers are further entitled to receive cash maternity benefit of not
less than Rs. 6,000 to partly compensate for the wage loss during the period of pregnancy and also to
supplement nutrition.
• Foodgrains under NFSA were to be made available at subsidized prices of Rs. 3/2/1 per kg for rice,
wheat and coarse grains respectively.
Limitations of PDS:
• Identification of beneficiaries - according to expert group, PDS suffers from nearly 61% error of
exclusion and 25% inclusion of beneficiaries.
• Urban bias-mostly limited to urban areas though rural expansion is also increasing.
• The burden of subsidy- due to rise in procurement price and issue price getting lower.
• Loss of food grains- according to planning commission around 36% leakage of PDS rice ,wheat at all India
level.
• PDS result in price increase-due to larger procurement net quantities available in market is less results in
increase in price.
• Inefficiencies in the operations of FCI- audit by CAG revealed a serious shortfall in the government's
storage capacity.
• Larger procurement due to MSP has put lot of pressure on FCI godowns.
• Aadhar validation issues- such as biometric, spelling on aadhar leads to exclusion of real beneficiaries.
• Challenges in delivery mechanisms: -such as card issues, quantity and quality issue, measurements issue
and record maintenance.
Recent PDS reform

• Digitization of ration cards- allows online entry and verification of beneficiary data. Online storing of
monthly entitlement of beneficiaries, no of dependents etc.
• Linking with Aadhar - 56% of the digitised cards have been seeded with unique identification no of
AAadhar.
• Computerization of FPS allocation - this makes declaration of stock balance, issuance of web-based
truck challans etc very convenient.
• ePOSC- electronic point of sale - devices at shop to track sale of foodgrains to actual cardholders on
real time basis.
• GPS (Global positioning system)- state like Tamil Nadu and Chhattisgarh uses GPS tech to track
movements of trucks.
• DBT- three UT - Chandigarh, Puducherry and Dadra Nagar Haveli implemented DBT on pilot basis.
One nation one ration card (ONORC)

• The ONORC scheme is being implemented by the Department for the nation-wide portability of ration
cards under National Food Security Act (NFSA). Through this all-eligible ration card holders/beneficiaries
covered under NFSA can access their entitlements from anywhere in the country.
• The Partha Mukhopadhyay working group on migration recommended for portability of public
distribution system and its benefits in 2017.
• Later, govt launched Integrated Management of Public Distribution system in April 2018.
• Benefits - The new system will identify beneficiaries through biometric authentication on electronic point
of sale (ePos) devices installed at FPS.
• Under this migrant will be allowed to buy maximum of 50% of family quota.
• Inter-state as well as intra state portability of ration cards.
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• Inter-state portability at IMPDS portal.

• Intra state Annavitran portal -to display electronic transaction made through ePos for distribution of
subsidized foodgrains to beneficiaries.
• Can control food subsidy bill by preventing leakages.
• Removes bogus ration card holders through integrated online system.
Challenges in implementing one ration card:

• Technological
o Aadhar authentication - only 85.41% of ration cards linked with Aadhar but still there is a gap.
o Internet connectivity - specially in remote areas prove to be hurdle.
o ePOS - out of 79,050 only 37,392 FPS have ePos machines and it is further low in west Bengal and
Bihar.
• Huge gap in data on migration - unplanned distressed migration and lack of proper mechanism to keep
the record of patterns of migration.
• Federal relations - engagement of central and state government on the implementation may pose
challenges of encroachment in each other's area.
• Disincentivizing state govt to provide the additional benefits to their population in terms of nutritional
requirements.
Way forward
• Providing nutritional security - along with food security a broader perspective of nutritional security
should also be considered.
• Integration of schemes - PDS can be integrated with mid-day meal. ICDS, immunization under one nation
one ration cards.
• Use of technology - to handle operations such as Bharat net, separate AI platform.
• Constant monitoring - with the help of village panchayat and social auditing to decrease exclusion error.
• Alternative delivery mechanism - if emergencies appeared to hamper ration shops alternative delivery
mechanism can be considered.
• Idea of food coupon - instead of ration card, food coupon can be solutions in longer term.
As ONORC have many challenges for its implementation but still india with larger migration and vulnerable
section have potential to achieve the sustainable development goal 2 i,e. Zero hunger by 2030.
Food processing industries (fpi)
"There is a need for post-harvest revolution or food processing revolution, and value additions." - PM MODI
(while inauguration of PM SAMPADA Scheme)
The food processing Industry (FPI) provides a vital linkage between agriculture and Industry.
Current scenario
• FPI accounts for 32% of the country's total food market and ranked 5th in terms of production,
consumption, exports and expected growth.
• Contribution to world processed food trade – 1.5%.
• Unorganised Sector constitutes >40% of FP sector.
• Contribution to Total employment – 12.2 per cent of persons in the registered manufacturing sector
were employed in the food processing sector (Annual Survey of Industries (ASI) 2019-20)
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• Contribution to India’s exports - In 2020-21, the country exported processed food items worth USD 39
million.
• FDI inflow - US$ 709.72 Million (April 2021- March 2022).
• Growth - During the last five years ending FY21, the sector has been growing at an average annual
growth rate of around 8.3 per cent. It is projected to reach USD 482 billion by 2025.
• Exports of processed fruits and vegetables grew by 59.1%; cereals and miscellaneous processed items
grew by 37.66%; meat, dairy and poultry products grew by 9.5%; basmati rice grew by 25.5%; non-
basmati rice grew by 5%; and miscellaneous products grew by 50%.
Significance:
• A Sunrise Sector: India’s food processing sector is one of the largest in the world and its output is
expected to reach $535 Bn by 2025-26.
• Economic Growth: The Indian food sector contributes about 8% of GDP.
• Export potential - accounts for 13% of GDP .
• Employment generation- both direct and indirect employment.
• Farmers income - by adding value to the product.
• Reduce wastage - UN stated that 40 % of production is lost through food wastage .
• Reduce malnutrition - by fortifying with minerals and vitamins.
• Rural development - FPI directly contributes to development to the rural economy.
• Crop diversification - different inputs required hence scope to crop diversification.
• MSME's- accelerate their growth and scale
Scope of fpi:
• Huge Production base to become leading food supplier - India ranks 1st in the world in the production of
Milk, Ghee, Ginger, spices, Bananas, Guavas, Papayas and Mangoes.
- It ranks 2nd in the production of Rice, Wheat and other vegetables & fruits.
• Geographical advantage – Diverse agro-climatic zones, soil types, and largest arable land in the world.
• Increase in Demand for processed food – that is convenient, hygienic and high quality, due to socio-
economic transition i.e. rising disposable income, changing consumption and demographic patterns,
increase in nuclear families, working women, media penetration etc.
• Rapid growth in Organised retail – Ensuring productivity gains across the supply chain through
disintermediation and superior technology. Emergence of tier 1 & 2 cities and “shopping mall culture”.
• Exponential growth of Online food delivery industry – Estimated to grow at 30%, especially buoyed by
COVID induced preference for ‘no-contact delivery’. For eg. Zomato, Swiggy, FoodPanda etc.
• Favourable Government Policies and incentives – To boost the “sunrise” food processing Industry. For
eg. Relaxation of FDI limits, tax breaks, introduction of new schemes, reforms in agriculture sector etc.
• Rising demand of Indian products in international market – For eg. Companies like Haldiram’s &
Bikarnervala have a presence in over 70 countries.
• Abundant agriculture produce - by setting up processing units closer to agriculture hubs, post-harvest
losses can be minimized.
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Upstream and downstrean requirements of fpi:

• The upstream stage of the production process deals with procurement of raw materials.
o This stage is not concerned with the processing of the product but simply with searching and
extracting of the raw material.
• The downstream stage consists of processing the materials collected during the upstream stage into a
finished product.
o The downstream stage further includes the actual sale of that product to other businesses,
governments or private individuals.
Reasons for low performance of food processing industry

⚫ Lack of cutting-edge infrastructure: Many operate in the small and medium enterprises (SMEs), which
often lacks the resources needed to upgrade their facilities and machinery to the latest technology.
⚫ Inefficient supply chains: Lack of adequate infrastructure leads to wastage. The NITI Aayog cited a study
that estimated annual post-harvest losses close to Rs 90,000 crores.
⚫ Lack of access to credit and financing: Traditional banks and financial institutions often have stringent
lending criteria, making it difficult for SMEs to access funding.
⚫ Informalisation: The sector is very unorganized and every unorganized sector comes with its own set of
challenges like employment is subject to high degree of insecurity.
⚫ Lack of organized retail – 90% of retail consists of “mom & pop” shops ➔low quality products, lack of
variety & choice, poor shopping experience, etc.
⚫ Export problems – fragmented supplier base & non-uniform quality, high import duties on raw material,
poor adherence to food safety laws, etc. leading to high cost & low competitiveness in global markets.
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⚫ Small size of food processing units – >40% of FP sector is unorganised ➔ poor economies of scale, high
production costs, difficulty in access to credit, inability to compete with MNCs➔ Low profits ➔ inability
to spend on marketing, R&D, Technology, Quality improvement etc.
⚫ Skills and technical know-how deficit - As per report of National Skill Development Corporation the
industry faces skill gap of 10 million workers.
Key initiatives of the government:

• Pradhan Mantri Kisan Sampada Yojana (PMKSY):
• Mega Food Parks Scheme: modern food processing infrastructure for the processing units based on
a cluster approach.
• Integrated Cold Chain: Promotion of cold chain facilities without any break from the farm gate to the
consumer
• Scheme for Creation of Infrastructure for Agro Processing Clusters: Two basic components i.e.,
Basic Enabling Infrastructure (roads, water supply, power supply, drainage, ETP etc.) and Core
Infrastructure/Common facilities.
⚫ Production Linked Incentive Scheme for Food Processing Industry (PLISFPI): to support creation of
global food manufacturing champions
⚫ Pradhan Mantri Formalisation of Micro food processing Enterprises (PMFME) Scheme: Basic Enabling
Infrastructure (roads, water supply, power supply, drainage, ETP, etc.) and Core Infrastructure/Common
Facilities.
⚫ One District One Product- to leverage scale in input procurement, common services, and district-level
product marketing.
⚫ Inclusion of food & agro-based processing units and cold chain as agricultural activity under Priority
Sector Lending (PSL)
• 100 percent Foreign Direct Investment (FDI) approval under automatic route has been permitted for the
food processing sector.
• Marketing reforms - Operation Greens (‘Top to Total’), Developing & upgrading existing rural haats into
Gramin Agricultural Markets (GrAMs), One District, One Product (ODOP), Agri Law Reforms, e-NAM, etc.
• Food Standards - rationalization of food laws & enactment of Food Safety & Standards Act, 2006.
• Investment facilitation - Nivesh Bandhu portal, developed by the MoFPI to assist investors.
• Credit & finance - Special ‘Food processing Fund’ in NABARD to make available affordable credit. 100%
FDI under the automatic route is allowed in the sector and inclusion of food and agro-based processing
units as agricultural activity under Priority Sector Lending.
Way forward:
• Efficient infrastructure- efficient supply chain that, inter alia, include cold storages, refrigerated vans,
better road facilities, and uninterrupted power supply is a prerequisite
• Boost export- in respect of production and quality of processed foods, consumer safety and public
health.
• Regulation- business-friendly administration and customer-oriented promotional measures.
• Formalization of FPI- technology up-gradation and improvement in infrastructural facility.
Food processing sector has been identified as one of the key and priority sector of the Government’s
ambitious “Make in India” campaign. Special efforts are being undertaken to improve the competitiveness of
the private and public sector units, so that they can integrate well with global value
chain and global markets.
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Buffer stock
Buffer stock refers to a reserve of a commodity that is used to offset price fluctuations and unforeseen
emergencies. Buffer stock is generally maintained for essential commodities and necessities like food grains,
pulses etc.
The concept of a buffer stock was first introduced during the 4th Five Year Plan (1969-74) and a buffer stock
of 5 million tonnes of food grains was envisaged. The buffer stock figures are normally reviewed after every 5
years.
Buffer stock of food grains in the Central Pool is maintained by the Government of India (GOI)/Central
Government for:
• Meeting the prescribed minimum buffer stock norms for food security
• Monthly release of food grains for supply through Targeted Public Distribution System (TPDS) and Other
Welfare Schemes (OWS)
• Meeting emergency situations arising out of unexpected crop failure, natural disasters, etc.
• Price stabilisation or market intervention to augment supply so as to help moderate the open market
prices.
Advantages of buffer stocks

• Stable prices help maintain farmers’ incomes. A rapid drop in prices can make farmers go out of
business, which leads to structural unemployment.
• Investment in agriculture due to stable income of farmers.
• Positive externalities e.g., helps rural communities. A drop in price could cause a negative multiplier
effect within rural areas.
• Prevent excess prices for consumers and help reduce food inflation.
• It helps to maintain food supplies and avoid shortages.
• Government making profit- If it buys during a glut and sells during a shortage, it can make a profit.
• Food security - fulfill the goal of providing food grains to every citizen.
Problems of buffer stocks

• Fiscal burden- Cost of buying excess supply could become quite high for the government and may
require higher taxes.
• Environmental impacts-It could even encourage excess use of chemicals to maximise yields
• High cost of maintenance - such as logistics, storage and administrative cost.
• Issues of leakages - it is sometimes diverted to black marketing, ghost beneficiaries.
• Some goods cannot be stored in buffer stocks, e.g., fresh milk, meat etc.
• Inefficient storage management - Warehouse are not technically updated, malpractices, corruption at
field level.
• Trade distorting practices - many of the countries think that procurement and maintaining buffer stock
would distort market.
Way forward
A 6 member committee formed i.e., Shanta Kumar committee for improving operational efficiency of FCI and
maintaining storages.
• Adopting DBT - So that MSP and food subsidy amount can be directly transfers into the account of
beneficiaries.
• Reduction in no of beneficiaries - under NFSA from 67-40%
• Private participation - to procure and store grains.
• Transfer of procurement - to the states which have higher capacity e.g. Maharashtra ,UP etc.
• Abolition of levy rice and allow mills to sell in market.
• Greater flexibility to FCI - for procuring and dealing with operational stocks.
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Food Storage
Context: The Union Cabinet approved the establishment and empowerment of an Inter-Ministerial
Committee (IMC) for the facilitation of the “World’s Largest Grain Storage Plan in the Cooperative Sector”.
Government initiatives for augmentation of grain storage capacity

• National Policy on Handling and Storage of Food Grains 2000: To reduce storage and transit losses at
farm and commercial levels, and to modernize the handling, storage, and transportation system of
food grains in India.
• Gramin Bhandaran Yojana: Subsidy is provided for the construction/ renovation of rural godowns to
create scientific storage capacity.
• The Warehousing (Development and Regulation) Act, 2007: It made the Warehousing Receipt a
negotiable. Private Entrepreneurs Guarantee (PEG) Scheme: To augment the storage capacity of FCI in
PPP mode.
• PM Kisan Sampada Yojana: For Development of cold storage facilities, specialised packaging units,
warehousing facilities, etc.
Need for an effective food grain storage system

• Backward and forward linkages: An effective storage system aids farmers as well as forward linkage
systems such as the food processing sector.
• Improper local storage systems: The household sector retains about 70% of the total production and
substantial quantities of foodgrains are wasted due to improper storage at the farm level.
• Lack of storage management: Often the stock stored in the warehouses remains in storage for more
than its shelf life and such long storage, makes grains prone to rodents, moisture, birds, and pests.
• Lack of mechanised storage: About 80% of handling and warehousing facilities are not mechanized and
traditional manual methods for loading, unloading, and handling food grains and other commodities are
used.
• Insufficient number of storage facilities: The FCI has insufficient grain silos and covered godowns with
adequate storage capacities. The country's current godown facilities can store only up to 47 percent of
the produce.
• Issues with cold storage: India’s cold storage capacity is unorganized and dominated by traditional cold
storage facilities. The distribution of cold storage is highly uneven with the majority of the cold storage is
limited to Uttar Pradesh, Gujarat, Punjab, and Maharashtra.
Way forward
• Improve efficiency at farmgate: Building aggregation units (i.e. modern pack-houses and pooling points)
at the village level with transport links should be promoted.
• Participation of States and local government: More responsibility can be shared with States which are
performing well such as Haryana, Punjab, Andhra Pradesh, Chhattisgarh, Madhya Pradesh etc.
• Focus on drying, aeration, and temperature control: Moisture and temperature determine how long the
grain can remain in storage without losing its quality. Therefore, altering storage methodologies and
management in accordance with these indicators.
• Strengthening traditional means of storage methods: Traditional means of storage should be
strengthened with modern inputs like Bamboo structures and Mud and earthen structures.
• Phase out of Covered and Plinth (CAP) storage: CAP should be gradually phased out with no grain stocks
remaining in CAP for more than 3 months. Silo bag technology and conventional storage should be used
instead.
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• Encouraging private participation: Government can also provide credit facilities for Farmer’s Producer
Organizations (FPOS) to invest in storage warehouses, cold chain storage, etc.
• Modern and cutting-edge technology in food storage: Adoption of technologies like Internet of Things,
Blockchain, and Artificial Intelligence can aid food grain management. Sensors-based data can be used to
assess the quality of grains in real-time and maintain the temperature and moisture control variables
accordingly.
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Animal rearing
Economics of animal rearing
Livestock production and agriculture are dependent on the other and both are crucial for overall food
security of the nation. Livestock sector is an important sub-sector of Indian agricultural economy. It is an
integral part of livelihood activity for most of the farmers and help sustaining farm activity.
Potential of animal rearing in india:
• About 20.5 million people depend upon livestock for their livelihood.
• Livestock contributed 16% to the income of small farm households as against an average of 14% for
all rural households.
• Livestock provides livelihood to two-third of rural community.
• It also provides employment to about 8.8 % of the population in India.
• India has vast livestock resources. Livestock sector contributes 4.35% GDP and 29.35% of total
Agriculture GDP.
• According to Basic animal husbandry statistics,2022 and ES 2021-22
• Total milk production in India is 221.06 mn tn
• India ranks 8th in meat production.
• India's rank in egg production is third.
• According to 20th livestock census the livestock population is 535.78 mn in country with increase of
4.6% .
• India's rank in goat and sheep population is 2nd and 3rd.
Challenges to livestock sector:

• Productivity -As per Integrated Sample Survey average annual productivity of cattle in India during
2019-20 is 1777 kg per animal per year as against the world average of 2699 kg per animal per year
during 2019
• Disease: Livestock are susceptible to a variety of diseases that can reduce productivity and even lead to
death.
• Deficit of fodder: There is a deficit of 23.4% in the availability of dry fodder, 11.24% for green fodder and
28.9% for concentrates.
• Environmental degradation: e.g., Overgrazing, deforestation, and other forms of environmental
degradation led to loss of pastureland and reduced productivity.
• Lack of infrastructure: such as roads, electricity, and water supply can make it difficult to transport feed
and other inputs, and to access markets for livestock products.
• Limited access to credit- many small-scale producers have limited access to credit, which can limit their
ability to expand their operations.
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Government initiatives for the livestock sector:
How India can enhance its livestock productivity?

