NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022

 (R.E. + C.E)– (Non Debt CR + T.R )

 (BS)ECONOMICS B.K SINGH
 SOURCES
 Indian economic development +2 ncert
 Introductory macroeconomics +2 Ncert
 Sanjeev verma at the place of ncert
 Choose 1 only between ncert and Sanjeev verma
 Class notes are must
 Yellow book is must
Sir Mobile Number 9015322506
 WHAT WE READ IN BK SINGH’S CLASS
 FISCAL POLICY-
 Introduced on 1st April 1997 on recommendation of
Sukhmoi Chakravarti Committee. It has brought more
transparency and accountability in budget making
process
3. Primary deficit
 F.D. (Fiscal deficit) – Interest payment
4. Budget deficit
 {(Total Expenditure) T.E. – T.R. (Total Receipts) }
 (Revenue Exp.) R.E. + CE (Capital Exp.) – RR (Revenue
receipt) + CR (Capital receipt)
5. Effective revenue deficit 2012
 {R.D Grants to States for capital formation}
 1 to 3 are announced by government
 Fiscal responsibility budget management Act
(FRBMAct 2003 old , 2016 New ) talks about revenue
and fiscal deficit
 Before fiscal deficit budget deficit concept was in
operation. If the budget deficit was more than zero
than it was being financed by borrowing from reserve
bank or by reducing cash balances of government
with RBI. That why it was called as Monetized Deficit
because new currency equals to deficit would come
in the economy.

 FINANCE COMMISSION
 We talk about why finance commission always try to
reduce the horizontal and vertical imbalance

 INFRASTRUCTURE
 Economic infrastructure:- electricity , transportation,
communication
 Societal Infrastructure:- Education, Health , Housing

 INCLUSIVE GROWTH
 Physical Infrastructure development
 Human development
 Growth & development
 Sustainable Inclusive Growth
 Sustainable development
 STUDY OF INDEX
 HDI:- IHDI 2010 + PHDI 2020
 GII
 WHI
 GROWTH-INFLATION CONFLICT
 Demand pull inflation
 Cost push inflation
 EMPLOYMENT AND UNEMPLOYMENT
1. Cyclic Un employment
2. Structural Unemployment
3. Natural rate unemployment
4. Voluntary unemployment
5. In-voluntary unemployment

 BASIC ABOUT DEFICITS:-

1. Revenue-deficit:-
 {Revenue Expenditure– Revenue receipts}
2. Fiscal deficit1997:-
 TE – TR

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 1

 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022


Measurement of unemployment
UPS-usual principal status TOPIC:- THE RECEIPTS
 CWS-current weekly status
 CDS-current daily status A. REVENUE RECEIPTS :-
 Unemployment before 2000 & after  Those receipts which are not created by Selling
 Labour laws public assets. Apart from this they do not
 Employment line concept given by mc-Kinsey global Increase Public liabilities, It can be divided into
institute 2013 two parts:-
 NOTE:- These topics we will Cover Now
a) Tax Revenues (Direct taxes)
 SOME FACTS b) Non-tax Revenues
 Fiscal policy announced by GOI and State Govt
at state level
1. TAX REVENUES:-
 Monetary Policy by the RBI means Money + 1) DIRECT TAXES: Paid by same person on whom
Banking it is Imposed/ levied. It is non-transferable and
 Fiscal Policy 4 feb - Budget compulsory by nature because its imposition
does not have any condition
 Example: Income Tax
 Old Slabs –
 2.5 lakh – No tax
 More than 2.5 – 5 L – 5%
 More than 5 – 10 L – 20%
 10 L – 30
 SOME EXAMPLES OF DIRECT TAXES:-

a) STT- SECURITY TRANSACTION TAX:-
 Imposed on purchasing and selling of Securities.
 It reduces the betting in Share Market.
b) SCGT – SHORT TERM CAPITAL GAINS TAX,
 Corporate Tax Wealth Tax (1957) (scrapped in
2017),
c) MAT (MINIMUM ALTERNATE TAX):-
 Imposed on profit of Small Companies and those
companies who do not pay corporate tax and
hide it on various exemptions. It is more in news
due to retrospective tax. Under it taxes are
imposed on previous years are carry forward.
d) CGT:-CAPITAL GAINS TAX:-
 It is a tax imposed on the profit obtain by Selling
of properties. Capital gains tax is imposed on
these types of benefits although it is mostly
imposed on profit gains through selling of
equities.
 In India for the capital gains from short term
equities STCG is imposed with 15% rate which in
the annual budget of 2018-19 government has
imposed 10% LTCG for the equities held for
more than 1 year and gain must be 1 lakh or
more
 SOME CONCEPTS RELATED TO DIRECT TAX
 GMCT-global minimum corporate tax
 GAAR- General Anti-avoidance Rule
 TDS- Tax Deducted at Source
 TCS- Tax Collected at Source
2) IN-DIRECT TAX
 It is not compulsory because paid only when
consumed
 It is transferable

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 2

 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Imposed on one and paid by another (end
consumer). It is imposed on both goods and
services on their transactions. It is like
production tax.
 It is notable that if an item has less elasticity
then despite having the high price its demand
would not be affected much.
 If the item is luxurious, then it is highly elastic  It may create liabilities and it may also be
which means demand fluctuates. If there is
competitive environment then less tax would be
forwarded.
 E.g.: GST, Custom duty, Excise duty,
Entertainment tax, Entry duty
 Custom Duty
 It is imposed on both Exportable and Importable
Items.
 According to WTO it is called as T.B. (Trade
Barriers)
 Excise Duty
 Imposed on production, It was imposed by
central government in terms of CEN VAT. Sales
Tax
 Imposed on Selling of Items by State
government. Under VAT it is called as SL VAT.
 Entry Tax
 For the movement from one State to another,
one has to pay entry tax .
 Octroi Duty
 Movement from one municipality to another
Municipality.
 In Maharashtra it is called as LBT (Local body tax)
although other states have already abolished it
 Dividend of PSU Transfer of profit by RBI, ONGC,
SBI. Etc
2. NON-TAX REVENUE
a) Fees, fines
b) Escheat:-If there is a death of the owner of a
property and the legal heir is minor, then govt
will take the control of the property and after
attaining the age of 18 years government hands
over the property to the legal heir and charge
some amount for this care taking work called as
Escheat.
c) Special Assessment:-It is imposed by the
government on the people of a particular area
for the developmental activities done by the
government in that area. Example:- Toll Tax on
highway
 Dividend of PSU
 Transfer of profit by RBI, ONGC, SBI. etc
 Revenue Receipts:
 Does not create liabilities also not obtained
through selling of public properties.
 Capital Receipts:
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 It may create liabilities and it may also be
obtained through selling of public properties.
 Disinvestment:
 Done by selling of shares of Public Sector
Undertaking.
B. CAPITAL RECEIPTS:
obtained through selling of public properties.
 Disinvestment: Done by selling of shares of
Public Sector Undertaking.
 DIRECT TAXES ARE CONSIDER AS
BETTER THAN INDIRECT TAXES AS :-
a) Direct taxes are progressive in nature which
means it is more on higher income group people
while less on lower income group.
b) While indirect taxes are regressive in nature. It
means its incidence is more on poor people and
less on rich people.
c) Indirect taxes are attached with goods and
Services so it is purchased by both poor and rich.
d) Direct taxes do not affect prices of goods and
Services, while indirect taxes do affect prices in
the commodity. Which changes public choice
which also affects the production structure.
Which may disturb the ideal distribution of
resources and may pulls down GDP.
e) At the time of imposition of Direct tax it should
always be checked that the rates should be
payable by the people otherwise it will de-
motivate the people and which may force
people to go for more rest, which can have the
following effects:
f) Govt tax revenues decrease.
g) GDP may decrease
 TOPIC:- THE EXPENDITURES
1. REVENUES EXPENDITURE:-
 Those expenditures which do not create public
assets and also do not decrease public liabilities
a) Developmental Revenue expenditure:-
 Providing day to day services by the government
in order to run the economy like health ,
education services, transport services,
communication services, irrigation , food control
services, research and development services.
 Export services, a host of services, which govt.
Provides in a day to day basis to industry ,
agriculture, various other sectors
b) Non-developmental revenue expenditure:- It
comprises of the expenditure on defence , law
and order , interest payment, pensions, civil
administration, subsidies, grants to states etc.
3
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
2. CAPITAL EXPENDITURES
 These expenditures create public assets and also
reduce public liabilities.
 Example:- Repayment of loans, construction of
public properties like Metro, National Highway,
Airports
 NOTE:-
 During 1987-88 there was a new classification of
government expenditures:
a) Plan expenditure
b) None plan expenditure
 Following Institution and Commissions have
suggested to Remove Difference between Plan
and Non Plan Expenditure.
 Rangarajan Committee on the analysis of
classification of Public Expenditure.
 Bimal Jalan Commission on Efficiency in Public
Expenditure 14th Finance Commission
 Planning Commission.
 After the formulation of Niti Ayog. The entire
work under plan expenditure is operated under
the finance ministry.
………1st class ended,2nd started………
THE DIRECT TAX:-
A. MERITS OF DIRECT TAX
a) It curbs the inflation because it reduces money
available in the hands of consumers
b) It is equitable in nature because it is a progressive tax
(means lower to poor and more on those who are
capable)
c) It reduces inequality by providing welfare schemes
like subsidies, old age pensions etc government
collects SUR charges from super rich and distributes
among the poor in the form of welfare schemes
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
B. DEMERITS OF DIRECT TAX
a) It appears burden on some because paid in lump
sum amount
b) Tax evasion is possible means people hide their
income while paying cash or doing transaction in
cash and do not involve in any bill or salary slip
during transaction
c) Tax avoidance is also possible as people show
there income but avoid paying taxes through
various loop holes in the tax structure
d) It may restrain investments in the equity
through capital gains tax
 Note- share market has 10% tax on gains so
people search other options to invest because
this tax discourage people to invest
THE INDIRECT TAX
A. MERITS OF INDIRECT TAX
a) It gives more tax revenue because all citizens pay this
tax
 Tax revenue= tax × quantity
 Before 1997 service sector was not under tax so
quantity was increased by bringing this under, people
feel less burden of it because it is paid in small
amounts over the year for example paying Indirect
Tax by purchasing biscuits
b) It is convenient to pay because attached with goods
and services tax
B. DEMERITS OF INDIRECT TAX
a) It is an regressive tax means burden seems to be
more on poor than rich
b) It makes prices of goods and services more expensive
c) Government increases indirect tax to compensate
revenue shortages or shortfalls that occurs due to
reduction in a direct taxes
 CLASSIFICATION OF TAXES
1. Direct tax and indirect tax
2. Progressive tax and regressive tax
3. Specific tax and Ad Valorem tax
A. SPECIFIC TAX
 It is imposed in lump sum amount not in percentage
 Nothing to do with the prices of goods only
 For example on purchasing a pencil of rs 10 sometimes you
are giving two rupees as a specific tax so it is not in the
form of percentage
 So either prices 10 rupees or 100 rupees you have to pay
only to at additional to price as a specific tax on a single
pencil
B. AD VALOREM TAX
 It is levied in percentage on goods
4
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Tax amount changes with the change in price 2) Entire life you get one chance to switch to on
 For example 10% on petrol per litre is petrol is 100 slab either but service provides can shift to any
per litre then it taxes 10 rupees if a petrol is 200 per number of times
litre then a tax is 20 rupees as per 10% on petrol per
3) LTD. limited company- more than one owner
litre so it changes with the amount change
4) Corporate tax is a tax imposed on profit of the
 There are examples like VAT,GST
company for the old manufacturers it is imposed
 DIRECT TAX at 22% while for new manufacturers it is
 Personal tax imposed at the rate of 15%
OLD SLAB NEW SLAB 5) 2013 New company act comes states that if the
Up to 2.5 lakh not tax Up to 2.5 lakh not tax company is owned by one man then he only
2.5 lakh -5 lakh 5% tax 2.5 lakh - 5 lakh 5% tax
5 lakh to 10 lakh 20% 5L -7.5 lakh 10% tax
pays personal income tax however if a company
++ 10 lakh 30% tax 7.5 L -10 lakh 15% tax has many owners then they have to pay
10 L- 12.5 lakh 20% tax corporate profit tax and personal income tax of
12.5 L-15 lakh 25% tax the owners
++15 lakh 30% tax
6) MAT-minimum alternate tax at least 15% of
 If income is up to 500000 then there is tax rebate of
12500 - Under income tax Act 1961 section 87A
your profit it is to limit tax exemptions availed by
 But up to 5 lakh your full tax is rebated companies so that they pay at least a minimum
 But movement it crosses the 5 lakh you need to pay amount of income tax Act present it is 15%
from 2.5 lakh and even the 12500 rupees  TAX REVENUE CONTRIBUTION
 In old slabs under income tax Act 1961 section 80c-
1. GST 16%
LIC policy PF pension fund up to 10 lakh your whole
tax was rebated
2. Income tax and corporate tax both 15-15%
 But more than 10 lakh if in medical policy then it 3. Excise duty
25000 rebated under income tax Act 1961 section  GLOBAL MINIMUM CORPORATE TAX
80D
(GMCT)
 Understand by example
 It is to ensure minimum required tax amount
1) New slabs
 An outcome of G20 summit
 Ratified by OECD
 132 + Nations agreed
 It may stop BEPS
 1 globe one corporate tax
 BEPS- Base erosion and profit shifting- tax planning
strategies used by multinational companies

CAPITAL GAINS TAX

A. EQUITY
15% For Short term and 10% long term for 12
less than 12 months months and more

B. IMMOVABLE PROPORTION
According to Income Tax Flat 20% long term- 24
slabs Short term-less than months and more
24 months Example
Example Land= 1 cr
Land= 1 cr Sold= 1.5 cr
Sold= 1.5 cr Salary = 12 lakh
Salary = 12 lakh Gain = 50 lakh
Gain = 50 lakh Tax
Tax on = 62 lakh according Flat 20% = 50 lakh
to income tax slab 12lakh= according to
income tax slab

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 5

 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
C. JEWELLERIES  May 2007 – Vodafone acquired 67% stake in
Hutchison Essar $ 11.2 billion.
According to Income Tax Flat 20% long term- 36
 Vodafone International hording bought the
slabs Short term-less than 36 months and more
months Example stake of Hutchison Telecommunications
Example Gold Purchased= 1 cr International Ltd. In Hutchison Essar.
Gold purchased= 1 cr Sold= 1.5 cr  Deal between companies based overseas:
Sold= 1.5 cr Salary = 12 lakh executed in Cayman Islands.
Salary = 12 lakh Gain = 50 lakh e) October 30, 2009 – Income tax department
Gain = 50 lakh
Tax served notice to Vodafone International
Flat 20% = 50 lakh Holdings for non-deduction of tax at source on
Tax on = 62 lakh according to
income tax slab
12lakh= according to the $ 11.2 billion transaction.
income tax slab f) October 30, 2010 – IT department ordered
Vodafone to furnish Rupees 11,218 crore under
A. SHORT TERM CAPITAL GAINS section 201 of IT Act.
TAX(STCGT) g) April 29, 2011 – Rupees 7, 900 cr. Penalty was
 15% on equity imposed. LITIGATION:
 September 8, 2010 – The Bombay High Court
B. LONG TERM CAPITAL GAINS upheld the tax-authorities decision.
TAX(LTCGT)  Department raised tax demand in the
 It is a tax levied on the long term investment in subsequent months.
equity on the gain exceeding Rs 1 lakh . it was  January 20, 2012 – Supreme Court set aside
introduced in 2018 before that there was no tax Bombay High Court decision, quash tax &
on long term gain for equities interest demand.
 10% now on equity  It (SC) said transaction was between two
Invested = 1 lac for equity Invested = 1 lac overseas entities and Indian tax authorities
Sold = 3lakh long term Sold = 1.5lakh had no territorial tax jurisdiction.
Time 14 months capital gain Time = 14 months h) Feb 17, 2012 – Government filed review
Gain = 3-1= 2lac text Gain = 1.5-1= 50000 petition.
In 2 lac gain 1 You can In 2 lac gain 1 lax has  March 20, 2012 – Supreme Court dismissed
lac has no tax apply same no tax so the review petition
so example on 50000is under 1 lac
Left = 2-1 = 1lac others acc.. gain tax exemption  THE RETROSPECTIVE AMENDMENT
Tax=10% Tax here is zero  2012 Indian Government amended the Income
Tax = 10,000 Tax act retrospectively.
 Section 119 of the Finance Act validations the
 RELATED CONCEPTS TO CAPITAL tax levied on Vodafone.
GAINS TAX:-  Government said the amendment was only a
1. RETROSPECTIVE TAX :- clarification to remove ambiguity and provide
certainty.
 one that is charged for transactions in the long
past. It can be a new or additional charge on a) Tax Demand Back on Table
transactions done in the past.  January 3, 2013 – IT department raised a fresh
demand for rupees 11, 218crore.
 500
b) Arbitration
300
 April 2014 – Vodafone saved arbitration notices
500× 300 under the India-Netherlands treaty.
 New government did not roll back demand but
 Scrapped last year August 2021 said no fresh action under retrospective tax.
HAND-OUT MATERIAL OF RETROSPECTIVE TAX  A fresh demand was issued in Feb 12, 2016
a) It allows the government to tax certain products, rupees 22,100 crore tax.
deals or transactions that happened behind the  September 25, 2020 – The Hague based
date on which the law is passed. arbitration court ruled in favour of Vodafone.
b) On August 9, the Rajya Sabha approved the  December 21, 2020 – India challenges
Taxation Laws (Amendment) Bill 2020. The arbitration award at Singapore.
decision will help the center project India as  CAIRN ENERGY CASE
investor friendly nation. 1) In 2006 – Cairn UK had transferred its shares in
c) It was introduced by P. Mukherjee in 2012. Cairn India holding to Cairn India.
d) Vodafone Case –  In 2011, Cairn energy sold nearly its entire
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 6
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
holding in the India unit to Vedanta resources,
owned by Anil Agarwal (except 9.8% share).
2) In 2014, tax, tax department issued a tax notice
to Cairn Energy and sought to levy CGT on the
2006 transactions armed with a retrospective
amendment enacted in 2012.
 NOTE: The change in the tax provision meant
that all transactions over the previous five
decades could be brought under the tax net.
3) This Act (2012) brought nearly a dozen
transactions under the IT departments taxable
net.
4) Cairn India had a residual 9.8% stake in the
Indian Unit after its sale to Vedanta.
 In 2014, the IT department went on to freeze the
remaining shares of Cairn Energy as part of its
efforts to recover the tax dues.
5) Subsequently after Cairn India’s merger with
Vedanta in 2017, Cairn Energy held 95% stake in
Vedanta Ltd along with some preference share
valued at over billion $ 1.
 But this holding was soon taken away by IT
department.
 Cairn Energy’s 4.95% shares in Vedanta as of
December 2017 were transferred to Tax
Recovery office. New Delhi in the Jan March
2018 period.
 The tax department then started selling
these shares as part of its efforts to recover
its dues.
 It also withheld tax refunds amounting to $
222.8 million due to Cairn UK in another
matter.
 It also seized dividends amounting to $ 159.8
million and seized proceed due to the
company from redemption of preference
shares as part of its efforts to recover the
dues.
 Cairn Energy decided to initiate internal
Arbitration against India in 2015 in Hague.
 The Permanent court of Arbitration ruled in
Cairn Energy’s favour in December 2020,
hands it an award of $ 1.7B.
 However, earlier this month, Cairn successfully
managed to freeze residential real estate owned
by the Indian Government in Paris, impacting
around 20 Centrally located properties valued at
more than $ 20 million.
 Although Cairn Energy told that it prefers an  It will ensure proper utilisation of local resources
amicable settlement with the Indian
Government.
So, after these international reverses Modi
government abolished it in August 2021.
 PROBABLE QUESTIONS -
Q1. “GST is considered as one of the biggest indirect
tax reforms”. In the light of the statement do the
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
critical analysis of GST in India and also the role of
GST Council as a fiscal Council.
Q2. Do you think that retrospective tax was out-
dated in the present scenario. In the light of
Vodafone and Cairn energy case discuss the adverse
impact of this tax on the Indian Economy.
Q3. DTAA and Round Tripping help in avoiding
money laundering in India. Discuss
Q4. BEPS is an international collaboration to end tax
avoidance. Explain.
2. ROUND TRIPPING 2013:-
 a process in which the money returns back to
the same place from where it had originated.
This is basically done to avoid paying taxes and
escaping other legal essentialities.
 DTAA- Double Tax Avoidance Agreement- is a
tax treaty signed between two or more countries
to help taxpayers avoid paying double taxes.
Means where is the source of income tax is
imposed there
 Treaty Shopping:- “situation where a person
who is not entitled to benefits of a tax treaty
makes use
…..2nd class ended,3rd started…
 THE GAAR- GENERAL ANTI-
AVOIDANCE RULE:-
 refers to a concept which generally empowers
the revenue authority in a country to Deny tax
benefits of transactions or arrangements which
do not have any commercial substance and the
only purpose of such a transaction is achieving
the tax benefit
 It applies where tax payers enter into a scheme
for the sole and dominant purpose of obtaining
tax benefits
 In simple words GAAR is a set of general rules
enacted so as to check tax avoidance
 Before GAAR the SAAR was operational specific
anti avoidance rule
 SAAR was targeting some specific individuals and
also some specific business man
 But GAAR is applicable on all
A. MERITS OF GAAR
 It will increase tax revenue
 Increase investment and employment economy
 It will curb money laundering
 It will work as deterrent for tax defaulters
B. CRITICISM OF GAAR
 Considered to be harsh in nature and there is a
fear that tax authorities will apply these
provisions regularly to torture the general
honest tax payers
7
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Many experts feel that the provision would give putting it into ola or uber so there is no any kind of
unlimited powers to tax officers , allowing them TCS on it
to question any tax saving deal  Tax collected at source is collected by sellers while
selling something to buyers
 SECURITIES TRANSACTION TAX STT
 If a goods are utilized for the purpose of
 There is a debate about is it direct tax or indirect
manufacturing processing and producing further
tax
thanks then there is no TCS payable
 Supported as directed tax by
 If the same goods are utilized for final consumption
 Angel broking organisation
then TCS is payable
 Clear tax organisation  Somewhere it is 1% 2% or 5%
 Supported as indirect tax  Car I lakh
 Economic Times newspaper  TCS 1%
 Ministry of statistics and program  Bullion value 2lakh TCS 1%


implementation MOSPI
We have to accept it as indirect tax as in
 CESS TAX
 It is tax on tax
India due to MOSPI
 Temporary in nature and has a specific purpose
 So it is a tax payable in India on value of
 For example krishi Kalyan cess , health and
securities transaction through the recognized
education cess ,she CESS
stock exchange
 If it is collected then it is used only for that
 In simple words it is a tax levied on every
purpose for which it is collected
purchase and sell of securities that are listed on
 For example if government is taking this tax on
the recognized stock exchange in India
swachh Bharat Abhiyan CESS then the money
 TDS-TAX DEDUCTED AT SOURCE collected by this is only used for swachh Bharat
 It is a lump sum deduction by the government Abhiyan not for any other purpose
 Sources can be salaries  Therefore government cannot deviate this
 It can be monthly basis money
 In TDS person responsible for making payment  It is levied on income Tax amount
for specified services such as commission
 SUR CHARGE
brokerage professional consultancy are required
It is also tax on tax
to deduct a fixed percentage from the amount
 It is long term in nature and can be used for any
such a deducted amount has to be deposited to
purpose even government can David this money
the government by the deductor on the behalf
for any purpose
of deducee which he can claim as income tax
 It is particular case based like the following
paid at the time of filing his income tax return
 Based on income
 Whenever you are getting money there is TDS
 50 lakh to 1 crore it is 10%
got either monthly or annually
 1 crore to 2 crore it is 15%
 For example
 2 crore to 5 crore it is 25%
 Your income is 10 lakh
 + 5 crore income it is 37% surcharge
 TDS is 10%
 Suppose you have income up to 1 lakh and
 So only 90000 you get a salary
there is a surcharge on one percent therefore
 10000 is TDS on 10 lakh as per 10%
 Income 1 lakh
 12×10000= 1.2 lakh TDS
 Income tax 10%

 TCS-TAX COLLECTED AT SOURCE  Tax amount= 10000

 It is applied on few examples used as final products  Sur Charge = 1% of 10000

 TCS when you use it for final consumption but if a  Sur Charge amount= 1000
source is further used for further manufacturing then  Total tax paid = 10000+1000=11000
not TCS on it  Note -CESS+ SURCHARGE are not returned to
 For example I bought a car for myself so there is TCS States by the centre but all other taxes paid by
on it but if I bought a car for earning money by the state of them 42% is a returned back to the
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 8
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
state by the central government except these 2. Borrowing from reserve Bank of India
two taxes  On the recommendation of shubhmoi
 GOVERNMENT ANNOUNCES THREE
TYPE OF DEFICITS
 Deficit is= expenditure - receipts
 Purpose of announcing deficits
1. To understand these deficits which reflect
borrowings of the government and burden of
interest payment due to these deficits
2. Also to understand composition of the union
budget deficits related to the budget
A.THE REVENUE DEFICIT
 Revenue expenditure - Revenue receipt
 Revenue expenditure= developmental revenue
expenditure and non development revenue
expenditure
 Revenue receipt= tax revenue and non tax
revenue
 Government is trying to make 80 by increasing
the revenue receipt
 High revenue deficit of the government is mainly
due to non development revenue expenditure
 Government finds its difficult to reduce because
most of it may have social and political
implications and also major chunk of it is used to
ensure security and defence of the country for
example Pradhan mantri Garib Kalyan Yojana in
corona pandemics now becoming problem
because government find its difficult to reduce it
 To meet revenue deficit government has to
borrow which is not only unproductive and also
put huge burden of interest on the government
 If a revenue deficit is zero then deficit in the economy
would be because of capital expenditure capital
expenditure is on construction of roads and railways
and infrastructure would further generate
employment in the economy
B. THE BUDGET DEFICIT
 Total expenditure (R.E+C.E) - total receipt (R.R+C.R)
 In 1997 which changed budget deficit to fiscal deficit
that is modern budget deficit type
 Before 1997 government was following the path of
making budget deficit zero
 Through following ways
1. Printing of new currencies that is also called
monetized deficit it is the most inflationary
measure to finance deficit
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
Chakraverti committee 1997:- government
replaced budget deficit with the fiscal deficit and
also stopped the financing of a deficit through
printing of new currencies and borrowing from
RBI
 Now government finances deficit through
borrowing from banks and financial institutions
 It is announced at the last of the financial year
C. THE FISCAL DEFICIT
 announced before the financial year
 = Total expenditure - total receipts ( RR + CR
except borrowings)
 Fiscal deficit is high but revenue deficit is zero
then it will not cause panic as this borrowing is
used for productive purposes
 Implications of financing physical deficient
through borrowings
1. It may lead to crowding out-as government
borrows from Bank so banks would have less
money they can increase the rate of interest
because of financing fiscal deficit therefore
many small investors would leave the market
and hesitate to invest called crowding out. As
government borrows more largely from banks
and financial institutions against Government
security it crowds out private sector in the sense
that banks are left with the lesser funds to land
private sector
2. It may lead to inflation- small investors now
stopped therefore the price of the things will
hike. It is due to the borrowing rate of interest
would increase and these high cost maybe
passed on to consumers by way of higher prices
3. It may further lead to inflation- people get free
money but raised demand therefore no supply is
maintained ultimately inflation Hike can be seen
4. As high borrowings are largely on account of
non-development revenue expenditure. It
implies that while income and demand is
generated on an account of this expenditure
then there is no corresponding output which
may also have the potential to cause inflation
5. It may wide revenue deficit-borrowing-further
expenditure increase because now interest has
to be paid on the money that was borrowed.
High borrowing implies that high interest burden
9
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
and interest is paid out of the current expenditure on one hand and increasing its
receipts/revenue receipt due to which the gap revenue on the other
between revenue expenditure and revenue  Such Act aimed at making the Govt. responsible ,
receipts widens accountable and transparent in its fiscal exercise
6. It may lead to downgrading of the ratings- as that is in managing its expenditure and revenue
government borrows more its credit rating  Some rules were led down under the act to be
suffers a blow at the global level by various followed by the Government to achieve fiscal
credit rating agencies due to which the consolidation
borrowings abroad may now come at high rate  Features Of FRBM 2003:-
of interest because people show lack of trust on 1. Beginning 2004-05 and ending 2008-09 GOI should
you. It may also discourage foreign investors bring down its revenue deficit by 0.5 % of the GDP
rd th each year so that by 2008-09 revenue deficit would
………3 class ended,4 started……..
 PRIMARY DEFICIT = {F.D-Interest payment } fall to zero.
 Suppose P.D= 5%-0.5% = 4.5% 2. Beginning 2004-05 and ending 2008-09 GOI should
 Fiscal deficit :- Total expenditure – total receipt bring down its fiscal deficit each year by 0.3% of GDP
 F.D= TE-TR so that by 2008-09 its fiscal deficit would not be more
 Suppose = F.D = 5% -4.5%= 0.5% than 3% of the GDP
 Primary deficit shows direction of the fiscal deficit  However , these targets would not be achieved
 Low primary deficit is not a healthy sign as it shows  2012 = effective revenue deficit concept introduced
that most of the fiscal deficit may be on account of but scraped later on
interest payments of loans taken in the past B. FRBM Act 2016
 2012 concept of effective revenue deficit  based on NK (Nand Kishore) Committee
evolved  Implementation period 2016-2023
 Effective revenue deficit = {Revenue deficit –  To review old FRMB NK committee submitted its
grants given to states for productive purposes report in early 2017
and asset creation}  Recommendations
 It shows the exact amount of the adverse a) Revenue deficit should be 0.8% by bringing
impact of the revenue deficit on the down from 2.1% (2017 ) of GDP by 2022-23 by
economy 0.25% each year so that 2022-23
 was introduced in 2012 but scraped in 2016 b) Fiscal deficit should be reduced to 3% by 2017-
 GOI thought fiscal deficit is the prime one 18 and should remained at 3% for next three
 1997 budget deficit was replaced by fiscal years and thereafter it should be reduced by
deficit 0.2% each year so that by 2022-23 Fiscal deficit
 But it only showing deficit of the centre not should be 2.5% of GDP by 2022-23
states c) should be a scope of an escape route of ± 0.5%
 So PSBR is in suggestion phase (Public sector fluctuations in fiscal deficit target which means if
borrowing requirement )introduced economy does not perform well fiscal deficit
 PSBR= FD of central Govt. + Gross F.D of target may be increased by 0.5% and if economy
states + Independent borrowings by PSUs performs well than it can be reduced by 0.5%. it
 2003= Fiscal responsibility and budget will give more freedom to the policy makers to
management act (FRBM Act 2003) have more practical feasible policies :-
 { FD= TE –TR (except borrowings) }
A. TOPIC:- FRBM Act 2003 = d) Formation of fiscal council:- There should be a
 could not achieved targets of it formation of one autonomous body called as
 based on VK (vijay kelkar) committee Fiscal council:- which would ensure better co-
 Implementation period 2003-2009 ordination between centre and state
 Target up to 31 march 2009 governments and also between fiscal and
 Passed in 2003 monetary policies in all kind of tax
 Principle objective = GOVT. should adopt a path implementation
of fiscal consolidation by rationalizing its
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 10
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
e) To have a better Debt management:- debt  Once the circle rate is determined it is applicable for

management should be the prime focus because the minimum period of 5 years and maximum of 10
credit rating agencies give more importance to it years
 Rate of tax varies from 0.5-1% depending on value of
 one Suggestion is debt : GDP should not be more
land
than 20% for states and many states has more
 Seller pays
than it
 Note stamp duty is paid by buyer of land not
f) reduction in total outstanding debt:- GOI should
seller , seller pays land revenue tax
bring down its total outstanding debt from 70%
Circle rate is the lowest price, or minimum price, at
of GDP is total outstanding debt ( centre 49% which the sale or transfer of a residential or commercial
and states 21% ) to 60% of the GDP (centre 40% , property can be registered before being sold or
states 20% ) (external and internal also ) transferred, whether it is a plot of land, an apartment, or
a built-up house.
 SOME FACTS
 India = Tax: GDP = 11.7 % D. PROFESSIONAL TAX
 Denmark it is 45%  Levied by state Govt on professionals like doctors
 Pakistan = 4.8%
 Sri Lanka = 7.10% ,advocates , CA etc in lump sum amount
 OECD= tax : GDP = 32%  vary depending on the state you live in.
 More tax : GDP ratio more would be the development  The maximum limit of which you can be charged is Rs
 2016= lower tax to GDP ratio result in less development ,
2500yearly
salary less, welfare schemes would be less
 currently impose a professional tax in India are West
 So fiscal matters should be managed in
Bengal, Maharashtra, Gujarat, Andhra Pradesh,
responsible way so FRBM Acts were introduced
Kerala, Tamil Nadu, Karnataka, Bihar, Assam, Madhya
SOME NEW DIRECT TAXES Pradesh etc.

INTRODUCED (INDIA):- E. EQUALIZATION LEVY (GOOGLE

A. WINDFALL TAX:- TAX (2016)
 Till 31 march 2016 license to provide platform
 Is a Sur tax (an extra amount of money that you
for content creators
have to pay for something) imposed by Govt on
 After 1 April 2016 google-youtue etc if adds are
businesses or economic sectors that have
there and revenue is more than 1 lakh they pay
benefited from economic expansion
google tax at rate of 6%
 Purpose is to redistribute the excess profit in
 Equalization levy is aimed at taxing foreign
one area for the social good
companies which have a significant local client
 India Levied Special additional excise duty on the
but are billing them their off-shore units
sale of locally produced crude oil and also on the
effectively escaping the countries tax system .
exports of petrol diesel and aviation turbine fuel
 In simple words , it is levied on the revenue
 It has also been mandated the exporters to meet
generated by google , twitter , you-tube , face
the requirements of the domestic demand
book etc for the advertisements in India
 Note:- additional revenue will help to offset the
 Levied at rate of 6% , has been enforced since
relative impact of a reduction in excise duty for
2016 {proposed in 2016-17 budget}, on
petrol and diesel announced in may 2022
payments exceeding 1 lakh rupees/year to a
 Example – refining sector of India
non-resident service provider for online
B. LAND TAX advertisements
 Also called property tax, house tax or building  Outcome of the OECD nations
tax  Only on Non-resident service providers like you-tube but
 Imposed by Municipality or municipal not on Indian service providers but if there is permanent
establishments of outsiders then not applied
corporation in lump sum amount ( lump sum:-
an amount of money that is paid at one time )  IMPACTS OF EQUALIZATION LEVY
1. Role of international organizations/forms :-
C. LAND REVENUE TAX
idea of this comes from OECD nations BEPS
 By state Govt
action plan. The action plan considers
 Based upon circle rate of the land
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 11
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
equalization levy as an option to tax digital
transactions
2. Prevent shifting of profits:- tax levy will prevent
the technology companies from shifting profits
off-shore to tax heavens (several nations like
Ireland , Singapore where direct taxes are almost
zero or negligible).Levy will against the base
erosion and profit shifting and will prevent
shifting of profits from high tax countries to
lower tax rate jurisdiction . off late levy has
become an attractive tool for Govt around the
world
3. To ensure tax payments by online companies:-
to make sure that the global online businesses
are taxed for the considerable income they
generate from India
4. Incentive to have permanent establishment in
India:- levy will act as an incentive for the
companies to have permanent establishments in
India and to get taxed on to their net income
made here . it will also discourage the practice of
avoiding taxes by exploiting businesses in the
international taxation rules
 Now it is levied on e-commerce firms also
(Amazon, flipchart )at 2%, who are allowing
advertisements from 1st April 2021 in the form of
digital service tax
F. DIGITAL SERVICE TAX
 Equalization levy is now applicable for e-
commerce companies that are sourcing revenue
from India customers without having tangible
presence here in the country
 The amendment to the finance Act 2020, has
expanded the ambit of the equalization levy for
Non-residents e-commerce operators involving
in supply of services including online selling of
goods and provision of services with the levy at
the rate of 2% effecting from 1st April 2020.
Note:- this is Changing economic world order as in past
developed countries were putting these taxes but now
developing nations are putting these taxes on e-
commerce firms
 IMPACT :-
a) Pro launched international tax law
negotiations:- the agenda to reform
international tax law so that digital
companies are taxed where economic
activities are carried out , was formally
framed within OECD’’s BEPS program
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
b) Changing economic world order:-
proliferation of GST is symptom of changing
international economic order . countries
such as India which provides large markets
for digital corporations seek a greater right
to tax income
c) May adversely affect online buyers and
sellers:- the taxation of digitalized economy
turned out to be relatively contentious. Online e-
commerce firms may stop their economic
activities in the country due to lesser profit
margin and online buyers may be discouraged
due to lesser discounts offered by the
companies.
……4th class ended,5th started….
 FACE LESS ASSESSMENT SYSTEM
 It was for the direct tax and introduced to provide
greater transparency , efficiency and accountability in
income tax assessments
 It is an attempt to remove individual tax officials
discretion and potential harassment for income tax
payers
 All provisions introduced under this , under
income tax Act 1961 are :-
a. To eliminate the interface b/w tax officers
and the income tax payers
b. To optimize the utilization of the resources
through economies of scale & functional
specialization
 TOPIC:- TAX RELATED DISPUTES
AND SCHEMES FOR SOLUTION
1. VIVAD SE VISHVAS TAK (D-TAX)
 From controversy to trust
 Objective:- to settle pending disputes of direct
taxes
 This will benefit the Govt by generating timely
revenue and also to tax payers by bringing down
mounting litigation cost
2. SABKA VISHVAS SCHEME (IT)
 For IT:- indirect tax
 Objective:- settling pending disputes of service
tax and central excise duty which are now
subsumed under GST
 Two main components of scheme are
a. Dispute resolution
 This component is aimed at liquidating the
legacy (old) cases of central excise duty and
service tax which are now subsumed under
12
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
GST & are pending in litigation at various
forums
b. Amnesty
 Amnesty component offers an opportunity to tax
payers to pay the outstanding tax and be free of
any other consequences under the tax
 Under it there will be total waiver of interest,
penalties , and immunity from prosecution
 TOPIC:- ANTI-DUMPING DUTY &
COUNTER VAILING DUTY
 These two are for indirect taxes
A. ANTI-DUMPING DUTY
 It is imposed on the excessively produced
imported items to neutralize its adverse impact
on domestic producers
 Under it importers sell their products in
domestic country at the price even lower than
their own domestic price
 An anti-dumping duty is a protectionist tariff
that a domestic government imposes on foreign
imports that it believes are priced below fair
market value
 As it Results to Trade discrimination through
tariff barriers by putting higher taxes on
imported items so that people only buy
domestic items rather than imported (not
leaving people free to choose = Trade
discrimination)
 Therefore to ensure level playing field for both
domestic and imported items ,NITI AYOG
suggested BAT
B. COUNTER VAILING DUTY
 It is imposed on the excessively subsidized imported
items to neutralize its adverse impact on domestic
producers
 Countervailing duty (CVD) is a specific form of duty
that the government imposes in order to protect
domestic producers by countering the negative
impact of import subsidies
 Now it has been subsumed under GST
 BAT: BORDER ADJUSTMENT TAX
 NITI Aayog member has favoured imposing
a Border Adjustment Tax (BAT) on imports to
provide a level-playing field to domestic
industries.
 Simply BAT is a duty that is proposed to be
imposed on imported goods in addition to
custom duty
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 BAT is a fiscal measure that imposes a charge
on goods or services in accordance with the
destination principle of taxation
 Under this principle a Govt taxes product based
on location of their sell to the final consumer
rather than on the location of their production
or origin
 IMPACTS OF BAT
1) At macro level with imports reduced a
country can cut or reduce its trade deficit
2) If a country is major export market , for
many developed countries , Tax plan will
have serious adverse effects on them after
implementation
3) However, BAT may render some firms less
profitable if prices are forced upwards , they
may lose competitiveness with substitute
products or locally made similar products
 Note:- it is just proposal not accepted yet.
 e-BKRAY PLATFORM
 launched by Ministry of Finance
 it is an e-auction platform , which provides single
window access to Information on properties up
for e-auction as well as facility for comparison of
similar properties
 it is for those mortgage properties whose loans
become NP
 The eBkray platform provides navigational links
to all PSB e-auction sites, property search
feature and presents single-window access to
information on properties up for e-auction,
comparison of similar properties, and also
contains videos and photographs of the
uploaded properties and google map address
 The platform also helps the buyers to easily
navigate to the banks e-auction sites after a
notified property is selected
 It also helps the users to search properties using state
wise , district wise and bank wise details
 The e-auction platform is now linked on Indian Banks
Auctions Mortgaged Properties Information (IBAPI)
portal and guidelines have been made available
which will help banks in the release of cash trapped in
mortgaged assets. It will also bring transparency in
the process
 Indian Banks Auctions Mortgaged Properties
Information (IBAPI) portal:- It is an initiative of Indian
Banks Association under the policy of the Department
of Financial Services, Ministry of Finance to provide a
platform to provide details of mortgaged properties
to be auctioned online by Banks, starting with PSBs.
13
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
INDIRECT TAX:- “VAT” :-
 Value Added Tax
 Common form of indirect tax levied on goods
(not on services )
 Paid to the Govt by the procedures at every
stage In supply chain
 It levied only on those goods sold within a
particular state which means that the buyer and
the seller need to be in the same state
 VAT IN INDIA
 VAT is the tax which is charged on the gross
margin at every stage in the sell of goods.
 Tax is assessed and collected at each point ,
starting from the manufacturers until the
product reaches the retailer
 Introduced in India 1986 on the
recommendation of Laxmikant Jha committee
 Initial Suggestion was to introduce in the form of
MANVAT (MAN-Manufacturing VAT) ,but
introduced in the form of MODVAT (Modified
VAT) with rates MDDVAT 8% , 16%, 24%
 In 2000year :- Yashwant Sinha was finance
minister and subsumed all VATs and changed it
to CENVAT (16% only) (CEN-Central)
 ITC :- INPUT TAX CREDIT
 Output tax amount > input tax amount
 It is the tax that a business pays on a purchase
and that it can use to reduce its tax liability
when it makes a sale.
 It means at the time of paying tax on output,
one can reduce the tax that has already been
paid on inputs and pay the balance amount
 Refers to the tax already paid by a person at
time of purchase of goods or services and which
is available as deduction from tax payable . For
e.g- A trader purchases good worth rs 100 and
pay tax of 10% on it
 INVERTED DUTY STRUCTURE
 Output tax amount < input tax amount
 It arises when the taxes on output is lower than
the taxes on inputs
 Creates an inverse accumulation of input tax
credit which has to refunded back
 Inverted duty structure indicates a situation
when the rate of tax on inward supply is higher
than rate of tax on outward supply.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 In other words, the GST rate paid on purchases
is more than the GST rate payable on sales.
 SLVAT OR SVAT:- state level VAT
GST AND NEED OF GST
 Despite having the VAT people were paying several
other taxes like service tax , entertainment tax ,
counter vailing duty, entry tax, octroi duty etc
 Both central and state govt. levied taxes separately
under the VAT i.e. why it was realized that a national
level VAT in the form of GST is needed , on that basis
it was introduced in July 2017.
 GST IS OR HAS:-
1. A national level VAT:- one nation one tax
2. Dual structure :-
 CGST+ SGST/UTGST:- when goods & services
are produced and consumed in same state
 IGST :- if goods and services are produced in
one state and consumed / sold in other state
IGST collected by GST council first and later
on divided equally in CGST and SGST. SGST
amount is only shared with consumer state.
 Note:- GST is not on exported items
3. Slabs:- 5%,12%,18%,28%
4. Destination based:- always consumer state
gets the revenue share (SGST) not producer
state
5. e-way bill:- items costing 50,000rs+ , e-way bill
can be carried while travelling (now everywhere
is applicable)
 an electronic document generated on the
GST portal , GST app, even through SMS
evidencing movement of goods valued
50,000 rs or more
6. No cascading effect:-
7. Composition scheme:-can be opted by those
manufacturers or traders whose annual turnover
is upto 1.5 crore and also by those service
providers whose turnover is upto 50 lakh.
Instead of monthly GST return filing they can do
it on quarterly basis , tax rate is 1% for
manufacturers and traders , 5% for restaurants
not servicing alcohol and 6% for other services
providers , these are on turnovers
8. Zero rated status :- on the exportable items
GST is not levied but exporters are eligible for
input tax credit but IGST is levied on imported
items
14
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
9. GST Compensation fund:- As per Section 18 of the  NAA ensures the benefit of tax reduction to people
Constitution (101st) Act, 2016, Parliament “shall, by
law, on the recommendation of the GST
Council, provide compensation to States for loss of
revenue arising on account of implementation of the
Goods and Services Tax for a period of five years from
the date of its implementation.”
 It ended in July 2022 AND
 now states are demanding to extend it so GST
compensation CESS is introduced for extension of
GST Compensation from 2022-2027
 RNR: Revenue neutral rate:-
 Before the introduction of GST states suggested that
the GST should be introduced with the single rate of
27% so that their entire perspective , future revenue
loss would be neutralized
 but central govt did not accept this proposal but
assured state govts that their entire future revenue
perspective loss would be compensated by the
central govt for the next 5 years (2017-2022) even
with some increment
 last year (2021) 2.35 lakh crore was demanded by
states as a demand for GST compensation from
center out of which 1.10 lakh crore rs is revenue
deficit due to GST implementation
 Centre said no it is only 97000crore loss due to GST
implementation and remaining is because of
Pandemic and center will not pay through GST
compensation fund
 GOI instructed state govts to borrow GST related
deficit amount from RBI and from market but that
would not be reflected into states debt account
 GOI will pay the entire principal along with interest in
future through GST compensation CESS
 Later on central govt also allowed the states to
borrow even pandemic related deficit amount from
the market and RBI for which central govt will pay the
and also ensures the timely distribution of input tax
credit to the beneficiaries.
 It was constituted by the GOI to analyse weather
Input Tax Credit (ITC) availed by any registered
person or the reduction in tax is passed on to the
consumer and he/she is protected from random price
increase for self interest in the name of GST
Input Tax Credit (ITC) Input Tax Credit refers to the tax
already paid by a person at time of purchase of goods &
services and which is available as deduction from tax
payable . For eg- A trader purchases good worth rs 100 and
pay tax of 10% on it
 Items still under the VAT not under the GST
1) Five petroleum products
a) Crude oil
b) Petrol (motor spirit)
c) Diesel (high-speed diesel not a bio-diesel as
bio diesel comes under GST f 18%))
d) Aviation turbine fuel
e) Natural gas
2) Alcohol for human consumption
3) Electricity
 Taxes subsumed under GST
a) CEN VAT
b) SL VAT
c) Service tax
d) Additional excise duty
e) Additional duty of customs (counter vailing duty
= CVD)
f) Special additional duty (SAD) of customs
g) Luxury tax
h) Purchased tax
i) Entertainment tax
j) Entry tax (on the state boundaries)
k) Octroi duty ( under the municipality or municipal
corporation boundaries)
l) Tax on lottery and gambling