• Improve productivity- The effective ways to improve livestock productivity are crossbreeding, upgrading
and selective breeding.
• Feed strategies strategic supplementation of limiting macro and micro nutrients, probiotics/ prebiotics,
feed additives (enzymes, methane inhibitors etc.), development of Total Mixed Ration technology for
improving efficiency
• Climate adaptability -The goal of increasing productivity without impacting environment can be attained
through diversification and selection of inputs and management practices that foster positive
ecological relationships.
• Health management - Wider and effective immunization for important economic diseases and
compulsory deworming programme should be practiced. Also concepts like veterinary ambulance
should be carried out.
• Processing and value addition of livestock products: Value addition of milk and milk products with the
integration of fruit, vegetables and cereals has a large potential.
• Extension and training: call for delivery of services and inputs at the farmer’s door.
India with highest number of livestock have immense potential for harnessing the advantage associated with
it by adopting technological solutions and prioritizing their development.
Dairy Sector
India's dairy sector is characterized by "production by masses" more than "mass production". India is the
largest milk-producing country on the basis of the efforts of these small farmers with one, two or three
cattle. This sector provides employment to more than 8 crore families in India. India is the Largest Producer
of Milk: India contributes 23% of global milk production.
India’s dairy sector: status

India’s Global Position Largest producer of milk in the world, since 20
years.
India’s share in Global Market >20% of world’s milk production
Annual growth rate of Milk production (in last 6 6% (growth rate of world milk production is 1.5%)
years)
Livestock Contribution to Agriculture GDP (%) 25-30%
Contribution to country’s GDP 5%
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Employment generation 80 million farmers directly

Per capita availability of milk (2021-22) 444 grams per day (more than world average)
Nature of Milk distribution industry Organized sector - 40% (cooperatives & private
dairies) & unorganised sector - 60%
Nature of Milk processing Industry Organized sector - 20% & unorganised sector -
80%
Operation Flood and Anand Pattern:

• Operation Flood was launched in 1970s to increase the milk production in India through network of co-
operatives launched under the leadership of Dr. Verghese Kurien.
• The ‘Anand Pattern’ was essentially a cooperative structure comprising village-level Dairy Cooperative
Societies (DCSs), which promote district-level unions, which in turn promote state-level marketing
federation. Starting in 1970, NDDB replicated the Anand Pattern cooperatives through the Operation
Flood programme all over India.
• Milk production in 1950-51 stood at merely 17 million tonnes (MT). In 1968-69, prior to the launch of
Operation Flood, milk production was only 21.2 MT which increased to 30.4 MT by 1979-80 and 51.4 MT
by 1989-90. Now it has increased to 210 million tonnes in 2020-21.
Significance of dairy sector:

• Economic Growth: The sector contributes about 5% to the country's GDP.
• Employment – 80 million households are dependent on dairy farming for livelihood.
• Tool for Inclusive growth - Livestock distribution is more equitable than land distribution. 85% of the
small & marginal farmers own 45% of the land, but 75% of the bovine.
• Women Empowerment: Women have over 70% participation in the dairy sector.
• Additional Income for Farmers: About 20-30 % of the total income of farmers comes from the dairy
sector.
• Savior for dryland Agriculture
• Processing demand - for cheese, paneer and other products.
• Nutritional Security - Milk contains nutrients that meet the body’s needs for calcium, magnesium,
riboflavin, vitamin B12 etc.
• Sustainable agriculture by promoting integrated farming systems. For eg. Manure from dairy animals can
be utilised as organic fetiliser.
Challenges to dairy sector

• Informal sector-large share of milk (70–85%) of marketable surplus goes through informal channel
where quality is a big concern
• Farmers less share in benefits - Farmers do not share in the benefits of high demand because of poor
governance of cooperatives.
• Low productivity per animal – 1,700 kg compared to global average of 2700 kg.
• Inadequate healthcare and veterinary – Frequent occurrence of deadly diseases. E.g. Foot & Mouth
disease, black-leg etc. Poor veterinary services, lack of diagnostic labs, spurious medicines, etc.
• Fragmented supply- production scattered over large no of farmers at miniscule.
• Perishability- dairy requires more complex supply chain operations and logistics to ensure freshness and
safety.
• Infrastructure - modern cold chain storage, transport storage facilities etc.
• Reducing grazing land- due to industrial growth.
• Fodder- availability and affordability.
• Limited financial resources - as majority dependent on small and marginal.
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Creating opportunities in dairy:

• Upstream supply management- for securing a reliable, high-quality milk procurement
• Milk Processing Opportunities-Milk can be processed into a range of high-value-added products.
• Downstream supply management-need for a secure supply and a reliable distribution infrastructure
• Private participation - will boost credit supply and quality
• Processing potential - should be direct link between farmers and industries.
• Marketing - Organize traders collecting milk at the farm into groups and create joint facilities – testing,
processing and storing their milk supplies.
- Promote value-addition ➔Enriching milk with other nutrients and vitamins.
- Additional marketing for healthy A2A2 type milk (milk from indigenous breeds).
• Promote exports – Create rational export policy on lines of Agriculture Export Policy to enable farmers
get higher prices. Adherence to international standards through mechanized and hygienic production.
• Dairy quality - Training on clean milk practices, develop milk testing infrastructure, adequate cooling
facilities along with power supply, processing plant certification to build consumer confidence.
• Shift towards technology driven environment - Eg: Israeli Technology has made its country’s “Super
Cows” world famous – producing more milk than any other country, up to 10.5 tons a year.
- For eg. Milk Mantra in Odisha enabled traceability and efficient supply chain management.
• Other measures – Strengthen women participation, diversify dairying to India’s Eastern Region,
strengthening dairy cooperatives and encourage farmers to sell fine manure as natural fertilizer to
organic farming.
Government initiatives:
• Special Livestock Sector Package - Merger of Schemes into three broad categories:
- Development Programmes: It includes Rashtriya Gokul Mission, National Programme for Dairy
Development (NPDD), National Livestock Mission (NLM), Livestock Census etc. as sub-schemes.
- Disease Control Programme: It is renamed as Livestock Health and Disease Control (LH & DC)
- Infrastructure Development Fund: The Animal Husbandry Infrastructure Development fund
(AHIDF) and the Dairy Infrastructure Development Fund (DIDF) are merged.
• e-Gopala App - A comprehensive breed improvement marketplace & information portal for farmers.
• For Ensuring Milk Quality: Unified Dairy Mark developed by Bureau of Indian Standards.
• Dairy Entrepreneurship Development Scheme - being implemented through NABARD.
• Gopal Ratna Award 2021 – To encourage farmers, artificial insemination technicians and Dairy
cooperatives.
• Quality mark - To the dairy plants of cooperatives adhering to the process standards across the dairy
value chain.
• E-Pashuhaat Portal - To connect breeders and farmers regarding availability of bovine germplasm.
• Dairy Entrepreneurship Development Scheme - To generate self-employment and provide
infrastructure for dairy sector.
• "Dairy Sahakar" scheme - to extend financial support by NCDC to eligible cooperatives for activities
such as bovine development, branding, marketing, exports of dairy products within the overall
objectives of "Doubling the farmers income" and "Atmanirbhar Bharat.
• National Animal Disease Control Programme (NADCP) - to prevent the spread of diseases like Foot and
Mouth diseases and Brucellosis among the bovines.
Dairying has become an important secondary source of income and is considered as one of the activities
aimed at alleviating poverty and unemployment for marginal and women farmers especially, in the rural
areas and in the rain-fed and drought-prone regions of India. The progress in this sector will result in a more
balanced development of the rural economy.
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Fisheries Sector
India is the 3rd largest fish producing and 2nd largest aquaculture nation in the world after China. The Blue
Revolution in India demonstrated importance of Fisheries and Aquaculture sector. The sector is considered
as a sunrise sector and is poised to play a significant role in the Indian economy in near future.
Status and trends in fisheries sector in india:

• India’s fish production hit an all-time high of 162.48 lakh ton in fiscal year 2021-22.
• India’s fish production has grown 22-fold since independence, from 7.5 lakh ton in 1950-51 to a record-
breaking 162.48 lakh ton in 2021-22.
• Till 2000, marine fish production dominated India's total fish production.
• However due to practice of science-based fisheries, Inland fisheries in India has seen a turnaround and
presently contributes ~70 % of total fish production.
• Inland fish production, predominantly driven by aquaculture, has witnessed an extraordinary surge. In
2000-01, inland fish production stood at 28.23 lakh tonne, which rose to 121.21 lakh tonne in 2021-22,
marking a remarkable 400% increase.
Importance of fisheries sector:

• Economic growth-The contribution of fisheries sector to the GDP/GVA has gone up from 0.46 per cent in
1950-51 to 1.24 per cent in 2018-19.
• Employment generation- The sector provides livelihood to about 16 million fishers and fish farmers at
the primary level and almost twice the number along the value chain.
• Export potential - India is 4th largest fish exporting nation.
• Hunger and nutrition - fish is an affordable and rich source of Animal protein.
• Fish biodiversity - India have more than 10% of global fish biodiversity.
• Increased demand - due to increased standard of living and incomes.
Challenges of fishing sector:

• Unregulated fishing - overfishing without proper regulations threats sustainability.
• Infrastructure bottlenecks - insufficient cold storage and transportation.
- Lack of resource-specific fishing vessels, thus, fish stocks in deep-sea waters remain untapped .
- Weak linkages between R&D and fish farmers community - Limited number of species grown.
• Inadequate mechanization- without proper technology, freezing, transport.
• Illegal, Unreported and Unregulated (IUU) fishing - IUU fishing accounts for 40% of total marine fish
catch in Indian waters.
- Bottom trawling and improper demarcation of coastal boundaries leading to disputes with
neighbouring nations, For eg, Katchatheevu island dispute.
• Increased demand- is not proportional to meet the rising demand.
• Low productivity - stagnated yield
Government initiatives:
• Blue Revolution Scheme: For Integrated Development and Management of Fisheries'
• Aquaculture Infrastructure Development Fund (FIDF): For creation of fisheries infrastructure facilities
both in marine and inland fisheries sectors and augment the fish production
• Pradhan Mantri Matsya Sampada Yojana (PMMSY) (2020-21 to 2024-25):
o Harnessing of fisheries potential in a sustainable, responsible, inclusive and equitable manner
o Modernizing and strengthening of value chain
o Social, physical and economic security for fishers and fish farmers
o Robust fisheries management and regulatory framework
• National Policy on Marine Fisheries, 2017' (NPMF) which provides guidance for promoting 'Blue Growth
Initiative'.
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• Establishment of separate Ministry for animal husbandry, dairy and fisheries in 2019
• Kisan Credit Card (KCC): Extended to fishers and fish farmers to help them meet their working
capital and short-term credit needs.
Way forward:
• The Meena Kumari Committee on deep sea fishing has recommended strengthening of the fisheries
institutions, terms of manpower, human resource development and wherewithal.
• India will be able to optimally exploit its fisheries resources in the EEZ as also ensure that the resources
are sustained and inter-generational equity is not compromised. Such an approach would also ensure
realization of the ‘Blue Revolution’ from the Indian seas.
• Neel kranti to arthakranti is vision to achieve economic prosperity of country and nutritional food
security of India and unleash the potential of India
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6. Industry and Economy
6. Industry and Services
LPG Reforms and Effects in India

• The Liberalization, Privatization and Globalization (LPG) reforms were introduced in India in the early
1990s to deal with economic and financial crisis. India approached the International Bank for
Reconstruction and Development (IBRD), popularly known as World Bank and the International
Monetary Fund (IMF), and received $7 billion as loan to manage the crisis.
Causes of the Balance-of-Payment Crisis

• High Fiscal Deficit: The fiscal deficit in 1990 and 1991 was approximately 8.4% of GDP
• Impact of Crude Oil Prices and Gulf War: The invasion of Kuwait by Iraq in 1990 and 1991 caused a
surge in oil prices,
• High Inflation: Rapid increase in the money supply led to a rise in inflation from 6.7% to 16.7
• Rising Internal Debt: As a consequence of the high fiscal deficit, the government's internal debt soared.
It surged from 35% of GDP in 1985-86 to 53% of GDP in 1990-91
• Depleted Forex Reserves: By June 1991, India had less than $1 billion in forex reserves, just enough to
cover three weeks of imports, posing a significant challenge for conducting international business and
worsening the balance of payment crisis.
• Capital Flight: Investors swiftly withdrew their investments from India as they perceived the worsening
economic conditions. This exacerbated the crisis, leading to a negative cycle of economic decline.
Introduction of the New Economic Policy, 1991

• In response to the crisis, the Indian government announced the New Economic Policy in 1991, which
served as a foundation for economic reforms known as the LPG reforms (Liberalization, Privatization,
Globalization).
• The LPG model included various reforms in different sectors:
• Industrial Policy Liberalization: Reductions in import tariffs, elimination of the license-permit raj
(restrictive industrial licensing), and other measures to promote industrial growth and
competitiveness.
• Privatization Initiatives: Deregulation of markets, reforms in the banking sector, and other measures
to encourage private participation and improve efficiency.
• Globalization Measures: Changes in exchange rates, liberalization of trade and foreign direct
investment policies, and removal of mandatory convertibility to stimulate international trade and
investment.
Goals of Liberalization
The objectives of liberalization in the Indian economy were to:
• Encourage Private Businesses, Facilitate Global Integration, Address Balance-of-Payments Issues,
Enhance Private Sector Participation, Attract Foreign Direct Investment, Promote Competition
Policies of Liberalization:
The liberalization policies that contributed to the expansion of the Indian economy included:
• Financial Sector Reforms: Deregulation of the banking sector, introduction of market-based interest
rates, and liberalization of capital markets.
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• Industrial Sector Reforms: Reduction of industrial licensing requirements, simplification of regulations,

and encouragement of private sector participation.
• External Sector Reforms: Liberalization of trade policies, reduction of import tariffs, and relaxation of
restrictions on foreign exchange transactions.
• Foreign Exchange Reforms: Introduction of market-determined exchange rates, easing restrictions on
capital movements, and simplification of foreign exchange regulations.
• Trade and Investment Policy Reforms: Opening up of key sectors to foreign investment, streamlining
investment procedures, and encouraging export-oriented industries.
Impact of Liberalization on the Indian Economy

• Increased Economic Growth: From 1991 to 2020, the country's GDP grew at an average rate of 6.7%,
compared to an average rate of 3.5% in the preceding three decades.
• Higher Foreign Investment: FDI inflows increased from $97 million in 1990-91 to $81.72 billion in 2020-
21, according to the Ministry of Commerce and Industry.
• Improvement in Industrial Productivity: The Indian manufacturing sector's productivity increased by
6.8% annually between 1991 and 2006, as per a study by the Reserve Bank of India.
• Expansion of the Services Sector: The services sector's contribution increased from 37.2% in 1990-91 to
54.3% in 2020-21, according to the Ministry of Statistics and Programme Implementation.
• Increase in per capita income: The average monthly per capita expenditure of Indian households
increased significantly from Rs. 206 in 1987-88 to Rs. 2,446 in 2017-18, based on a study by the National
Sample Survey Office.
• Agriculture: Availability of modern Agro- technologies, Rise in production and productivity, Growth of
Agro-exports (USD 43.37 billion in 2023).
Negative Impacts of Liberalization

• Widening Income Inequality: The top 1% of the population held 22% of the country's wealth in 1991,
which rose to 42.5% in 2018, while the bottom 50% saw a decline in their share of wealth from 14% to
12.5%.
• Jobless Growth: India had job growth of 3% per annum in the 1970s and when the economy grew at 3-
3.5 % however over the last three decades despite growth over 5-8% the job growth is only close to 1%
per annum.
• Environmental Degradation: The industrialization and economic growth resulting from the reforms
contributed to increased pollution levels in India. The country ranked 177th out of 180 countries in terms
of air quality in 2020, according to the Environmental Performance Index.
• Dependence on Foreign Investment: The FDI inflows increased from $97 million in 1990-91 to $81.72
billion in 2020-21
• Agriculture: The status of Indian agricultural sector indicates that globalization did not yield the desired
results in India.
Changes in Industrial Policy and their Effects on Industrial Growth
According to IMF “Industrial policy” refers to government efforts to shape the economy by targeting specific
industries, firms, or economic activities. This is achieved through a range of tools such as subsidies, tax
incentives, infrastructure development, protective regulations, and research and development support.
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Goals of Industrial Policy in India:
Evolution of Industrial Policies in India:
Industrial Policy Resolution 1956 (IPR Industrial Policy Resolution 1977 India’s Industrial Policy
1956): (IPR 1977): Statement, 1980:
This resolution classified industries into • Thrust on cottage and small- • Integrating Industrial
three categories. scale industries Development by
• The first category comprised • Development of industrial Promoting the concept
industries which would be technology that was of Economic
exclusively owned by the state; appropriate in Indian context Federalism
• Second category consisted of • Recognized the role of large- • Optimum utilization of
industries in which the private scale industries for building installed capacity
sector could supplement the efforts up infrastructure, meeting • Promotion of export-
of the state sector, with the state the requirements of oriented and import
taking the sole responsibility for machinery of other substitutions industries
starting new units; industries.
• Third category consisted of the • Use of Monopolies and
remaining industries which were to Restrictive Trade Practices
be in the private sector. (MRT P) Act to curb
monopoly power of big
industries
New Industrial Policy During Economic Reforms of 1991
Features of the New Industrial Policy

• De-reservation of Public Sector: Sectors that were previously exclusively reserved for the public sector
were reduced in scope. However, certain core areas, including arms and ammunition, atomic energy,
mineral oils, rail transport, and mining, retained the pre-eminent position of the public sector.
• De-licensing: Currently, industrial licenses are required for only four industries related to security,
strategic concerns, and environmental issues, which include electronic aerospace and defence
equipment, specified hazardous chemicals, industrial explosives, and cigars and cigarettes of tobacco and
manufactured tobacco substitutes.
• Disinvestment of Public Sector: The government reduced its stakes in Public Sector Enterprises (PSEs) to
enhance their efficiency and competitiveness.
• Liberalization of Foreign Investment: The new industrial policy marked the first-time foreign companies
were allowed to have majority ownership in India. Up to 51% Foreign Direct Investment (FDI) was
permitted in 47 high-priority industries, and for export trading houses, FDI up to 74% was allowed.
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• Foreign Technology Agreements: Automatic approvals were granted for technology-related agreements.
The Monopolies and Restrictive Trade Practices (MRTP) Act was amended, removing asset threshold
limits for MRTP companies and dominant undertakings. The MRTP Act was subsequently replaced by the
Competition Act of 2002.
Outcomes of the New Industrial Policies Limitations of Industrial Policies in India

1. Reduction of Bureaucratic Hurdles 1. Stagnation of the Manufacturing Sector
2. Limited Role of the Public Sector 2. Distortions in Industrial Pattern
3.Easier Entry of Multinational Companies and 4. Absence of Incentives for Efficiency
Privatization 5. Vaguely Defined Industrial Location Policy
4. Focus on Export Promotion
Way Forward
• Shift from Socialistic to Capitalistic Industrial Policies: India's industrial policies have transitioned from a
predominantly socialistic pattern in 1956 to a more capitalistic approach since 1991. The current
industrial policy regime in India emphasizes increased foreign investment and reduced regulations.
• Positive Reforms and Campaigns: Reforms related to insolvency resolution (Bankruptcy and Insolvency
Act, 2017) and the Goods and Services Tax (GST) have yielded positive outcomes for the industrial sector.
Initiatives like Make in India and Start-up India have contributed to enhancing the business ecosystem in
the country.
• Ongoing Challenges: Challenges such as electricity shortages, high prices, credit constraints, labor
regulations, political interference, and other regulatory burdens continue to hinder the growth of the
industrial sector in India.
• Need for a New Industrial Policy: To boost the manufacturing sector, there is a need for a new industrial
policy in India. The government recognized this necessity in December 2018 and expressed the intention
to introduce a comprehensive industrial policy that would serve as a roadmap for all business enterprises
in the country.
Need for Economic Reforms 2.0

The Indian economy has faced a slowdown since the early 2010s, further aggravated by the COVID-19
pandemic. Achieving the goal of a $5 trillion economy by 2025 necessitates further economic reforms.
Key Reforms for Achieving the Target

• Simplify and Streamline the Tax System: India ranks 115th out of 190 countries in the ease of paying
taxes, according to the World Bank's Ease of Doing Business Report 2022.
• Boost Manufacturing: Efforts should be made to increase the share of manufacturing in GDP, which
currently lags behind other major economies.
• Increase Foreign Investment: India should strive to improve its attractiveness to foreign investors by
creating a conducive investment environment.
• Encourage Entrepreneurship: Efforts should be made to address the challenges faced by entrepreneurs
in starting and scaling businesses.
• Increase Agricultural Productivity: India's agriculture sector has untapped potential that needs to be
harnessed.
• Invest in Education and Skills: India's human capital quality ranks 116th out of 174 countries, according
to the World Economic Forum's Human Capital Index 2020.
• Promote Exports: India's export performance needs to be enhanced to remain competitive in the global
market.
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Target of $5 Trillion Economy by 2025

The goal of achieving a $5 trillion economy by 2025 was set by the Government of India to propel the
country's economic growth. To reach this target, several areas of focus have been identified:
• Infrastructure Development: Massive investments in infrastructure are planned to create employment
opportunities, attract foreign investment, and improve productivity.
• Digital Transformation: Promoting digitalization across sectors can drive innovation, improve efficiency,
and create new business opportunities.
• Skill Development: Skilling programs aim to create a skilled workforce capable of meeting industry
demands and contributing to economic growth.
• Promoting Entrepreneurship: Support for entrepreneurs through access to funding, mentorship, and
resources can foster innovation and create new business ventures.
• Ease of Doing Business: Simplifying regulations, reducing bureaucratic hurdles, and streamlining
processes to improve the ease of doing business in India.
Schemes Launched by the Government

The Government of India has implemented several economic programs to promote growth, development,
and social welfare. Some notable programs include:
• Make in India: Launched in 2014 to promote manufacturing and attract foreign investment.
• Digital India: Launched in 2015 to transform India into a digitally empowered society and knowledge
economy.
• Skill India: Launched in 2015 to provide skill training and vocational education to the youth.
• Pradhan Mantri Jan Dhan Yojana: Launched in 2014 to promote financial inclusion and provide banking
services to all.
• Atmanirbhar Bharat Abhiyan: Launched in 2020 to promote self-reliance and self-sufficiency in various
sectors.
While achieving the $5 trillion economy target is challenging, the government continues to implement
reforms and measures to boost economic growth and development in India.
Industrial Revolution 4.0

Introduction
• The concept of 'Industry 4.0' was initially formulated by the German government back in 2011.
• Industry 4.0 signifies a novel stage in the Industrial Revolution, concentrating mainly on
intercommunication, automation, application of machine learning, and instantaneous data.
• Industry 4.0 integrates the Industrial Internet of Things (IoT) and smart manufacturing, merging physical
procedures and production with intelligent digital technologies, machine learning, and extensive data.
• Objective: To develop a comprehensive and more interconnected ecosystem for businesses that are
centered around manufacturing and supply chain management.
• Companies and organizations today face a common challenge: the need for interconnectedness and
real-time data across processes, partners, products, and personnel. This is where Industry 4.0 becomes
crucial.
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Fourth industrial revolution in india: status

• The digital economy is projected to reach $1 trillion by 2025, contributing around 25% of India's GDP.
(Source: McKinsey Global Institute).
• Industry 4.0 technologies have the potential to create 90 million jobs in India by 2030. (Source: BCG
and World Economic Forum).
Challenges to the 4th industrial revolution

1. Cybersecurity issues: The increased connectivity in this revolution exposes vulnerabilities to
cybersecurity threats.
2. Reduction in low-skill jobs: Automation and artificial intelligence technologies can replace repetitive and
manual tasks, resulting in a shift in the workforce and potentially fewer opportunities for low-skill jobs.
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3. Industry and market disruption: Companies that fail to adapt and embrace innovation may struggle to
survive in the new competitive landscape.
4. Rise in social inequalities: This can lead to heightened social tensions and widen the gap between
different socio-economic groups.
Challenges specific to India