principal but interest will have to be paid by states
Revenue Neutral Rate is a rate of GST at which the
TOPIC:-THE GST COUNCIL
amount of taxes currently collected by the MEMBER POST
government and the amount expected to be 1) UNION finance minister 1) Chairman
collected after GST remains the same 2) Union minister of state 2) Another member
…....5th class ended, 6th class started……. for finance 3) Another member
3) One selected member 4) Vice-chairman
 NATIONAL ANTI-PROFITEERING from each state who 5) Another member
should be minister of 6) Ex-officio secretary
AUTHORITY {NAA}:- finance or taxation or
 GOI introduced GST and later on decreased tax on may be another minister
certain items like earlier tax was 18% on restaurants 4) One elected member by
for consumers and GOI reduced it to 5% but all the state
restaurants still charging 18% instead of 5% {charging representatives
5) CBIC chairman (Central
more the consumers}, therefore GOI came up with
Board of Indirect Taxes
NAA & Customs (CBIC)
6) Revenue secretary
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 15
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 VOTING RIGHT IN GST COUNCIL:-
 States have :- 2/3rd of voting right c)
 Central govt :- 1/3rd of voting right
 To take any decision there is a need of 75%
voting support
 So states have more voting rights (they can get
d) In the initial phase of GST implementation,
petrol or any products under GST:- note it while
any controversy)
 Members who don’t have the voting rights
 CBIC chairman :- another member of GST council
 Revenue secretary :- ex-officio secretary of GST
council
A. MERITS OF GST
a) It removes cascading effect because of the
refund of taxes paid on inputs in the form of ITC
(input tax credit)
b) It saves us from tax on tax (Saved people from
multiple taxes)
c) It reduces the manufacturing cost through
return of ITC (input tax credit).in this way it
promotes programme like “make in India” and
“PLI-production linked incentive schemes”
d) It promotes exports because Govt does not levy
GST on exportable items but exporters are
eligible for ITC benefits
e) It also reduced the price of final goods because
of removal of cascading effect
f) It creates a national common market means
Developed entire nation into a one national
common market with principle “one nation one
tax”
g) It promotes ease of doing business from
registration to return filing, indirect tax payment
burden has been reduced
h) It boosts productivity of logistics. Earlier (pre-
GST period), the logistics industry in India had to
maintain various warehouses across states to
avoid tax on inter-state movement. Since entry
tax and octroi duty have been subsumed inside
the GST, so there is no need of such warehouses
near the state boundaries { Ensured a proper
supply chain management}
i) It tackles corruption and tax leakages. With the
online facility to directly register, file returns,
and make payment of taxes online, the whole
tax mechanism has become transparent
B. DE-MERITS OF GST
a) It has increased operating cost due to additional
cost of purchasing software
b) The new GST regime states that companies have
to get GST registered in all the states, in which
they operate their business. This leads to an
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
unnecessary burden on businesses for TDS paper
work, processes and compliance
It is the failure of GST council to not include a
petroleum and some other items inside the GST
because of that people are paying heavy taxes
on them that is reducing their demand which
may further adversely affect GDP of the country
people phase several difficulties because of
improper training of tax officers and another
employees given to them and because of this
they were unable to handle GST software and
systems
 CONCLUSION
 Govt has introduced a GST system to smoothen
tax processes and bring businesses into formal
economy
 Being GST compliant, businesses can experience
the merits of having a unified tax system & easy
input credits
1. ZERO GST:-
 For on external trade.
 ITC can be availed
2. NIL GST
 For internal trade
 On the output= zero % GST
 But ITC cannot be claimed
3. EXEMPTED GST
 Comes under higher GST rates but exempted at
present
 Means on the output = 0% GST
 But ITC cannot be claimed
 Check list from internet
 ITC {INPUT TAX CREDIT}:-
 Input Tax Credit refers to the tax already paid
by a person at time of purchase of goods &
services and which is available as deduction
from tax payable . For eg- A trader purchases
good worth rs 100 and pay tax of 10% on it.
 Output tax amount > input tax amount
 It is the tax that a business pays on a purchase
and that it can use to reduce its tax liability
when it makes a sale.
 It means at the time of paying tax on output,
one can reduce the tax that has already been
paid on inputs and pay the balance amount
 Refers to the tax already paid by a person at
time of purchase of goods or services and which
is available as deduction from tax payable . For
e.g- A trader purchases good worth rs 100 and
pay tax of 10% on it
16
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 INVERTED DUTY STRUCTURE
 Output tax amount < input tax amount
 It arises when the taxes on output is lower than
the taxes on inputs
 Creates an inverse accumulation of input tax
credit which has to refunded back
 Inverted duty structure indicates a situation
when the rate of tax on inward supply is higher
than rate of tax on outward supply.
 In other words, the GST rate paid on purchases
is more than the GST rate payable
 Ordinarily, taxation involves payment of tax at
lower rates on inputs and a relatively higher rate
of tax on the final product / output.
 In contrast, however, as the name suggests,
inverted duty structure indicates a situation
when the rate of tax on inward supply is higher
than rate of tax on outward supply
 An inverted duty structure comes up in a
situation where import duties on input goods
are higher than on finished goods.
 In other words, the GST rate paid on purchases is
more than the GST rate payable on sales.
TOPIC: THE ANGEL TAX:-
 Introduced by PRANAB MUKHERJEE in 2012-13
budget
 Levied on un-registered start-up companies if they
sell their shares at the price higher than their fair
market value
 Recently govt has exempted registered start-up
companies from this tax to promote them further
 Angel tax essentially derives its genesis from section
56(2) (viib) of the Income Tax Act, 1961. The finance
act, 2012 introduced section 56(2) (viib) in the IT act
which taxes any investment, received by any unlisted
Indian company, valued above the fair market value
by treating it as income
 In simple words, Angel tax is the tax charged on the
closely held company when it issues shares to a
resident person at a price which is more than its fair
market value.
 Angel tax is essentially the tax that unlisted
companies (read-startups) are liable to pay on the
capital they raise through issue of shares.
 UNDERSTAND BY EXAMPLE :-ANGEL TAX
 Suppose a company “X” with overall valuation of
100crores (suppose OLA) and wants to starts a new
business even having already an existing business
(transport)
 Company will sell its shares and start new venture,
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022

doesn’t take loan
Valuation = 100crore
 Planned to sell % of Shares = 10% = 10 crore = called
as FMV {fare market value}
 Let three companies want to purchase these 10%
share are A,B,C= these companies are called as angel
investors
 So Angel investors are= A,B,C
 A if offering 11 crore more than 10 crore , by having
an expectation of profit in future after investing
 B if offering 10.5 crore more than 10 crore , by having
an expectation of profit in future
 C if offering 10.25 crore more than 10 crore , by
having an expectation of profit in future
 So without any problem, the OLA sells his 10% shares
to company A as it is getting more investment (of 1
crore)
 So sold amount= 11 crore
 FMV= 10crore
 OLA= gets= 1 crore additional
 GOI says this extra 1 crore is your income and you
have to pay tax and rate is 30%
 And this tax is called as “Angel tax” , so it is on
whatever is got above the FMV
 Now, several startups companies started complaining
 FACTS FOR EXPENDITURE (note)
 Before 2017-18, whatever the govt had the total
money, govt was dividing it into two parts
a) Planned expenditure

b) Non-planed expenditure
As because till that time there was “planning
commission”. Now NITI AYOG has come
 Now Govt divided Public expenditure divided
into two parts
a) Schemes expenditure
b) No-schemes expenditure
A. Schemes expenditure
a) Centrally sponsored schemes
 Central + state Govt share in expenditure in
proportion
b) Central sector schemes
 100% central govt share
B. No-schemes expenditure
a) Salaries
b) Pensions
c) Subsidies
d) Defence expenditure
e) Grants to states
f) State’s revenue share
 On the basis of recommendations of
C.rangarajan committee and Bimal jalan
committee, in union budget of 2017-18, GOI
announced to remove classification of its
expenditure into “plan” and “non-plan
expenditure” and replace it through another
way of classification with names “Schemes” and
“non-schemes”
17
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 TECHNIQUES OF BUDGETING
1. ZERO-BASED BUDGETING
 This technique implies that annual budget of a
ministry or a department is prepared assuming
that there was no budget in the previous years
to refer to i.e the base was zero.
 This technique helps in allocating expenditure on
each item in the budget on its merit rather than
on the basis of what was allocated in the
previous years
 Hence, this technique helps in rationalizing
expenditure and may weed out non-essential
expenditures
 Countries like Britain, Sweden and several others
adopted this technique
 Zero-based budgeting (ZBB) is a budgeting
technique in which all expenses must be justified
for a new period or year starting from zero,
versus starting with the previous budget and
adjusting it as needed.
 With zero-based budgeting, the budget is started
from scratch or a “zero base” each year. Using
this approach, every line of business within an
organization is analyzed for its needs and costs
while ignoring historic spending
2. THE OUTCOME / PERFORMANCE
BUDGETING
 Micro-level budgeting
 This technique implies that each department or
ministry while preparing its annual budget, has
to analyse the qualitative impact of budget
allocation also apart from the quantitative
impact, so that each penny spent on various
items in the budget can be justified in terms of
the qualitative impact
 In India, outcome budgeting technique was
adopted in 2004-2005 under which every
minister prepares outcome budget
 Ministry of finance prepares “performance
budgeting” as such, it can be said outcome
budgeting is micro & performance budgeting is
macro
 A performance budget is a budget that reflects
the input of resources and the output of services
for each unit of the government. This type of
budget is commonly used by government bodies
to show the link between taxpayer funds and the
outcome of services provided by federal, state,
or local governments
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
3. LINE ITEMS TECHNIQUE
 This technique implies that the annual budget of
a ministry and a department is prepared while
considering allocations of the previous year’s
budget
 Line item budgeting: Emphasizes on items of
expenditure without highlighting its purpose and
conceives budget in financial terms. Amount
granted by legislature on an item should be
spent on that item only.
4. GENDER BUDGETING
 It was introduced in India in 2004-2005, while
Australia was the first country to introduce it in1984
 Gender budgeting implies that each
department/ministry has been given direction that
while preparing their annual budget they must keep
in mind the gender sensitivities of the budget.
 This implies that whatever proposals they have in the
budget it must be keeping in view the impact , these
proposals will have on improving and uplifting female
gender in their country
 For example:- programs like “Beti Bachao Beti
rd
Padhao” as well as “1/3 of the jobs to be set aside
for women in MGNREGA” and also maternity leave
with pay are al part of gender budgeting in India.
 Gender budgeting allows governments to promote
equality through fiscal policies by taking analyses
of a budget's differing impacts on the sexes as well
as setting goals or targets for equality and
allocating funds to support those goals.
 Examples: Reallocate education expenditure to
promote measures to increase gender equality in
access to primary school (e.g. scholarships);
Improve targeting of health resources according to
the different illnesses of men and women;
Increase number of female extension staff; etc
 Government Budget, Union Budget, In 2005, India
started releasing a gender budget along with its
Union budget. The gender budget is an exercise
that applies a gendered-lens to the allocation and
tracking of public funds. The focus is on improving
women's welfare through government policies
 Gender Budgeting is concerned with gender-
sensitive laws, programs, and schemes; resource
allocation; implementation and execution;
program and scheme audit and impact
assessment; and follow-up remedial action to
alleviate gender inequities
 Status of gender budgeting
 It is not very encouraging even after a decade
 Only 57 ministries/departments so far have
established GBC (gender budgeting cell).
 Over the last one decade, the allocation for women
as proportion of total budget has remained constant
at 5.5 percent.
18
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Only about 30% of all the demands for grants
presented to Union Govt are reported in gender
budgeting statement
 About 85% of the budget of women & child
development, is allocated to ICDS (integrated child
development and services), leaving only 15% for
other schemes meant for women
 Domestic violence act that aims at preventing crime
against women was not allocated fund in 2013-14
budget & a very small amount was allocated in the
next budget.
 National commission for women have budget
allocation sufficient enough to meet just revenue
expenditure.
 Although, a positive trend over the past couple of
years has been the pre-budget consultation organised
by ministry of finance, aimed at ensuring that the
voices of women are also heard in the budged making
process
 Recent publication of increment in sex ration in the
NFHS-5 is also a positive outcome in this direction
 Equal mortality rate recently achieved for infants
(both male and female IMR) is a win for the
programme “Beti Bachao”.
……6th class ended,7th started………
 THE FINANCE COMMISSION:-
 It talks about removal of two type of imbalances
(removing inequalities in terms of tax revenue
collections)
 Finance commission comes under Art 280 of the
constitution.
 The president shall within 2 years from the
commencement of this constitution and thereafter
th
and the expiration of every 5 year at such earlier
time as the president considers necessary by order
constitute a finance commission which shall consist of
a Chairman, and 4 other members to be appointed
by the president.
 It shall be the duty of the commission to make a
recommendations to the president for:-
a) Tax devolution from center to state
b) Non-specific grants For states and local
governing bodies
 There are two different types of imbalances exist b/w
center and state govts regarding fiscal power. So
finance commission talks about two imbalances in
economic perspective
a) Vertical imbalance:- when there is an
imbalance b/w center govt and state in
terms of tax revenue collection
b) Horizontal imbalance:- it is an imbalance of
tax revenue collection among the states in
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
tax revenue collection. This type of fiscal
imbalance arises due to differences in the
availability of natural resources given the
uniform revenue powers and expenditure
responsibilities
 INTERNET MATERIAL FOR F. COMMISSION
 Finance Commission is a constitutional body for the
purpose of allocation of certain revenue resources
between the Union and the State Governments. It
was established under Article 280 of the Indian
Constitution by the Indian President. It was created
to define the financial relations between the Centre
and the states. It was formed in 1951
 Shri Ajay Narayan Jha recently joined the Fifteenth
Finance Commission as its member. The 15th Finance
Commission has released a report titled ‘Finance
Commission in COVID Times’ on 1st February 2021
 Article 280 of the Indian Constitution
 President after two years of the commencement of
Indian Constitution and thereafter every 5 years, has
to constitute a Finance Commission of India.
 It shall be the duty of the Commission to make
recommendations to the President in relation to the:
 the distribution between the Union and the States of
the net proceeds of taxes which are to be, or maybe,
divided between them and the allocation between
the States of the respective shares of such proceeds;
 the principles which should govern the grants in aid
of the revenues of the States out of the Consolidated
Fund of India;
 any other matter referred to the Commission by the
President in the interests of sound finance
 The Commission shall determine their procedure and
shall have such powers in the performance of their
functions as Parliament may by law confer on them
 Note: President can also constitute Finance
Commission before the expiry of five years as he
considers necessary
 Article 281 of the Indian Constitution
 It is related to the recommendations of the Finance
Commission:
 The President has to lay the recommendation made
by Finance Commission and its explanatory
memorandum before each house of Parliament
 Who Constitutes Finance Commission of
India?
 President of India constitutes the Finance
Commission every five years or on time
considered necessary by him.
 WHAT IS THE COMPOSITION OF FINANCE
COMMISSION OF INDIA?
 Finance Commission Chairman & Members
 Chairman: Heads the Commission and presides over
the activities. He should have had public affairs
experience.
 Four Members.
 The Parliament determines legally the qualifications
of the members of the Commission and their
selection methods
19
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Qualifications of Finance Commission
Chairman and Members
 The 4 members should be or have been qualified as
High Court judges, or be knowledgeable in finance or
experienced in financial matters and are in
administration, or possess knowledge in economics.
 All the appointments are made by the President of
the country.
 Grounds of disqualification of members:
 found to be of unsound mind, involved in a vile act, if
there is a conflict of interest
 The tenure of the office of the Member of the
Finance Commission is specified by the President of
India and in some cases, the members are also re-
appointed.
 The members shall give part-time or service to the
Commission as scheduled by the President.
 The salary of the members is as per the provisions
laid down by the Constitution.
 Functions of the Finance Commission of
India?
 Functions of Finance Commission
a) The Finance Commission makes recommendations to
the president of India on the following issues:
b) The net tax proceeds distribution to be divided
between the Centre and the states, and the allocation
of the same between states.
c) The principles governing the grants-in-aid to the
states by the Centre out of the consolidated fund of
India.
d) The steps required to extend the consolidated fund of
a state to boost the resources of the panchayats and
the municipalities of the state on the basis of the
recommendations made by the state Finance
Commission.
e) Any other matter referred to it by the president in
the interests of sound finance.
f) The Commission decides the basis for sharing the
divisible taxes by the centre and the states and the
principles that govern the grants-in-aid to the states
every five years.
g) Any matter in the interest of sound finance may be
referred to the Commission by the President.
h) The Commission’s recommendations along with an
explanatory memorandum with regard to the actions
done by the government on them are laid before the
Houses of the Parliament.
i) The FC evaluates the rise in the Consolidated Fund of
a state in order to affix the resources of the state
Panchayats and Municipalities.
j) The FC has sufficient powers to exercise its functions
within its activity domain.
k) As per the Code of Civil Procedure 1908, the FC has
all the powers of a Civil Court. It can call witnesses,
ask for the production of a public document or record
from any office or court.
 Advisory Role of Finance Commission
 The recommendations made by the Finance
Commission are of an advisory nature only and
therefore, not binding upon the government.
 It is up to the Government to implement its
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
recommendations on granting money to the states.
 To put it in other words, ‘It is nowhere laid down in
the Constitution that the recommendations of the
commission shall be binding upon the Government of
India or that it would amount to a legal right
favouring the recipient states to receive the money
recommended to be provided to them by the
Commission
 Who is the current chairman of the Finance
Commission?
 The commission’s chairman is Nand Kishore Singh,
with its full-time members being Ajay Narayan Jha,
Ashok Lahiri and Anoop Singh.
 What are the key recommendations of the
Finance Commission
 For horizontal devolution, the15th Finance
Commission has suggested 12.5% weightage to
demographic performance, 45% to income, 15% each
to population and area, 10% to forest and ecology
and 2.5% to tax and fiscal efforts.
 Who appoints the Finance Commissioner
for a State?
 Under Article 243-I of the Constitution of India, the
governor of a state is required to constitute a Finance
Commission every five years
 Some extra example type material
 According to finance commission, 42% of total tax
revenue collection of central govt gets returned to
state govts by central govts except sur charge and
cess charge.
 This entire money (42%) is distributed on some
indicator among states
 Population :- like for example keep 50% of this
returning amount (42% ) for population
 Forest cover:- keep 10%
 This share is distributed among states on basis of
different indicators like on basis of population and
forest cover and many more.
 Land is also an institution for farmers to earn the
money. Similarly in Mains examination if question
comes about finance commission we have to write in
economic perspective .
A. 14TH FINANCE COMMISSION AND
VERTICAL IMBALANCE:-
 States share in the net proceeds of union tax revenue
increased to 42% from 32% earlier. This is the largest
ever jump in %age of devolution
 8 centrally sponsored schemes delinked from the
support of the center , although finance commission
identified over 30 CSS (central sponsored schemes)
schemes to be delinked from centres support .
examples are JNNURM, BGC etc
 Sharing pattern for the rest CSS to undergo a change
with the states’ sharing higher fiscal responsibility for
a scheme implementation
 Revenue compensation to states under GST should
be for 5 years:-
20
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
a) 100% in the first three years ,
th
A. MERITS
b) 75% in the 4 year ,
th
c) 50% in the 5 year  With enough fiscal space, states can
 Although central govt made it 100% for the meaningfully contribute to the overall growth
entire 5 years eve with some increments. and development in their regions thereby adding
 Create an autonomous and independent GST to the aggregate growth of the nation
compensation fund through legislative actions to  States will now have the flexibility to implement
facilitate the compensation process delinked CSS schemes as per local needs. This
th
 Suggesting a fiscal consolidation road map. 14 should ideally ensure the efficient utilisation of
finance commission puts a ceiling on fiscal deficit 3%
govt resources.
of GDP from 2016-17 onwards
 Some flexible provisions for states’ borrowings over B. DEMERITS
and above the annual limit of fiscal deficit at 3% of  Huge tax devolution could put some strain on
GSDP (gross state domestic product) centre’s finances especially until major CSS
 Establish an independent fiscal council to ensure for a schemes get delinked and almost all the items
proper coordination b/w central govt and state govts would come under the GST.
and also b/w fiscal policy and monetary policy  With greater discretionary funds with the states
 Suitably amend electricity Act 2003 to facilitate levy
there is a risk of wastage of funds by some states
of penalties for delays in payment of subsidies by the
towards populists and non-productive ends
state govts th
 Have independent regulator for road sector, for tariff  INTERNET MATERIAL FOR 14 F.C
setting, quality regulation among other functions  The Finance Commission is a Constitutional body
 Several recommendations made for evaluating govts formulated under Article 280 of the Indian
Constitution. It is constituted every five years by the
ownership and disinvestment in central public sector
President of India to review the state of finances of
undertakings the Union and the States and suggest measures for
B. 14TH FINANCE COMMISSION AND maintaining a stable and sustainable fiscal
environment. It also makes recommendations
HORIZONTAL IMBALANCE:- regarding the devolution of taxes between the Center
 There are several indicators suggested for this , the and the States from the divisible pool which includes
new one added is forest cover in this finance all central taxes excluding surcharges and cess which
commission the Centre is constitutionally mandated to share with
the States.
INDICATORS Wright (%)  The FFC has submitted its recommendations for
Population (1971) 17.5%
the period 2015-16 to 2020-21.
Demographic change (1971-2011) 10%
PCI distance (from Haryana) 50%
 Some of the major recommendations are as
Area 15% follows:
Forest cover 7.5% 1) The FFC has radically enhanced the share of the
PCI: - per capita income = {national income ÷ population}. states in the central divisible pool from the current 32
percent to 42 per cent which is the biggest ever
Haryana is taken as a reference state for PCI for comparison.
increase in vertical tax devolution. The last two
Note:- So some states complain like Haryana for less Finance Commissions viz. Twelfth (period 2005-10)
share given and some states like south Indian states who and Thirteenth (period 2010-15) had recommended a
reduced their population for just 10% share (from 1971- state share of 30.5 per cent (increase of 1 percent)
2011) and 32 per cent (increase of 1.5 percent), respectively
in the central divisible pool.
To solve the complaints of the states the 15th FC
th 2) The FFC has also proposed a new horizontal formula
15 finance commission recommended the following and for the distribution of the states’ share in divisible
a new indicator also has been created pool among the states. Relative to the Thirteenth
INDICATORS Wright (%) Finance Commission, the FFC has incorporated two
Population (2011) 15% new variables: 2011 population and forest cover; and
Demographic change (1971-2011) 12.5% excluded the fiscal discipline variable.
PCI distance (from Haryana) 45% 3) The FFC has not made any recommendation
Area 15% concerning sector specific-grants unlike the
Forest cover & ecology 10% Thirteenth Finance Commission.
Tax & fiscal efforts 2.5% 4) Grants: Should be distributed to states for local
PCI: - per capita income = {national income ÷ population}. bodies on the basis of the 2011 population data; the
Haryana is taken as a reference state for PCI for grants be divided into two broad categories on the
comparison. basis of rural and urban population — constituting
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 21
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
gram panchayats, and constituting municipal bodies
respectively.
5) Types of grants: A basic grant and a performance grant
— the ratio of basic to performance grant be 90:10, with
respect to panchayats; and 80:20 in the case of
municipalities.
6) Rail Tariff Authority: Replacement of the advisory
body with the statutory through required
amendments to the Railways Act 1989
7) Delinking of schemes: Eight centrally sponsored
schemes (CSS) will be delinked from support from the
Centre; various CSS will now see a change in sharing
pattern, with states sharing a higher fiscal
responsibility
1. The nature of shift
 The shift, however, as the distinguished chairman of
the commission Y. V. Reddy has himself admitted, is
qualitative and not quantitative.
 In the aggregate, states have not gained and overall
resources transferred to them by the Centre have not
increased.
 The seminal shift is in terms of composition of
transfer. This means that states will have more
“untied” funds at their disposal and will be free to
deploy them in the manner they deem appropriate to
their needs and concerns.
 Planning within states now assumes even greater
importance even if the Planning Commission has
been abolished.
2. Which states will gain?
 States normally compare their shares with previous
Finance Commissions to judge whether they have
gained or lost. Strictly speaking, this is not right
because different Finance Commissions have used
different formulae to allocate the share of states to
each individual state.
 The formula used in the Fourteenth Finance
Commission is not the same as that used by its
predecessor and so the share of individual states
cannot really be compared.
 Reddy’s Commission, for instance, has given 7.5%
weightage to forest cover, which had not been done
by the Thirteenth Finance Commission. As a result,
some large states with low forest cover like Uttar
Pradesh and Bihar are complaining that their share in
tax devolution has decreased. It has, but the basis for
calculations has itself undergone a change.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Nevertheless, all the states stand to gain from FFC
transfers in absolute terms.
3. Changed Equations
 The FFC seeks to fundamentally alter the Centre-
State funding patterns to give boost to the idea of
"cooperative federalism". For instance Central
assistance for critical developmental programmes
being implemented by states relating to health, child
development, education, rural drinking water,
housing etc has been reduced drastically by about Rs
75,000 crore in the budget for 2015-16..
 However, the union government has argued that the
reduction of Rs 75,000 crore in the central funding of
development programmes is more than compensated
with the States receiving an additional Rs1,85,000
crore from the total taxes and duties collected by the
Centre. The States will get an additional Rs1,00,000
crore on a net basis every year.
 The States will have to show results on the ground
while implementing their own exclusively designed
development programmes in health, education,
agriculture, sanitation, housing and drinking water. In
future they cannot really complain that the Centre is
not giving enough funds for these programmes.
 One apprehension is what if regional leaders resort to
wasteful expenditures like laptops distributed by the
UP government some years ago. Another argument is
crony capitalism and corruption is far more rampant
in State politics which does not even get captured by
the CAG which is mostly focused on big cases of
Central corruption.
4. Case of Bihar in the post FFC scenario
 Bihar’s inter se share in the FFC award, compared to
the Thirteenth Finance commission, has declined, the
flow of resources to that extent would be lower for
Bihar during the FFC award period. However, there
has been an absolute increase in tax devolution to
Bihar to the tune of more than Rs 12,600 crore in the
fiscal year 2015–16 due to the increase in vertical
devolution to 42%.
5. Restructuring of Centrally sponsored
schemes(CSS)
 In the last decade, the proliferation of big-ticket CSS
has emerged as the key fiscal strategy to transfer
grants to States. The States having to fund these
schemes with a higher matching contribution. And,
they may have to bear the same burden of CSS
conditionalities, reducing fiscal autonomy and the
available untied fiscal space.
 Restructuring is not only important from the
perspective of State finances. It is also about getting
the expenditure priorities right for both the Union
and the State governments. Therefore FFC
recommend Eight centrally sponsored schemes (CSS)
to be delinked from support from the Centre and
various CSS will now see a change in sharing pattern,
with states sharing a higher fiscal responsibility.
 As articulated in the 14th commission’s report,
“between 2002-05 and 2005-11, revenue expenditure
by the Union Government on State List subjects
increased from an average of 14 per cent to 20 per
22
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
cent, and on Concurrent List subjects from an average
of 13 per cent to 17 per cent. This implies a reduction
in expenditure, in percentage terms, on Union List
subjects.
 The Union government should move its focus from
spending on overlapping functional domain to
subjects that squarely fall in the functional domain of
the Union, as in the Union List, and limit its
intervention on the ‘State List’ and ‘Concurrent List’
on subjects of national priority having a consideration
of externality.
6. FFC and Local Government
 The FFC has given the refreshing title “local
governments” as against local bodies used by the
previous commissions to the chapter dealing with
grants to the third tier of government.
 The 14th FC has given due consideration to the fiscal
federalism framework in India by devolving a larger
amount to local governments. The 14th FC has
recommended a grant-in aid for local governments
that is equal to an e
 Equity is and should be the overarching concern of
any federal polity worth the name. It is the underlying
rationale for federalism. For inter se distribution of
local government grants to the states, the FFC uses
the 2011 population with weight of 90% and area
10%. The choice of 2011 population has adversely
affected states like Kerala, Tamil Nadu etc. who have
undertaken family planning to contain population.
 The effort of the Thirteenth Finance Commission to
divide local government grants into basic
unconditional grants and conditional performance
grants was meant to incentivise the “laggards”. To
avail of performance grants, the PRIs had to fulfill six
conditionalities and urban local bodies nine. The FFC
has not only reduced the share of performance grants
to 10% from 34%, the conditionalities are also made
less demanding.
7. Amending FRBM (Fiscal Responsibility and
Budget Management) Act
 FFC recommended that the Union Government
should consider making an amendment to the FRBM
Act to omit the definition of effective revenue deficit
from 1 April 2015.
 It recommended an amendment to the FRBM Act
inserting a new section mandating the establishment
of an independent fiscal council to undertake ex-ante
assessment of the fiscal policy implications of budget
proposals and their consistency with fiscal policy and
Rules. In addition, the Union Government take
expeditious action to bring into effect Section 7A of
the FRBM Act for the purposes of ex-post
assessment.
 FFC recommended that the State Governments may
amend their FRBM Acts to provide for the statutory
flexible limits on fiscal deficit.
8. Pricing of Public Utilities
 FFC recommended that 100 per cent metering be
achieved in a time-bound manner for all electricity
consumers as already prescribed statutorily. The
Electricity Act, 2003, currently does not have any
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
provision of penalties for delays in the payment of
subsidies by State Governments. Therefore, the Act
be suitably amended to facilitate levy of such
penalties.
 In order to provide financial autonomy to the SERCs,
the Electricity Act, 2003, provides for the
establishment of a State Electricity Regulatory
Commission Fund by State Governments.The FFC
reiterated the importance of financial independence
of the SERCs and suggested all States to constitute a
SERC Fund, as statutorily provided for.
 It endorse the initiative to set up a Rail Tariff
Authority (RTA) .The RTA is expected to lead an era of
rationalisation of fares and freight structures for
improving the fare-freight ratio and gradually brining
down cross subsidisation between different
segments.
 It recommend the setting up of independent
regulators for the passenger road sector whose key
functions should include tariff setting, regulation of
service quality, assessment of concessionaire claims,
collection and dissemination of sector information,
service-level benchmarks and monitoring compliance
of concession agreements.
 It endorsed that all States, irrespective of whether
Water Regulatory Authorities (WRAs) are in place or
not, consider full volumetric measurement of the use
of irrigation water. FFC reiterated the
recommendations of the FC-XIII and urge States
which have not set up WRAs to consider setting up a
statutory WRA, so that the pricing of water for
domestic, irrigation and other uses can be
determined independently and in a judicious manner.
9. Balancing Fiscal Autonomy and Fiscal Space
 The spirit behind the FFC recommendations is to
increase the automatic transfers to the states to give
them more fiscal autonomy .There is concern that
fiscal space or fiscal consolidation path of the Centre
would be adversely affected. However, to ensure that
the Centre’s fiscal space is secured, the suggestion is
that there will be commensurate reductions in the
Central Assistance to States (CAS) known as “plan
transfers.”
 The Economic Survey 2014-15 notes that CAS
transfers per capita are only mildly progressive. This
is a consequence of plan transfers moving away from
being Gadgil formula-based to being more
discretionary in the last few years. Greater central
discretion evidently reduced progressivity. A corollary
is that implementing the FFC recommendations
would increase progressivity because progressive tax
transfers would increase and discretionary and less
progressive plan transfers would decline.
10. Conclusion
 The FFC has made far-reaching changes in tax
devolution that will move the country toward greater
fiscal federalism, conferring more fiscal autonomy on
the states. This will be enhanced by the FFC-induced
imperative of having to reduce the scale of other
central transfers to the states. In other words, states
will now have greater autonomy on the revenue and
expenditure fronts.
23
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 MAINS QUESTION
 How have the recommendations of the
14th Finance Commission of India enabled
the States to improve their fiscal position?
(150 Words)
A. Approach
a) Introduce the finance commission and
constitutional provision related to it.
th
b) Discuss how 14 Finance Commission enabled
the States to improve their fiscal position.
c) Conclude suitably.
B. Introduction
 The Fourteenth Finance Commission was constituted
by the President under Article 280 of the Constitution
in 2013 to make recommendations for the period
2015-20. Dr. Y. V. Reddy was appointed the Chairman
of the Commission. Finance Commission is a
constitutional body created to address issues of
vertical and horizontal imbalances of federal finances
in India.
C. Body
th
 The 14 Finance Commission enabled the States to
improve their fiscal position in the following ways:
 Share in Centre’s Divisible Pool: The commission
recommended an increase in the share of States in
the Center's divisible tax pool to 42% from 32% at
present. This will enhance the states autonomy in
deciding their expenditure priorities.
 Centrally Sponsored Schemes: The Commission also
recommended eight centrally sponsored schemes
(CSS) to be delinked from support from the Centre.
Thus, States will be sharing a higher fiscal
responsibility and autonomy to implement
development initiatives.
 Taxation: The Commission has recommended that
tax devolution should be the primary source of
transfer of funds to States. This would increase the
flow of unconditional transfers and give States more
flexibility in their spending
 Grants: Transfers were proposed including grants to
rural and urban local bodies, a performance grant
along with grants for disaster relief and revenue
deficit. These transfers total to approximately 5.3
lakh crore for the period 2015-20.
 Compensation: The commission recommended
compensating States fully for three years in case of
revenue loss after GST implementation. The
Commission suggested that 100% compensation be
paid to the States in the first, second and third years,
75% compensation in the fourth year and 50%
compensation in the fifth and final year. It also
recommended the creation of an autonomous and
independent GST compensation fund through
legislative actions
D. Conclusion
 The Finance Commission recommendations will
reform the State finances which will assume greater
significance for macroeconomic management as the
fiscal deficit of State governments reached
unsustainable levels. After the recommendations,
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
States will get autonomy in deciding their
expenditure priority, which will enhance the spirit of
“balancing wheel of fiscal federalism”.
 15TH FINANCE COMMISSION
 Due to corona there are:-
a) 2020-21 and
b) 2021-2026
 Thanks to corona pandemic some recommendations
for just 2020-21:- 42% = {41% to other states + 1% to
the UTs of J&K and Ladakh}
th
 15 FC was constituted by the president in Nov 2017
under the chairmanship of NK singh
 Its recommendations will cover a period of a five
years (2021-2026)
 Although some separate recommendations were also
made for a year 2020-21 because of corona pandemic
 FEATURES OF 15TH FC
a) It has recommended maintaining the vertical
devolution at 41%. it is at the same level of 42% , the
th
divisible pool as recommended by 14 finance
commission
b) It has made the required adjustment of 1% due to the
changed status of the state of J&K into the new union
territories of J&K and Ladakh.
th
c) Some of its recommendations of 14 FC like
withdrawal from the CSS , change in the revenue
sharing pattern b/w center and states, appointment
of independent regulator for road sector ,
th
disinvestments of PSU’s will also continue in 15
finance commission
 15TH FINANCE COMMISSION & HORIZONTAL
IMBALANCE:-
To solve the complaints of the states the 15th FC
INDICATORS Wright (%)
Population (2011) 15%
Demographic change (1971-2011) 12.5%
PCI distance (from Haryana) 45%
Area 15%
Forest cover & ecology 10%
Tax & fiscal efforts 2.5%
 Tax & fiscal efforts is added as a new indicator in
15th finance commission.
A. MERITS
 With enough fiscal space states can meaningfully
contribute to the overall growth and
development I their regions thereby adding to
the aggregate growth of the nation
 Fiscal space for center:- total 15th finance
commission transfers (devolution + grants) ,
constitutes about 34% of estimated gross
revenue receipts of the union leaving adequate
24
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
fiscal space to meet its resource requirements
and spending obligations over National
 KEY POINTS
A. Vertical Devolution (Devolution Of Taxes Of
development priorities
The Union To States,
 Grants to local governments:- along with grants a) It has recommended maintaining the vertical
for municipal services , local govt bodies, it devolution at 41% - the same as in its interim report
includes performance based grants , incubation for 2020-21.
 It is at the same level of 42% of the divisible
of new cities and health grants to local govts to th
pool as recommended by the 14 Finance
support human resource Commission.
 In grants for urban local bodies:- basic grants b) It has made the required adjustment of about 1% due
are proposed for cities/ towns having a to the changed status of the erstwhile State of
Jammu and Kashmir into the new Union Territories of
population of less than 1 million. For million +
Ladakh and Jammu and Kashmir.
cities, 100% of the grants are performance B. Horizontal Devolution (Allocation Between
linked through the Million plus cities challenge The States):
funds (MCF).  For horizontal devolution, it has suggested 12.5%
 MCF amounts: - is linked to the performance of weightage to demographic performance, 45% to
these cities in improving their air quality, income, 15% each to population and area, 10% to
forest and ecology and 2.5% to tax and fiscal efforts.
meeting the service level benchmark for urban
C. Revenue Deficit Grants To States:
drinking water supply, sanitation and solid waste  Revenue deficit grants emanate from the
management. requirement to meet the fiscal needs of the States on
their revenue accounts that remain to be met, even
B. POSSIBLE DEMERITS after considering their own tax and non-tax resources
 Performance based incentives (allocations) may and tax devolution to them.
dis-incentivise independent decision making.  Revenue Deficit is defined as the difference between
spending only by the states in case of un-tied revenue or current expenditure and revenue receipts
that includes tax and non-tax.
funds would undermine cooperative fiscal  It has recommended post-devolution revenue deficit
federalism and states now cannot hold union grants amounting to about Rs. 3 trillion over the five-
govt accountable for their own fiscal year period ending FY26.
 The number of states qualifying for the revenue
imprudence
deficit grants decreases from 17 in FY22, the first
 This may dilute the joint responsibility that the year of the award period to 6 in FY26, the last
union and the states have. year.
 INTERNET MATERIAL FOR 15th F.C D. Performance Based Incentives And Grants
 Recently, the government accepted the To States:
 These grants revolve around four main themes.
15th Finance Commission’s recommendation to
 The first is the social sector, where it has focused
maintain the States’ share in the divisible pool
on health and education.
of taxes to 41% for the five-year period starting  Second is the rural economy, where it has focused
2021-22 on agriculture and the maintenance of rural roads.
 The Commission’s Report was tabled in the  The rural economy plays a significant role in the
Parliament country as it encompasses two-thirds of the
 15TH FINANCE COMMISSION country's population, 70% of the total
 The Finance Commission (FC) is a constitutional workforce and 46% of national income.
 Third, governance and administrative reforms under
body, that determines the method and formula
for distributing the tax proceeds between the Centre which it has recommended grants for judiciary,
and states, and among the states as per the statistics and aspirational districts and blocks.
 Fourth, it has developed a performance-based
constitutional arrangement and present
requirements. incentive system for the power sector, which is not
 Under Article 280 of the Constitution, the President linked to grants but provides an important, additional
of India is required to constitute a Finance borrowing window for States.
Commission at an interval of five years or earlier. E. Fiscal Space For Centre:
th

th
The 15 Finance Commission was constituted by the  Total 15 Finance Commission transfers (devolution +
President of India in November 2017, under the grants) constitutes about 34% of estimated Gross
chairmanship of NK Singh. Its recommendations will Revenue Receipts to the Union, leaving adequate
cover a period of five years from the year 2021-22 to fiscal space to meet its resource requirements and
2025-26. spending obligations on national development
priorities.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 25
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
F. Grants To Local Governments: defined as the total number of children that
 Along with grants for municipal services and local would be born to each woman if she/they were
government bodies, it includes performance-based to pass through the childbearing years bearing
grants for incubation of new cities and health children according to a current schedule of age-
grants to local governments. specific fertility rates.
 In grants for Urban local bodies, basic grants are 6. Tax Effort:
proposed only for cities/towns having a population of  This criterion has been used to reward states with
less than a million. For Million-Plus cities, 100% of the higher tax collection efficiency.
grants are performance-linked through the Million-  It has been computed as the ratio of the average per
Plus Cities Challenge Fund (MCF). capita own tax revenue and the average per capita
 MCF amount is linked to the performance of state GDP during the three-year period between
these cities in improving their air quality and 2016-17 and 2018-19.
meeting the service level benchmarks for urban
drinking water supply, sanitation and solid waste
management.
G. Criticism
 Performance based incentives disincentivizes
independent decision-making. Any conditions on the
state's ability to borrow will have an adverse effect
on the spending by the state, particularly on
development thus, undermines cooperative fiscal
federalism.
 It does not hold the Union government accountable
for its own fiscal prudence and dilutes the joint
responsibility that the Union and States have.
 HORIZONTAL DEVOLUTION CRITERIA
1. Population:
The population of a State represents the needs of the
State to undertake expenditure for providing services
to its residents.
 It is also a simple and transparent indicator that has a  TAX EXPENDITURE OR TAX PREFERENCE OR
significant equalising impact. REVENUE FOREGONE:-
2. Area:  It indicates how much more revenue could have
 The larger the area, greater is the expenditure
been collected by the government if tax be
requirement for providing comparable services.
3. Forest and Ecology: levied.
 By taking into account the share of dense forest of  It is also called as revenue foregone or Tax
each state in the aggregate dense forest of all the preference.
states, the share on this criteria is determined.  It accounts for a major loss of revenue due to
4. Income Distance: rebates & exemptions.
 Income distance is the distance of the Gross State
Domestic Product (GSDP) of a particular state from  Tax Expenditure in Housing Sector:-
the state with the highest GSDP. a) Exemptions allowed for HRA (income Tax) &
 To maintain interstate equity, the states with lower Mediclaim.
per capita income would be given a higher share.
b) Exemptions allowed for interest payment & principal
5. Demographic Performance:
repayment for housing loans (CLSS).
 It rewards efforts made by states in controlling their
c) For PM Awas Yojana, very high interest and tax break
population.
 This criterion has been computed by using the have been provided.
reciprocal of the total fertility ratio of each d) Exemption of rental income.
state, scaled by 1971 population data. …7th Class ended,8th started………
 This has been done to assuage the fears of
southern States about losing some share in tax  TOPIC:- INCLUSIVE GROWTH
transfers due to the reliance on the 2011 Census
data instead of the 1971 census, which could  THE INCLUSIVE GROWTH:-
penalise States that did better on managing
demographics. A. PHYSICAL DEVELOPMENT
 States with a lower fertility ratio will be scored  Physical infrastructure development
higher on this criterion.  Developing civic amenities
 The Total Fertility Ratio in a specific year is  Financial inclusion
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 26
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
B. HUMAN DEVELOPMENT b) Growth :-
 Education  DEFINITION OF GROWTH
 Health  Growth is a quantitative concept which relates to
 THE INFRASTRUCTURE :- increase in flow variables to keep accumulating stock
variables which can further contribute to higher
A. ECONOMIC INFRASTRUCTURE
output, production and standard of living. It includes
 Electricity
increased commercialisation, industrialisation and
 Transportation
urbanisation, all of which can increase the
 communication
productivity for everyone in the economy which will
B. SOCIAL INFRASTRUCTURE result in uplifting the everyone’s standard of living
 Education including the lowest income growth of the economy.
 Health
 Housing
 DEFINITION OF INCLUSIVE GROWTH
 It is a qualitative concept which is based on not only
 SOME BASIC THINGS TO KNOW
the amount of GDP but also on the inclusion of all
 We study the growth in terms of GDP
 GDP = P×Q + P×S sections of society and minimization of deprivation
 When we talk quantity with quality , it is along with providing equal opportunities to all
development or called as inclusive growth geographical economic areas for further
 Development or the better quality of life , better development.
standard of living, better income the following things
are needed
 Commercialisation and
 urbanisation and
 industrialisation = leads to trickle-down effect
 STOCK VARIABLES:- POINT OF TIME
 Stock is defined as a variable that is measured at a
particular point in time.
 A stock variable is a quantified variable that is
measured at a particular point of time. Since, stock
of capital, total money supply, and number of
persons employed are a quantities measured at a
particular point of time, these are stock variables
 FLOW VARIABLES:- PERIOD OF TIME
 Flow is defined as a variable which is measurable
 Its main features are:- The inclusive growth
over a period of time
 A variable whose value depends on a period of time means the growth that ensures
rather than an instant, example being the gross a) Equitable distribution of resources
domestic product ➡ It can be ensured by proper distribution of
 Note:- There must be a continuous flow for the
subsidies like:-
better stock.
 Note:- With consumption = tax ↑, income ↑,  through input subsidies in agriculture , the
production ↑, GDP ↑ inclusive cultivation can be promoted.
 GDP↑ = Primary sector ↑ + S.S ↑ + T.S ↑= GDP↑  Through sarv Shiksha Abhiyaan, mid-day meal
scheme, free education, the inclusive education
can be promoted
 Through Ayushman Bharat scheme, inclusive
health can be promoted and
 These all will ultimately lead to inclusive growth
b) Poverty alleviation
 It can be ensured through proper poverty
 Note:- Availability of any resource without any elimination programmes
discrimination is also a form of democracy. It is c) Sustainable development
democratic  Economic growth with environmental protection
 ECONOMIC WELFARE & GROWTH would save natural resources for the next
 After the great depression period of America, two generation
terms emerged:  Development but in an environmentally
a) Economic welfare :- responsible manner
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 27
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
d) Removing capability deprivation (by Amartya
Sen)
 This removal can be done through proper
skill development training [programmes, By
schemes like
 PM Kaushal Yojana Project (for
capability the training is given under
this),
 Deen Dayal upadhaiya skill
development programmes
 We can train people by education to earn
more by increasing capability
 Like by TVE (ownship and village enterprises)
model is followed in China
 POLICIES :-INCLUSIVE GROWTH
A. THE PHYSICAL DEVELOPMENT:-
1. PHYSICAL INFRASTRUCTURE DEVEL.
 Physical infrastructure creation has high
potential to reduce inequality.
 For example:- development of transportation
links like rods or railways can reduce
segmentation of markets resulting in opening
new business opportunities, more employment
opportunities and better standard of living of
poor in deprived regions.
 Roads or railways, electricity and communication
are very important for this development.
a) Roads :-
 Roads do end to end management and
 Ensure the proper supply chain
management,
 Promote business opportunities
 Markets linkages can be done, segmentation
of markets can be removed
b) Electricity:-
 Development of electricity can result in
improving the production capacity by
mechanisation, increasing hours of work,
improving training techniques.
 It increases the working hours of people
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 It also makes the people more skilful as
many machines run on electricity
c) Communication:-
 Development of communication reduces
search cost (real expenditure in finding best
opportunities), improving business
knowledge, quick transmission of
information w.r.t any new opportunity. It
makes information more democratic and can
be used as the tool to spread technical
inclusion to increase productivity in far off
regions.
 Note:-Availability of any resource without
any discrimination is also a form of
democracy. It is democratic
2. DEVELOPING CIVIC AMENITIES:-
 Note:- Disposable income :- income remaining
after deduction of taxes and social security charges,
available to be spent or saved as one wishes
 D.I = Y-Tax+TR-Medical bill-Transportation cost
 Development of civic amenities like treated
water , better drainage system, public
transportation etc will help in reducing cost of
living for all and increases disposable income,
which can be used to improve standard of living
3. THE FINANCIAL INCLUSION:-
 Financial inclusion consists of
a. Banking inclusion means accessibility to a
bank account for all
b. Credit inclusion:- means accessibility to
cheaper loans from formal sector like banks ,
non-banking financial company etc
c. Insurance inclusion :- means getting
insurance support to protect from sudden
events outside the control of producer
 All of this will help in encouraging the poor
to take a calculative risk, develop new
business opportunities, and increase their
earning capacity through institutional
mechanism without any discretion of an
individual.
 Concept was given by Committee on Financial
Inclusion - Chairman: Dr C Rangarajan, RBI,
2008) and Raghuram Rajan.
 The concept of financial inclusion was first
introduced in India in 2005 by the Reserve Bank of
India. The objectives of financial inclusion are to
provide the following: A basic no-frills banking
28
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
account for making and receiving payments. Saving
products (including investment and pension)
 Financial inclusion has been defined as “the process  One passport printing machine is also be given
of ensuring access to financial services, timely and
adequate credit for vulnerable groups such as weaker
 One locker would also be given to business
sections and low-income groups at an affordable
cost”. (Committee on Financial Inclusion - Chairman:
Dr C Rangarajan, RBI, 2008)
THE FINANCIAL INCLUSION
BEFORE 2014 2014 ONWARDS
 No frills A/C  PM Jan Dhan Yoj. (×)
 GCC  Payment banks (×)
 B.C Model (×)  Small Finance Banks (×)
 USB  PM Mundra Yojana
 50 minutes loan .com
 FIP
 Swabhiman Yojana  Offline cashless
payments
 CRISIL inclusix
 DBT
(×) means sir cross
. Look the sham sunder sir class for (×) marked
 No-Frills A/C:-
 It was a zero balance account , but due to the
lack of information and less banking habit
among the people it was not so successful .
 So in 2012, RBI instructed the commercial banks
to convert it into BASIC SAVING BANKS DEPOSIT
Account with some basic facilities like
permission of transaction upto 1lakh/month,
debit card facility. No cheque book facility was
given (note it)
 GCC:- GENERAL CREDIT CARD 2005
 It is for rural and semi-urban areas . under it , a
person can take loan upto 25,000 Rs without any
collateral.
 It will reduce people (especially farmers)
dependency on non-institutional money lenders
 All Credit Card (e.g. Artisan Credit Card, Laghu
Udyami Card, Swarojgar Credit Card, and
Weaver’s Card etc.) catering to the non-farm
entrepreneurial credit needs of individuals are
covered by General Credit Card Scheme. As the
GCC is intended to cover all entrepreneurial
credit, the consumption credit extended to
individuals is not be reported under GCC.in FIP
reports to RBI
 USB:-ULTRA SMALL BRANCH 2012
 Under it, some new features had been added
with business Correspondent model (B.C
Model) like one bank employee would come
once in a week to a business correspondent
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
along with laptop and internet connection to do
necessary updation.
to business correspondents
correspondents to keep the cash and other
valuable documents safe.
 FIP:FINANCIAL INCLUSION PLAN 2010
 Under it, RBI instructed commercial banks to
prepare a plan to spread financial inclusion to
their respective areas during the period of 2010-
2013 and submit it into the RBI so that RBI can
take further necessary steps on that bases.
 SWABHIMAN YOJANA 2011
 Under it, RBI instructed commercial banks to
provide the banking facilities in 74000 villages
through B.C Model (business correspondent
model)
 CRISIL INCLUSIX 2013
 CRISIL INCLUSIX full form :- Credit rating
information services India Limited. Financial
inclusion index 2013
 Score is 0-100 under this index
 India’s score was 47 in 2014
 India’s score is 56 in 2021
 There are 4 different parameters on which
the rank is given
a) Deposit penetration
b) Branch penetration
c) Credit penetration
d) Insurance penetration
 All are calculated per 1lakh people. And the
rank is given from 0-100.
 DBT-DIRECT BENEFIT TRANSFER 2013
 Under this, subsidy amount is directly
transferred in the real/genuine beneficiary’s
account.
 It stops the leakages.
 It hands over money in the hands of real
beneficiaries, using this they can raise their
quality of life.
 It was introduced with JAM trinity (JAN-DHAN
AADHAR MOBILE TRINITY).
 PAHAL Scheme:- CBT in Hindi called Pratyksh
hastenterit Lab
 PMMY:- PM MUDRA YOJANA
MUDRA:- Micro Units Development Refinance