1. Infrastructure and connectivity: Insufficient power supply and high-speed internet, especially in rural
areas, limit digital infrastructure. Skilled workforce development is crucial.
2. Data quality: Inconsistent standards and a significant informal sector affect the reliability and accuracy of
data, impacting decision-making and policy implementation.
3. Limited research and development: India's inadequate investment in R&D hampers innovation and the
ability to address challenges and opportunities in the Fourth Industrial Revolution.
Steps taken by the Government

1. SAMARTH Udyog Bharat 4.0 Initiative
• It is an Industry 4.0 initiative by the Department of Heavy Industry, Ministry of Heavy Industry &
Public Enterprises.
• The goal is to establish an ecosystem for the adoption of Industry 4.0 technologies in Indian
manufacturing by 2025, including MNCs, large, medium, and small-scale Indian companies.
2. Centre of Excellence (CoE) on IT for Industry 4.0
• The CoE serves as a knowledge center for entrepreneurs and startups, promoting the concept of IT
and its application in the Fourth Industrial Revolution (IR 4.0).
3. Centre for Fourth Industrial Revolution
• World Economic Forum has established its fourth Center for Fourth Industrial Revolution in Mumbai,
India.
• This center will collaborate with NITI Aayog (National Institution for Transforming India) to co-design
new policies and protocols for emerging technologies.
4. National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS)
• Launched by the Union government in 2018 and implemented by the Department of Science &
Technology.
• The mission addresses society's technological needs and considers international trends and
roadmaps for next-generation technologies.
5. National Strategy on Artificial Intelligence
• NITI Aayog has adopted a three-pronged approach under the strategy:
o Undertaking exploratory proof-of-concept AI projects in various areas
o Crafting a national strategy for building a vibrant AI ecosystem in India
o Collaborating with experts and stakeholders
Way Forward
• Foster international collaboration:
o A joint platform between ministries, state governments, and industry bodies can be considered.
• Promote industry-academia collaboration
o Introduce a compulsory apprenticeship program at the higher secondary level to provide hands-
on experience in technology.
• Increase investments.
• Focus on improving productivity: Embrace digitalization by fostering competitive advantages along value
chains. Prioritize productivity and address productivity gaps to enhance global competitiveness.
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Conclusion
• The Fourth Industrial Revolution offers more than just technological advancements; it presents an
opportunity to create an inclusive, human-centred future.
• It is essential for leaders, policymakers, and people from all income groups and nations to harness
converging technologies for positive impact.
Revitalizing the MSME Sector
Introduction
The Micro, Small and Medium Enterprises (MSMEs) sector plays a vital role in the Indian economy. The
sector contributes almost 8% of the country's GDP, around 45% of manufacturing production, and about 40%
of exports.
MSMEs currently employ over 46.6 million people, as per the national sample survey (2019).
Despite its significance, the sector faces numerous challenges, including low registration on the UDYAM
Platform, heterogeneity, fragmentation, and informalization. To unlock the full potential of MSMEs and
propel the Indian economy towards higher growth, targeted policies in infrastructure development,
technology adoption, and backward and forward linkages are necessary.
REVISED MSME CLASSIFICATION

Composite Criteria: Investment & Annual Turnover
Classification Micro Small Medium
Manufacturing & Investment < Rs. 1 crore Investment < Rs. 10 crore Investment < Rs. 50 crore
Services Turnover < Rs. 5 crore Turnover < Rs. 50 crore Turnover < Rs. 250 crore
MSME Status & Significance

• Economic Significance
- Composition - > 99% of MSMEs are in ‘Micro’ sector, 94% of MSME are unregistered with the
government, 55% of MSME in rural areas.
- Diversity of MSME sector - products ranging from traditional to high –tech precision items.
- Comprises key sunrise sectors – such as electronics industry, chemicals, leather, textiles, agro and
food processing, pharmaceuticals, transport and tourism industries, etc
• High Labour Intensity - Provides employment to 80% population with just 20% investment. Generates
2nd highest employment, after Agriculture sector. Thus, key to poverty alleviation and to prevent distress
migration.
• Growth Potential: There are over 36.1 million MSME units in India, with the Ministry aiming to increase
its GDP contribution to 50% by 2025 as India's economy grows to $5 trillion.
• Key to Inclusive growth - Creating employment opportunities for special segments such as women,
physically challenged, traditional industries, etc.
• Strategic significance - MSME is a key component in ‘Make in India’, Digital India, Start-up India, Stand
up India, Indigenous Defence production, Foreign Trade Policy, & e- commerce initiatives of GoI.
Significance of MSME Sector for India

• Boon for Rural Development: MSMEs have contributed to the industrialization of rural areas with
minimal capital cost, leading to socio-economic growth and complementing major industries.
• Front Runner in Make in India Mission: MSMEs are crucial in making the 'Make in India' initiative
successful by adhering to global quality standards and becoming the backbone of the mission.
• Simple Management Structure for Enterprises: Compared to large corporations, MSMEs offer a flexible
management structure that allows for easy decision-making and efficiency.
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• Economic Growth and Leverage Exports: MSMEs significantly contribute to India's GDP, accounting for
8% of it. Moreover, they have the potential to create linkages between India's MSME base and larger
companies by supplying semi-finished and auxiliary products.
Factors leading to the growth of MSME

• Promoting Innovation and Competitiveness: MSMEs provide opportunities for aspiring entrepreneurs to
develop innovative products, fostering competitiveness and driving growth.
• Government Campaigns: Initiatives like Make in India, Startup India, Skill India, and Digital India aim to
level the playing field and promote increased production.
• Adapting to Labor Market Trends: Younger generations are moving away from agriculture and entering
businesses, creating employment opportunities.
• New Definition: The new definition and classification eliminate the need for frequent inspections and
provide transparency and impartiality.
• Digitization: Growing internet use and digital payment comfort, supported by B2C e-commerce firms,
facilitate MSME sector expansion.
• Collateral-Free Financing: Partnerships with modern non-banking finance enterprises offer MSMEs
easier access to financing.
Various Initiatives Undertaken by the Government for MSME Sector

• Udyami Mitra Portal: Launched by SIDBI to improve credit accessibility and provide handholding services
to MSMEs.
• MSME Sambandh and MSME Samadhaan: Monitor and address delayed payments by central
ministries/departments/CPSEs/state governments.
• Digital MSME Scheme: Enables MSMEs to access common and tailor-made IT infrastructure through
cloud computing.
• Revamped Scheme of Fund for Regeneration Of Traditional Industries (SFURTI): Organizes traditional
industries and artisans into clusters to enhance competitiveness.
• A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE): Creates new job
opportunities and promotes an entrepreneurship culture.
• Micro & Small Enterprises Cluster Development Programme (MSE-CDP): Implements a cluster
development approach to increase productivity and competitiveness.
• Credit Linked Capital Subsidy Scheme (CLCSS): Upgrades technological expertise of MSMEs.
Current Challenges Related to MSME Sector in India

1. Financial Constraint: Access to timely finance remains an issue, with only 16% of SMEs having such
access, leading to heavy reliance on their own resources.
2. Lack of Innovation: MSMEs struggle with outdated technologies and low productivity due to a lack of
entrepreneurial spirit and innovation.
3. Majority of Small Firms: Micro and small businesses constitute over 80% of MSMEs, but they often
struggle to take advantage of government initiatives.
• Communication gaps and lack of awareness hinder their access to emergency credit lines, stressed
asset relief, equity participation, and fund of funds operations.
4. Lack of Formalization Amongst MSMEs: A significant number of MSMEs in India operate without formal
registration, leading to credit gaps and limited access to support.
• Approximately 86% of manufacturing MSMEs remain unregistered, hindering their ability to avail
themselves of benefits and services.
• The Goods and Services Tax registration rate for MSMEs is relatively low, with only about 1.1
crore entities registered.
5. Mounting NPAs in MSMEs: The MSME sector has witnessed a rise in non-performing assets (NPAs)
during recent times.
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• As per the Reserve Bank of India (RBI), bad loans of MSMEs account for 9.6% of gross advances, up
from 8.2% in 2020.
• Many MSMEs did not benefit from restructuring schemes and relief packages, aggravating their
financial distress.
6. Lack of Infrastructure and Technology: Inadequate infrastructure and outdated technology pose
significant challenges for MSMEs in India.
• Power supply issues, including poor quality and unscheduled cuts, impede smooth operations.
• Insufficient substations, inadequate road networks, Lack of proper transport facilities, ineffective
storm water drainage, and limited sewage treatment plants further hamper growth.
Case study: Model that can be learned from other economies

• By providing employment and income, SMEs can raise income, living standards and consumer
spending. SMEs can aid the atmanirbharta vision, especially in the manufacturing sector.
• This pattern is observed in countries with strong manufacturing sectors such as Germany and China.
China’s pattern is more relevant to India due to a similarity in size and population as well as its
recency.
• SMEs make up over 99% of all enterprises in China today, with an output value of at least 60% of its
GDP; they generate more than 82% of employment opportunities.
• As per China’s national economic census, manufacturing SMEs accounted for nearly 53% of its total
incorporated SMEs and 65% of the total employment in SMEs.
• With global manufacturing moving out of China, our SMEs can play a key role in sustaining the
manufacturing that is shifted to India.
Remedial Measures for MSMEs
• New Definition of MSMEs: The Indian government has provided a new definition for MSMEs.
• Promotion of ATMANIRBHAR Bharat and Make in India: The government has prohibited global
procurement contracts of up to INR 200 crores and promoted ATMANIRBHAR Bharat.
• Emergency Credit Line Guarantee Scheme: Providing loans with a 100% guarantee to eligible MSME
borrowers to address capital shortages.
• Access to Digital Platforms: Private sector and government support provide MSMEs with access to digital
platforms for marketing and payments.
o E-commerce websites have also encouraged the onboarding of MSMEs.
o Open Network for Digital Commerce creating opportunities for MSMEs to access technology and
diversify their target markets.
• Sign of Robust Recovery: Greater formalization and growth in GST collections indicate a positive
recovery. More than 10 million MSME units have registered on the Udyam portal since July 2020.
• Udyam Portal: The online registration portal has facilitated the registration of over 10 million MSME
units since its launch.
o MSME registration process is fully online, totally free, paperless and based on self-declaration and is
a step towards Ease of Doing Business for MSMEs.
o No documents or proof are required to be uploaded for registering an MSME. With Udyam number
banks can categorize lendings to MSMEs as priority sector loans.
Way Forward
1. Regulatory Mechanism
• Establishment of an independent body to safeguard MSMEs from economic shocks and promote
their growth.
2. Supply Chain Finance
• Provide MSMEs with access to working capital through technology-enabled platforms and encourage
Zero Defect & Zero Effect practices.
• Enables MSMEs to invest in expansion, procure raw materials, and update inventories.
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3. Linking Government Projects with Local MSMEs

• Foster domestic manufacturing capabilities by leveraging public procurements and projects.
• Close linkage between initiatives like Sagarmala, Bharatmala, and industrial corridors with the
MSME sector.
• Promotes collaboration between the government and MSMEs for enhanced growth and
employment opportunities.
4. Industry-Academia Channel
• Strengthen collaboration between government, industry, and academia to identify manufacturing
requirements and develop a skilled workforce aligned with Industrial Revolution 4.0.
• Bridge the gap between education and industry needs, fostering innovation and driving technological
advancement.
5. Dedicated MSME Portal
• Creation of a dedicated portal for MSME formalization and registration to enhance transparency and
reduce fraudulent activities.
• Use of Aadhaar or PAN as a unique identifier for compliance purposes and simplification of the
annual registration process.
6. E-Courts for Dispute Resolution
• Strengthen the NCLT framework by introducing alternative methods of debt resolution, including e-
courts.
• Faster resolution of cases to reduce financial burdens on MSMEs and enhance their overall
competitiveness.
7. Incentivizing Digital Adoption Within the Sector
• Provide incentives for digital adoption, especially in disruptive technologies like artificial intelligence
and quantum technology.
• Encourage innovation, efficiency, and competitiveness within the MSME sector.
Conclusion
MSMEs are the backbone of the Indian economy, providing resilience against global economic shocks. To
revive the economy and address the challenges faced by MSMEs, a comprehensive approach is required,
including easing regulatory burdens, fiscal support, and ensuring a level playing field. By prioritizing the
interests of MSMEs, India can unlock their full potential and foster inclusive growth.
Special Economic Zones (SEZs)
Introduction
An SEZ, or Special Economic Zone, is an area within a country that offers fiscal concessions and different
business and commercial laws to encourage investment and create employment. SEZs are established to
address infrastructural and bureaucratic challenges and improve the ease of doing business.
SEZs in India
• The first EPZ (Export Processing Zone) in Asia was set up in 1965 in Kandla, Gujarat.
• In 2000, the government started establishing SEZs under the Foreign Trade Policy to overcome the
limitations of EPZs.
• The Special Economic Zones Act was passed in 2005, and it came into force along with the SEZ Rules in
2006. India’s SEZs were structured closely with China's successful model.
• Currently, India has 379 notified SEZs, out of which 265 are operational. Tamil Nadu, Telangana,
Karnataka, Andhra Pradesh, and Maharashtra account for 64% of the SEZs.
• The Board of Approval is the apex body and is headed by the Secretary, Department of
Commerce (Ministry of Commerce and Industry).
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Types of Special Economic Zones (SEZs)
Salient Features of Special Economic Zone

• A Special Economic Zone is
a designated duty-free area deemed
to be foreign territory for the purpose
of trade operations, duties & tariffs.
• There is no requirement for a license
for import.
• Other notable features are:
o The units in SEZ must become net
foreign exchange earners within a
period of 3 years.
o Full freedom for subcontracting.
o Special Economic Zones are
allowed for trading,
manufacturing, and other service
activities.
SEZs in India enjoy several facilities and incentives, such as:

1. Duty-free import/domestic procurement of goods for development, operation, and maintenance of SEZ
units.
2. 100% Income tax exemption on export income for SEZ units under the Income Tax Act for first 5 years,
50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
3. Exemption from Central Sales Tax, Service Tax, and State sales tax (now subsumed into GST).
4. Other levies imposed by respective State Governments.
5. Single window clearance for approvals at the Central and State levels.
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Government Measures to Revamp SEZs

1. Baba Kalyani Committee
• The government has constituted Baba kalyani committee to study the existing SEZs of India and prepare
a policy framework to adopt strategic policy measures.
• Recommendations of Baba Kalyani committee 2018
1. Rename SEZs in India as 3Es- Employment and Economic Enclave.
2. Framework shift from export growth to broad-based employment and economic growth
3. Separate rules and procedures for manufacturing and service SEZs
4. Ease of Doing Business (EoDB) in 3Es such as one integrated online portal for new investments
5. Extension of Sunset Clause and retaining tax or duty benefits
6. Unified regulator for IFSC
7. Dispute resolution through arbitration and commercial courts
2. Development of Enterprise and Service Hubs (DESH) Bill 2022
• It is an outcome of the recommendations of Baba Kalyani committee constituted in 2018.
• Objectives:
o It will replace the SEZ Act of 2005 and aims to develop more inclusive economic hubs.
o SEZs will be renamed as ‘Development hubs’. They will facilitate both export-oriented and domestic
investment. It combines the role of the domestic tariff area and SEZ.
o DESH legislation provides for an online single-window portal for the grant of time-bound approvals
for establishing and operating the hubs.
o A larger role for State boards would be set up to oversee the functioning of the hubs.
o It allows partial denotification of SEZ to free up unused built-up area & idle land inside SEZ for other
economic activities.
Challenges with SEZs

• International competition - SEZs in India have not been as successful as their counterparts in many other
countries. ASEAN countries have tweaked their laws to attract investments at the cost of Indian SEZs.
• Limited exports SEZs account for only 30% of India’s total exports (China – > 60%).
• Challenges of Manufacturing SEZ - SEZs have failed to bolster manufacturing and only IT SEZs have been
successful to some extent. For eg. more than 60% of SEZ are in IT/ITES sector.
• Dismal performance - Most manufacturing SEZs in India have performed below par due to their poor
linkages with the rest of the economy.
• Under - utilization of Area - About 50% of land has remained unutilized in SEZs due to presence of sector
specific constraints in utilization of land.
• Disparity between States - Majority of the SEZs are in just in coastal states while NE states, Bihar and
Jharkhand have a minimum number of SEZs and very low FDI.
• Barrier in Single Window Clearance System - as many states have not synced their state laws with
central SEZ Act leading to delayed approvals.
• Unfavourable Tax regime - Uncertainty in government policies, specifically tax ie. withdrawal of MAT,
Dividend Distribution Tax benefit, introduction of sunset clause etc.
• Other challenges - Lack of a robust policy design, efficient implementation and effective monitoring have
seriously jeopardized India’s effort to industrialise through SEZs.
Way Forward
• Promotion of MSME investments in SEZs by linking with MSME schemes and allowing alternate sectors
to invest in sector-specific SEZs is among the recommendations by the Baba Kalyani Committee on SEZs.
• It had also batted for additional enablers and procedural relaxations as well as granting SEZs
infrastructure status to improve their access to finance and enable long-term borrowings.
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Conclusion
Special Economic Zones are globally recognized tools for promoting economic growth. They offer various
incentives to attract investment and boost exports. Although SEZs in India face challenges, the benefits they
provide far outweigh the drawbacks.
Semiconductor Industry in India
Introduction
Semiconductors are vital for electronics and computing, but there's a global shortage due to high demand
exceeding supply. This shortage impacts economic growth and jobs. To address vulnerabilities, India aims to
become the global hub for Semiconductor Design, Manufacturing, and Technology Development. However,
the shortage of semiconductor chips has exposed vulnerabilities in the semiconductor supply chain,
underscoring the need to bolster domestic manufacturing capacity.
What are Semiconductor Chips?

• Semiconductors are materials that exhibit a conductivity level between conductors and insulators.
They can be pure elements such as silicon or compounds like gallium arsenide.
• Significance: Semiconductor chips serve as the fundamental building blocks and the "heart and brain" of
modern electronics and information and communication technology (ICT) products.
Semiconductor Industry in India: Present Status

• India has become the hub for semiconductor design with nearly 2,000 chips being designed per year.
• Worth (nearly $23.3 billion in 2021; expected to reach $80 billion by 2023).
• Expected Consumption: India's own consumption of semiconductors is projected to exceed $80 billion by
2026 and $110 billion by 2030.
• Employment potential - generate 6 lakh employment opportunities by 2030; an exceptional
semiconductor design talent pool making up to 20% of the world’s semiconductor design engineers.
• Consumption of semiconductors is expected to reach India $110 billion by 2030.
Need for promoting Semiconductor Industry

• Foundation of Digital Transformation: Semiconductors and displays are at the core of modern
electronics, driving the next phase of digital transformation under Industry 4.0.
• Export potential - leveraging manufacturing capabilities can help tap the global market and contribute to
export earnings → narrowing trade deficit.
• Employment generation - in domains like design, fabrication, assembly, testing.
• National security - By reducing dependence on imported semiconductors, safeguarding critical
infrastructure, defense system, sensitive data from vulnerabilities.
• Sustainable development - by enabling energy-efficient technologies and solutions contributing to low
carbon footprint.
• Spillover effects - Enabling digital transformation in healthcare, energy, agriculture.
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Disruptions in the Semiconductor Market

Semiconductor manufacturing operates within a complex global ecosystem, making its supply chain
vulnerable to macroeconomics, geopolitics, and natural disasters.
Several factors have contributed to recent disruptions:
1. Demand Hike: During the COVID-19 pandemic, with people spending more time at home and remote
work becoming the norm, there was a surge in demand for consumer electronics such as laptops.
2. Global Scramble: such as the automotive sector, began competing for the same raw materials,
intensifying the shortage.
3. Production Bottlenecks: The increased demand outpaced the supply of semiconductor chips, leading to
shortages of consumer durables and vehicles, which were previously unheard of.
4. Supply-Chain Constraints: Palladium and neon are crucial resources for semiconductor chip production,
with Russia supplying over 40% of the world's palladium and Ukraine producing 70% of neon.
5. Geopolitical Tensions: Taiwan accounts for 92% of advanced semiconductors. Ongoing trade tensions
between the United States and China have impacted chip production in Taiwan.
Challenges in Developing the Semiconductor Industry in India

Several challenges need to be addressed to establish a robust semiconductor industry in India:
1. Highly capital-intensive - As semiconductor fabrication units undertakings costing billions of dollars for
large facilities.
2. High maintenance: They require high-quality supply of water, electricity, and insulation from the
elements, reflecting the high degree of capital needed to make sophisticated circuits.
3. Lack of highly-skilled labor and technology: Semiconductor fab is a multiple-step sequence by which
electronic circuits are gradually created, which requires high skills and technology in which India is
lagging.
4. Scarcity of raw materials: From a value-chain perspective, it needs silicon, Germanium & Gallium
arsenide, and Silicon carbide which are not available in India and needs to be imported.
5. Adverse effect on the environment: Many toxic materials are used in the fabrication process such as
arsenic, antimony, and phosphorous, that consists a hazardous impact on the environment.
6. Disposal of Hazardous Waste: The semiconductor fabrication process involves the use of toxic
materials such as arsenic, antimony, and phosphorus, which can have adverse environmental effects
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Policy Initiatives in India

India has implemented several policy initiatives to foster the growth of the semiconductor industry:
1. Make in India: This initiative aims to transform India into a global hub for Electronic System Design and
Manufacturing (ESDM).
2. Production-Linked Incentive (PLI) Scheme: In December 2021, the Indian government sanctioned
₹76,000 crore under the PLI scheme to encourage the domestic manufacturing of various semiconductor
goods.
3. Design-Led Incubation (DLI) Scheme: The DLI scheme offers financial incentives and design infrastructure
support at different stages of semiconductor design and development, including Integrated Circuits (ICs),
Chipsets, System on Chips (SoCs), Systems & IP Cores, and semiconductor-linked design.
4. Digital RISC-V (DIR-V) Program: This program aims to enable the production of microprocessors in India,
achieving industry-grade silicon and design wins by December 2023.
5. India Semiconductor Mission (ISM): The ISM envisions building a vibrant semiconductor and display
design and innovation ecosystem to establish India as a global hub for electronics manufacturing and
design.
6. Semicon India program: It aims to provide attractive incentive support to companies that are engaged in
semiconductor industries.
7. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): For
the manufacturing of electronic components and semiconductors.
Way Forward
• Becoming a Key Player: India should strive to become a significant player in a trusted, plurilateral
semiconductor ecosystem that excludes key adversaries.
• Favourable trade policies play a critical role in establishing such an ecosystem.
• Fiscal Support: Given India's talent and experience, focusing fiscal support on other parts of the chip-
making chain, such as design centres, testing facilities, and packaging
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• Maximizing Self-Reliance: Future chip production should encompass the entire value chain, from design
to fabrication, packaging, and testing
• Connectivity and Capability: Connecting related industries and enhancing national capabilities are crucial
steps to build a robust chip manufacturing ecosystem in India.
• Collaboration between Industry and Government: Industry-government collaboration is essential to
leverage existing capabilities,
Conclusion: To fulfil the global demand for semiconductors and enhance India's capabilities, it is imperative
to build upon existing strengths, implement robust policy mechanisms, and foster a collaborative
environment between industry and government. Central and state governments must cooperate on policy
priorities and execution to achieve this goal.
Fintech Sector in India
Introduction
India's Fintech sector has experienced rapid growth over the past decade and is currently at the forefront of
the Fintech Revolution. The traditional cash-dependent Indian economy has undergone a significant
transformation due to the convenience and efficiency of digital services.
What are Fin-techs?