Agency
29
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Upto 10 lakh can be taken as loan without b) Steps by govt to promote inclusive
collateral education
a) Shishu loan :- upto Rs50,000  Initiating total literacy mission govt launched
b) Kishore loan :- Rs2.5 lakh-Rs5 lakh Sarva Shiksha Abhiyan, or SSA, under it govt
c) Tarun loan:- Rs 5lakh-10lakh provides compulsory education to the children
 According to the latest economic survey, more aged 6-14 years
than 21crore people took loan under it and out  Initiating national secondary school literacy
of them more than 70% were women. In this mission, and national higher school literacy
way it is also promoting entrepreneurship mission to reduce dropout rates from schools
among the women. through better sustainability in education.
 59 minutes Loan.Com  To promote skill development, govt launched
 If you have a good CIBIL score (more than 750 PM Kaushal vikas Yojana tor Deen Dayal
out of 900) , you can take loan upto 5crore as a Upadhyaya skill development programme
business loan, car loan, home loan etc. (DDUSDP), these programmes not only provide
 The Credit Information Bureau (India) Limited (CIBIL) training but also provide placement
is the most popular of the four credit information opportunities to all
companies licensed by Reserve Bank of India. There  Ministry of Education launched NIPUN Bharat
are three other companies also licensed by the RBI to Programme i.e is the National Initiative for
function as credit information companies. They are
Proficiency in Reading with Understanding and
Experian, Equifax and Highmark
Numeracy Bharat Programme for ensuring that
 OFFLINE CASHLESS PAYMENT every child in the country necessarily attains
 Problems were like not having internet foundational literacy and numeracy by 2026-27.
connection and smart phones faced by many  Govt facilitates publishing of annual status of
people while making online payments. So govt education report (ASER) which is Published by
came up with offline cashless payment method. the NGO Pratham since 2005.
 *99# is the number to dial to make offline  Note:- ASER survey 2020 was the first ever
payments. phone based education survey
 Started by RBI in March-2022
 SARVA SHIKSHA ABHIYAN
…8th Class ended,9th started……… a) Govt launched Sarva Shiksha Abhiyan, or SSA, is an
B. THE HUMAN DEVELOPMENT:- Indian Government programme aimed at the
universalisation of Elementary education "in a time
 Human development is an approach focusing on the bound manner", the 86th Amendment to the
people themselves and the opportunities they have. Constitution of India making free and compulsory
With the finding that the economic growth does not education to children between the ages of 6 to 14 a
bring automatic growth in wealth for everyone, fundamental right.
human development focuses on the role of the b) It is a flagship programme of the government of India,
that was started in 2001, to achieve the
people themselves in bringing human life to a better
Universalisation of Elementary Education (UEE). The
condition legal backing to SSA was provided when free and
1. EDUCATION compulsory education for the children in the age
 Health is also divided into three parts group of 6-14 was made a fundamental right in the
Indian Constitution under Article 21 A. SSA aims to
a) Definition meet the expectations of this fundamental right in a
 Education promotes inclusive growth through time-bound manner.
following ways:- c) Ministry of Human Resource Development (MHRD),
 It increases information which results in improving Government of India (GoI) anchors the SSA
choice of opportunities , creating better earnings Programme and it has been operational since 2000-
2001
prospects, it improves productivity which results in
 NATIONAL LITERACY MISSION WAS
improving earnings opportunities and even
developing new business opportunities
ESTABLISHED IN THE YEAR
 The National Literacy Mission was established in the
 It increases capability to adapt which results in more
year 1988 and launched by the Government of India
stability of occupation especially in world with fast on May 5, 1988 with the goal of eradicating illiteracy
changes in technology from the country by catering to the section of the
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 30
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
society that requires education the most and will
benefit from it. Thus, the National Literacy Mission
was established not with the only motive of making
every individual of the country self-reliant in the three
R's - Reading, Writing, and Arithmetic but so by
making them aware of the developmental issues that
cause hurdles to the growth of the society. The target
group for this mission was set between the age group
of 15 to 35. This Mission worked under the
administration of the National Literacy Mission
Authority which was an independent wing of the
Department of Education
 The two flagship programmes of the National Literacy
Mission (NLM) include:
a) Total Literacy Programmes and
b) Post Literacy Programme
 PM KAUSHAL VIKAS YOJANA
 The Vision of DDU-GKY is to “Transform rural poor
youth into an economically independent and
globally relevant workforce”.
 It aims to target youth, in the age group of 15–35
years.
 DDU-GKY is a part of the National Rural Livelihood
Mission (NRLM), tasked with the dual objectives of
adding diversity to the incomes of rural poor families
and cater to the career aspirations of rural youth.
c) Our suggestions to make education more
inclusive
 Improving basic infrastructure in schools and making
it more accessible at primary level
 Reducing absenteeism from the teachers to promote
sustainable education
 To create a dedicate cadre of teachers to promote
health educational development
 Give proper rewards to those dedicated teachers on
the regular basis for their outstanding work
 Increase the speed of quality recognition of colleges,
universities and educational institutions to help
students in getting quality education .In India it is
done by NAAC
 NAAC:- National Assessment and Accreditation
Council (established by UGC in 1994 ay
Bangalore)conducts assessment and accreditation of
higher education institutions to derive an
understanding of the quality status of the institution.
2. HEALTH
 It also further divided into three parts:-
a) Definition
 WHO measures four accessibility to assess better
health:-
a. Accessibility to clean drinking water
b. Accessibility to sanitation
c. Accessibility to Nutrition
d. Availability of trained medical staff
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Millennium sustainable goals (MDGs) and
sustainable development goals (SDGs) also
focus on health and education
 MDGs focus on developing nations, they are 8 in
numbers
a. Eradicate extreme poverty and Hunger
b. Achieve universal primary education
c. Promote gender equality & empower women
through wage employment & political
participation
d. Reduce child mortality {according to the census
committee report 2022, India witnessed a drop
in female infant mortality rate from 32/1000 live
births to 28/1000 live births, which is equal to
male infant mortality rate. It endorses govt
programme “Beti Bachao Beti Padhao”}
e. Improve maternal health
f. Combat HIV/AIDS, Malaria and other diseases
g. Ensure environmental sustainability
h. Develop a Global Partnership for development
 SDGs: Sustainable Development goals, total are
17 in number:-they are applied to all countries. The
SDGs are also nationally owned and country led,
wherein each country is given the freedom to
establish a national framework in achieving the SDGs.
First 7 SDGs are an extension of MDGs, rest 10 cover
aspects such as :-
 Inclusiveness and jobs
 Infrastructure and industrialisation
 Equitable distribution of income and resources
b) Govt steps to Promote Inclusive health
 Initiating national health mission by combining
National urban health mission and national Rural
health Mission (NRHM) to provide universal health
support
 Initiating mission Indradhanush from 25Dec 2014 to
provide vaccination to children
 Making appointments of ASHA {Accredited Social
Health Activist (ASHA)} to provide nutritional support
for pregnant and lactating women and vulnerable
groups in the population (old age people, children)
 Initiating Ayushman Bharat under PM Jan Arogya
Yojana to provide treatment upto 5 lakh rupees
without any payment to the poorest of the Poor.
 Initiating swachh bharat mission to make India open
defecation free by oct 2019.
 Govt has initiated national drinking programme both
in rural and urban areas to provide free drinking
water to all by 2024.
c) Our suggestions to make health More
inclusive:-
 Increasing the number of trained medical
professionals. This can be done through three ways
31
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
a. Opening more training institutions
b. More concentration of doctors
c. Increasing nursing career growth :{According
to WHO report India’s has 1.79 nurses/1000
population which is 46% less than WHO norms}
 Ensuring the proper supply of medicine.
 Spreading awareness and information to the
people about deadly diseases associated with
consumption of dirty water and open defecation
 CONCLUSION:-
a) Health care expenditure in India is still mostly
privately financed.
b) 67% of the total health care expenditure was
through out of pocket expenses till 2020.
c) According to latest NFHS-5 report, it has reduced
to 49% which shows a positive improvement
towards providing affordable health care
facilities to the people . but this should be
improved further and public health care facilities
should become quantitatively and qualitatively
more stronger i.e. not only the amount of
expenditure should increase but also better
targeting and fixing of accountability in the case
of poor delivery of services
HAND-OUT MATERIAL OF INCLUSIVE GROWTH
 Inclusion/Inclusive policy refers to the practice or
policy of providing equal access to opportunities and
resources for people who might otherwise be
excluded or marginalized, such as those having
physical or mental disabilities or belonging to other
minority groups or other gender etc.
 OBJECTIVES OF INCLUSION
a) It aims for ensuring access to essential services in
health and education by the poor.
b) It includes providing equality of opportunity,
empowering people through education and skill
development.
c) It also encompasses a growth process that is
environment friendly growth, aims for good
governance and helps in creation of a gender
sensitive society.
 EMPOWERING/ SOCIAL SECTOR
POLICIES FOR WOMEN, SC/ STS,
AND MINORITIES:-
1. National strategy for financial Inclusion
 Recently, Reserve Bank of India released
National Strategy for Financial Inclusion (NSFI)
for the period 2019-2024 to set forth the vision
in expanding and sustaining the financial
inclusion process at national level through a
broad convergence of action.
 Key recommendations
 Provide banking access to every village within a
5km radius/hamlet of 500 households in hilly
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
areas by March 2020.
 Ensure that every adult had access to a financial
service provider through a mobile device by
march 2024.
 Strengthen eco-system for various modes of
digital financial services in all the Tier 2 to Tier 6
centers to create the necessary infrastructure by
March 2022.
 Enroll every willing and eligible adult enrolled
under PM Jan Dhan Yojana under an insurance
scheme (PMJJBY, PMSBY, etc.), Pension scheme
(NPS, APY, etc.) by March 2020.
 Make Public Credit Registry (database of credit
information of borrowers) fully operational by
March 2022 so that organized financial entities
could leverage it for assessing credit proposals
from all citizens.
 NSFI has been organized and approved by the
Financial Stability Development Council.
 Impact
 The strategy is in line with steps needed to
strengthen the digital financial services’ ecosystem
including increased awareness on usage of digital
modes of transactions, increased acceptance
infrastructure and a safe environment incorporating
the principles of consent and privacy.
 The strategy also envisions to make the Public Credit
Registry (PCR) fully operational by March 2022 so
that authorized financial entities could leverage it for
assessing credit proposals from all citizens.
 FINANCIAL STABILITY DEVELOPMENT COUNCIL
 It is apex level autonomous body constituted in 2010
to ensure financial stability, regulate the entire
financial sector of the country and enhance
coordination between various financial regulatory
bodies.
 It is headed by the finance minister and heads of
financial sector regulatory authorities are its member
(RBI, SEBI, IRDA)
2. National Strategy for Financial Education
 The Reserve Bank of India (RBI) has released the
National Strategy for Financial Education (NSFE)-
2020-2025 document for creating a financially aware
and empowered India.
 It emphasizes a multi-stakeholder -led approach for
empowering various sections of the population to
develop adequate knowledge, skill, attitudes and
behaviour which are needed to manage their money
better and to plan for the future i.e., ensuring their
financial well- being.
 It recommends ‘5C’ approach for dissemination of
financial education, which includes-
 Content: Financial Literacy content for various
sections of population.
 Capacity: Develop the capacity and ‘Code of
Conduct’ for financial education providers.
 Community: Evolve community led approaches
for disseminating financial literacy in a
sustainable manner.
 Communication: Use technology, media and
32
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
innovative ways of communication for
dissemination of financial education messages.
 Collaboration: Streamline efforts of other
stakeholders for financial literacy.
 Impact
 It will inculcate financial literacy concepts among the
various sections of the population through financial
education to make it an important life skill.
 It will encourage active savings behaviour.
 It will encourage participation in financial markets to
meet financial goals and objectives.
3. Reforms for Migrants: Occupational Safety,
Health and Working Conditions Code, 2020
(OSHC) and the Code on Social Security (CSS)
2020
 Both OSHS and CSS have increased the scope of who
qualifies as an interstate migrant worker by including
persons who move from one state to another for
employment on their own in addition to those
workers who are recruited by contractors from one
state to another for employment.
 The provision in the OSCH provides that while
migrant workers will be registered by the states
themselves, they can also do so themselves with
Aadhaar and a telephone authentication.
 Other provisions including the setting up of a social
security fund, toll free call centers, and helplines are
also part of the new codes.
 INTER/INTRA-STATE MIGRANTS IN INDIA
 Internal migrant flows can be classified on the basis
of origin and destination.
 One way to classify migration is: (1) intra-state, and
(2) inter-state.
 In 2011, intra state movement accounted for almost
88% of all internal migration (39.6 crore persons).
 According to the 2011 Census, there were 5.4 crore
inter-state migrants.
 As of 2011, Uttar Pradesh and Bihar were the largest
source of inter-state migrants while Maharashtra and
Delhi were the largest receiver states.
 Another kind of classification is: (1) rural-rural, (2)
rural-urban, (3) urban-rural, and (4) urban-urban.
 As per the 2011 census, there were 21 crore rural-
rural migrants which formed 54% of classifiable
internal migration.
 Rural-urban and urban-urban movement accounted
for around 8 crore migrants each.
 There were around 3 crore urban-rural migrants (7%
of classifiable internal migration).
 Reasons for Internal Migration
 As of 2011, majority (70%) of intra-state migration
was due to reasons of marriage and family.
 While 83% of females moved for marriage and family,
the corresponding figure for males was 39%.
 Overall, 8% of people moved within a state for work
(21% of male migrants and 2% of female migrants).
 Movement for work was higher among inter-state
migrants- 50% of male and 5% of female inter-state
migrants
 PYQS ON GROWTH AND DEVELOPMENT
 Q1. The main reason for low growth rate in India, in
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
spite of high rate of savings and capital formation is:
[1995]
 (a) High birth rate (b) Low level of foreign and (c) Low
capital output ratio (d) High capital output ratio
 Ans: (d)
 Q2. Human development index comprises literacy
rates, life expectancy at birth and [1997]
 (a) Gross National Product per head in the US dollars
(b) Gross Domestic Product per head at real
purchasing power (c) Gross National Product in US
dollars (d) National Income per head in US dollars
 Ans: (d)
 Q3. Human Poverty Index was introduced in the
Human Development Report of the year: [1998]
 1994 (b) 1995 (c) 1996 (d) 1997
 Ans: (d)
 Q4. The first Indian state to have its Human
Development Report prepared and released by
Amartya Kumar Sen in Delhi is: [1999]
 (a) West Bengal (b) Kerala (c) Madhya Pradesh (d)
Andhra Pradesh
 Ans: (c)
 Q5. Indian Human Development Report does not
give for each sample village: [2000]
 (a) Infrastructure and Amenities Index (b) Education
Related Index (c) Health Related Index (d)
Unemployment Related Index
 Ans: (d)
 Q6. Consider the following statements:
 Most international agencies which find Development
Program in India on intergovernmental bilateral
agreements, mainly provide: [1996]
 (1) Technical assistance
 (2) Soft loans which are required to be paid back with
interest
 (3) Grants, not required to be paid back
 (4) Food assistance to be paid back
 (a) 2 and 4 are correct
 (b) 1, 2, and 3 are correct
 (c) 1, 2, and 4 are correct
 (d) 3 and 4 are correct
 Ans: (b)
 Q8. “…instil into the vast millions of workers, men,
and women, who actually do the job, a sense of
partnership and of cooperative performance….” The
above passage relates to: [2000]
 (a) Planned development (b) Community
Development (c) Panchayati Raj System (d) Integrated
Development Programme
 Ans: (b)
 Q9. Inclusive growth as enunciated in the Eleventh
Five Year Plan does not include one of the following:
[2010]
 (a) Reduction of poverty (b) Extension of employment
opportunities (c) Strengthening of capital market (d)
Reduction of gender inequality
 Ans: (c)
 Q10. Which of the following can aid in furthering the
Government’s objective of inclusive growth? [2011-
1]
 1. Promoting Self-Help Groups. 2. Promoting Micro
Small and Medium Enterprises. 3. Implementing the
Right to Education Act.
33
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Select the correct answer using the codes given
below:
 (a) 1 only (b) 1 and 2 only (c) 2 and 3 only (d) 1, 2 and
3 only
 Ans: (d)
 Q11. Economic growth is usually coupled with [
2011-01]
 (a) Deflation (b) Inflation (c) Stagflation (d)
Hyperinflation
 Ans: (b)
 Q12. Economic growth in country X will necessarily
have to occur if [2013-01]
 (a) There is technical progress in the world economy
(b) There is population growth in X (c) There is capital
formation of X (d) The volume of trade grows in the
world economy
 Ans: (c)
 Q13. Increase in absolute and per capita real GNP do
not connote a higher level of economic
development, if [2018-01]
 (a) Industrial output fails to keep pace with
agriculture output (b) Agriculture output fails to keep
pace with industrial output (c) Poverty and
unemployment increase. (d) Imports grow faster than
exports.
 Ans: (c)
 DRISTI IAS ON FINANCIAL INCLUSION
 Financial inclusion may be defined as the process of
ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups
such as weaker sections and low income groups at an
affordable cost.
 In a diverse country like India, financial inclusion is a
critical part of the development process. Since
independence, the combined efforts of successive
governments, regulatory institutions, and the civil
society have helped in increasing the financial-
inclusion net in the country.
 The state of financial inclusion has improved
considerably over time. However, the financial
inclusion hasn’t reached the poorest of the poor and
there exist many bottlenecks and challenges which
need immediate attention.
 Thus, there exists both a great need and the potential
to tap into the unbanked population and bring them
into the financial net
 FINANCIAL INCLUSION INITIATIVES
1. Jan Dhan-Aadhar-Mobile (JAM) Trinity
 The combination of Aadhaar, PMJDY, and a surge in
mobile communication has reshaped the way citizens
access government services.
 As per the estimates in March 2020, the total number
of beneficiaries under Jan Dhan scheme have been
more than 380 million.
 By significantly changing the concept of individual
identity, Aadhaar has not only brought about a secure
and easily verifiable system but also easy to obtain as
well to help in the financial inclusion process.
 The government has also launched many flagship
schemes to promote financial inclusion and provide
financial security to empower the poor and unbanked
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
in the country.
 These include the Pradhan Mantri Mudra
Yojana, Stand-Up India Scheme, Pradhan Mantri
Jeevan Jyoti Bima Yojana, Pradhan Mantri
Suraksha Bima Yojana, and Atal Pension Yojana.
2. Expansion of financial services in Rural and
Semi-Urban Areas
 Reserve Bank of India (RBI) and National Bank for
Agriculture and Rural Development (NABARD) have
taken initiatives to promote financial inclusion in
rural areas.
 These include the opening of bank branches in
remote areas.
 Issuing Kisan Credit Cards (KCC)
 Linkage of self-help groups (SHGs) with banks.
 Increasing the number of automated teller
machines (ATMs)
 Business correspondents model of Banking, etc.
3. Promotion of Digital Payments
 With the strengthening of the Unified Payment
Interface (UPI) by NPCI, digital payments have been
made secure, compared to the past.
 The Aadhar-enabled payment system (AEPS) enables
an Aadhar enabled bank account (AEBA) to be used at
any place and at any time, using micro ATMs.
 The payment system has been made more accessible
due to offline transaction-enabling platforms,
like Unstructured Supplementary Service Data
(USSD), which makes it possible to use mobile
banking services without internet, even on a basic
mobile handset.
4. Enhancing Financial Literacy
 The Reserve Bank of India has undertaken a project
titled "Project Financial Literacy".
 The Objective of the project is to disseminate
information regarding the central bank and
general banking concepts to various target
groups, including, school and college going
children, women, rural and urban poor, defence
personnel and senior citizens.
 Pocket Money is Securities and Exchange Board of
India (SEBI) and National Institute of Securities
Markets (NISM’s) flagship programme aimed at
increasing financial literacy among school students.
 The objective is to help school students
understand the value of money and the
importance of saving, investing and financial
planning.
 FINANCIAL INCLUSION: SUCCESS STORY
1) Increased Access to Banks
 According to the World Bank’s Global Financial
Inclusion Database or Global Findex report (2017),
80% Indian adults have a bank account against the
53% estimated in 2014.
 The Findex 2017 report also estimates that 77%
Indian women have bank accounts, against 43% in
2014.
2) Multiplier Effect
 These initiatives have brought about major changes
to increase the last-mile connectivity of financial
services to its people.
34
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 By providing access to financial resources to
underprivileged and marginalised sections of society,
financial inclusion has the potential to reduce
poverty, create jobs, among others.
3) Enhancing Active Participation of Citizenry
 Earlier, private institutions did not engage with the
poor as customers on a significant scale.
 This has now changed, and there has been an active
participation of the private players (payment banks
like paytm, airtel money and jio money), as they have
also realised that bringing the poor into the financial
net is beneficial to their business models as well.
4) Integration of Financial Services
 The convergence of JAM trinity with the Direct
Benefit Transfer (DBT) scheme has largely been
successful.
 Due to this, there has been a significant improvement
in terms of targeted and accurate payments.
 It has also helped in weeding out duplication of
entries, and bringing down the reliance on cash mode
of payments.
 ASSOCIATED CHALLENGES
1) Non-Universal Access to Bank Accounts
 Bank accounts are a gateway to all financial services.
But, according to a report by the World Bank, 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.
2) Digital Divide
 The most common barriers to the adoption of digital
technology which may promote financial inclusion:
 Non-availability of suitable financial products
 Lack of skills among the stakeholders to use digital
services
 Infrastructural issues
 Low-income consumers who are not able to afford
the technology required to access digital services
3) Implement Deficit
 For instance, the Jan Dhan scheme has resulted in the
opening of many dormant accounts which never saw
actual banking transactions.
 All such activities incur costs on the institutions, and
thus, huge operative costs only proved to be
detrimental to the actual objective.
 To avoid these counterproductive outcomes, it is
important that all stakeholders participate in such
programmes with proper intent and not just for the
sake of it.
4) Informal and Cash-Dominated Economy
 India is the heavily dominated cash economy, this
poses a challenge for digital payment adoption.
 Also, according to the International Labour
Organization (ILO), about 81% of the employed
persons in India work in the informal sector.
 The combination of a huge informal sector along with
a high dependence on cash mode of transaction
poses an impediment to digital financial inclusion
5) Gender Gap in Financial Inclusion
 According to the 2017 Global Findex database, 83% of
males above 15 years of age in India held accounts at
a financial institution in 2017 compared to 77%
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
females.
 This is attributed to socio-economic factors, including
the availability of mobile handset and internet data
facility being higher among men than women.
6) Lack of Credit Penetration
 One of the main constraints in providing credit to
low-income households and informal businesses is
the lack of information available with formal creditors
to determine their credit worthiness. This results in a
high cost of credit.
 Due to this, in 2016, the number of loan accounts per
1,000 adults was 154 in India. This is quite low when
compared to similarly placed economies like BRICS
nations.
 STEPS TO BE TAKEN
1) Reviving Banking Correspondent Model
 Given the infeasibility of locating branches in every
nook and corner of the country, bank correspondents
are used to reach out to prospective clients.
However, an inadequate compensation structure
makes correspondent banking unattractive.
 Thus, there is a need to create better monetary
incentives for banking correspondents as well as to
provide them better training.
2) Leveraging JAM Trinity
 Technology should be used to improve the
assessment of credit-worthiness for households and
informal businesses.
 With the adoption of appropriate technology a new
data-sharing framework (using Jan Dhan and Aadhaar
platforms), to enable easier access to credit, with
adequate safeguards for maintaining data privacy.
3) Need For Data Protection Regime
 In addition to greater digitization, there is also a need
to strengthen cyber security and data protection
regime in the country.
4) Leveraging Differentiated Banks
 Differentiated Banks like Payment banks and small
finance banks can be leveraged to scale up payments
systems in underserved areas.
5) Promoting USSD for Rural Areas
 Payments through the USSD channel should be
promoted (by reimbursing the charges incurred in the
USSD process), as they have an advantage over the
internet in that it can also cover a large proportion of
non-smartphone users.
 In India, USSD can be particularly useful in rural areas
where some segments still do not have reliable
access to the internet.
 CONCLUSION
 For the success of financial inclusion in India, there
has to be a multidimensional approach through which
existing digital platforms, infrastructure, human
resources, and policy frameworks are strengthened
and new technological innovations should be
promoted.
 If adequate measures are taken to tide over the
existing problems, financial inclusion has the
potential to amplify the benefits of economic growth
to the poor.
35
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
th