• Fintech is a combination of "financial technology" and refers to new technologies that aim to enhance
and automate the delivery and use of financial services.
• At its core, fintech utilizes specialized software and algorithms to assist companies, business owners, and
consumers in managing their financial operations and processes more effectively.
Key fintech products
1. Digital Public Infrastructure (DPI): DPI refers to digital solutions that facilitate essential functions such as
collaboration, commerce, and governance, which are crucial for public and private service delivery.
2. Digital Public Goods (DPGs): DPGs encompass open-source software, open data, open AI models, open
standards, and open content that adhere to privacy and best practices.
Current state of the fintech sector in India
• Rapid Growth and Valuation of India's Fintech Market: India is one of the fastest-growing fintech
markets globally, with a valuation of 50-60 billion USD in FY20, expected to reach 150 billion USD by
2025.
• Increasing Number of Fintech Companies in India: The number of fintech companies in India has
surpassed 2,100, with over 67% established in the last five years alone.
• Diverse Sub-Segments in India's Fintech Sector: The sector comprises various sub-segments, including
payments, lending, WealthTech, personal finance management, InsurTech, RegTech, and more.
• Shift in Investment Focus within the Fintech Sector: Initially, the majority of investment inflow in the
fintech sector focused on payments and alternative finance. However, there is now a more equitable
distribution of investments across other segments, such as InsurTech and RegTech.
• Significant Growth in Digital Payments Segment: The digital payments segment has experienced
significant growth, with monthly transaction volumes exceeding 5.7 billion and a value of around 2
trillion USD in 2021.
• India's Leadership in Digital Payment Adoption: India leads in real-time online transactions,
surpassing the combined numbers of the USA, UK, and China, making it a global leader in digital
payment adoption.
• Widely Accepted Fintech Services in India: Fintech services such as mobile banking, mobile wallets,
paperless lending, and secure payment
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Significance of Fintech in India

1. Enabling Financial Inclusion
• Fintech has reached under-banked and unserved segments, where traditional banks struggled to
penetrate.
• Increased transparency through adaptable, multilingual options and a robust interface has expanded
the consumer base.
• Reduced friction between financial institutions and retail customers.
2. Attracting Capital Flows
• Fintech has drawn capital flows into the Indian economy.
3. Bridging Gender and Accessibility Gap
• Fintech has addressed challenges faced by women during the pandemic, such as mobility restrictions
and loss of employment.
• The ease of signing up, making transactions, and obtaining credit offered by fintech services has
resonated with women.
4. Fintech Unicorn and Soonicorn Valuations
• The Indian market has witnessed a rise in fintech unicorn and soonicorn valuations.
• This is attributed to the regulatory sandbox regime introduced by the Reserve Bank of India (RBI) in
2019, paving the way towards a $5 trillion economy.
Government Initiatives Driving Fintech Growth

1. Jan Dhan Yojana
• It has facilitated financial inclusion with over 450 million beneficiaries gaining access to various
financial services.
• Fintech players have leveraged this initiative to develop technology products for the large
consumer base in India.
2. India Stack
• India Stack, a collection of APIs, has empowered governments, businesses, startups, and
developers to address India's challenges through digital solutions.
• The India Stack has been a catalyst for the rapid evolution of fintech in India.
3. Unified Payments Interface (UPI)
• UPI, a mobile app-based payment system, enables fund transfers between bank accounts.
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4. Digital Rupee
• India recently introduced the Central Bank Digital Currency (CBDC), known as the digital rupee or
e-rupee.
• The digital rupee, an electronic version of cash, is expected to accelerate the growth of the fintech
market in India.
India Post Payments Bank Launches 'Fincluvation'

• India Post Payments Bank (IPPB), a government-owned entity under the Department of Posts (DoP), has
introduced Fincluvation, a collaborative initiative with the Fintech Startup community.
• Aim: To co-create and innovate financial inclusion solutions.
• Startups are encouraged to develop solutions aligned with the following tracks:
1. Creditization: Create innovative and inclusive credit products that cater to the needs of target
customers and deliver them through the Postal network.
2. Digitization: Enhance convenience by merging traditional services with Digital Payment
Technologies. For example, transforming the traditional Money Order service into an Interoperable
Banking service.
3. Market-led Solutions: Propose problem-solving ideas related to IPPB and/or DoP, benefiting the
target customers.
Associated Challenges
• Cyber-Attacks:
o Recent incidents of hacks targeting debit card companies and banks highlight the ease with which
hackers can access systems and cause irreparable harm.
• Data Privacy Concerns: Consumers are primarily concerned about the responsibility for cyber-attacks
and the misuse of personal and financial information.
• Regulatory Difficulties: Regulation poses challenges in the emerging realm of FinTech, particularly in
relation to cryptocurrencies.
Regulating Fin-techs: Finding the Right Approach.

• To address these risks, regulators have begun examining the operations of fintech firms and
implementing supervisory measures.
Steps Taken by India
India has implemented following measures to regulate fintech activities:
• Zero-MDR Guidelines: These guidelines aim to promote small ticket debit card merchant transactions.
• Buy Now Pay Later (BNPL) Criticism: The Reserve Bank of India's decision to prohibit prepaid
instruments with credit lines related to BNPL has faced criticism for potentially hindering fintech growth
and innovation.
• Cryptocurrency Transactions: The RBI's strict stance on cryptocurrency transactions has also drawn
criticism from fintech firms. X.
Way Forward
• Guarding Against Cybercriminals: Strict law and monitoring tools to be brought
• Educating Consumers: Consumer awareness regarding using of Apps, software to be raised
• Data Protection Law: Thorough debate and deliberation are necessary for the passage of the Personal
Data Protection Bill, 2019
• Increase in Domestic capability: Further increase in manufacturing and software development within
India boost Fintech development
Conclusion: While the Indian fintech sector holds immense growth potential and promises to bring about
positive changes in the economy, it is crucial to approach its expansion with caution. The accompanying
regulatory challenges must be acknowledged and addressed effectively to ensure a secure and sustainable
fintech ecosystem.
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E- Commerce Sector in India
E-commerce (electronic commerce) enables businesses and individuals to engage in buying and selling
activities as well as the transmission of funds or data, conducted over electronic networks through the
Internet.
Driven by the increased adoption of smartphones, the introduction of 4G networks, and the growing
affluence of consumers, the Indian e-commerce market is projected to reach a value of US$ 200 billion by
2026, a significant rise from 2017, exhibiting an annual growth rate of 51%, the highest in the world.
The Indian e-commerce industry has been on an upward trajectory and is expected to surpass the United
States, becoming the world's second-largest e-commerce market by 2034.
FDI Policy in India for E-commerce

The e-commerce sector in India is classified into two groups based on FDI policy:
1. Marketplace Model
• E-commerce entity acts as a facilitator between buyers and sellers on a digital platform.
• Multiple sellers interact with buyers and sell goods.
• Marketplace charges commission from sellers.
• Examples: Naaptol, Shopclues
2. Inventory Model
• E-commerce entity owns inventory and sells directly to consumers.
• Sellers are e-commerce companies sourcing from brands and sellers.
• Example: Myntra
E-commerce industry in india: status & facts

• India’s E – Commerce market: Indian e-commerce is expected to grow at a CAGR of 27 per cent, almost
three times the overall retail market and expected to surpass the US to become the 2nd largest E-
commerce market in the world by 2034.
• Nascent stage – India’s online retail market is just 3% of the total retail market and 25% of organized
retail market.
• Greater Adoption - India has the third largest online shopper base of 150 million (2021) after China and
US and is expected to reach 350 million by 2026.
• Huge Employment potential – Directly & indirectly through backward linkages (MSME, Textile, Leather,
Farmers, craftsmen etc) & forward linkages (Logistics, packaging, transport, storage, advertising etc.)
• Sunrise sector - Fashion, grocery, general merchandise sector would capture nearly two-thirds of the
Indian e-commerce market by 2027.
Significance of E-commerce
1. Enhancing Competitiveness of Indian Goods
2. Boosting Exports
3. Efficient Service Delivery
4. Revolutionizing Logistics
5. Employment Generation
6. Increasing Disbursal Income for Low-Income Households
Regulatory Framework for E-commerce in India

1. Business Regulation
• Foreign Direct Investment (FDI) policy and Foreign Exchange Management Act (FEMA) govern foreign
investments and business setups in India's B2B e-commerce sector.
• Market and inventory-based models in India must adhere to specific rules outlined in the FDI policy.
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• Other regulations governing e-commerce in India include the Companies Act, Payment and Settlement
Act, RBI regulations on payment mechanisms, labelling and packaging rules, and more.
2. Taxation Related
• Income Tax Act, 1961
• Double Taxation Avoidance Agreement
• Goods and Services Tax (GST)
3. Legal Issues
• Indian Copyright Act, 1957: Copyright protection is provided to original creative works shared or sold
through e-commerce platforms.
• The Patents Act, 1970: Regulations under this act govern the protection and enforcement of patents
related to e-commerce innovations.
• Labor laws: E-commerce platforms must comply with labour laws concerning employment practices,
working conditions, and employee benefits.
4. Data and Associated Issues
• Information Technology Act, 2000 (IT Act): The IT Act regulates various aspects of e-commerce,
including electronic contracts, digital signatures, and cybercrime.
• Section 84A and Section 43A: These sections of the IT Act specifically address the obligations of entities
dealing with sensitive personal data or information.
• The Information Technology (Reasonable security practices and procedures and sensitive personal
data or information) Rules, 2011: These rules provide guidelines for the protection of sensitive personal
data and information collected and stored by e-commerce platforms.
• The Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, 2021:
Recently introduced rules focus on regulating digital media intermediaries, including e-commerce
platforms.
• Consumer Protection Act, 2019, and Consumer Protection (E-Commerce) Rules, 2020: These regulations
aim to safeguard the interests of consumers in e-commerce transactions V. Benefits of E-commerce
Benefits
• Availability and flexibility: E-commerce sites are accessible 24/7, allowing customers to shop at their
convenience without any time restrictions.
• Speed of access: Physical stores often face overcrowding, leading to slower purchasing activities.
• Wide range of options: Range of products can be accessed at single application. Ex. Flipkart, Amazon
• No geographical barrier: Delivery of products are being taken place in the remotest part of the country.
• Lower cost: Due to decrease in miscellaneous expenses and increase in economy of scale, cost of the
products also gets reduced.
• Personalization and product recommendation: Feedback, remarks system prove an idea to customers to
know about the products in a better way.
• For business: Advantages include an expanded customer base, increased sales, extended business reach,
and the convenience of recurring payments and instant transactions.
Limitations of E-commerce
• Lack of Security: Inadequate security measures in online transactions instil fear and apprehension among
users.
• Lack of Privacy: The absence of robust encryption methods to safeguard personal data, identity, and
financial transactions hinders widespread acceptance of e-commerce shopping habits.
• Limited Customer Service: Resolving complaints and assessing product suitability is more straightforward
in physical stores compared to e-commerce sites.
• Regulatory Issues: Ambiguity surrounding cyber laws regulating online purchases fosters mistrust
between buyers and consumers.
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• Limited Knowledge about Product Suitability: Online purchases lack the advantage of physically
experiencing products, relying solely on electronic images. Discrepancies may arise between the
delivered product and the electronic images displayed, leading to unfulfilled buyer expectations.
• Wait Period in Product Delivery: Unlike physical stores where customers can purchase and take products
home instantly, online shoppers must wait for delivery. Although shipping times have improved with
next-day and even same-day delivery, instantaneous fulfilment is not yet achievable.
Government Initiatives: Boosting the E-commerce Sector in India
Digital India, Make in India, Start-up India, Skill India, and Innovation Fund
• These schemes were launched to provide a significant impetus to the e-commerce sector.
• They aim to foster digital transformation, encourage domestic manufacturing, support startups, promote
skill development, and provide funding for innovation.
Policy Support:
• FDI Policy:
o B2B e-commerce allows 100% FDI.
o Marketplace model of e-commerce permits 100% FDI under the automatic route.
o Clarity in FDI policy definitions related to e-commerce, e-commerce entities, marketplace-based
model, and inventory-based model is a positive step.
Digital India Initiatives:
• Under the Digital India movement, several initiatives such as Umang, Start-up India Portal, and Bharat
Interface for Money (BHIM) were launched to drive digitization and enhance digital accessibility.
Encouraging Domestic Participation:
• The equalization levy rules of 2016 were amended to promote domestic participation.
• Foreign companies operating e-commerce platforms in India are required to have Permanent Account
Numbers (PAN).
Consumer Protection (e-commerce) Rules, 2020:

• Ban on Flash Sale: The draft rules seek to ban “specific flash sales” by e-commerce entities.
• Fall-back Liability: The rules have also introduced the concept of “fall-back liability”, which says that e-
commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due
to negligent conduct, which causes loss to the customer.
• Restricting Manipulation: The rules also propose to restrict e-commerce companies from “manipulating
search results or search indexes”.
• Consumer Consent: E-commerce companies will also be restricted from making available to any person
information pertaining to the consumer without express and affirmative consent.
• Provide Domestic Alternatives: Further, the companies will have to provide domestic alternatives to
imported goods, adding to the government’s push for made-in-India products.
• National Consumer Helpline: The draft amendment also proposes to ask e-commerce firms to
mandatorily become a part of the National Consumer Helpline.
• Mandatory Registration: Any online retailer will first have to register itself with the Department of
Promotion for Industry and Internal Trade (DPIIT).
• No Differential Treatment: The rules propose mandating that no logistics service provider of a
marketplace e-commerce entity shall provide differentiated treatment between sellers of the same
category.
• Associated Enterprise: Any entity having 10 percent or more common ultimate beneficial ownership will
be considered an “associated enterprise” of an e-commerce platform.
• Time-bound Information: The draft rules propose that the information sought by the government
agency will have to be produced by the e-commerce company “within 72 hours of the receipt of an order
from the said authority”.
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6. Open Network for Digital Commerce (ONDC):

• Launched by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry
of Commerce and Industry.
7. Investment in Fiber Network for 5G:
• The Government is heavily investing in rolling out a fibre network for 5G technology, which will
contribute to the growth of e-commerce in India.
Challenges in the E-commerce Sector

• Consumer Vulnerability, Dynamic Pricing and Regulatory Models, Impact on Banks, Balancing Innovation
and Protectionism, Policy Challenges
Way Forward
1. Risk-Based Regulations: There is a need for a risk-based regulatory framework to address emerging
challenges in e-commerce.
2. Strengthen Competition Commission of India (CCI): Efforts should be made to enhance the capacity of
the Competition Commission of India to effectively regulate the e-commerce sector.
3. Nurturing Start-ups and SMEs: The government must create an enabling ecosystem that nurtures online
start-ups and small and medium enterprises (SMEs).
4. Focus on Infrastructure: The government should prioritize the development of data centers and cloud
infrastructure to support the growth of the e-commerce sector.
5. Consumer Protection: Strengthening consumer protection measures is crucial to instill trust and
confidence in the e-commerce ecosystem.
Conclusion: E-commerce in India is experiencing remarkable growth and is poised to become the world's
second-largest market by 2034. It encompasses various types of transactions, driving competitiveness,
boosting exports, and revolutionizing logistics. However, challenges such as security concerns, limited
customer service, and regulatory issues need to be addressed.
National Technical Textiles Mission: Boosting India's Potential in the Technical Textiles Sector
Introduction
Technical textiles play a vital role in various industries, providing functional fabrics designed for specific
applications. They find applications in sectors such as automobiles, civil engineering, agriculture, healthcare,
industrial safety, and personal protection. The demand for technical textiles is closely linked to a country's
development and industrialization. The Ministry of Textiles recently approved 23 strategic research projects
worth approximately Rs 60 crores under the National Technical Textiles Mission.
India's Position in the Technical Textiles Sector

• India is the 5th largest producer of technical textiles in the whole world with a market size of nearly $22
billion, which we hope to build up to $300 billion when we turn 100 by 2047.
• Technical textiles account for more than 25% of all fiber consumed and nearly 50% of total textile
activity in certain industrialized countries.
• Asia, particularly China, Japan, Korea, Taiwan, and India, is rapidly establishing itself as a technological
textile’s powerhouse in terms of production and consumption.
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India's Domestic Technical Textiles

Landscape
• India currently utilizes products from all
12 technical textile segments, but not all
of them are manufactured domestically.
• India excels in the production of
technical textiles in the Packtech,
Clothtech, Hometech, and Sportech
segments.
• However, many technical textile
products are heavily imported, unlike
the traditional textile industry, which
relies on exports.
Market Size and Consumption of Technical

Textiles in India
• Technical textile accounts for
approximately 13% of India's total
textile and apparel market and
contributes to India's GDP at 0.7%.
• Packtech is the most important
segment, accounting for around 36% of
domestic consumption. Clothtech represents about 17% of total technical textile consumption.
• Mobiltech and Hometech account for 8% and 12% of total consumption, respectively. The growth rate
for these segments is expected to be 11-12% per year over the next five years.
About the National Technical Textiles Mission (NTTM)

• The National Technical Textiles Mission (NTTM) was granted approval by the Cabinet Committee on
Economic Affairs (CCEA) in 2020, with a substantial budget of Rs.1480 Crore.
• Spanning four years, from FY 2020-21 to FY 2023-24, the NTTM aims to elevate India's standing as a
global leader in Technical Textiles, propelling the domestic market size from USD 40 billion to USD 50
billion by 2024.
• Additionally, the mission supports the 'Make in India' initiative by fostering domestic manufacturing of
machinery and equipment related to technical textiles.
Key Components of NTTM

1. Research, Development, and Innovation: Research activities will focus on both fiber-level exploration
and application-based advancements in various sectors.
2. Market Promotion and Development: The mission seeks to achieve an average growth rate of 15% to
20% per annum by 2024, thus increasing the adoption and utilization of technical textiles within the
country.
3. Export Promotion: NTTM places significant emphasis on export promotion, aiming to escalate technical
textile exports from Rs 14,000 crores to Rs 20,000 crores by 2021-2022, with a consistent annual growth
rate of 10% until the conclusion of the mission.
4. Education, Training, and Skill Development: The fourth component focuses on nurturing expertise in
technical textiles through education and skill development at higher engineering and technology levels,
with a specific focus on areas related to technical textiles and their applications.
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Implementation and Governance

The NTTM will be executed through a three-tier institutional mechanism, comprising the following
entities:
1. Mission Steering Group: This group holds the authority to approve financial norms, schemes,
components, and programs associated with the mission as well as Scientific and technological research
projects under the mission.
2. Empowered Programme Committee: Responsible for approving projects (excluding research projects)
within the financial limits set by the Mission Steering Group.
3. Committee on Technical Textiles on Research, Development & Innovation: Tasked with identifying and
recommending research projects to the Mission Steering Group for approval. These projects primarily
focus on strategic sectors such as space, security, defense, paramilitary, and atomic energy.
Issues in Textile Sector:
Shortage in supply of raw material, increase in cost of raw material, Inflexible labor laws, Pressure to meet
stringent social and environmental norms, Infrastructural bottlenecks, highly fragmented, Uneven regional
development:
Other Initiatives Related to Technical Textile

1. Production Linked Incentive (PLI) Scheme for Textiles Sector
• The government has approved the PLI Scheme for Textiles products which aims to enhance India's
manufacturing capabilities and boost exports with an approved financial outlay of Rs 10,683 crore over
five years.
• Harmonized System of Nomenclature (HSN) Codes for Technical Textile
o In 2019, the Government of India dedicated 207 HSN codes to technical textiles to monitor import
and export data, provide financial support, and offer incentives to manufacturers.
2. 100% FDI under Automatic Route
• The Indian government allows 100% Foreign Direct Investment (FDI) under the automatic route.
3. Technotex India
• Technotex India is a flagship event organized by the Ministry of Textiles in collaboration with the
Federation of Indian Chambers of Commerce & Industry (FICCI).
• It includes exhibitions, conferences, and seminars involving stakeholders from the global technical
textile value chain.
4. PM MITRA Park Scheme
• The PM MITRA parks are Mega Integrated Textile Region and Apparel parks to be established in
different states.
• These parks align with the vision of 'Atma Nirbhar Bharat'. The parks will be developed by a Special
Purpose Vehicle (SPV) in a Public-Private Partnership (PPP) mode.
• The parks are inspired by the '5F' vision of the Prime Minister of India, which encompasses farm to
fibre, fibre to factory, factory to fashion, and fashion to foreign.
Way Forward
• Addressing the technological gap in the field of technical textiles should be a priority.
• Identifying research areas in technical textiles through industry interaction and promoting their use
through conferences, exhibitions, and buyer-seller meetings are crucial for increasing exports and
domestic usage.
Conclusion
The technical textiles sector in India is projected to grow at a rate of 12% per year. To achieve its potential of
nearly 20% annual growth, proactive measures are needed, including expanding the market, promoting the
use of technical textiles in government schemes, raising awareness among citizens and institutions, adopting
advanced technology, fostering foreign collaboration, and investing in domestic demand.
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7. Infrastructure
7. Infrastructure
Energy
Energy Poverty in India
Introduction
India recently achieved 100% village electrification, marking a significant milestone in its development.
However, the country has faced challenges in reaching this goal, despite dedicated efforts and public
spending. According to World Economic Forum, Energy poverty refers to the lack of access to sustainable
modern energy services and products.
Link between Human Development and Energy Use

• Energy plays a crucial role in human development, as it is essential for fulfilling basic human needs such
as clean air, health, food, water, education, and human rights.
• Energy is essential for economic growth. However, geopolitical tensions worldwide have raised energy
prices, preventing equitable access.
Energy Scarcity Amid Technological Advancements
• Despite the revolutionary advancements in Liquefied Petroleum Gas (LPG) and Light-emitting Diode (LED)
technologies in India, access to energy remains limited, particularly among rural households.
• This paradox of energy scarcity amidst plenty calls for a deeper understanding of energy poverty in the
Indian context and the exploration of alternative energy sources.
Causes of Energy Poverty in India:

1. Lack of Energy Infrastructure: Inadequate modern energy infrastructure, such as power plants and
transmission lines, hinders energy access in rural areas.
o Dependence on traditional biomass fuels like wood and crop residue is common due to the absence
of infrastructure for delivering natural gas.
2. Lack of Affordability: Lower-income households rely on cheap but inefficient and polluting fuels, as they
are unable to afford cleaner alternatives.
3. Inefficiency of Energy: High energy loss during conversions contributes to energy poverty. Energy
poverty rates tend to drop by 0.21% when energy efficiency index scores increase by 1 point, thus
showing the direct effect of energy efficiency in energy poverty.
4. Geopolitical Tension: Geopolitical instability disrupts the global energy supply chain, affecting energy
prices and availability.
o India's oil import bill increased significantly to 119 billion dollars in the fiscal after the Ukraine
conflict, reflecting the impact of geopolitical tensions.
Impacts of Energy Poverty in India

1. Vicious Labyrinth: Insufficient energy access hampers agricultural and manufacturing development,
trapping affected populations in a cycle of poverty.
2. Health Hazard: Traditional fuel burning causes indoor air pollution, leading to significant health risks.
India experiences a high number of premature deaths, 1 of every 4 of the annual global premature
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deaths caused by from Household Air Pollution (HAP), with women being particularly vulnerable (approx.
90%).
3. Energy Crisis: Escalating energy demand and dependence on fossil fuels contribute to resource depletion
and carbon dioxide emissions. Rising greenhouse gas concentrations contribute to global temperature
increases.
Measures to Curb Energy Poverty
1. Global Intergovernmental Organization: Powerful platforms like the G-20 and the BRICS need to focus
more on energy access, poverty, and security.
• It is crucial to establish a global intergovernmental organization dedicated to energy transition,
access, justice, and climate action.
2. Creation of Database for Effective Policy Making: Collecting comprehensive data on intra-household
and collective differences is vital for policy makers and stakeholders.
3. Shifting the Focus Towards Renewable Energy Sources: Emphasizing the use of renewable energy
sources such as solar energy and biogas is essential for combating energy poverty.
4. Robust Institutional Mechanism: Establishing strong linkages between different sectors like energy,
manufacturing, health, and finance is crucial.
• These linkages will enable the provision of energy-efficient machinery and subsidies to households in
India.
• Collaborative efforts among institutions in different sectors can offer bundled packages of services to
alleviate energy poverty effectively.
5. Translating Goals into Implementable Action: Conduct awareness campaigns to educate the public
about subsidies and technological advancements for efficient energy consumption.
• Establish a monitoring mechanism to ensure policy implementation.
Initiatives Shaping India's Energy Transition

Category Initiative
• Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA): Ensuring electricity access
to all households in India.
• Green Energy Corridor (GEC): Development of transmission infrastructure for

renewable energy.
Electrification
• National Smart Grid Mission (NSGM): Implementing smart grids for efficient
electricity distribution.
• Smart Meter National Programme: Deployment of smart meters to monitor and

optimize electricity consumption.
• National Solar Mission (NSM): Promoting solar power generation and increasing solar
capacity.
• National Biofuels Policy and SATAT: Encouraging the production and use of biofuels.
Renewable • Small Hydro Power (SHP): Harnessing hydropower from small-scale projects.
Energy
• National Hydrogen Energy Mission (NHEM): Promoting the use of hydrogen as a clean
energy source.
• Production-Linked Incentive (PLI) Scheme: Incentivizing domestic manufacturing of

renewable energy equipment.
Energy • Unnat Jyoti by Affordable LEDs for All (UJALA): Promoting energy-efficient LED
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Efficiency lighting
• Pradhan Mantri Ujjwala Yojana (PMUY): Providing clean cooking fuel to rural
Clean Cooking
households.
Industrial • Perform, Achieve, and Trade (PAT): Encouraging industries to reduce carbon
Decarbonisation emissions through efficiency measures.
Sustainable • Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME):
Transport Promoting the adoption of electric and hybrid vehicles.
Climate Smart • Smart City Mission (SCM): Developing sustainable and climate-resilient cities.
Cities
• International Solar Alliance (ISA): Facilitating solar energy deployment in member
countries.
Global • Clean Energy Ministerial (CEM): Promoting clean energy collaboration among
Initiatives countries.
• Mission Innovation (MI): Accelerating clean energy research and development

globally.
Conclusion
By addressing the causes of energy poverty, focusing on renewable energy sources, and implementing
comprehensive measures, India can make significant progress in alleviating energy poverty and achieving
sustainable development.
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State of DISCOMs: Challenges and Initiatives
Introduction
Power generation, transmission, and distribution are integral processes in the power sector. Distribution
Companies (DISCOMs) act as intermediaries, connecting power producers with households and serving as
the interface between utilities and consumers. In India, DISCOMs are primarily owned by state governments,
although a few private DISCOMs operate in select cities.
Challenges Faced by Power Sector DISCOMs

1. Power losses: High technical and commercial aggregate (AT&C) losses of 17% (FY 2022) due to
inadequate infrastructure, theft, and unpaid bills. AT&C losses encompass energy losses during
transmission and distribution, theft, billing inefficiencies, collection inefficiencies, and payment delays.
2. Financial losses: Over 15 years through FY2021, public discoms were found to have suffered a cash-basis
loss of ₹10 lakh crore.
3. Poor cash flow: Delayed consumer payments result in insufficient cash income, preventing timely
payments to energy generators. This leads to operational liabilities with power and transmission
companies.
4. Missing measurements: Inadequate measurement at different levels of the distribution chain makes it
difficult to identify areas of loss and take corrective action.
5. Competition with renewable energy: Long-term power purchase agreements (PPAs) and the declining
price of electricity, particularly from coal-based power generation, have created financial rigidity for
DISCOMs, resulting in losses.
6. Rise of informal credit: DISCOMs have increasingly delayed payments to producers and other
stakeholders.
7. Ambitious projects without sufficient support: Expansion plans to provide electricity to all citizens
require a review of the cost structure and an expansion of the distribution network.
8. Profitability: The gap between the average cost of supply and the average realized revenue for DISCOMs
is currently estimated at Rs. 0.49 per unit, resulting in accumulated losses and delayed payments to
generators.
9. Foreign investor averse to invest despite 100% FDI – due to lack of visible reforms, financial
incompetency, long gestation period, huge delays in commissioning, etc.
Private sector participation- benefits

• Operational autonomy - This can lead to rationalisation of fares and revival of fiscal health of DISCOMS.
• Efficiency and profit motive - Profit driven approach also creates a more efficient value chain. Private
sector usually carry acumen in reducing losses and building sustainability through profits.
• Innovation mechanism like smart metering can be brought by the private sector.
• Better Customer Service - increased revenue, reduced inefficiencies, and introduction of better
technologies and more competition will help provide a better overall consumer experience.
- For eg. Smart prepaid meters will allow transparency for consumers, help DISCOMs reduce AT&C
losses, and ensure billing accuracy which leaves no scope for human errors.
• Nuanced planning - The private sector’s ability to strategize for the long-term is essential in an area like
power distribution.
• Opportunity to start afresh – The standard bidding document puts forth that the winning entity will be
provided with a clean balance sheet, free of accumulated losses and all unserviceable liabilities.
• Diversified options for attracting investment - Private participation in power distribution can follow
various models: licensing, distribution franchisee, etc. Various PPP models will be tested and will assist in
generating private sector appetite amongst Indian and international investors.
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• Technological advancements - deployment of advanced metering infrastructure, smart grids, and

distribution automation systems for better monitoring of electricity consumption, reduced losses, and
improved billing accuracy.
• Successful example – Delhi privatised DISCOMs in 2002 and witnessed a complete turnaround ➔ AT&C
losses have come down from 55% in 2002 to about 9% in 2022.
Initiatives for Power Sector DISCOMs

1. Revamped Distribution Sector Reform Scheme (RDSS): Launched in July 2021, this central government
grant-based program aims to improve the operational efficiencies and financial sustainability of DISCOMs
(excluding private sector DISCOMs).
• It provides conditional financial assistance to strengthen the supply infrastructure of DISCOMs.
• The program allocates half of its budget to better feeder and transformer metering and prepaid
smart consumer metering.
• RDSS consolidates existing power sector reform schemes, including the Integrated Power
Development Scheme, DDU Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana.
• The Rural Electrification Corporation and Power Finance Corporation are responsible for
implementing this program.
Issues Associated with RDSS
o RDSS inherited design issues from previous schemes, including complex processes and conditions
for fund disbursal. Only 60% of the allocated grants in past schemes were disbursed.
2. UDAY Scheme: Launched in November 2015, the Ujjwal DISCOM Assurance Yojana (UDAY) was
designed to turn around the financial position of DISCOMs.
• The state governments took over 75 % of the debt of their DISCOMs, issuing lower-interest bonds to
service the rest of the debt.
• In return, DISCOMs were given target dates (2017-19) to meet efficiency parameters like reduction in
power lost through transmission, theft and faulty metering.
3. Reforms-Linked, Result-Based Scheme for Distribution (RLRBSD): In budget 2021-22, the Union
government had announced the launch of a “reforms-based and results-linked” scheme for improving
the financial health and operational efficiency of discoms.
• Under the scheme, AT&C losses will be brought down to 12-15% by 2025-26, from 21-22%.
• Operational efficiencies of discoms will be improved through smart metering and upgradation of the
distribution infrastructure, including the segregation of agriculture feeders and strengthening the
system.
4. Liquidity Scheme: To help these DISCOMs, the Centre in May 2020, announced a Liquidity Infusion
Scheme (Aatmanirbhar Bharat Abhiyan), under which loans of ₹1,35,497 crore have been sanctioned.
Way Forward
1. Strengthening Rural Networks: Investing in rural network infrastructure is crucial to meet the growing
demand for electricity, especially in rural areas.
2. Fulfilling Agricultural Consumer Requirements: The PM-KUSUM scheme aims to provide day-time, low-
cost power supply to farmers by installing large-scale solar plants.
3. Automatic metering of distribution feeders: Equipping all feeders with meters capable of
communicating readings without manual intervention can enhance accuracy in loss estimation
4. Role of states: States should identify implementation issues, devise suitable metering strategies, and
create frameworks to assess the benefits and costs of prepaid and postpaid metering.
Conclusion
By addressing the challenges faced by DISCOMs requires a multi-pronged approach involving strengthening
rural networks, fulfilling agricultural consumer requirements, implementing automatic metering, and active
participation of states in strategizing and evaluating initiatives. With these efforts, the power sector can
move towards financial sustainability and provide reliable electricity supply to all consumers.
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India's Push Towards a Gas-Based Economy

Introduction
Prime Minister Narendra Modi aims to increase India's share of natural gas in its energy mix from 6.2% to
15% by 2030, as part of the country's commitment to achieving net-zero carbon emissions by 2070 with a
planned $60-billion investments in gas infrastructure by 2024. A gas-based economy implies making natural
gas the primary commercial energy source in India's energy mix.
Understanding Natural Gas

• Natural gas is a fossil fuel primarily composed of methane and is considered the cleanest among fossil
fuels.
• It is used as a feedstock in the production of fertilizers, plastics, and other essential chemicals, as well as
a fuel for electricity generation, heating purposes in industries, and transportation.
Importance of Natural Gas in India
• Energy Efficiency: Natural gas provides more energy per unit compared to other fossil fuels.
• Cleaner Fuel: It is an environment-friendly, safer, and more affordable fuel option compared to coal and
liquid fuels.
• Economic Benefits: Compressed Natural Gas (CNG) is cheaper than petrol or diesel, promoting cost
savings for consumers.
• Emission Commitments: India committed to reducing carbon emissions by 33%-35% of 2005 levels by
2030 under the COP-21 Paris Convention.
• Diverse Applications: Natural gas can be used for domestic cooking, transportation, and as a fuel in
fertilizer industries and commercial units.
• Supply Chain Convenience: Natural gas is supplied through pipelines, eliminating the need for
cylinder storage in households and saving space.
• Global Progress: Switching to natural gas globally has shown positive results. According to the
International Energy Agency (IEA), natural gas surpassed coal in electricity production for the first
time.
Natural Gas Scenario in India
• Domestic Gas Sources: India relies on domestic gas from oil and gas fields located in the western,
southeastern, and northeastern regions viz. Hazira basin, Mumbai offshore & KG basin as well as North
East Region (Assam & Tripura).
o India has 26 sedimentary basins. However, only a small percentage of the sedimentary basin
area has been explored, resulting in limited domestic production.
• LNG Imports: To meet the growing demand, India imports Liquefied Natural Gas (LNG) through the
Open General License (OGL) regasification terminals located in various ports.
• Gas Pipelines: The development of a National Gas Grid aims to ensure the availability and equitable
distribution of natural gas across the country.
• Pricing: India links local gas prices to global benchmarks to incentivize gas producers and boost local
output.
Statistics of Natural Gas in India

• Current Consumption: India's natural gas consumption is projected to grow by 8% annually, reaching
around 34,949 million standard cubic meters in the current calendar year. City Gas Distribution (CGD)
accounts for the largest consumption, followed by fertilizers, power, and other industrial sectors.
• High Prices: Local gas prices and ceiling rates are at a record high, and global gas price surges due to
geopolitical tensions may further increase prices.
Kirit Parikh Committee

• Objective: The committee, led by energy expert Kirit Parikh, aims to ensure fair prices for consumers
and establish a market-oriented, transparent, and reliable pricing regime to support India's gas-based
economy.
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RECOMMENDATIONS OF KIRIT PARIKH COMMITTEE ON GAS PRICING

• Fixed Ceiling pricing for APM gas from old fields.
• Market determined Pricing System by 2027.
• Linking gas price on a nomination basis to 10% of the cost of imported crude oil prices.
• Ceiling rate to be increased by $0.5 per mmBtu annually.
• Not tinkering with the existing pricing formula.
• Natural gas in the GST regime by subsuming excise duty and varying rates of VAT.
− Setting up a mechanism similar to the compensation cess regime to address issue of loss of
concern.
• No Cut Category and city gas to get top priority in the allocation of APM gas.
• Removal of Caps on gas prices within three years.
Challenges Facing India's Natural Gas Reserves

• Lack of Infrastructure, Import Dependence, consumption relies on imported LNG, Safety Concerns:
Domestic Issues and Delays, Underutilization, Less Feasible Power Alternative, Ecological Concerns:
• Energy Trilemma: India must balance affordability and access, energy security, and environmental
sustainability.
Natural Gas Marketing Reforms
• Objective: The reforms aim to establish a standard procedure for discovering market prices through
transparent and competitive processes. It permits affiliates to participate in bidding and grants marketing
freedom to certain Field Development Plans.
• Aim: To provide standard procedure for sale of natural gas in a transparent and competitive manner to
discover market price by issuing guidelines for sale by contractor through e-bidding.
Various Government initiatives

Government Initiatives Description
Hydrocarbon
• Outlines a new contractual and fiscal model for the exploration and production
Exploration and
(E&P) of hydrocarbon acreages, providing a clear framework for investment.
Licensing Policy (HELP)
• Aims to develop and expand the National Gas Grid.
National Gas Grid
• Currently, 16,788 km of natural gas pipelines are operational, and an additional
Development
14,239 km of pipelines are under development.
Pradhan Mantri Urja • A flagship project that will provide connectivity to the North-East Gas Grid,
Ganga Pipeline Project further enhancing gas availability in the region.
Pradhan Mantri • A scheme aimed at providing free cooking gas connections to poor families,
Ujjwala Yojana improving access to clean energy.
• Ongoing efforts to revive the Turkmenistan-Afghanistan-Pakistan-India (TAPI)
Revival of TAPI Pipeline
transnational gas pipeline, which will enhance regional energy connectivity.
• Implementation of a series of reforms in the gas sector, attracting investments
Reforms in the Gas of over Rs. 70,000 crores on the East coast.
Sector • This contributes to India's self-reliance by meeting the growing energy demands
of the country.
• Promotion of LNG (liquefied natural gas) as a cleaner transportation fuel,
Clean Mobility
including for long-haul trucking.
Solutions
• Plans to establish 1,000 LNG fuel stations across the country are underway.
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Way Forward
• Seizing Opportunities: India should take advantage of low gas prices and enter into contracts with gas-
rich countries through pipelines.
• Aggressive Reforms: More dynamic reforms are needed, including subsidy restructuring and improved
production.
• Empowering Producers and Buyers: Allowing greater control over pricing and marketing, and
introducing e-bidding systems.
• Focus on Electricity: Encouraging greater reliance on electricity as a cleaner alternative to natural gas
and other fuels.
• Government as Facilitator: The government should facilitate resource development, improve quality and
quantity, and reduce import dependence.
• Subsidy Reforms: Directly transferring fertilizer subsidies to farmers' accounts and granting marketing
and pricing freedom to the fertilizer industry.
• Extending Policies: The policy reforms should cover the entire gas sector, moving away from
administrative pricing mechanisms.
• Effective Implementation: Governments play a crucial role in driving energy sector growth, and India's
gas market is still in its early stages. Ensuring effective implementation of policies is essential for the
transition to a gas-based economy.
Conclusion
India's ambition to transition to a gas-based economy presents significant challenges, including infrastructure
limitations, import dependence, safety concerns, and underutilization. However, with aggressive reforms,
empowering stakeholders, and a focus on clean and affordable energy solutions, India can progress towards
its goal.
Renewable Energy in India: A Catalyst for Sustainable Growth
Introduction
Power plays a pivotal role in the economic prosperity and welfare of nations. A robust and sustainable power
sector is indispensable for fostering India's economic growth.
As per the recent report "Investing for Impact: Renewable Energy & Cleantech" by Aspire Circle, an
investment of $350 billion in renewable energy and cleantech ventures can potentially enable India to
generate a staggering $212 billion in revenue, create 3.4 million jobs, and positively impact the lives of 919
million individuals by 2030.
Understanding Renewable Energy

• Renewable energy encompasses energy derived from natural resources that replenish themselves over
time.
• It comprises various sources, such as solar energy, wind energy, hydroelectric power, wave energy,
ocean thermal energy conversion, tidal energy, and biomass power.
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Current Landscape of Renewable Energy in India (Facts for Mains)

• India stands 4th globally in Renewable Energy Installed Capacity (including Large Hydro), 4th in Wind
Power capacity & 4th in Solar Power capacity (as per REN21 Renewable’s 2022 Global Status Report).
• India has set its sights on achieving a remarkable renewable energy target of 500 GW by 2030.
• Some of the world's largest solar parks are located in India, including the 2,255 MW Bhadla Solar Park
in Rajasthan, the Pavgada Solar Park in Tumkur, Karnataka, and the Kurnool Solar Park in Andhra
Pradesh.
• India has cultivated a strong manufacturing base for wind power, with 20 manufacturers producing 53
different wind turbine models up to 3 MW in size.
• The country's nuclear power sector also contributes significantly, with 10 reactors under construction
and 23 existing reactors operating across 7 nuclear power plants, amounting to a total installed
capacity of 7.4 GW.
• India also boasts the fourth-largest wind power capacity worldwide. Moreover, at the recent COP26
summit, India made a commitment to achieve an astounding 500 GW of installed electricity capacity
from non-fossil fuel sources by 2030.
The Role of REN21