HDI AND OTHER INDEXs:- 35

52
nd
Saudi Arabia (OPEC)
Russia (BRICS)
0.875
0.822
 According to the Human Development Report 2021- 63rd Mauritius (India suspended its 0.802
22, India’s rank on the Human Development Index DTA from it)
rd
73 Sri lanka 0.782
(HDI) has slipped from 130 in 2020 to 132 in 2022, in th nd
79 China (2 largest economy in 0.768
line with a global fall in HDI scores in the wake of st
terms of Nominal GDP, 1 rank
the Covid-19 pandemic in terms of PPP based GDP)
 HDI is given by United Nations development (BRICS Member)
th
Programme 87 Brazil (BRICS) 0.754
th
 UNDP GIVES 5 HDRS 109
120
th
South Africa (BRICS)
Venezuela (OPEC), 2015
0.713
0.691
A. HDI = introduced in 1990 inflation was around 756%
st
B. IHDI/PHDI = 2010(IHDI), 2020 (PHDI) 121 Iraq (OPEC) 0.686
th
C. GDI = 1995 (some addition in 2014) 127 Bhutan (Gross national 0.666
D. GII = 2011 happiness concept gave, later
E. MPI =2010 world happiness index was
developed)
A. HUMAN DEVELOPMENT INDEX (HDI) 129
th
Bangladesh 0.661
 The human development concept was developed by 132th India 0.633
Pakistani economist Mahbub ul Haq in 1990 later on 143rd Nepal 0.602
th
149 Myanmar 0.585
supported by Indian economist Amartya sen. Since st
161 Pakistan 0.544
development is a qualitative concept so it cannot be th
180 Afghanistan 0.478
measured through mathematical formula 191
st
South Sudan (last) 0.385
 HDI has various dimensions and to measure them  BRICS:- 87, 52, 132, 79, 109 {understand the
various indicators are there.
India’s Position}
DIMENSIONS INDICATORS
 Most developed countries have HDI score of 0.8
1. Longevity 1. Life expectancy at birth {LEI}
2. Education 2. Education has two indicators or above because of
3. Standard of a) Average mean years of schooling a) stable Govts,
living {EAI} b) wide spread affordable education and
b) Expected years of schooling
c) health care,
3. Per capita income or GNI per
capita {GNI Index) d) High life expectancy

 HDI VALUES:-  WHAT IS HUMAN DEVELOPMENT REPORT?

 About:
a) 0-0.54 = Low developed
 Human Development Reports (HDRs) have been
b) 0.55-0.69= Medium developed released since 1990 and have explored different
c) 0.70-0.79=Highly developed themes through the human development
d) 0.80-1.0 =very highly developed approach.
Indian is in medium developed nations
  It's published by the Human Development
Report Office for the United Nations
category
Development Programme (UNDP).
RANKS COUNTRY HDI VALUE  Goal:
st
1 Switzerland 0.962  The goal is to contribute toward the expansion of
nd
2 Norway 0.961 opportunities, choice and freedom.
rd
3 Iceland 0.959  Theme:
th
4 hongkong 0.952  The theme for Human Development Report
th
5 Australia 0.951 2021-22 is Uncertain Times, Unsettled Lives:
th
9 Germany 0.942 Shaping our Future in a World in
th
(4 largest economy ) Transformation.
th
12 Singapore (tax heaven nation) 0.939  What is the Human Development Index?
th th
18 UK (6 largest economy) 0.929  HDI is a composite index that measures average
th rd
19 Japan (3 largest economy) + 0.925 achievement in human development taking into
South Korea (best demographic account four indicators:
dividend , best industrial  Life expectancy at birth (Sustainable
production) Development Goal 3),
st
21 USA 0.921  Expected years of schooling (Sustainable
th
26 UAE (OPEC nation) 0.911 Development Goal 4.3),
th
28 France 0.903  Mean years of schooling (Sustainable
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 36
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
Development Goal 4.4),
 Gross national income (GNI) (Sustainable
Development Goal 8.5).
 INDIAN PERSPECTIVE:2021-2022
 Human Development Index: India’s HDI value
stood at 0.633 in 2021, which was lower than the
world average of 0.732. In 2020, too, India
recorded a decline in its HDI value (0.642) in
comparison to the pre-Covid level of 2019
(0.645).
 Life expectancy (LEI) : In 2021, India’s life
expectancy at birth was recorded at 67.2 years.
 Schooling (EAI): Expected years of schooling at
11.9 years, mean years of schooling at 6.7 years,
 Gross National Income (GNI) : The gross national
income per capita stood at USD 6,590.
 Gender Inequality Index (GII) : India has been
ranked 122 on the Gender Inequality Index.
B. INEQUALITY ADJUSTED HDI (IHDI)
 Introduced in 2010. From 2010 UNDP also publishes
IHDI, under which a country is penalised for the
presence of inequality by reducing its value.
 IHDI shows the actual level of Human development ,
while HDI can be viewed as an Index of potential
Human development or the maximum level of HDI
that could be achieved if there was no inequality
 The loss in potential Human development is given by
the difference b/w the HDI and the IHDI
 PHDI:- PLANETARY PRESSURES ADJUSTED
HDI-2020
a) 2020 UNDP introduced PHDI for the first time .
b) PHDI is an experimental matric that adjusted HDI
for planetary pressures.
c) PHDI shows the level of human development
adjusted for ecological and environmental
factors like CO2 emission per person and material
foot print in India.
d) Material foot print is :- is fossil fuels, metals, and
other resources consumed by a country to
produce required goods and services
e) In an ideal scenario where there is no pressure
on the planet, the PHDI equals HDI, however, all
countries of the world have substantial pressure
from their part
f) If the new matric is taken into account Ireland
tops the list, while India’s rank is 111 with 0.626
value.
 INTERNET ADDITION:-
 IHDI
 IHDI adjusts the Human Development Index (HDI) for
inequality in the distribution of each dimension
across the population.
 IHDI is based on a distribution-sensitive class of
composite indices proposed by Foster, Lopez-Calva
and Szekely (2005), which draws on the Atkinson
(1970) family of inequality measures. It is computed
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
as a geometric mean of inequality-adjusted
dimensional indices. The IHDI accounts for
inequalities in HDI dimensions by “discounting” each
dimension’s average value according to its level of
inequality. The IHDI value equals the HDI value when
there is no inequality across people but falls below
the HDI value as inequality rises. In this sense, the
IHDI measures the level of human development when
inequality is accounted for.
 PHDI:-
 PHDI is the level of human development adjusted by
carbon dioxide emissions per person (production-
based) and material footprint per capita to account
for the excessive human pressure on the planet. It
should be seen as an incentive for transformation
 The planetary pressures-adjusted HDI is the product
of the HDI and the adjustment factor A: PHDI = HDI *
A, or, equivalently, PHDI = HDI * (1-P)
……..9th Class ended,10th started………
C. GDI: GENDER DEVELOPMENT INDEX
 1995 (some addition in 2014)
 Developed by UNDP in 1995
 It shows gender sensitivities in HDI measurement
 It talks about well-being of both the genders
 GDI measures gender gap in Human development
achievements in three basic dimensions
a) Male & female life expectancy at birth
b) Education,
c) Command over economic resources
D. GII:- GENDER INEQUALITY INDEX
 The Gender Inequality Index is a composite measure
reflecting inequality in achievements between The
GII is a composite measure, reflecting inequality in
achievements between women and men in three
dimensions: reproductive health, empowerment and
the labour market
 Includes
a) Maternal health
 MMR
 AMR:- adolescent fertility rate
b) Gender empowerment
 Proportion of women in parliament
 Proportion of women in higher studies
c) Participation of women in workforce
 World economic forum checks this
participation and gives ranks
 WEF form publishes global gender report
th
since 2006, India’s rank is 135 out of 156
nations (last years it was 140/156)
 MMR:-MATERNAL MORTALITY RATE
 Shows number of maternal deaths on per 1-lakh live
births
 AMR:- ADOLESCENT FERTILITY RATE
 Defined as the number of births per 1000 women
ages 15-19
37
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 It exposes adolescent women to higher risks
INTERNET ADDITION FOR GII
 Recently, the World Economic Forum
(WEF) ranked India at 135 out of 146 countries in
its Global Gender Gap (GGG) Index for 2022.
 India’s overall score has improved from 0.625 (in
2021) to 0.629, which is its seventh-highest score in
the last 16 years.
 In 2021, India was ranked 140 out of 156 countries.
 The gender gap is the difference between women
and men as reflected in social, political, intellectual,
cultural, or economic attainments or attitudes
 WHAT IS THE GLOBAL GENDER GAP
INDEX?
 About:
 It benchmarks countries on their progress towards
gender parity in four Key dimensions with Sub
Metrices.
 Economic Participation and Opportunity
 Educational Attainment
 Health and Survival
 Political Empowerment
 On each of the four sub-indices as well as on the
overall index the GGG index provides scores
between 0 and 1, where 1 shows full gender parity
and 0 is complete imparity.
 It is the longest-standing index, which tracks
progress towards closing these gaps over time since
its inception in 2006.
 Objectives:
a) To serve as a compass to track progress on
relative gaps between women and men on
health, education, economy and politics.
b) Through this annual yardstick, the stakeholders
within each country are able to set priorities
relevant in each specific economic, political and
cultural context.
 WHAT ARE THE INDIAN INITIATIVES TO
REDUCE GENDER GAP IN SOCIAL,
ECONOMIC AND POLITICAL LIFE?
 Economic Participation and Health and Survival:
a) Beti Bachao Beti Padhao: It ensures the protection,
survival and education of the girl child.
b) Mahila Shakti Kendra: Aims to empower rural
women with opportunities for skill development
and employment.
c) Mahila Police Volunteers: It envisages engagement
of Mahila Police Volunteers in States/UTs who act as
a link between police and community and facilitates
women in distress.
d) Rashtriya Mahila Kosh: It is an apex micro-finance
organization that provides micro-credit at
concessional terms to poor women for various
livelihood and income generating activities.
e) Sukanya Samriddhi Yojna: Under this scheme girls
have been economically empowered by opening
their bank accounts.
f) Female Entrepreneurship: To promote female
entrepreneurship, the Government has initiated
Programmes like Stand-Up India and Mahila e-Haat
(online marketing platform to support women
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
entrepreneurs/ SHGs/NGOs), Entrepreneurship and
Skill Development Programme (ESSDP).
g) Kasturba Gandhi Balika Vidyalaya: They have been
opened in Educationally Backward Blocks (EBBs).
 Political Reservation: Government has reserved
33% of the seats in Panchayati Raj Institutions for
women.
 Capacity Building of Elected Women
Representatives: It is conducted with a view to
empowering women to participate effectively in
the governance processes.
 WHAT IS WORLD ECONOMIC FORUM?
 About:
 The World Economic Forum is the International
Organization for Public-Private Cooperation.
 It was established in 1971 as a not-for-profit
foundation and is headquartered in Geneva,
Switzerland.
 Major Reports:
1) Energy Transition Index.
2) Global Competitiveness Report.
3) Global IT Report
 WEF along with INSEAD, and Cornell University
publishes this report.
4) Global Gender Gap Report
5) Global Risk Report
6) Global Travel and Tourism Report
 GII:GLOBAL INNOVATION INDEX 2011
 The Global Innovation Index 2011: Accelerating
Growth and Development is the result of a
collaboration among INSEAD and Knowledge
Partners. The Global Innovation Index, like any
innovation project, is a collaborative effort. The
valuable contributions of the individuals listed below
are gratefully acknowledged
E. MPI: MULTIDIMENSIONAL POVERTY
INDEX-2010
 The Global Multidimensional Poverty Index (MPI)
was developed in 2010 by the Oxford Poverty &
Human Development Initiative (OPHI) and the United
Nations Development Programme and uses health,
education and standard of living indicators to
determine the incidence and intensity of poverty
experienced by a population
 Yet to be discussed in another topic
 WORLD HAPPINESS INDEX (WHI)
 Concept given by Bhutanese King J.S Wangchuk
th
(1972). It was given for the first time by 4 Bhutanese
King J.S Wangchuk (1972). Its Initial name was gross
national happiness
 It was Published for the first time in 2012 by United
Nations programme for sustainable solutions (UN
Sustainable Development Solutions Network
publishes the World Happiness Report)
 It is a part of Global happiness report
38
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 India ranked 136th in the World Happiness Report  What about the Performance of the
2022. 139th in 2021 and 144th in World Happiness Countries?
Report 2020 a) Top Performers:
 There are 6 criterias to measure WHI  Finland has been named the world's happiest
country for the fifth year running followed
a) GDP Per Capita (on basis of purchasing power
by Denmark.
parity) (income)
 The biggest gains in happiness have taken place
b) Social support in Serbia, Bulgaria and Romania.
c) Trust and Generosity b) Worst Performers:
d) Healthy life expectancy at birth  Afghanistan was ranked as the unhappiest
e) Freedom to make life choices nation, followed by Lebanon, Zimbabwe, Rwanda and
f) Perception about corruption in government Botswana, respectively.
mechanism c) India’s Performance:
 India saw a marginal improvement in its ranking,
 WHI RANKS:- jumping three spots to 136, from 139 a year ago.
st
 1 :- Finland

nd
2 :- Denmark  INFLATION GROWTH CONFLICT:-
rd
 3 Switzerland
th
 139 :- India (out of 149 nations),
 Note:- India and some other nations complaint that
this index does not show the real condition of their
nations because this index ignores the cultural
diversity of the nations and it also takes smaller
sample sizes
Some background before starting this topic
INTERNET ADDITION FOR WHI
Just an overview as discussed earlier :-
 What is the Sustainable Development Solutions
a) DEMAND PULL INFLATION
Network?
 The SDSN, launched in 2012, mobilises global scientific and
technological expertise to promote practical problem
solving for the Sustainable Development Goals (SDGs) and
the Paris Climate Agreement.
 It was established under the auspices of the United
Nations Secretary-General.
 The SDSN and the Bertelsmann Stiftung have been
publishing the annual Sustainable Development Goals
(SDGs) Index & Dashboards Global Report since 2016.
 the World Happiness Report 2022 was published by
the United Nations Sustainable Development Solutions
Network.
th
 This year marks the 10 anniversary of the World
Happiness Report.
 What is the World Happiness Report?
 Published since 2012, the World Happiness Report is
based on two key ideas:
 Happiness or life evaluation measured through
opinion surveys and
 Identifying key elements that determine well-being
and life evaluation across countries.  Controlled by monetary policy and fiscal policy
 The report usually ranks 150 countries based on INTERNET ADDITION FOR THIS INFLATION
several factors such as real GDP per capita, social  Inflation is a general rise in the average level of
support, healthy life expectancy, freedom to make prices, sustained over time.
life choices, generosity and perceptions of  Demand-pull inflation occurs when aggregate
corruption. demand (AD) increases above the capacity of the
 This year, the report ranked 146 countries. economy to meet this demand - prices are 'pulled
 Every year, each variable measures a populated- up' by demand, rather than being 'pushed up' by
weighted average score on a scale of 0-10 that is cost increases.
tracked over a period of time and further compared  Causes of demand-pull inflation
with other countries.  Demand-pull inflation could arise from any
 This year, countries which ranked in the top 10 last increase in a component of aggregate demand,
year, moved upwards and downwards. including:

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 39

 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
a) Increases in household incomes, including  MGNREGA :- Rs. 150 + 10 Rs additional = so final
wages and other earnings goods price also increases to compensate this
b) Lower direct tax, which increases disposable increased labor cost
income and consumption  From the govts programmes like MGNREGA are
c) An increase in public spending - especially if it
also responsible for the increment in wages
is funded by increased borrowing
d) An increase in export demand, placing because MGNREGA increased wage but there
pressure on domestic firms was no increment in the production of labor
e) An increase in the money supply* which results in increment in final goods price.
f) Lower interest rates After observing the rise in final goods price
b) COST-PULL INFLATION (Also called as labours demand increment in wages
SUPPLY SIDE CONSTRAINTS)
 Controlled by fiscal policy only
 Cost pull inflation occurs when aggregate demand
remains the same but there is a decline in aggregate
supply due to external factors that cause rise in
price levels