• The Renewable Energy Policy Network for the 21st Century (REN21) assumes a crucial role in accelerating
the global transition to renewable energy.
• It facilitates the formulation of effective policies, fosters knowledge exchange, and promotes
collaborative action among governments, NGOs, research institutions, international organizations, and
businesses.
• REN21 acts as a catalyst to expedite the widespread adoption of renewable energy.
• According to REN21, renewable energy generation witnessed a substantial growth of nearly 7% in the
past year, thereby accounting for 29% of the global electricity generation mix, up from 27% in 2019.
India's Key Focus for Next 5 Years

Methanol and Biomass
• Emphasis on utilizing alternative options like methanol-based economies and biomass. Government's
target of bio-CNG vehicles with a 20% gasoline blend.
• Biomass energy generation as a cleaner option to reduce reliance on fossil fuels. Biomass-based fuels
offer high calorific value and are cleaner compared to traditional biomass.
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The Dual Challenge

• India faces the challenge of providing more and cleaner energy to its population. Focus on manufacturing
solar panels under the Atma Nirbhar Bharat initiative.
• Developing the entire supply chain for components other than the manufacturing sector.
Hydrogen-based Fuel Cell Vehicles (FCV)
• Transitioning to Hydrogen-Based Fuel Cell Vehicles as a key area of focus.
• Expected to transform the renewables landscape.
Grid Integration: Importance of creating efficient methods to supply variable renewable energy to the grid.
Benefits of renewable energy

• Private sector involvement: Government's target of 450GW from renewables opens opportunities for
private sector involvement in design and manufacturing, boosting profits.
• Low cost of maintenance: Renewable energies like wind energy, biopower or solar energy requires
almost zero maintenance and thus provide longer working hours and reduced labor cost.
• Environment friendly: as they have almost nil carbon footprint and does not emit any harmful pollutants
like PM2.5 or PM10 or greenhouse gases like carbon dioxide, NOx etc.
• Fulfill several government objectives: like achieving the Panchamrit goals, SDGs, Make in India, INDC of
Paris Climate Deal and employment generation.
• Decentralized: Renewable energy plants can be located near the location of demand for energy
o For example, UT Daman has been receiving its energy completely from solar energy generated
inside and in the vicinity of the city, thus reducing its dependence on the national power grid.
Factors Responsible for Increasing Demand for Renewable Energy

• Waiver of Inter-state Transmission Charges: The sale of solar and wind power is exempted from inter-
state transmission charges, boosting demand.
• Renewable Purchase Obligation (RPO) Targets: State DISCOMS are obligated to meet renewable
purchase targets, stimulating demand for renewable energy.
• Foreign Direct Investment (FDI): Permitting FDI in the renewable sector has accelerated progress and
attracted investment.
• Rebound in Economy: The rising demand for electricity following the COVID-19 lockdowns has
contributed to increased demand for renewable energy.
• Falling Prices of Renewable Energy: The cost of renewable energy has significantly decreased, with solar
energy tariffs reduced by up to 80% since 2008.
• Government Support for Manufacturing Solar Photovoltaic Modules: Schemes, such as Production
Linked Incentive schemes, aim to boost competitiveness and attract investment in manufacturing solar
modules.
Need for Transition to Renewable Energy

• Addressing the Climate Crisis: The continuous burning of fossil fuels for power generation contributes to
climate disruption. Transitioning to renewable energy can limit climate change and enhance energy
security.
• Volatile Supplies of Non-renewable Energy: Regional conflicts and international sanctions on major
energy producers like Iran and Russia have led to unstable supplies of non-renewable energy sources.
• Promoting Sustainable Development: Shifting to renewable energy reduces pollution externalities and
promotes a green economy, aligning with sustainable development goals.
• Commitments to International Agreements: As a signatory to the Paris Climate Agreement, India is
committed to increasing its renewable energy capacity to 450 GW by 2030.
• Government Targets: The Indian government has set targets to reduce carbon emissions, decrease
carbon intensity, achieve net-zero emissions by 2070, and expand renewable energy capacity to 450
GW by 2030.
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Prospects of Renewables in India

• Attractiveness for Renewable Energy Investment: EY's Renewable Energy Country Attractiveness Index
ranks India as the third most attractive destination, behind the USA and China.
• Wind Energy Potential: India has an estimated wind energy potential of 102,788 MW at a height of 80m.
The current installed capacity is 22,645 MW.
• Wave and Tidal Energy Potential: India's coastline of 7,500 km holds an estimated wave energy potential
of about 40,000 MW. Additionally, there is a potential of 8,000 MW of tidal energy.
• Ocean Thermal Energy Conversion (OTEC) Potential: India's OTEC potential is estimated at 180,000 MW,
accounting for 40% of gross power considering parasitic losses.
• Biomass Energy Potential: India possesses a significant biomass energy potential of 19,500 MW,
including biogas-based cogeneration and surplus biomass. Currently, 537 MW is commissioned, and 536
MW is under construction.
• Private Sector Interest: Major Indian private companies, such as Reliance Power, are showing interest in
the renewable energy sector, with plans to invest Rs 5 lakh crore in green energy projects.
Achievements of India in the Renewable Energy Sector

• Investment Attraction: Over the past six years, India has attracted a staggering investment of more than
Rs 4.7 lakh crore in the renewable energy sector.
• Impressive Growth: India has witnessed a remarkable 20% compound annual growth rate (CAGR) in
renewable energy generation since FY16. In comparison, the overall electricity generation in the country
grew at a rate of 4.3% during the same period.
• Reduced Cost: The cost of energy from large-scale solar projects, known as Levelized Cost of Energy
(LCOE), has dropped significantly in India.
• Global Position: India currently holds the fourth position worldwide in terms of overall installed
renewable energy capacity. Renewable energy contributes 26.53% to the country's total installed
generation capacity.
• Capacity Expansion: Over the last 7.5 years, India has experienced an impressive 286% increase in
renewable energy installed capacity.
• World's Largest Renewable Energy Park: Gujarat is home to the installation of the world's largest solar-
wind hybrid project, with a capacity of 30 GW.
Challenges of Renewable Energy in India

• High Initial Installation Cost: Compared to coal-based power plants, wind-based plants require higher
initial investments, making the cost per MW approximately Rs 6 crore, given a capacity utilization of 25%.
• Reliability Concerns: Solar and wind energy, due to their variable nature, require support from
conventional power sources to ensure consistent availability.
• Storage Infrastructure: Investing in affordable, high-capacity batteries is crucial to overcome the
intermittency of renewable energy sources.
• Funding Constraints: The need for large-scale projects to achieve economies of scale presents a
deterrent for private companies to initially invest in the renewable energy sector.
• Limited Social Acceptance: Despite government subsidies for solar water heaters and lighting systems,
urban India has yet to fully embrace renewable-based energy systems.
• Weak Domestic Manufacturing Capability: Enhancing manufacturing capacity within India is crucial to
reduce reliance on imports and promote self-sufficiency, resulting in job creation.
• Sustainability: Balancing reliable energy access, affordability for consumers, and financial stability for
DISCOMs is a vital aspect of India's transition towards renewable energy.
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India's Facilitation of the Green Energy Transition

India, as the world's third-largest energy-consuming country, is taking significant steps towards a green
energy transition. While the majority of energy demand is still met by coal, oil, and solid biomass, India is
actively pursuing renewable energy alternatives. Key initiatives include:
1. Ambitious Capacity Expansion: India has set a target to reach 450 GW of installed renewable energy
capacity by 2030.
2. Production Linked Incentive Scheme (PLI): The government's PLI scheme aims to boost the
manufacturing sector by encouraging the production of raw materials for renewable energy.
3. PM-KUSUM: The Pradhan Mantri-Kisan Urja Suraksha evam Utthaan Mahabhiyan focuses on providing
financial and water security to farmers by harnessing 30,800 MW of solar energy capacity by 2022. This
initiative includes the solarization of water pumps for distributed power supply.
4. Akshay Urja Portal and India Renewable Idea Exchange (IRIX) Portal: The Ministry of New and
Renewable Energy hosts these online platforms, promoting the exchange of ideas and fostering
collaboration among energy-conscious Indians and the global community.
Challenges Related to India’s Energy Sector

1. Energy Poverty and Inequality
• Approximately 77 million households still rely on kerosene for lighting.
• Rural areas are particularly affected, with up to 44% of households lacking electricity access.
2. Import Dependence and Weaponization of Supply Chain
• India's crude oil import bill increased by 76% to USD 90.3 billion in the first half of 2022-23,
accompanied by a 15% rise in total import quantity.
• India's reliance on foreign countries like China for solar modules exacerbates the issue, as there is no
backward integration in the solar value chain.
3. Climate Change Induced Energy Crisis
• Climate change has a direct impact on fuel supply, energy requirements, and the resilience of
existing and future energy infrastructure.
4. Women’s Health at Risk
• The use of non-clean energy sources increases the risk of respiratory, cardiovascular, and
psychological diseases for women, as well as maternal and infant mortality.
5. Widening Gap Between Demand and Supply of Coal
• Data from the Ministry of Coal in 2021 show a growing disparity between the demand and domestic
supply of coal.
6. Increasing Demand, Increasing Energy Cost
• Urbanization and industrialization lead to an increasing demand for energy in India, projected to rise
by more than 3% annually.
Government Policies for the Promotion of Renewable Energy in India

1. Renewable Energy Certificate (REC) Mechanism
• The REC mechanism is a market-based instrument that promotes renewable energy and facilitates
compliance with renewable purchase obligations (RPO).
• It aims to address the mismatch between renewable energy availability and RPO requirements.
2. Green Hydrogen Mission
• The mission focuses on meeting climate targets and establishing India as a green hydrogen hub.
• The goal is to produce 5 million tonnes of green hydrogen by 2030, along with the development of
renewable energy capacity.
3. Production Linked Incentive (PLI) Scheme
• The PLI scheme aims to promote renewable energy storage infrastructure and manufacturing
capacity through the National Programme on Advanced Chemistry Cell (ACC) Battery Storage.
4. Green Term Ahead Market (GTAM)
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• The pan-India GTAM is an alternative model introduced to sell renewable power in the open market
without long-term power purchase agreements (PPAs).
• It contributes to greening the short-term power market.
International Efforts
• The India Energy Modeling Forum was launched under the US-India Energy partnership.
• The International Solar Alliance, a treaty-based inter-governmental organization, mobilizes
investment for solar energy deployment.
5. Solar Energy Corporation of India (SECI)
• SECI facilitates the implementation of the National Solar Mission and the development of renewable
energy technologies throughout India.
6. National Offshore Wind Energy Policy, 2015
• The Ministry of New & Renewable Energy (MNRE) explores and promotes offshore wind farms in the
Exclusive Economic Zone (EEZ).
Way Forward
1. Interlinking Women Empowerment with Green Energy
• Promoting women's empowerment and leadership in the energy sector can accelerate the transition
to a low-carbon economy.
• Gender equality should be integrated into the "just transition" to ensure equal opportunities in green
jobs.
• Women can contribute to the green energy transition through entrepreneurship and policy-making.
2. Diversifying Green Supply Chain
• Clean energy supply chains should be diversified across a larger number of countries beyond
developed nations.
• Climate finance under COP27 can aid in managing the shift of revenues and employment from
traditional energy sources to renewable energy.
3. Incentivizing Least-Cost Energy Solutions
• Encouraging university-level innovations can drive economically viable clean energy transition.
• India's demographic dividend can be utilized by promoting research and innovation in clean energy.
• Programs like UJALA and campaigns promoting sustainable lifestyles contribute to this objective.
4. Focusing on Green Transport
• Restoring confidence in public transport, adopting e-buses, and developing electric freight corridors
are crucial.
• Tightening emission norms and promoting biofuels can replace fossil fuels in the transportation
sector.
5. Multisectoral Approach to Energy Transition
• India should focus on energy system design, urban development, industrial growth, and supply-chain
management to achieve future resilience.
• Gradual reduction of commodity imports and promotion of domestic manufacturing can enhance
self-sufficiency.
• Leveraging Make in India can transform India into a self-sufficient and globally competitive green
energy export hub.
Conclusion
Renewable energy is the future and holds the potential to eliminate fossil fuel-based energy by 2050, leading
to improved environmental health. A clear policy guideline is crucial to efficiently integrate energy sources
into the grid and achieve maximum efficiency.
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Ports
Inland Waterways: Unlocking India's Transport Potential

Introduction
Inland water transport, which involves the movement of people, goods, and materials through rivers, canals,
and lakes within a country's borders, offers significant advantages. Despite its potential, it remains
underutilized in India, accounting for only 2% of the country's transportation mix.
MARITIME INDIA VISION 2030

• It is a ten-year blueprint for the maritime sector (released in 2020).
• It will supersede Sagarmala initiative.
- Sagarmala aims to reduce logistics costs for EXIM and domestic trade with minimal infrastructure
investment.
• Objective: To boost waterways, give a fillip to the shipbuilding industry and encourage cruise tourism in
India.
• Development of green sustainable ports; increasing the share of renewable energy to over 60 per cent
by 2030 from current less than 10 per cent.
• Focusses on promoting waste to wealth through sustainable dredging and domestic ship recycling.
• Emphasises on 'Make in India, Make for the world'.
• Setting up Maritime Development Fund for enhancing cruise infrastructure by developing dedicated
cruise terminals at 12 selected ports.
INLAND WATERWAYS IN INDIA: POTENTIAL
• Cost effective: According to World Bank, inland Brief Background of role of waters in India
waterways in India can be up to 60% cheaper • Ancient Era-The Indus Valley Civilization (around
than road transport and 20-30% cheaper than 2500 BCE) had well-developed port cities along
rail transport. the Indus River. Rivers like the Ganges, Yamuna,
• Fuel efficiency: It consumes approximately 0.1 and Brahmaputra were also important trade
liters of fuel per ton-kilometer, while road routes.
transport consumes around 2.5 liters and rail • Mauryan Empire (322 BCE to 185 BCE)- The Grand
transport consumes around 0.6 liters. Trunk Road, built during this period, connected
• Economic impact: Varanasi-Haldia stretch of the Gangetic plains with the northwest regions.
NW-1 had direct impact on the industries in
• Mughal Era (1526-1857)- Emperor Akbar
Uttar Pradesh, Bihar, Jharkhand, and West
constructed the Yamuna Canal and the Agra Canal
Bengal.
for irrigation purposes.
• Connectivity and Trade facilitation: NW 2
opened up new trade routes and enabled • British Colonial Rule- Constructed numerous
transportation of goods to and from neighboring canals, including the Buckingham Canal, the
countries like Bangladesh. Godavari Canals, and the Upper Ganges Canal,
• Decongestion of Roads and Railways: primarily for irrigation and transportation
Transportation of coal on the NW-1 from Haldia purposes.
to Farakka reduced the number of trucks on the • Post-Independence- In 1986, the National
road by approximately 2,25,000 per year, easing Waterway Act was passed, declaring certain
road congestion and reducing pollution. stretches of rivers as National Waterways.
• Ecologically sustainable: Study by World Bank
found that inland water transport emits 10 times less carbon dioxide per ton-kilometer compared to
road transport in India.
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Scope of Inland Waterways in India

• India boasts an extensive network of inland waterways spanning over 20,000 kilometers, encompassing
rivers, canals, and backwaters. These waterways hold immense promise for both passenger and cargo
transportation.
• Notably, the development of National Waterway-1 under the Jal Vikas Marg Project (JVMP), including
Arth Ganga, is expected to provide a boost of Rs 1,000 crore in economic activity over the next five
years.
• Furthermore, promoting inland waterways aligns with Prime Minister's vision of making India a zero-
carbon emission country by 2070.
Advantages of Water Transport

Cost-effectiveness, Energy efficiency, Suitable for bulky goods, Friction-free, Eco-friendly, Catalyst for growth,
Safety and accessibility
Challenges of Water Transport
Despite its potential, inland water transport in India faces several challenges:
1. Limited navigability: Some rivers are seasonal and do not offer year-round navigability. Around 20 out of
the 111 identified national waterways have been deemed unviable due to this reason.
2. Capital and maintenance dredging: All identified waterways require extensive capital and maintenance
dredging, which may face resistance from local communities due to environmental concerns and
displacement fears, posing implementation challenges.
3. Competing water needs: Water has competing uses, including domestic needs, irrigation, and power
generation. Local governments and stakeholders must balance these needs, potentially affecting the
development of inland water transport.
4. Jurisdictional complexities: The Central Government has exclusive jurisdiction over shipping and
navigation on national waterways declared by Parliament.
Role of Inland Water Transport in Regional Development

Inland water transport can significantly contribute to regional development:
1. Cost-effective regional connectivity: Inland water transport is a cost-effective mode of transport
requiring minimal maintenance investments, making it conducive to regional development.
• It played a crucial role in pre-colonial times, fostering trade and regional development in North
India. Today, it can help reduce production costs for industries.
2. Facilitating development in challenging areas: In regions like the deltaic regions of Ganga, where
constructing roads and bridges across numerous distributaries is difficult and expensive, water transport
can serve as a vital mode of transportation, promoting economic development.
3. Rural water transport (RWT) and poverty reduction: RWT, a sub-sector of inland water transport, holds
particular importance in reducing isolation and poverty.
• Small family-owned boats operating on rivers and canal networks provide transportation services,
employment opportunities, and support fishing. Additionally, boat making generates additional
employment.
Types of Waterways
Inland water transport encompasses rivers, canals, and lakes. Noteworthy points about inland waterways
include:
• It is the cheapest mode of transport.
• It faces competition from roadways and railways.
• Water diversion from rivers can hinder navigation, reducing competitiveness.
• Approximately 5,200 km of rivers and 4,000 km of canals are navigable by mechanized crafts, accounting
for 1% of overall transport.
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• Out of 3,700 km of navigable rivers, only 2,000 km are utilized.

• Canals are regulated by the Inland Waterways Authority of India.
Ocean Transport
• Ocean transport is essential for foreign trade, connecting nations and facilitating the global market. It
operates on natural sea tracks without the need for infrastructure investments.
National Waterways
The National Waterways Act, enacted in 2016, proposed the development of 106 additional National
Waterways. Currently, there are six National Waterways in India, including:
1. National Waterway 1 (NW1):

Stretching from Allahabad (Prayagraj)
to Haldia, spanning 1,620 km, NW1
runs through the Ganges, Bhagirathi,
and Hooghly River system.
2. National Waterway 2 (NW2): NW2
covers a distance of 891 km along the
Brahmaputra River, from Sadiya to
Dhubri in Assam.
3. National Waterway 3 (NW3): Located
in Kerala, NW3 runs from Kollam to
Kottapuram, encompassing the 205
km long West Coast Canal.
connects Kakinada to Pondicherry via
Canals, Tanks, and the Godavari and
Krishna rivers.
links Odisha to West Bengal, utilizing
stretches of the Brahmani River, East
Coast Canal, Matai River, and
Mahanadi River Delta.
6. National Waterway 6 (NW6):
Proposed in Assam, NW6 aims to
connect Lakhipur to Bhanga in the
Barak River, covering a distance of 121
km.
Measures Taken for the Development of Inland Waterways in India:

1. Legislations and Policies
• The Inland Waterways Authority of India Act, 1985: The Inland Waterways Authority of India (IWAI) was
formed in 1986 to undertake projects for the development and maintenance of infrastructure on
national waterways with grants from the Ministry of Shipping.
• The Indian Vessels Act of 1917 (amended in 2007): This act addresses the survey and registration of
inland vessels, removal of obstructions in navigation, carriage of goods and passengers, and the
prevention and control of pollution.
• The Inland Water Transport Policy 2001: This policy highlights the economic, fuel-efficient, and
environmentally friendly nature of inland water transport (IWT). It recommends substantial private
sector involvement in infrastructure creation and fleet operations.
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• The National Waterways Act 2016: This act designates 111 rivers or river stretches, creeks, and estuaries
as national (inland) waterways. It empowers the Central Government to regulate these waterways for
development in terms of shipping, navigation, and transport using mechanically propelled vessels.
2. Laws Related to Environmental and Other Impacts
Several laws and notifications are in place to address environmental and other impacts:
1. Forest Act 1980
2. Environmental Protection Act 1986 and relevant notifications, such as the EIA Notification 2006 and
the Coastal Regulation Zone (CRZ) Notification 2011.
Initiatives
1. Jal Marg Vikas Project: This project aims to enhance the navigational capacity of National Waterway-1
(NW-1). It is being implemented by the Government of India with technical and investment assistance
from the World Bank.
2. Sagarmala Project: Alongside the development of coastal shipping routes, this project focuses on inland
waterways to stimulate industrial development. Its objective is to increase the share of domestic
waterways in the modal mix from the current 6% to reduce logistics costs.
3. Interlinking of Rivers Programme: This program is expected to provide transportation benefits through
navigation in the transport sector.
Conclusion
India's transportation system could benefit from inland waterways' cost-effectiveness, energy efficiency, and
regional development. Inland water transport must overcome navigability, maintenance, competing water
needs, and jurisdictional issues. India can maximise its transport potential and sustain economic growth by
developing and using waterways.
Road
Road Infrastructure in India: Enhancing Connectivity and Economic Growth
Introduction
India boasts the second-largest road network globally, covering a vast expanse of 5.89 million kilometres
(kms). With road transportation serving as a vital artery for the movement of goods and passengers, it plays a
pivotal role in the country's economic development. Over the years, India has witnessed significant growth in
road mobility, supported by improved connectivity between cities, towns, and villages.
Government initiatives driving road infrastructure development
1. National Infrastructure Pipeline: The government has allocated Rs. 111 lakh crores for FY 2019-25, with
the roads sector projected to account for 18% of the capital expenditure during this period.
2. Public-Private Partnerships (PPP): India's well-developed framework for PPPs in the highway sector has
been ranked first in operational maturity by the Asian Development Bank.
3. Bharat Mala Pariyojana: This ambitious project aims to construct 66,100 km of economic corridors,
border and coastal roads, and expressways, bolstering the national highway network.
4. Growth Potential: The roads and highways market are projected to exhibit a Compound Annual Growth
Rate (CAGR) of 36.16% during 2016-2025, showcasing promising opportunities for development.
5. PPP Projects: Roads accounted for almost 40% of the 1,824 PPP projects awarded in India until
December 2019, emphasizing the significance of private sector involvement.
6. Hybrid Annuity Model (HAM): Over 60 HAM projects worth over $10 billion have balanced risk between
private and public partners, encouraging PPP activity.
7. Digital Transformation: The National Highways Authority of India (NHAI) has embraced digitalization
with a cloud-based, AI-powered Big Data Analytics platform, streamlining project management and
documentation processes.
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Challenges
1. Land Acquisition: The process of acquiring land for road projects is time-consuming and costly,
accounting for 25-30% of project expenses.
2. Project Delays: For instance Bharatmala Pariyojana's Phase I, crucial for coastal and port connectivity,
has been postponed from 2021-22 to 2025-26, affecting project timelines.
3. Funding Challenges: MoRTH relies heavily on budgetary support and borrowings, lacking alternative
revenue sources.
4. Private Sector Participation.
5. Remote Area Development: Construction projects in remote areas pose challenges in terms of
equipment and raw material mobilization.
Way forward
1. Increased Investment: Road sector development requires increased budgetary allocations, private sector
participation, and alternative financing models like PPPs and TOT.
2. Focus on Road Maintenance: Prioritizing regular maintenance activities such as resurfacing, pothole
filling, and drainage system upkeep ensures road longevity and enhances safety.
3. Streamlined Land Acquisition: Simplifying land acquisition processes, ensuring transparency, and
providing fair compensation to landowners expedite projects and reduce costs.
4. Technological Advancements: Leveraging technology like sensors, intelligent transport systems, and
smart road infrastructure optimizes road safety and traffic management.
5. Road Safety Promotion: Creating awareness, enforcing traffic laws, and implementing safety measures
like speed limits, pedestrian crossings, and crash barriers contribute to reducing road accidents.
6. Institutional Capacity Building: Strengthening the capacity of government agencies involved in road
development and maintenance enhances efficiency and effectiveness. Training and skill development,
streamlined procedures, and adopting best practices from other countries are crucial in this regard.
Conclusion
A robust road network plays a vital role in India's economic growth. The government's commitment to
strengthening road infrastructure is commendable. However, efforts should focus on talent development
and research in this sector. Improved roads will not only boost the economy but also reduce accidents and
enhance travel efficiency.
Prospects of Electric Vehicles in India

Introduction
• EVs are vehicles that run solely on electricity, utilizing electric motors instead of internal combustion
engines. India, currently the fifth largest car market in the world, has the potential to become one of the
top three in the near future.
• A transportation revolution is needed in India to achieve Net Zero Emissions by 2070, focusing on
walkability, public transportation, railways, roads, and better electric cars.
Global status of EVs production and supply chain
• China dominates global EV production with a share of approximately 50%.