 IMPACTS OF SUPPLY SIDE CONSTRAINTS:-

a) Hyper inflation
1. If economic growth is driven by demand side of GDP  Inflation in 2-3 digits (like 20%, 30% , 100%,
particularly due to consumption expenditure then it 150%, 750% etc)
will lead to inflation and this phenomenon is called as  Hyperinflation is when the prices of goods and
inflation growth conflict services rise more than 50% per month. It is the
2. Growth is good but associated with inflation which last stage of inflation. Examples: Germany in the
beyond a limit (4% ± 2% fluctuations) is not good for 1920s, Zimbabwe in the 2000s, American Civil
the economy. War, and Venezuela in 2018. Price rise at a very
3. If inflation is more than 6% then it will reduce the high rate (20% to 100%)
purchasing power of consumers and if inflation is less b) Stagflation in economy
than 2% then it will not provide appropriate  Means stagnation + inflation
compensation to the producer or seller  Stagnation:- Means
4. SUPPLY SIDE CONSTRAINTS  no growth in the economy
 is related to increment in overall cost of  no production
 high unemployment
production in an economy. for example
 no income
 Higher prices of crucial inputs like
 Low demand
 Crude oil :- shows fuel dependency
 Producers have less incentives they go for
 Coal:- needed for power generation further production
 Iron ore:- needed for steel production &  Inflation here means
majority of the sectors cannot survive  Hyperinflation (Inflation in 2-3 digits)
without steel  It may further lead to cost-push inflation
 Obsolete technology  SOLUTIONS
 Increase the running cost which reduces a) Contractionary monetary policy can only tackle
production and further employment demand pull-inflation not cost push inflation
 Lower agricultural production b) In case of cost push inflation monetary policy is
 It increases food inflation & even wage inflation in-effective and only fiscal policy would be
 Earlier Rs.100 labor available at rural areas + 10 effective
Rs additional cost = final goods price c) Appropriate policy needed to decrease overall
cost of production & this may lead to investment
led growth in the economy
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 40
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
d) There is a need to ensure better availability of
crucial inputs
e) Govt should put more focus on agricultural
productions as it helps in keeping food prices and
wages lower
f) There is a need to have a technological reforms
across all economic sectors to increase
productivity
A contractionary monetary policy is a type of monetary policy
that is intended to reduce the rate of monetary expansion to
fight inflation. A rise in inflation is considered the primary
indicator of an overheated economy, which can be the result
of extended periods of economic growth
5. INDIA’S GROWTH IS AN INCLUSIVE
ONE OR NOT?
 India’s growth is not an inclusive one that is
revealed through following shortcomings
a) Existence of income inequality b/w rich & poor
 According to world inequality report 2022, 1%
richest people have around 22% of the countries
income and 50% poorest of the poor have only
13% of the country’s income
 According to Credit Suisse organisation 1%
richest people have around 45% of the country’s
wealth while 50% of the poorest of the poor
have only 4% of the country’s wealth
b) Less proportion of qualitative work
 According to the economist GS Bhalla, the
problem in India is not an unemployment but
quality in employment
c) Lower Human Development
 According to latest HDI rankings, India’s
ranks 132 out of 192 nations
d) Higher Level of Hunger
 According to Global Hunger Index 2022,
India’s rank is 107 out 121 nations
e) Lower level of agricultural productivity but
more dependency on it
f) Continuous decline of agricultural share in
national income
 NOTE:- India needs inclusive growth to achieve the
overall progress of the country and attain certain targets
relating to poverty, employment, education, infrastructure,
health, women and children, gender equality, regional
equality etc.
SOME POINTS FROM INTERNET ON INCLUSIVE
GROWTH OF INDIA
 Poor rate of technology and innovation creates a burden
on capital and resource base. India's agricultural
productivity is far below to that of developed countries.
Agriculture is mainstay of the economic growth and a
source to unskilled work-force employment.
 The World Economic Forum's “Inclusive Development
Index”, ranks India 62nd out of the 74 emerging countries
when it comes to inclusive development. While India is
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
well on its path to become a $ 5 trillion dollar economy,
economic inequalities are still a reality in India, much like
many countries globally.
 REASONS WHY INDIA HAS NOT BEEN ABLE TO
ACHIEVE INCLUSIVE GROWTH IN THE ECONOMY:-
a) Growth vs. Development
 Over a period since economic reforms, India’s
economic growth has witnessed a mixed effect
on the real development.
 GDP is considered the key parameter of
economic growth. In reality, the increasing GDP
growth rate has not trickled down to the bottom
of pyramid.
 A research study carried by Indira Gandhi
Institute of Development Research, an
autonomous think-tank under Reserve Bank of
India find out that economic growth has “trickled
down” in both rural and urban areas; it has not
been in favour of the poor.
 In urban areas, growth has been “anti-poor.” BPL
and poor of the poor still remains marginalized.
Such issues are quite fundamental in nature as
they depict the lack of clarity in the vision and
strategy of the policy.
 It is time, to put the Inclusive Growth as the
central agenda of the economic growth.
b) Defining Poor
 Who are poor and who should be the
beneficiaries of the welfare schemes? Without a
proper criterion of poverty, proper policy
framework for inclusive growth cannot be
developed.
 Efforts have been put taking calorie values,
wages etc. as criteria of defining poverty line.
 The lacuna of poverty definition also impacts the
other associated areas such as employment
schemes and subsidies for the poor.
 All this have repercussions on inclusive growth.
Govt. is gung-ho on the observation the reducing
rate of poverty which has come down to the
level of 35% but the inequality has increased at
the same time.
c) Fiscal deficit
 Development schemes run by the govt. have
created a dilemma of expanding fiscal deficit.
 India’s current fiscal deficit situation has limited
the prospect of development schemes.
 India has significantly high debt to GDP ratio,
balance of trade (negative) and current account
deficit (CAD).
 Last year’s estimates were: fiscal deficit: 5.2% of
GDP; CAD: USD 92 billion; stimulus package: Rs.
1.84 lakh crore (3% of GDP). The govt. has set a
target of reducing fiscal deficit to the level of 3
per cent by 2016-17.
 Fiscal deficit also creates the problem of
inflation which in turn makes the poor even
more vulnerable.
 Increasing CAD is comparatively more
detrimental to INCLUSIVE GROWTH than fiscal
deficit.
d) Ill-effects of LPG:
41
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Liberalization, privatization and globalization of
Indian economy has ushered the poor to
vulnerability and irony.
 Liberalization and privatization have particularly
suited to the Indian private corporate, elites and
rich. Globalization has created a question of
existence in-front of small and medium
enterprises (SMEs).
 Have a look at the plight of the women
employed in the cotton fields of northern India.
Now, India’s share of textile industries in world
trade is remarkably low.
 All this have limited the growth potential and
created the problem of unemployment. The
malfunctioning of LPG in Indian scenario has
surmounted new issues viz. gender inequality
and threat to women empowerment.
e) Social-injustice:
 Government is gung-ho on their efforts of
reducing the poverty rate; even the UN’s MDG
report affirms that India’s poverty rate is
expected to fall to 22% by 2015 from 51% in
1990.
 At the same time, there are other chronicle
issues which have magnified over a period e.g.
child malnutrition.
 Poor skilling and professional competencies;
Lack women’s in mainstream economic
activities; Poor nutritional, health and
educational indicators
 A Hunger and Malnutrition Survey 2011 revealed
something shocking; in the 100 focus districts
with the poorest child development indicators,
over 40 per cent of children were underweight
and almost 60 per cent stunted.
 Regional Disparities; Inadequate infrastructure;
Social inequality and discrimination
 Citing the report, the PM lamented: the problem
of malnutrition a matter of national shame. Rich
have become richer and poor have become
poorer, marginalized are even more ignored,
also, poverty has concentrated more in
backward classes, minority, SCs and STs.
f) Infrastructure:
 Infrastructure is fundamental to the economic
and inclusive growth. In budgetary allocations,
Infrastructure is assigned the highest
expenditure. Major proportion of this allocation
goes to large projects such as power generation,
freight corridors, and airports etc.
 While rural infrastructure is immensely
neglected. In many areas, the lack of proper
infrastructure is acute.
 Major thrust of the infrastructural development
of the govt. has been from view of industrial
development. Agriculture, for an instance, has
always lacked the focus. Infrastructure to
support and facilitate backward linkages in
agriculture e.g. cold storage houses, processing
facilities, rural transport is need of the hour.
 Apart from that, the rural-urban divide in
infrastructure development has become
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
prominent.
 For a case in point, Eleventh plan recognizes
that: It is an irony that the phenomenal growth
in the telecom sector has also created a digital
divide in terms of mobile and land line
connections and Internet and broadband
connections between urban and rural India.
 The plan also highlights the dearth of rural
electrification and observes that rural
electrification an important instrument to bring
about inclusive growth by making electricity
available to farmers and in rural areas. 7.8 crore
rural households still remains un-electrified.
g) Low technology and innovation:
 Indian economy is suffering from a technology-lag vis-
a-vis developed economies and other industrialized
economies. Poor rate of technology and innovation
creates a burden on capital and resource base.
 India’s agricultural productivity is far below to that of
developed countries. Agriculture is mainstay of the
economic growth and a source to unskilled work-
force employment.
 The rapid technological development in primary
activities such as agriculture creates a question of
economic duality in front of the policy makers of the
country. This means, if a high rate of technology is
adopted in primary sector industry, then it may lead
to high rate of unemployment, but at the same time,
without technological progress, the productivity
would be less to sustain the pressure on the
economy.
 Considering this, there is an immediate requirement
of technologies such as green technology,
environmentally friendly technologies and renewable
energy technology etc. so that the pressure on
natural resources may be overcome.
 Policy makers have to address the economic duality
judiciously. Apart from that, the innovation per se is
required to be a harbinger of Inclusive Growth which
is broad sense is termed as inclusive innovation.
 Inclusive innovation means the creation and
absorption of product and services relevant to the
poor. In this case, SMEs, MSMEs and grass root
innovation enabling agencies such as National
Innovation Foundation can play a decisive role.
Finance, competency and infrastructure are the
foundation for inclusive innovation and enabler for
Inclusive Growth.
 SUSTAINABLE DEVELOPMENT:-
 BRUNDTLAND COMMISSION 1983:-
 This concept was given by Brundtland commission (a
sub-organisation of the UN:- formally known as
“World commission on environment &
development”) In its report “OUR COMMON
FUTURE-1987”
 According to the commission:- “We should use our
present natural resources in such a way that they
would be available for the future generation in
adequate quantity”.
 A similar kind of concept was also given by “Club of
Rome 1968” in its report “LIMITS TO GROWTH-1972”
under which it was said that “unlimited growth of
GDP cannot be obtained”
42
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 CONCEPTS RELATED TO SUSTAINABLE
DEVELOPMENT:-
a) ZERO GROWTH
 Under it, it is said that after observing the
population and country’s available resources, a
certain level of GDP growth can be targeted &
should be maintained for the longer period to
ensure better utilisation of natural resources &
also reduction in the overall utilisation
 In simple words, a situation in which there is no
increase in the growth or development of
something.
b) UNECONOMIC GROWTH
 This growth depends upon production of those
items which are comparatively less significant to
human life
 Example:- production of cigarettes, other
tobacco products , alcohol etc
c) REBOUND EFFECT
 It bursts the myth that technical advancement saves
natural resources, in fact technical advancements
increased productivity which further increased
income, investment, and further more exploitation of
natural resources
 The rebound effect is generally expressed as a ratio of the
lost benefit compared to the expected environmental
benefit when holding consumption constant. For instance,
if a 5% improvement in vehicle fuel efficiency results in only
a 2% drop in fuel use, there is a 60% rebound effect (since
(5-2)⁄5 = 60%).
……..10th Class ended,11th started………
 SUSTAINABLE DEVELOPMENT NEED:-
 There is a need of the proper development and the
sustainable development aims at maximising the net
benefits of economic activities subject to maintaining
to stock of productive assets (physical, human,
environmental) over time and providing social safety
network to meet the basic needs of the poor
 Sustainable development therefore attempts to
accelerate development in an environmentally
responsible manner keeping in mind the inter-
generational equity requirements { inter-
generational equity means taking care of the need of
the present generation and also of the future
generation}
 Sustainable development report 2022
th
 Started in 2015, so 2022 is 7 edition
 According to this 7
th
addition of sustainable
development report 2022 released by sustainable
development solutions network
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 India with score of 60.7 has been placed at 121 out of
163 nations (121/163)
 Finland topped the Index followed by Denmark and
Sweden
 For the first time since 2015, all countries have shown
a reversal in progress in achieving sustainable
development goals due to the covid-19 pandemic
 Status of India:-
 In 2022 global index of SDGs , India ranked 121/163
countries.
 2020:- It had ranked 117
 2021:- it had ranked 120
 India continued to face major challenges in achieving
11out of 17-SDGs which has pushed down its global
ranking on SDGs. The progress of around 10 of these
goals is similar to those in 2021
 NITI AYOG report on Sustainable
development (As per Budget 2022-2023)
 According to NITI Ayog SDGs India index 2020-21
India progressed further on achieving the SDGs.
 India’s overall score improved to 66 from 60 in 2019-
20 and 57 in 2018-19
 Number of front-runners (scoring more than 65)
increased to 22-states and UTs in 2020-21 from 10 in
2019-2022
 Kerala + Chandigarh:- top state and UT respectively
on SDGs performance in 2020-21
INTERNET ADDITION
 India is not placed well to achieve the United Nations-
mandated Sustainable Development Goals (SDG) and
its preparedness has worsened over the years in
comparison with other countries, a new report
showed.
 India’s rank in the global Sustainable Development
Report, 2022 has slipped for the third consecutive
year.
 The country continues to face major challenges in
achieving 11 of the 17 SDGs, which has pushed down
its global ranking on SDG preparedness.
 The progress in around 10 of these goals is similar to
those in 2021. These include SDG 2 on ending hunger,
SDG 3 on good health and well being and SDG 6 on
clean water and sanitation.
 But ensuring decent work (SDG 8) has become more
challenging, the report showed.
 In the 2022 Global Index of SDGs, the country ranked
121 out of the 163 countries. It had ranked 117
in 2020 and 120 in 2021.
 With eight years left to meet the global goals on
sustainable development, the country is off-track, the
trends indicated.
 Since 2015, the report has been tracking and ranking
the performance of 163 UN member states on SDGs.
 It is published by a group of independent experts at
the Sustainable Development Solutions Network
(SDSN).
 SDGs are not mentioned in the latest central or
43
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
federal budget documents of India, pointed out the
report based on a survey conducted in February
2022.
 India is on track to achieving SDG 13 on climate
action, the report mentioned. But another report
presented a grim picture.
 Preparedness to deal with climate impacts is essential
to deal with climate crisis, but the country has been
facing major challenges in this area, flagged The State
of India’s Environment in Figures, 2022 released June
2, 2022.
 The report was based of the trends revealed in NITI
Aayog’s index on SDGs.
 The seventh edition of CSE and DTE publication was
released online by Sunita Narain, director-general of
the Centre for Science and Environment (CSE) and
editor of Down to Earth.
 India’s performance on climate action — (SDG) 13 —
has slipped from 2019-2020. In 2020, the country’s
overall national score on SDG 13 was 54 (out of 100)
— a significant dip from 60 in 2019.
 This decline in India’s overall performance is primarily
due to eight states — Bihar, Telangana, Rajasthan,
Uttar Pradesh, Karnataka, Andhra Pradesh, Punjab
and Jharkhand — whose scores have dipped under
SDG 13 in the two years.
 Telangana, the state which is among the top overall
performers (rank six) in the country, has seen a dip in
its score for climate action by 23 points.
 It is second after Bihar, whose SDG 13 performance
worsened the most (by 27 points). Besides this, the
performance of 27 states / Union territories
remained off-track in SDG 13, according to the CSE
report.
 Climate action failure is the most severe global risk in
the short term and will also have the most severe
impact over the next decade, the global risks report
of the World Economic Forum alerted in January
2022
 INITIATIVES TAKEN BY THE GOVTS /
ORGANISATIONS FOR THE SUPPORT
OF SUSTAINABLE DEVELOPMENT:-
1. CARBON TAX
 India has cut subsidies and increased taxes on fossils
fuels (petrol+ Diesel) turning a carbon-subsidy regime
into to one of carbon taxation
 This has significantly increased petrol + diesel price
while reducing annual carbon dioxide emissions
 Excise duty on petrol and diesel also act as an implicit
carbon-tax by putting an effective price on emissions
 The GOI has even revised its coal Cess (to discourage
the use) from Rs.50/ton to Rs.100/ton
INTERNET ADDITION
Carbon Tax is a tax imposed on the burning of carbon-
based fuels such as coal, oil, and gas. It is the main
strategy for decreasing and ultimately eliminating the use
of fossil fuels, whose burning is causing instability and
destruction to the climate
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
2. SOVEREIGN GREEN BOND (2022-23
BUDGET)
 In 2022-23 budget Finance Minister announced that
the govt proposes to issue sovereign green bonds to
mobilise resources to build green infrastructure
 The proceeds will be deployed in Public sector
projects which help in reducing the Carbon intensity
of the economy
 The announcement is in sync with India’s
commitment to Net Zero Carbon Emission by 2070.
INTERNET ADDITION
 The budget para 103 is reproduced as below: 'As a part
of the government's overall market borrowings in
2022-23, sovereign Green Bonds will be issued for
mobilizing resources for green infrastructure.
 The plan to issue sovereign green bonds was
announced by Finance Minister Nirmala Sitharaman in
the 2022/2023 budget as a part of overall market
borrowing with the intention to use the funds to build
green infrastructure (like to install charging port
stations for EVs)
 Why in News?
 Recently, the Finance Minister in the Budget
2022 announced that the government proposes to
issue sovereign green bonds to mobilise resources for
green infrastructure.
 The proceeds will be deployed in public sector projects
which help in reducing the carbon intensity of the
economy.
 The announcement is in sync with India’s commitment
to achieving net-zero carbon emissions by 2070.
 What are Green Bonds?
 Green bonds are issued by companies, countries and
multilateral organisations to exclusively fund projects
that have positive environmental or climate benefits
and provide investors with fixed income payments.
 The projects can include renewable energy, clean
transportation and green buildings, among others.
 Proceeds from these bonds are earmarked for green
projects. This is unlike standard bonds, the proceeds of
which can be utilised for various purposes at the
discretion of the issuer.
 The international green bond market has seen
cumulative issuance worth more than USD 1
trillion since market inception in 2007.
 By the end of 2020, 24 national governments had
issued Sovereign Green, Social and Sustainability
bonds totalling a cumulative USD 111 billion dollars,
according to the London-based Climate Bonds
Initiative.
 What is the Significance of Sovereign Guarantee
to Green Bonds?
 Sovereign green issuance sends a powerful signal of
intent around climate action and sustainable
development to governments and regulators.
 It will catalyze domestic market development and
provides impetus to institutional investors.
 It will provide benchmark pricing, liquidity and a
demonstration effect for local issuers, helping to
44
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
support the growth of a local market.
 With the IEA’s World Energy Outlook 2021, estimating
that 70% of the additional USD 4 trillion spending to
reach net-zero is required in emerging/developing
economies, sovereign issuance can help kickstart these
large inflows of capital.
 What are Other Measures on Climate Action
announced in the Budget?
 The budget included several measures on climate
action such as:
 Battery swapping policy.
 Additional allocation under the PLI scheme for
manufacturing high efficiency solar modules.
 The government is introducing a new bill that aims to
provide a regulatory framework for Carbon Trading in
India to encourage penetration of renewables in the
energy mix.
 Way Forward
 Following the French Model: India can follow the
example of France which as part of the budgeting
process, assigns a green coefficient to each budget line
according to how green the expenditure is relative to
the six environmental priorities of the European
Union (climate change mitigation, climate change
adaptation, water management, circular economy,
pollution, and biodiversity).
 Harmonising Standards: One of the foremost
requirements is to harmonise international and
domestic guidelines and standards for green bonds to
develop a robust green bond market.
 Homogeneity is also required in terms of what
constitutes green investments, as varied taxonomies
would be antithetical to a cross-border green bond
market.
 Leveraging Private Sector: Appropriate capacity
building efforts for issuers in emerging markets to
spread knowledge on the benefits and related
processes and procedures pertaining to green bonds
would help in addressing the institutional barriers to
entry into this market.
3. GREEN ACCOUNTING
 It is focused on addressing deficiencies in conventional
accounts with respect to the environment.
 Integrated environment and economic accounting known
as (Green Accounting), therefore attempts at accounting
for both socio-economic performance and its
environmental effects and integrating environmental
concerns into mainstream economic planning and policies
 Green accounting is a type of accounting that attempts to
include environmental costs in business results. It has
been argued that the gross domestic product ignores the
environment, so policymakers need a revised model that
includes green accounting
4. CARBON CREDIT POINTS (CCPs)
 Reduction of 1-ton Carbon dioxide from
environment represents one finance unit called as
Carbon Credit Point
 To get that there is a need to invest in greenhouse
gas emission reduction project
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 If investment is as such that it reduces 1-ton Carbon
dioxide from environment under Clean Development
mechanism then company will get one CER (Certified
emission reduction) and i.e. called as one carbon
credit point
 CCPs can be traded.
 In India they are traded at MCX (Multi commodity
exchange)
 If a company/firm is emitting carbon dioxide more
than the standard set under Kyoto protocol, that
company can purchase the required CCPs from the
CCPs surplus company at MCX
INTERNET ADDITION
 Why in News?
 The Ministry for Power, New & Renewable Energy is
taking steps to establish a Carbon Credit Market to
help the country meet its Nationally Determined
Contributions (NDC).
 What are the Carbon Markets?
 Carbon Credits:
 A carbon credit (also known as carbon offset) is
a credit for greenhouse emissions reduced or
removed from the atmosphere by an emission
reduction project, which can be used by governments,
industry, or private individuals to compensate for the
emissions they generate elsewhere.
 Those that cannot easily reduce emissions can still
operate, at a higher financial cost.
 Carbon credits are based on the "cap-and-
trade" model that was used to reduce sulphur
pollution in the 1990s.
 One carbon credit is equal to one metric ton of carbon
dioxide, or in some markets, carbon dioxide equivalent
gases (CO2-eq).
 Negotiators at the Glasgow COP26 climate change
summit in November 2021 agreed to create a global
carbon credit offset trading market.
 The Kyoto Protocol provides for three
mechanisms that enable countries, or operators in
developed countries, to acquire greenhouse gas
reduction credits:
 Under Joint Implementation (JI), a developed
country with relatively high costs of domestic
greenhouse reduction would set up a project in
another developed country.
 Under the Clean Development Mechanism
(CDM), a developed country can “sponsor” a
greenhouse gas reduction project in a developing
country where the cost of greenhouse gas
reduction project activities is usually much lower,
but the atmospheric effect is globally equivalent.
The developed country would be given credits for
meeting its emission reduction targets, while the
developing country would receive the capital
investment and clean technology or beneficial
change in land use.
 Under International Emissions Trading
(IET), countries can trade in the international
carbon credit market to cover their shortfall in
45
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
Assigned Amount Units (AAUs). Countries with
surplus units can sell them to countries that are
exceeding their emission targets under Annex B of
the Kyoto Protocol.
 Carbon Markets:
 A carbon market turns emission reductions and
removals into tradeable assets, thus creating
incentives to reduce emissions or improve energy
efficiency. The carbon markets can be compliance and