• Europe stands at second place with a 25% share.
• The US plays a relatively smaller role, producing only 10% of EVs and having 7% of battery production
capacity.
• India is not a significant player in the global EV supply chain.
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Need for Electric Vehicles

Climate change
• The need to reduce the use of fossil fuels and their associated emissions has arisen due to the problem of
rapid global temperature increase.
• By 2030, India has committed to reducing its GHG emissions intensity by 33% to 35% below 2005 levels.
Clean and Low Carbon Energy
• The cost of electricity generation has been reduced through the adoption of better technologies,
• The shift towards renewable energy sources has led to cost reduction from better electricity generating
technologies.
Energy security
• Over 80 percent of India's transport fuel is covered by oil imports.
• Electric vehicles (EVs) can decrease reliance on imported crude oil, promoting India's energy security.
Rapid urbanization
• According to a recent study by WHO, 14 out of the world's 20 most polluted cities are located in India.
EVs can help address this problem by reducing local concentrations of pollutants in cities.
Innovation
• Adoption, adaptation, and research and development will encourage the implementation of cutting-edge
technology in India.
• The manufacturing capacity of EVs will promote global scale and competitiveness.
Employment: The promotion of EVs will foster employment growth and create more opportunities in the
country.
India's Support to EVs

• India supports the global EV30@30 campaign, aiming for at least 30% new vehicle sales to be electric by
2030.
• At the COP26 summit in Glasgow, India advocated for "Panchamrit," including renewable energy
fulfilling 50% of India's energy needs, reducing carbon emissions by 1 billion tonnes by 2030, and
achieving net-zero emissions by 2070.
• The Indian government has implemented various measures to develop and promote the EV ecosystem,
such as –
o Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme
o Production-Linked Incentive (PLI) schemes for Advanced Chemistry Cell (ACC) and Auto and
Automotive Components
Challenges faced by Electric Vehicles (EVs) in India

• Lack Battery Manufacturing Capacity: India imported Li-Ion batteries worth US$ 1.2 billion during 2018-
22, which is expected to increase by around 50 percent by 2030.
• Consumer Related Issues: As of January 23, 2023, India had only 5,254 public electric vehicle (EV)
charging stations, to cater to a total of 20.65 lakh EVs.
o Additionally, the cost of purchasing a basic electric car is higher compared to a conventional
fuel-powered vehicle.
• Lack of Technology and Skilled Labor: India lags behind in technological capabilities for the production of
essential electronic components for EVs, such as batteries, semiconductors, and controllers.
• Unavailability of Materials for Domestic Production: Dependence on other countries for importing
lithium-ion batteries hinders the goal of becoming self-reliant in the battery manufacturing sector.
• Lack of Stable EV Production Policy: The lack of a stable policy framework for EV production creates
uncertainty for manufacturers, making long-term planning and profitability challenging.
• High Production Cost: The rapid depreciation of the Indian rupee has led to high production costs due to
the increased import costs of inputs.
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• Electric vehicles are costlier than gasoline-powered vehicles within the same range primarily due to the
expensive lithium-ion batteries.
o Additionally, maintenance costs are higher due to the new technology involved and the need for
skilled labour.
• Dependence on China: India heavily relies on China for 90% of electric scooter components. As EV
adoption increases, the dependence on imports is projected to rise to 70% or more, increasing the
reliance on Chinese imports.
Case Study: What contributes to China's dominant position in the EV supply chain?
• Complete concentration of EV parts in China: A recent report by the International Energy Association
reveals that China is highly concentrated in every aspect of the EV supply chain.
• Significant global mining output of key minerals, particularly graphite: The initial stage of the supply chain
involves obtaining essential minerals like lithium, nickel, cobalt, and graphite. China holds an 80 percent
share of global graphite mining.
• Chinese influence over politically unstable cobalt mines in the DRC: The Democratic Republic of Congo,
known for its political instability, contributes two-thirds of the global cobalt supply. Chinese companies
have a substantial stake in the mining operations of this country.
• Chinese dominance in ore and mineral processing: China takes the lead in processing various minerals
globally. It accounts for over 60 percent of lithium processing, more than 70 percent of cobalt processing,
80 percent of graphite processing, and approximately 40 percent of nickel processing.
• Extensive production of cell components in China: With the exception of Japan and South Korea, China
manufactures two-thirds of the world's anodes and three-fourths of the cathodes.
• China's significant share in battery cell production: China boasts a 70 percent share in the production of
attery cells.
Central Government Initiatives on Electric Vehicles

1. Target for EV Sales
• The central government has set a target of 30% of new sales of cars and two-wheelers to be electric
vehicles (EVs) by 2030.
2. National Electric Mobility Mission Plan (NEMMP)
• The NEMMP was launched in 2013 to promote hybrid and EVs in the country and achieve national
fuel security. The goal is to achieve 6-7 million sales of hybrid and EVs year on year from 2020
onwards.
3. Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India)
• It focuses on four areas: technology development, demand creation, pilot projects, and charging
infrastructure.
4. Standards Development
• Organizations like the Bureau of Indian Standards (BIS), Department of Heavy Industry, and
Automotive Research Association of India are working on designing and manufacturing standards
for EVs, Electric Vehicle Supply Equipment (EVSEs), and charging infrastructure.
• These standards will facilitate in-house production of EVs.
5. Establishment of Charging Stations
• Charging stations are proposed to be set up on major highways, connecting city clusters on both
sides of the road, with an interval of about 25 km between each station.
• This will ensure convenient access to charging infrastructure for EV owners traveling between cities.
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Way Forward
1. Electric Vehicle as Way Forward: EVs will contribute to improving the overall energy security situation as
the country imports over 80% of its overall crude oil requirements, amounting to approximately $100
billion.
2. Opportunities for Battery Manufacturing and Storage: With recent technology disruptions, battery
storage has great potential to promote sustainable development in the country, considering government
initiatives to promote e-mobility and renewable power (450 GW energy capacity target by 2030).
3. Increasing R&D in EVs: The Indian market needs encouragement for indigenous technologies that are
suited for India from both strategic and economic standpoints.
The Ministry of Power has prescribed at least one charging station to be present in a grid of 3 km and at
every 25 kms on both sides of the highways.
The Ministry of Housing and Urban Affairs under the Model Building Bye-laws, 2016 (MBBL) has
mandated setting aside 20% of the parking space for EV charging facilities in residential and commercial
buildings.
Conclusion
With government initiatives and the increase in crude oil prices, the Indian EV industry is gaining momentum
as people seek alternative sources to reduce their expenses. However, for a widespread transition from
internal combustion engine (ICE) vehicles to EVs, there is a need to expand infrastructure, including charging
stations, and improve the range of vehicles.
Hybrid Electric Vehicle

Introduction
An HEV utilizes both an internal combustion engine (ICE), such as a petrol or diesel engine, and one or more
electric motors to operate. It can be powered solely by the electric motor, which draws energy from stored
batteries, or by the ICE, or a combination of both.
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Regenerative Braking System (RBS)

• RBS utilizes various methods for energy recovery. A kinetic system captures energy lost during braking
and uses it to recharge the high-voltage battery.
• An electric system generates electricity through a motor during sudden braking. A hydraulic system
stores the vehicle's kinetic energy in pressurized tanks, offering a high energy recovery rate suitable for
heavy vehicles.
Key Advantages
• Fuel Efficiency: Hybrid vehicles with this technology offer superior fuel efficiency, increased power, and
reduced emissions.
• Increased Mileage: Hybrid vehicle design, featuring smaller engines and lighter weight compared to ICE
vehicles, leads to improved mileage, meeting the demand for such vehicles.
• Instant Torque: HEVs deliver instant torque and maintain high torque even at low speeds due to the
overall increase in power and torque.
• Transition in the Auto Industry: Rising fossil fuel prices, clean mobility solutions, and strict government
emission controls are driving the EV
market.
Challenges for Hybrid Technology

• Higher Cost: HEVs' higher price is a
problem in India and other cost-sensitive
markets. ICE-only vehicles are cheaper
than battery-powered ones. HEVs cost
more due to the RBS.
• Infrastructure Limitations: India still faces
obstacles in its journey toward a fully
electric ecosystem, such as inadequate
infrastructure and a lack of high-
performing EVs.
• Robust Manufacturing Ecosystem: EV
revolution challenges include a weak
manufacturing ecosystem for EV-related
materials and supply chain concentration
in specific regions.
Conclusion
SHEVs help reduce fossil fuel use, carbon
emissions, and pollution. They also create a local EV parts manufacturing ecosystem. HEVs protect significant
investments and jobs in ICE parts manufacturing, ensuring a smooth and fast transition to new technologies.
SHEVs and BEVs share electric powertrain components, enabling local manufacturing and accelerating their
adoption. This synergy lowers SHEV and BEV costs, making electrified vehicles viable.
Vehicle Scrapping Policy

Introduction
• All vehicles owned by central and state governments older than 15 years will be de-registered and
scrapped starting April 1 2023.
• The Ministry of Road Transport & Highways has announced this through a notification.
• Special purpose vehicles used for defense and law enforcement are exempted from this rule.
• The vehicles should be disposed of through a Registered Vehicle Scrapping Facility after 15 years
from the initial registration.
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• The Union Budget 2021-22 announced the policy, which includes fitness tests after 20 years for
personal vehicles and 15 years for commercial vehicles.
• States and Union Territories will provide up to 25% tax rebate on road tax for new vehicles
purchased after scrapping old vehicles.
Categorization of vehicles concerning scrappage

1. Government Vehicles
• The Scrappage Policy for government vehicles was approved in January 2021.
• Vehicles owned by the Centre and State Government that are more than 15 years old will be
scrapped from April 1, 2022.
2. Commercial Vehicles
• Commercial vehicles used for transportation purposes will need to undergo a fitness test after 15
years.
• If considered unfit, the vehicle will be scrapped according to the commercial vehicle scrap policy
rules.
3. Private Vehicles
• Private vehicles used for commuting will need to undergo a fitness test after 15 years.
4. Vintage Vehicles
• Vintage cars and bikes,
although older, will be
considered separately based
on their condition regarding
scrapping directives.
Fitness Tests for Vehicles
• Similar to the Pollution Under
Control (PUC) test, vehicles will
need to undergo an automated
Fitness Test after 15 years for
private vehicles.
• The test's validity will be five
years, and it will cost around Rs.
40,000.
• A Green Cess will also be
charged, varying by location.
Need for introduction of vehicle
scrappage policy
• Rise in demand for new cars:
• Incentives for Vehicle owners
• Employment growth
• Safer vehicles:
• More recycling & better air
quality
• Best price for scrap
Challenges
• Entire onus on State Governments, Funding support, BS 6 transition for heavy-duty vehicles,
Replacement with electric vehicles, Infrastructure, De-registering vehicles
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Way Forward
• The scrappage policy can contribute to the government's target of electrifying 30-40% of the vehicle fleet
by 2030.
• A comprehensive plan is needed to remove end-of-life vehicles from the road and support freight
transporters financially.
• The benefits of implementing BSVI vehicles can only be fully realized when old fleet vehicles are taken off
the road.
• Adequate support for electric vehicles, including infrastructure development, is crucial for sustainability.
• The scrappage scheme should incentivize the replacement of old vehicles with electric vehicles and
discourage the purchase of traditional petroleum-powered vehicles.
Conclusion
• Ecological scrapping aims to recover materials, reduce air pollution, and promote green technologies.
• Vehicle scrappage can stimulate economies and support the transition to electric vehicles.
• It aligns with the goal of achieving net zero emissions by mid-century and supports India's complex
automobile ecosystem.
National Infrastructure Pipeline (NIP) and Gati Shakti Master Plan: Infra Boost for India
Introduction
India's pursuit of a 5 trillion Economy hinges greatly on the crucial role of infrastructure development. In a
bid to accomplish this goal, the country has launched the 'National Infrastructure Pipeline (NIP)' initiative,
aiming to bolster infrastructure and foster employment opportunities.
Furthermore, India has unveiled the 'PM Gati Shakti Master Plan', a monumental project worth Rs. 100 lakh
crores, designed to holistically develop infrastructure and establish an integrated pathway for the country's
economy.
Focus areas of the PM Gati Shakti Master Plan

• Boosting local manufacturers: The plan aims to elevate the global profile of local manufacturers and
enable them to compete with their counterparts worldwide. It will serve as a National Infrastructure
Master Plan for India.
• Economic zones: It opens up possibilities for the establishment of new economic zones, promoting both
manufacturing and exports.
• Infrastructure development: Infrastructure development has a multiplier effect, with every rupee
invested yielding higher returns.
• Employment opportunities: The plan aims to create job opportunities for the youth in the future.
Need for such a plan

• Infrastructure development boosts capital spending and economic growth. It generates jobs and
economic growth.
• Quality infrastructure is crucial for inclusive growth and improving the standard of living.
• Inadequate infrastructure not only hampers economic development but also burdens people with
additional costs and difficulties in accessing essential services.
National Infrastructure Pipeline (NIP)

• NIP encompasses economic and social infrastructure projects.
• Sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) are projected to account
for around 70% of the capital expenditure in infrastructure in India from 2020 to 2025.
• The plan outlines an investment of over ₹102 lakh crore in infrastructure projects by 2024-25, with the
Centre, States, and the private sector sharing the capital expenditure in a 39:39:22 formula.
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Why is the infrastructure sector receiving more emphasis these days?

• Pandemic-induced slowdown: The slowdown caused by the pandemic presents an opportunity to invest
in infrastructure and boost economic growth.
• Multiplier effect on job creation and the economy: Infrastructure spending stimulates economic activity
and job creation.
• Inclusive growth: Quality infrastructure is crucial for both economic growth and inclusive development.
• Access to essential social services: Inadequate infrastructure not only hinders economic development
but also imposes additional costs on people trying to access essential services.
Key benefits of NIP

• Economic benefits: A well-planned NIP will increase infrastructure projects, business growth, job
creation, quality of life, and equitable infrastructure access, fostering inclusive growth.
• Government benefits: Infrastructure boosts economic activity, government revenue, and productive
spending.
• Benefits for developers: NIP improves project supply understanding, bidding preparation, aggressive
bids, project delivery failures, and investor confidence, which increases finance access.
• Benefits for banks/financial institutions/investors: Better-prepared projects boost investor confidence
and reduce stressed exposures. This reduces NPAs (NPAs).
Major constraints in the implementation of infrastructural projects

• Revenue shortfall: Slippage in revenue estimates due to lower-than-anticipated increases in GDP growth,
direct tax buoyancy, and disinvestment targets.
• Reduced funds for states: The vertical share of tax devolution from the centre to states has been
reduced from 42% to 41% as per the 15th Finance Commission report.
• Increasing fiscal deficit: Fiscal stimulus may cause high inflation, crowding out, and international rating
downgrades due to India's infrastructure development.
• Structural problems: Land acquisition, compensation payment, and approvals like land access and
environmental clearances take time and cause cost overruns. Court cases delay infrastructure projects.
Highlights of the task force's report:

The task force has proposed the following components under its Infrastructure Vision 2025, which
encompasses strategic goals, innovative strategies, and standardized frameworks:
1. Affordable and Clean Energy
• Ensuring uninterrupted 24x7 power availability.
• Reducing pollution through the widespread adoption of green and renewable energy sources.
• Promoting environment-friendly fuels for transportation.
2. Digital Services
• Ensuring universal access to digital services.
• Achieving 100% population coverage for telecom services.
• Providing high-quality broadband connectivity to empower citizens socioeconomically.
3. Quality Education
• Establishing world-class educational institutions dedicated to teaching, research, and technology-
driven learning.
4. Convenient and Efficient Transportation and Logistics

• Enhancing road connectivity, including expressways, major economic corridors, strategic areas, and
tourist destinations.
Housing and Water Supply for All
• Ensuring housing for all by 2022, minimizing slum populations.
• Providing piped water to all households meeting national standards by 2024.
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5. Agriculture Infrastructure
• Expanding irrigation and micro-irrigation coverage.
• Establishing integrated agro-logistics systems to enhance the storage, processing, and
transportation of agricultural produce.
6. Good Health and Well-being
• Establishing superior healthcare facilities, including robust electronic health records infrastructure.
• Strengthening primary, secondary, and tertiary healthcare infrastructure across India, aligned with
the goals of the National Health Policy 2017.
Issues with the report

• Finance: While the report suggests diversifying financing sources, it does not address the economic
slowdown and job losses that India is currently facing.
• Neglecting the health sector: The allocation for the health sector in the final report is lower than
recommended in the interim report, despite the inadequacies highlighted by the COVID-19 pandemic.
Way Forward
• Striking a balance between physical and social infrastructure is crucial for achieving both economic
growth and human development.
• The government's vision of a $5 trillion economy is achievable through massive infrastructure
development.
• Capacity creation and expansion in various sectors are necessary for sustainable growth and improving
the quality of life for all.
Conclusion
Economic growth and public well-being require infrastructure development. India's economic goals are
advanced by the National Infrastructure Pipeline and Gati Shakti Master Plan. India can boost economic
growth and job creation by investing in infrastructure. These initiatives must address implementation issues,
secure adequate funding, and prioritise the health sector to succeed. India can reach a $5 trillion economy
with a well-executed plan that benefits urban and rural areas and improves citizens' lives.
Multi-Modal Logistics Park (MMLP)

A Multi-Modal Logistics Park (MMLP) as an inter-modal freight-handling establishment comprising
warehouses, dedicated cold chain facilities, freight or container terminals and bulk cargo terminals.
It eases and optimizes merchandise movement via road, rail, waterway and air.
Advantages & Significances of MMLP

• Minimise Costs of Logistics: It aims to reduce
India’s logistics costs from the current about
14% of GDP to less than 10% of GDP, on par
with international standards.
• Reduce cost of storage and trans-shipment:
Shifting warehouses, currently being operated
inside city limits, to logistics parks will enable
reduction in warehousing cost, driven by
lower rentals in logistics parks situated
outside the city limits.
• Efficient Inventory planning: Regional
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logistics parks can provide end-to-end visibility of inventory, collaboration, agility and optimization. o
Often, companies are unable maintain inventories for contingencies due to the dearth of storage
infrastructure at the local level.
• Optimize efficiency through technology: MMLP’s with appropriate information technology
infrastructure and integrated Application Programming Interface (APIs) based platforms, can help in
digitizing the traditional supply chain, supporting big data analytics and disruptive technology such as AI.
o This can in turn help in achieving on-time performance and reduce cost to serve.
• Maximise Utilisation of Assets: It helps in the proper utilisation of assets as the transit time is less and
the goods vehicles and the other hardware are free to use for the other business or purposes.
• Environment Friendly: Increased freight movement on higher sized trucks and rail will enable in
reduction in CO2 emissions.
• Social Benefit: Create employment opportunities and Help with the development and expansion of Small
and Medium Enterprises (SME).
Challenges:
• Availability of Affordable land: Availability of land at an affordable rate and the issues with land
acquisition.
• Issues with material handling infrastructure: Warehousing landscape is highly unorganized with the
presence of many small, private, and unorganized warehouses.
• Poor Skill set: Efficiency is compromised as many firms try to compete through the factor advantage of
low wages which have led to hiring poorly skilled personnel thereby hampering service quality.
• Red Tapism in the departmental works: Multiplicity of government agencies involved in setting up
MMLPs which may hamper ease of business. Numerous approvals are mandatory from several Central
and State ministries for the fulfilment and carrying out of these MMLPs.
• Skewed modal transportation mix: In India, 60% of freight moves by road, which is significantly larger
than in many developed economies. Contribution of inland waterways is negligible, Rail transport is
marginal, despite being 45% cheaper per ton–km than road.
Way Forward:
• Promote private sector participation (PPP Model): The PPP is the preferred mode of implementing
MMLPs. To encourage greater private participation, the MMLPAI could develop a model PPP framework
to define the role and interdependencies between central and state governments and private players.
• Single window Clearance: Centralize MMLP approvals. A single window would facilitate the process of
clearances.
• Selection of Best suited location: Optimize the location of park and easy land availability. The location
should not only have the requisite infrastructure but should also house industries.
• Using of Modern cutting-edge Technology: Cutting edge information technology for delivery
management also plays an important role for MMLPs to work effectively.
• Develop Efficient connectivity: Identify gaps in trunk and multimodal interlinkages and bridge them
while developing terminals for efficient multimodal freight transfer.
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8. External Sector and India’s Trade
8. External sector and India’s Trade
Status of the Export Sector in India
Trade Status
• Jamnagar in Gujarat: The leading exporting district in India, contributing about 24% of India's exports in
value terms in FY23 (till January).
• Surat in Gujarat and Mumbai Suburban in Maharashtra rank second and third, accounting for only about
4.5% of the country's exports during the same period.
• The remaining districts in the top 10 are Dakshina Kannada (Karnataka), Devbhumi Dwarka, Bharuch,
and Kachchh (Gujarat), Mumbai (Maharashtra), Kancheepuram (Tamil Nadu), and Gautam Buddha
Nagar (Uttar Pradesh).
Status of the Export Sector in India
Status of Trade
• The merchandise trade deficit (the gap between exports and imports) increased by over 39% in 2022-23,
reaching USD 266.78 billion, compared to USD 191 billion in 2021-22.
• Merchandise imports rose by 16.51% in 2022-23, while merchandise exports grew by 6.03%.
• However, the overall trade deficit stood at USD 122 billion in 2022-23, compared to USD 83.53 billion in
2022, benefiting from a trade surplus in services.
India’s Major Export Arenas

• Engineering Goods: Exports in this sector experienced a
remarkable growth of 50%, reaching USD 101 billion in
FY22.
• Agriculture Products: The government's efforts to meet
global food demand during the pandemic have boosted
agricultural exports. India's rice exports alone amount to
USD 9.65 billion, the highest among agricultural
commodities.
• Textile and Apparels: In FY22, India's textile and apparel
exports, including handicrafts, reached USD 44.4 billion,
marking a significant 41% year-on-year increase.
o Government schemes like the Mega Integrated Textile
Region and Apparel (MITRA) Park are providing strong
support to this sector.
• Pharmaceuticals and Drugs: India ranks as the third-largest
producer of medicines by volume and the largest supplier
of generic drugs.
o India supplies over 50% of Africa's generic drug needs,
40% of US generic demand, and 25% of UK medicines.
Challenges Related to Export Sector
• Access to Finance: Obtaining affordable and timely finance
is crucial for exporters.
146
• Limited Diversification of Exports: India's export basket is concentrated in a few sectors, such as
engineering goods, textiles, and pharmaceuticals, making it vulnerable to fluctuations in global demand
and market risks.
• Rising Protectionism and Deglobalisation: The Russia-Ukraine War and supply chain weaponization are
reducing India's export capacity.
Way Forward
1. Investment in Infrastructure
• Enhancing export competitiveness requires improved infrastructure and logistics.
• India should prioritize investments in transportation networks, ports, customs clearance processes,
export promotion zones, and specialized manufacturing zones.
2. Skill Development and Technology Adoption
• Implement skill development programs to ensure the availability of skilled labour in export-oriented
industries.
• Incentivize and promote the adoption of technology, such as automation, digitization, and Industry
4.0 technologies, to boost productivity, competitiveness, and innovation in the export sector.
3. Exploring Joint Development Programs
• In the current wave of deglobalization and slowing growth, exports alone cannot be the sole engine
of growth.
• India can explore joint development programs with other countries in sectors like space,
semiconductors, and solar energy to improve its medium-term growth prospects.
Forex reserves
Introduction
• Forex reserves serve as the barometer of a country's economic health.
• These reserves consist of assets like foreign currencies, gold reserves, and treasury bills, managed by
the central bank.
• Forex Reserves can be classified into four categories: Foreign currency assets (FCA), Investment in gold,
Special drawing rights (SDRs) IMF, Reserve Tranche
Position.
Objectives of Holding Forex Reserves

There are several objectives of holding forex reserves:
• To support the country's balance of payments: A
country with a balance of payments deficit can use its
forex reserves to buy back its currency to prevent
depreciation.
• To stabilize the exchange rate: The central bank can
stabilise exchange rates by buying and selling foreign
currencies.
• To provide a cushion in times of economic crisis: A country can use its forex reserves to finance imports,
prevent bank runs, and stabilise the economy during an economic crisis.
Role of RBI in Forex Reserves

• Custodian, Regulator and Player, Dollar/Rupee Rate, Exchange Control, stabilisation of Currency
Volatility
147
Real Problem
• Import/Export Policy: Depletion of forex reserves can be attributed to import licenses granted by the
Ministry of Commerce, rather than RBI interventions.
• Twin Deficits: India's trade and current account deficits need to be addressed by aligning trade control
and exchange control regulations.
• Further Depletion: India's forex reserves may decrease further due to a growing current account deficit
and central bank interventions.
Government Initiatives to Boost Forex Reserves

• Atma Nirbhar Bharat: India aims to become self-reliant, reducing the need for imports and improving
forex reserves.
• Schemes like Duty Exemption, Remission of Duty or Taxes on Export Product (RoDTEP), and Nirvik have
been launched.
• India has attracted significant Foreign Direct Investment, contributing to increased forex reserves.
Understanding the Rupee's Exchange Rate

• The exchange rate is influenced by India's trading activities with other countries.
• Demand for US dollars corresponds to the demand for rupees in the market.
• A higher demand for dollars due to increased imports may lead to rupee depreciation.
Impact of Rupee's Exchange Rate

• Weaker Rupee Benefits: A weaker rupee supports India's exporters.
• Stronger Rupee Challenges: A stronger rupee hampers India's goal of becoming a global export hub.
Way Forward
• Measures to Boost Forex Inflows: Increasing borrowing limits for companies, attracting deposits from
NRIs, and relaxing rules for foreign investments in local-currency bonds.
• RBI's Role in Smoothing Volatility: The RBI intervenes in the forex market to stabilize exchange rate
fluctuations, ensuring credibility in India's currency.
• Promote Export-Oriented Industries: Encouraging industries that have a competitive advantage in
international markets will boost export earnings, leading to higher forex inflows.
• Attract Foreign Direct Investment (FDI): Implement policies and reforms to attract foreign investments
across various sectors, which will contribute to increased forex reserves.
• Enhance Skill Development: Invest in skill development programs to enhance the competitiveness of the
workforce, leading to higher productivity and export potential.
• Maintain Macroeconomic Stability: Pursue prudent fiscal and monetary policies to ensure
macroeconomic stability, which fosters investor confidence and attracts foreign investments.
Conclusion
Economic stability and resilience depend on forex reserves. They protect against financial crises, manage
currencies, and boost market confidence. The RBI manages exchange control regulations and currency
volatility and holds India's forex reserves. To avoid depletion of forex reserves, import/export policies, twin
deficits, and the need for a balanced approach to trade and exchange controls must be addressed.
148
Depreciation of Indian rupee
Introduction
Currency depreciation—a country's currency losing value relative to foreign reference currencies—can hurt
an economy. The depreciation of the Indian rupee against the US dollar has raised concerns and needs
further investigation into its causes, effects, and solutions.
Understanding Currency Depreciation

Under a floating exchange rate regime, a country's currency depreciates against one or more foreign
currencies. It can boost exports by lowering prices. Currency depreciation can affect neighbouring countries
and the economy.
Reasons for Indian Rupee's Depreciation:

Several factors have contributed to the current depreciation of the Indian rupee against the US dollar:
• Trade deficit growth: The increase in imports, particularly due to rising oil prices, has led to India's trade
deficit reaching a record high.
• Policy differences between central banks: The Fed's low interest rates and optimistic economic outlook
have strengthened the US dollar, diverging US and Indian central banks' policies.
• Reserve accumulation: The Reserve Bank of India (RBI) has been actively purchasing US dollars to build
reserves and prepare for potential future turbulence.
• Capital exodus and market uncertainties: The benchmark stock index, S&P BSE Sensex, has declined by
almost 10% from its peak, driven by capital outflows. Concerns regarding the Omicron variant and
geopolitical tensions have also contributed to market uncertainties.
• Global factors: Various global factors, including the conflict between Russia and Ukraine, rising crude oil
prices, and tightening global financial conditions, have played a role in the depreciation of the Indian
rupee.
Impact of Depreciation on Indian Economy

The depreciation of the Indian rupee has both positive and negative implications:
Positive impact:
• Theoretically, a weaker rupee should boost India's exports. However, in the current global uncertainty
and weak demand scenario, higher exports may not materialize.
Negative impact:
• Risk of imported inflation, Challenges for interest rate management, Increased cost of imports, Adverse
impact on oil and gas industry, Inflationary pressure, Impact on various sectors
Role of Reserve Bank of India (RBI)
The RBI plays a crucial role in managing currency volatility and supporting the rupee. Some steps taken by
the RBI include:
• Monitoring foreign currency markets and intervening when necessary.
• Relaxing restrictions on foreign ownership of government bonds and increasing borrowing limits for
businesses to attract foreign currency inflows.
• Proposing rupee settlement methods to reduce the demand for US dollars in international trade.
Measures to Address Rupee Depreciation

To address rupee depreciation, several steps can be considered:
• Encouraging foreign investment, Relaxing foreign investment caps, Selling foreign currency reserves,
Promoting industrial growth, Export promotion and import reduction, Rationalizing foreign currency
expenditure, Attracting NRI investments
149
Outlook for the Rupee in 2023

• While the near future outlook for the rupee remains weak, considering factors such as high inflation and
uncertainties, the depreciation may not persist indefinitely.
• As India maintains its position as the fastest-growing economy, the tide may eventually turn once the
tightening of monetary policies by the US Federal Reserve concludes.
Way Forward
• Inclusion of Indian corporations in global indices: Promoting the inclusion of large-cap companies in
global indices can offset foreign portfolio outflows and enhance foreign investments.
• Entry into bond indices: Expediting India's entry into bond indices can attract foreign inflows and
positively impact interest rates.
• Adequate forex reserves management: Maintaining a comfortable level of foreign exchange reserves
and employing timely interventions to control volatility can safeguard the rupee's value.
• Fiscal discipline and inflation control: The government should focus on limiting borrowing, while the RBI
concentrates on inflation control as mandated by law.
• Enhancing export competitiveness: Improving infrastructure, logistics, and export incentives to make
Indian exports more competitive.
Conclusion
The Indian rupee depreciation affects many sectors and the economy. Imported inflation and trade deficits
can hinder export competitiveness. Long-term stability requires fiscal discipline and inflation control. India's
resilient economy may improve the rupee's outlook, but careful monitoring and proactive measures are
needed to overcome the challenges.
Global trade in Rupees
Introduction
The Reserve Bank of India's recent announcement of a new arrangement for settling imports and exports in
rupees aims to boost global trade, with a focus on promoting Indian exports and meeting the growing
interest of the global trading community in the Indian Rupee.
Background: Russia-Ukraine War

• India, being a trade deficit country, imports more than it export, necessitating the maintenance of large
forex reserves as international trade still primarily relies on US dollars.
• The RBI has previously allowed international trade in rupees during the sanctions on Iran, resulting in
trade between the two countries being conducted in rupees instead of dollars.
• The ongoing Russia-Ukraine war and subsequent sanctions provide another opportunity for the RBI to
advocate for trading in rupees.
US Dollar: The Global Currency

• The US dollar has been the dominant global currency since World War II, with approximately half of
international trade, loans, and global debt securities being denominated in USD.
• The USD became the official reserve currency of the world in 1944 through the Bretton Woods
Agreement.
• Despite challenges faced by the US economy in the 1980s, such as fiscal and external deficits, the dollar's
share of global reserves remained stable and even grew over time.
• The dollar's dominance is supported by robust and credible institutions, deep markets, and its freely
convertible nature.
150
• Nearly 40% of the world's debt is issued in dollars, leading to a high demand for dollars by foreign banks
for conducting business, as seen during the 2008 financial crisis.
Why such a move?

• Trade facilitation: This arrangement will facilitate trade with countries facing sanctions, such as Russia.
• Forex savings: India, as a net importer, will save foreign currency through this new settlement system.
• Rupee appreciation: The rupee's historic low against the dollar can be stabilized through this initiative.
• Mitigating war impact: Following the Russia-Ukraine war and the cutoff of Russia from the SWIFT
payment gateway, exporters faced difficulties with payments, which this system aims to alleviate.
• Convertibility easing: This move can be seen as a stepping stone toward achieving 100% convertibility of
the rupee.
• Energy security: Access to discounted crude oil from Russia, which constitutes 10% of all imported crude,
is facilitated.
• Export promotion: This mechanism will promote Indian exports effectively.
Which countries would prefer this system?

• War-affected Countries: Trade settlements in rupees are expected to be limited to countries like Russia
and Iran facing Western sanctions.
• Economically challenged countries: Countries experiencing economic turmoil, like Sri Lanka, may benefit
from this arrangement as India has been extending lines of credit to them.
• Immediate neighbours: Other countries, particularly India's neighbouring nations, may also consider this
system.
• Preference for Rupees over Dollars: The preference for trading with India in rupees arises from the
strength of the US dollar against most currencies worldwide, making imports expensive for many
countries.
• Sri Lanka’s example: Sri Lanka's economy has suffered greatly, with its currency falling 83% against the
US dollar, while the fall against the Indian rupee has been comparatively lower at 70%.
• Trade surplus countries' preference: The Indian government and RBI must address why countries with a
trade surplus with India would want to trade in rupees.
• Negative trade balance: China, with a trade surplus of $100 billion with India in 2022, would hold a
significant amount of idle Indian rupees if it were to trade in rupees.
Way Forward
• In a multipolar world with frequent Free Trade Agreements (FTAs), reducing the dominance of the dollar
seems desirable for governments concerned about US global primacy, forming coalitions against it.
• Sanctions against Russia may indicate a decline in the dollar's status as the reserve currency.
Conclusion
While this move will not dismantle the dollar's dominance overnight, the demand for the rupee depends on
India's ability to export. Only if all nations collectively stop using the dollar will its significance decline.
New Foreign Trade Policy 2023
Introduction
The Foreign Trade Policy 2023 was recently launched by Union Minister of Commerce and Industry Shri
Piyush Goyal. The policy has undergone extensive stakeholder consultations and aims to address the needs
of the trade.
About Indian exports

• India's overall exports, including services and merchandise exports, have already surpassed US$ 750
billion and are projected to exceed US$ 760 billion this year.
151
• The value of India's exports in the financial year 2021-22 witnessed a growth of about 41% to reach 400
billion dollars compared to the pandemic-hit year of 2020-21.
Background of the policy

• The Foreign Trade Policy (2023) is a dynamic policy document that builds upon successful schemes and
adapts to changing trade requirements.
• The FTP 2015-20 underwent revisions based on emerging situations, even without the announcement of
a new FTP, emphasizing a responsive approach and incorporating feedback from the trade and industry.
• Going forward, revisions to the FTP will be made as necessary, while continuous efforts will be made to
streamline processes, update the policy, and ensure compliance with WTO rules.
Aims and objectives of the new policy

• The FTP 2023 focuses on process re-engineering and automation to improve the ease of doing business
for exporters.
• It aims to increase exports and strengthen India's position in the global value chain.
• The policy is based on four pillars: incentive to remission, export promotion through collaboration, ease
of doing business, and emerging areas like e-commerce and SCOMET policy.
Key highlights of the policy

• Process Re-Engineering and Automation: The new policy emphasizes export promotion through
automated IT systems and collaboration, moving away from an incentive regime.
• Towns of Export Excellence: Four new towns have been designated as Towns of Export Excellence, which
will have priority access to export promotion funds and other benefits.
• Recognition of Exporters: Exporter firms recognized with 'status' based on export performance will
contribute to capacity-building initiatives by providing trade-related training.
• Promoting export from the districts: The policy aims to build partnerships with state governments and
promote exports at the district level through institutional mechanisms.
• Streamlining SCOMET Policy: The export control regime is being strengthened to implement
international treaties and agreements.
• Facilitating E-Commerce Exports: The policy outlines plan for establishing e-commerce hubs and raising
the cap on consignment-wise e-commerce exports.
• Merchanting trade: Provisions for merchanting trade have been introduced to develop India as a
merchanting trade hub.
Current Export Schemes and Changes

(A) Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme
• The EPCG Scheme is being further rationalized and includes new schemes and products eligible for
benefits.
• The PM MITRA scheme and exemptions for the dairy sector and green technology products have been
added.
(B) Facilitation under the Advance Authorization Scheme
• Provisions have been added to facilitate export orders in the Apparel and Clothing sector and extend
benefits to status holders.
Possible positive outcomes of the scheme

• Supporting MSMEs to grow: The policy facilitates easy access to export benefits, reducing fee structures
and implementing IT-based schemes.
• Creating new export centres: The addition of new towns for export excellence is expected to boost the
exports of specific industries.
• Educating exporters: The recognition norms have been re-calibrated, enabling more firms to achieve
higher ratings and better branding opportunities.
152
• Providing access to dual-use high-end goods and technologies: A robust export control system will
benefit Indian exporters.
• Growth of GIFT city: Certain places like GIFT city can become major merchanting hubs.
• Reduce litigation burden: The amnesty scheme aims to provide relief to exporters by addressing default
on export obligations.
Limitation of NFT Policy

• The policy falls short in offering more targeted measures and a well-defined road map to meet the 2030
export target.
Conclusion
• With India's modest share in global trade, there is ample room for improvement.
• The Foreign Trade Policy 2023, along with additional measures, can enhance trade performance and help
achieve the ambitious $2 trillion export target by 2030.
• Monitoring policy implementation and addressing potential challenges are vital to fully benefit
businesses.
153
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MK YADAV Sir's

MAINS BOOSTER SERIES

Current + Static Integrated Series

1. ECONOMIC GROWTH, DEVELOPMENT, INEQUALITY, INCLUSIVE GROWTH .......................................... 2

2. PLANNING AND ISSUES RELATED TO IT .............................................................................................11

3. MOBILIZATION OF RESOURCES .........................................................................................................14

4. FISCAL POLICIES ...............................................................................................................................34

5. AGRICULTURE IN INDIA ....................................................................................................................40

6. INDUSTRY AND SERVICES .................................................................................................................94

7. INFRASTRUCTURE .......................................................................................................................... 119

8. EXTERNAL SECTOR AND INDIA’S TRADE .......................................................................................... 146

1. Economic Growth, Development, Inequality, Inclusive Growth

1. Economic Growth, Development, Inequality, Inclusive Growth

Economic growth: Economic growth

Phases of Economic Growth: The

Inequality and Growth:

Reasons why high growth

Positive aspects and notable achievements of India's development story

Inclusive Growth through Five-year Plans:

Need for Inclusive growth in India:

Government Initiative to achieve Inclusive Growth in India

Challenges in achieving inclusive growth in India

Atmanirbhar Bharat Abhiyaan

Objective of Atmanirbhar Bharat

Global Economic Recession

Reasons behind current Global Economic Recession

Concept of Green Growth

Principles and challenges of Green Growth:

Government Initiatives for Green Growth

What is Financial Inclusion?

Financial inclusion in India: Present status

Need of Financial Inclusion

Challenges to Financial Inclusion

Promotion of Financial Service in Rural and Semi-Rural areas

Promoting Financial Literacy

Digital Financial Inclusion:

Issues and Challenges:

loss of data, including payment instructions.

Conclusion: Inclusive growth is crucial for

2. Planning and Issues related to it

2. Planning and Issues related to it

Economic Planning in India

Achievements of planning in India:

4. Development of Science and Technology -

Drawbacks of planning in India:

Planning Commission of India

propose changes as justice, poverty alleviation, achieved.

Achievements of NITI Aayog

Components of resource mobilization

Need of Resource Mobilization

Sources of resource mobilization-

Issues regarding resource mobilization

Steps needed for effective resource mobilization

Banking Sector in India

Recent developments in Banking sector-

Functions of the Banking Sector:

Non - Banking Financial Institutions (NBFCs)

Types of Non-banking financial institutions

Significance of NBFCs Issues with NBFCs

Non -Performing Assets (NPA) Crisis in India

Possible reasons behind NPAs- Impacts of NPAs-

Need of the hour-

New Bad Bank Structure