voluntary.
 Carbon trading started formally in 1997 under
the United Nations’ Kyoto Protocol on climate
change which had more than 150 nation signatories.
 Parties with commitments under the agreement
agreed to limit or reduce their greenhouse gas
emissions between 2008 – 2012 to 5.4% which were
well below the levels of 1990.
 Emissions trading, as set out in the Kyoto Protocol,
allowed countries to sell the excess capacity of
emission units to countries that had levels well over
their targets.
 What is the Significance of Carbon Markets?
 Carbon markets will open up new avenues for
organizations that are engaged in developing, trading
and consulting carbon credits, while stunting the
growth of fossil-fuel generation capacities.
 Carbon credits will help developing countries like India
carry out economic activities, while keeping the
country’s carbon goals in perspective.
 In 2021, the global carbon credits market rose by
164 % and is expected to cross USD 100 billion by
2030.
 Carbon credits offer a way to reward the industries
and other sectors that have developed practices
involving technological innovations to reduce
emissions and achieve climate targets.
 Carbon markets will play a key role in the drive
towards decarbonisation, encouraging the reduction
of emissions through various schemes in the short
term with an ultimate goal of achieving Net Zero in the
long term.
 Carbon markets are one of the most effective drivers
of reducing emissions, offering the lowest-cost
emission reductions and enabling India to avert a loss
of USD 35 trillion.
 What are the Indian Emission Targets?
 India submitted its updated NDCs under the Paris
Agreement to the United Nations Framework Convention on
Climate Change (UNFCCC) in August 2022, in which it
stressed the fact that it is a step ahead in achieving the long-
term goal of Net Zero in 2070.
 Under the updated NDCs, India is committed to reducing the
emissions intensity of its gross domestic products by 45 %
from 2005 levels by 2030 and achieving 50 % of its
cumulative electric power installed capacity from non-fossil
fuel sources of energy by 2030.
 The country is working on expanding its supply chain in the
solar manufacturing division.
 What are the Related Indian Initiatives?
a) PLI Scheme:
 Diversification of the supply chain by introducing a
production linked incentive scheme for
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
the manufacturing of polysilicon cells into modules.
b) Clean Development Mechanism:
 In India, the clean development mechanism under the
Kyoto Protocol provided a primary carbon market for
the players.
 The secondary carbon market is covered by
the perform-achieve-trade scheme (which falls under
the energy efficiency category) and the renewable
energy certificate.
c) Energy Conservation (Amendment) Bill, 2022:
 Empowers the Centre to specify norms and standards
of energy efficiency for appliances, industrial
equipment and buildings with a connected load over
100 kiloWatts (kW) or a contractual demand of more
than 120 kilovolt-amperes (kVA).
 Way Forward
 India is on the path to establishing a carbon market at
the national level beginning with the voluntary carbon
market and then moving on to a compliance-based
market.
 The effects of climate change reduction should be
favorable to sectors such as renewable energy, energy
efficiency, transportation, waste, afforestation and
reforestation.
 The carbon credits market favoured by appropriate
regulations and policy will help in the creation of
suitable opportunities for the next decade.
 Prelims
 Q. The concept of carbon credit originated from which
one of the following? (2009)
(a)Earth Summit, Rio de Janeiro
(b) Kyoto Protocol
(c) Montreal Protocol
(d) G-8 Summit, Heiligendamm
Ans: (b)
 Q. Regarding “carbon credits”, which one of the
following statements is not correct? (2011)
 (a) The carbon credit system was ratified in
conjunction with the Kyoto Protocol
(b) Carbon credits are awarded to countries or groups
that have reduced greenhouse gases below their
emission quota
(c) The goal of the carbon credit system is to limit the
increase of carbon dioxide emission
(d) Carbon credits are traded at a price fixed from time
to time by the United Nations Environment
Programme.
Ans: (d)
 Mains
a) Q. Should the pursuit of carbon credits and clean
development mechanisms set up under UNFCCC be
maintained even though there has been a massive
slide in the value of a carbon credit? Discuss with
respect to India’s energy needs for economic
growth. (2014)
b) Q. Discuss global warming and mention its effects on
the global climate. Explain the control measures to
bring down the level of greenhouse gases which cause
global warming, in the light of the Kyoto Protocol,
1997. (2022)
46
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 SOME ADDITIONAL EFFORTS TO SUPPORT
SUSTAINABLE DEVELOPMENT:-
a) SPV (special purpose vehicle for afforestation)
 It is a temporary company formed under New
Company Act-2013 to complete environmental/
infrastructural projects
 After the completion of the projects this SPV is
discontinued
 A Special Purpose Vehicle is being set up jointly by
NTPC and other Central Power Sector Undertakings
as a Registered Society to take up afforestation and
environmental measures in order to reduce the
carbon dioxide in the atmosphere
b) Fly ash utilisation action plan:- The National Green
Tribunal (NGT) directed the constitution of a 'Fly Ash
Management and Utilisation Mission' in its order dated
January 18, 2022. The Mission's primary goal will be to
'coordinate and monitor issues relating to the handling
and disposal of fly ash and associated issues.
c) Clean development mechanism:- The Clean
Development Mechanism (CDM), defined in Article
12 of the Protocol, allows a country with an emission-
reduction or emission-limitation commitment under
the Kyoto Protocol (Annex B Party) to implement an
emission-reduction project in developing countries
 INITIATIVES FOR IMPROVING THE
ENVIRONMENTAL PERFORMANCE OF COAL
BASED STATIONS
a) NTPC 18 stations have been accredited with ISO-
14001 certification
 ISO-14001 certification is the international standard
that specifies requirements for an effective
environmental management system
b) Green climate fund (GCF):- was created to support
the efforts of developing countries in responding to
the challenges of climate change
 GCF established by 194 govts to limit or reduce GHG
emission in developing nations and to help vulnerable
societies to adapt to the unavoidable impacts of
climate change
 Mains question:- Explain inter-generational
and intra-generational perspective of
inclusive growth and sustainable
development.
 Inter-generational equity
 The principle of Rio-Declaration mentioned about
the concept of inter-generational equity
 It states that development must be done in such a
manner as it equally meets the environmental and
developmental needs or the present as well as of the
future generations
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 The main objective of this principle is to make sure
that the rights of the future generations upon the
non-renewable resources must be ensured
 Intra-generational equity
 It provides a root to the principle of common but
differentiated responsibility and respective
capabilities where states have a shared responsibility
to protect the environment and it is also the
obligation of developed countries to take notice of
the needs and priorities of present generation of
developing countries
INTERNET ADDITION ON SUSTAINABLE
DEVELOPMENT
 WHY IN NEWS
 NITI Aayog has released the second edition of the
Sustainable Development Goals (SDGs) India
Index (SDG Index 2.0).
 The index documents the progress made by India’s
States and UTs towards achieving the 2030 SDG
targets.
 2020 will be the 5th anniversary of the adoption of
SDGs by the United Nations (UN).
 WHAT IS SUSTAINABLE DEVELOPMENT?
 ‘Development which meets the needs of the present
without compromising the ability of future
generations to meet their own needs’.
 This most widely accepted definition of Sustainable
Development was given by the Brundtland
Commission in its report Our Common Future (1987).
 Sustainable development (SD) calls for concerted
efforts towards building an inclusive, sustainable and
resilient future for people and planet.
 SUSTAINABLE DEVELOPMENT NEED:-
a) Overexploitation of Natural Resources
 1 million species on track for extinction.
 The decline of more than 60% of the world's marine
fisheries
b) Climate Change
 Increase in atmospheric temperature and extreme
weather events.
 Rising Sea-Levels: Extinction threat to Small Island
nations due to climate change.
c) Scarcity of Resources
 Food production needs to double over the next 40
years at a time when almost 23% of the world's
agricultural land has been degraded.
 Nearly 2/3rd of the world's population will be living in
water-scarce/water- stressed areas by 2025.
 CORE ELEMENTS OF SUSTAINABLE
DEVELOPMENT
 Three core elements of sustainable development are
economic growth, social inclusion and
environmental protection. It is crucial to harmonize
them.
 Sustainable economic growth, achieving sustainable
livelihood, living in harmony with
nature and appropriate technology are important for
47
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
sustainable development.
 Environmental Sustainability:
a) It prevents nature from being used as an
inexhaustible source of resources and ensures
its protection and rational use.
b) Aspects such as environmental
conservation, investment in renewable energy,
saving water, supporting sustainable
mobility, and innovation in sustainable
construction and architecture, contribute to
achieving environmental sustainability on several
fronts.
 Social Sustainability:
 It can foster gender equality, development of
people, communities and cultures to help
achieve a reasonable and fairly-distributed
quality of life, healthcare and education across
the Globe.
 Economic Sustainability:
 Focuses on equal economic growth that
generates wealth for all, without harming the
environment.
 Investment and equal distribution of economic
resources.
 Eradicating poverty in all its forms and
dimensions.
 INTEGRATION OF SCIENTIFIC AND
TRADITIONAL KNOWLEDGE
 If the people are able to contribute their local resources
and practices into the process of change, the development
becomes not only sustainable but also gets accelerated.
 Combined traditional and scientific knowledge is
called community knowledge. Moving towards SD in many
areas will require community knowledge.
 Indigenous knowledge is also a potential source for the
conservation of biodiversity.
 Significance of traditional knowledge has been recognised
in India through initiatives such as National Ayush Mission
(NAM) and the Traditional Knowledge Digital Library
(TKDL).
 GLOBAL ISSUES RELATED TO SUSTAINABLE
DEVELOPMENT
 Inequitable growth of national economies (North-
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
South Divide)
 Loss of Biodiversity: Despite mounting efforts over
the past 20 years, the loss of the world’s biodiversity
continues.
 Climate Change: As a global problem, climate change
requires a global solution. Within climate change,
particular attention needs to be paid to the unique
challenges facing developing countries.
 Tackling climate change and fostering sustainable
development are two mutually reinforcing issues.
 Intellectual Property Rights (IPRs): There is a need
for welfare for all rich and poor to have affordable
access to the results of innovation that can lead to
sustainable development.
 GLOBAL INITIATIVES ON SUSTAINABLE
DEVELOPMENT
 The Stockholm Conference,1972: It was the first
step towards putting environmental concerns on the
global agenda.
 It resulted in the Stockholm Declaration which
contained principles and an Action Plan containing
recommendations for environmental policy.
 UNEP was set up in 1972 to serve as a catalyst in
developing and coordinating an environmental focus
in the programmes of other organisations.
 The Earth Summit, 1992: This was a direct
consequence of the Brundtland Commission’s
Report. It was held in Rio de Janeiro. The results of
the Conference were the following documents:
 The Framework Convention on Climate
Change (UNFCCC)
 The Convention on Biological Diversity
 The Statement on Forest Principles
 The Rio Declaration
 Agenda 21
 Kyoto Protocol,1997
 Rio +10, 2002: A 10-year assessment of the Rio
outcomes (Rio +10) took the shape of the World
Summit on Sustainable Development (WSSD) held
in Johannesburg.
 Ramsar Convention, 1971
 The World Heritage Convention, 1972: It identifies
and conserves the world’s cultural and natural
heritage. It draws up a list of ‘heritage sites’, which
are cultural, natural or mixed areas of ‘outstanding
universal value’ and therefore need to be preserved
for all humanity.
 Convention on International Trade in Endangered
Species of Wild Fauna and Flora (CITES), 1973
 Convention on the Conservation of Migratory
Species of Wild Animals (CMS), 1979
 Vienna Convention for the Protection of the Ozone
Layer, 1985
 Montreal Protocol on Substances that Deplete the
Ozone Layer, 1987
 Basel Convention, 1989
 Convention on Biological Diversity,1992
 United Nations Convention to Combat
Desertification,1994
 Rotterdam Convention,1998
 Stockholm Convention on Persistent Organic
Pollutants,2001
48
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Global Tiger Forum,1993
 International Whaling Commission,1946
 Minamata Convention,2013
 Climate change mitigation strategies: Carbon
sequestration, Carbon sink, Carbon Credit, Carbon
trading, Carbon offsetting, Carbon Tax, Geo-
engineering.
 United Nations Environment Programme (UNEP)
 UN Commission on Sustainable Development (CSD)
 United Nations Convention on the Law of the Sea
(UNCLOS)
 Climate Finance Architecture: Green Climate Fund
(GCF), Adaptation Fund (AF) and Global Environment
Facility (GEF)
 Reducing Emissions from Deforestation and Forest
Degradation (REDD) and REDD+
 Paris Agreement 2015
 The Clean Development Mechanism is a way to
reduce greenhouse gases(GHGs ) emissions through
efficient and sound technologies.
 Global Alliance for Climate-Smart Agriculture
(GACSA)
 Partnership for Action on Green Economy (PAGE)
 Sustainable Development Goals (SDGs):
 To bring sustainable development in the
mainstream United Nations (UN) launched the
2030 Agenda for Sustainable Development and
SDGs.
 This universal, integrated and transformative
agenda aims to spur actions that will end poverty
and build a more sustainable world over the next
15 years.
 There are 17 goals and 169 targets specific
targets to be achieved by 2030. Reaching the
goals requires action on all fronts – governments,
businesses, civil society and people everywhere
all have a role to play.
 SDGs are not legally binding.
 The 17 sustainable development goals (SDGs)
to transform our world:
1. GOAL 1: No Poverty
2. GOAL 2: Zero Hunger
3. GOAL 3: Good Health and Well-being
4. GOAL 4: Quality Education
5. GOAL 5: Gender Equality
6. GOAL 6: Clean Water and Sanitation
7. GOAL 7: Affordable and Clean Energy
8. GOAL 8: Decent Work and Economic Growth
9. GOAL 9: Industry, Innovation and Infrastructure
10. GOAL 10: Reduced Inequality
11. GOAL 11: Sustainable Cities and Communities
12. GOAL 12: Responsible Consumption and
Production
13. GOAL 13: Climate Action
14. GOAL 14: Life Below Water
15. GOAL 15: Life on Land
16. GOAL 16: Peace and Justice Strong Institutions
17. GOAL 17: Partnerships to achieve the Goal
 ROADBLOCKS TO GLOBAL INITIATIVES
 To reconcile the assertion of ‘sovereignty’, by the
member states with the growing environmental
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
interdependence and the need for concerted action.
 For ex: Overcoming the North-South divide is
one of the major hurdles facing the international
environmental protection regime.
 The ‘North’ world has just over 20% of the world
population but consumes 80% of the world’s
energy; on the other hand,
the ‘South’, comprising of the developing nations
of the world is still struggling to provide for the
basic needs for its population.
 Methods/ways to monitor and regulate global
commons (Oceans, Space and Antarctica). Being
nobody’s property may act as a disincentive for
protection.
 REGIONAL INITIATIVES
 Regional mechanisms are effective means for
addressing trans-boundary issues such as
atmospheric pollution and pollution of shared rivers
and water bodies, which nations are unable to solve
on their own. Regional mechanisms involve fewer
transactional costs, are less time-taking and have
higher chances of success.
 The European Union (EU): It enforced certain
environmental principles viz., preventive
principle, subsidiarity principle, integrative
principle, the polluter pays principle etc.
 ASEAN has numerous environmental legal
instruments.
 SAARC adopted Environment Action Plan (1997):
 Comprehensive Framework on Disaster
Management 2006-2015 was adopted in
2006 to address the specific needs of
disaster risk reduction and management in
South Asia.
 SAARC Convention on Cooperation on
Environment has been ratified by all
member states and entered into force in
2013.
 COMMUNITY INITIATIVES
 A significant initiative towards sustainable
development comes directly from the community
level. NGOs create linkages between global and local
needs and actors. They have played a role in
negotiation, monitoring and implementation of
environmental law and policy at all levels.
 IUCN, 1948 has helped draft or has provided a
secretariat for several important international
conventions.
 National Greenhouse Gas Inventories
Programme (IPCC-NGGIP)
 The WWF has played a major role in the
evolution of the international conservation
movement.
 TRAFFIC: The Wildlife Trade Monitoring
Network,1976
 Wetlands International
 Greenpeace uses
research, lobbying and diplomacy as well as
high-profile, ‘on-the-streets’ events, to draw
attention to the environmental problems and to
raise the level and quality of public debate.
49
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 In India, Biodiversity Act, 2002 is almost
completely built on inputs from a network of
NGOs working across the country.
 Similarly, the Chipko Movement and Save the
Silent Valley Movement were results of
community efforts.
 ROLE OF COOPERATIVES IN SUSTAINABLE
DEVELOPMENT
 Cooperative societies connect the people at the
grassroots level to the highest level of the
government.
 Cooperatives and NGOs help considerably in the
upliftment of the socio-economic conditions of the
rural poor and also adopt environment-friendly
technologies for their functioning and generate
awareness among people regarding environmental
issues.
 Ex: In India, AMUL became the most successful
cooperative movement for the sustainable
development of rural poor by launching
the Operation Flood.
 PROGRESS AND CHALLENGES AHEAD
a) Progress
As per the Sustainable Development Goals Report,
2019
Extreme poverty has declined considerably.
 The under-5 mortality rate fell by 49 % between 2000
and 2017.
 Immunizations have saved millions of lives.
 The vast majority of the world’s population now
has access to electricity.
 Countries are taking concrete actions to protect our
planet: marine protected areas have doubled since
2010.
 Countries are making concerted efforts to address
illegal fishing.
 186 parties have ratified the Paris Agreement on
climate change, and almost all have communicated
their first nationally determined contributions.
 About 150 countries have developed national
policies to respond to the challenges of rapid
urbanization, and more than 70 countries and the
European Union now have more than 300 policies
and instruments supporting sustainable consumption
and production.
 A wide range of other actors—international
organizations, businesses, local authorities, the
scientific community and civil society—have engaged
with the SDGs in a manner that generates great hope
for the coming decade.
b) Challenges
As per the Sustainable Development Goals Report,
2019
 Increasing inequality among and within countries
requires urgent attention.
 3 out of every 4 stunted children live in Southern Asia
and sub-Saharan Africa.
 Young people are more likely to be unemployed than
adults.
 Barriers in achieving gender equality.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Global hunger has been on the rise after a prolonged
decline.
 Extreme poverty declined from 36% in 1990 to 8.6%
in 2018, but the pace of poverty reduction is starting
to decelerate as the world struggles to respond to
entrenched deprivation, violent conflicts and
vulnerabilities to natural disasters.
 Extreme poverty is three times higher in rural areas
than in urban areas.
 2018 was the fourth warmest year on record. Levels
of CO2 concentrations continued to increase in 2018.
 Natural environment is deteriorating at an alarming
rate.
 Sea levels are rising.
 Ocean acidification is accelerating. Ocean acidity is
26% higher than in pre-industrial times.
 1 million plant and animal species are at risk
of extinction.
 Land degradation continues unchecked.
 VARIOUS METHODOLOGIES HAVE BEEN
EVOLVED TO MONITOR THE PROGRESS OF
SDGS.
a) Sustainable Development Index (SDI), 2019
 It is released by the Sustainable Development
Solutions Network (SDSN).
 The SDI seeks to help countries identify gaps that
must be closed in order to achieve SDGs by 2030 and
to identify priorities for early action.
 India ranked 115 out of 162 countries.
b) Global Sustainable Development Report
(GSDR), 2019
 It is the first GSDR prepared by the United Nations. It
is entitled “The Future is Now: Science for Achieving
Sustainable Development”.
 It evaluated progress on the 2030 Sustainable
Development Agenda.
 The report finds that the current development model
is not sustainable, and the progress made is in danger
of being reversed through worsening social
inequalities and potentially irreversible declines in
the natural environment that sustains us.
 The amount of modern renewable energy in the total
global energy supply has increased by an average of
approx. 5% annually over the past decade.
Meanwhile, since 2009 the price of renewable
electricity (solar and wind) has dropped for five years
in a row.
 WAY FORWARD
 To make the process of sustainable development
feasible and operational, it is important to establish a
common focus that can integrate the outlook and
efforts of various participants in
development, worldwide, realising the diversity, in
terms of geography, society, economics, level of
science and technology capabilities and capacities
and education standards/levels.
 Developed countries need to change their
production and consumption patterns, including by
limiting the use of fossil fuels and plastics, and to
encourage public and private investments that align
with the SDGs.
50
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Environmental commons—such as the atmosphere,
rainforests and oceans—must be safeguarded as
crucial sources of ecosystem services and natural
resources. All stakeholders must work together to
conserve, restore and sustainably use natural
resources.
 The food system must undergo widespread changes
to the infrastructure, cultural and societal norms, and
policies that are supporting the current,
unsustainable, status quo.
 The much deeper, faster and more ambitious
response is needed to unleash the social and
economic transformation needed to achieve our 2030
goals.
 A far more optimistic future is still attainable only by
drastically changing development policies, incentives
and actions.
 EMPLOYMENT & UNEMPLOYMENT
HANDOUT MATERIAL
 WHAT IS EMPLOYMENT AND
UNEMPLOYMENT?
 There are a few technical terms needed to
understand what employment and unemployment
is:
a) Workforce – The number of people who are
willing, able and of age to work in an economy.
b) Employed – People who are in work
c) Unemployed – People who are willing, able and of
age to work but are not currently employed.
d) The level of employment – The level of
employment refers to the number of people who
are in work.
e) The rate of employment – The rate of
employment refers to the proportion of people who
are working relative to the workforce of the
economy.
f) The level of unemployment – The level of
unemployment refers to the number of people who
are out of work
g) The rate of unemployment – The rate of
unemployment refers to the proportion of people
who are not working relative to the workforce of
the economy.
 UNEMPLOYMENT VS
UNDEREMPLOYMENT
 Underemployment is when individuals are
employed but they are not given enough hours to
earn a wage they want/expect given their
qualifications.
 For example, a worker running an ice-cream van
may not be able to work every day due to the
weather and therefore they might have to work
another job to make up his income.
 Underemployment is important because it exposes
misleading unemployment figures.
 An example of this is during the 2008 Financial Crisis
where, although unemployment rose, it did not
seem as much as past recessions (Tech Bubble etc)
however, underemployment skyrocketed by 50%.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Given Types:-
a) Voluntary
b) Involuntary
c) Frictional
d) Disguised
e) Structural
f) Cyclical
g) NRU (Natural rate of unemployment)
 VOLUNTARILY UNEMPLOYMENT
 Under it, works are available but people don’t do the
work, it may be because of
a) Persons are unwilling to do the work
b) Job profile is not matching with the educational
qualification in voluntarily
 It is a situation when a person is unemployed not
due to unavailability of jobs in the economy, but
because of not being able to find employment of
his/her own choice.
 INVOLUNTARILY UNEMPLOYMENT
 Under it persons are able to do and willing to do the
work but works are not available
 Involuntary unemployment occurs when a person is
unemployed despite being willing to work at the
prevailing wage. It is distinguished from voluntary
unemployment, where a person refuses to work
because their reservation wage is higher than the
prevailing wage.
 FRICTIONAL UNEMPLOYMENT –
 Kind of temporarily unemployment which is caused
due to innovation at the working place or shifting of
Job
 When a person loses their job quickly moves onto
another job, this is known as frictional
unemployment. It is short term and there will always
be frictional unemployment in most economies, and
it is not seen as a dangerous problem.
 DISGUISED UNEMPLOYMENT
 Under It, people are employed more than the
requirement. The marginal productivity of additional
labour is zero
 Disguised unemployment is unemployment that
does not affect aggregate economic output. It occurs
when productivity is low and too many workers are
filling too few jobs. It can refer to any part of the
population that is not employed at full capacity
 STRUCTURAL UNEMPLOYMENT –
 Unemployment caused due to shifting of structure of
production from one sector to another for example
from primary to secondary to tertiary sectors
 It is because of lack of skills and education , the
workers of previous sectors would become
unemployed called as structural unemployment
51
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 Structural unemployment occurs when the demand
of labour is less than the supply of labour in a specific
labour sector. An example of this is when steel
factories were moving overseas, away from Britain, it
caused unemployment because the demand of
labour was reduced.
 CYCLICAL UNEMPLOYMENT –
 It Occurs due to fluctuations in trade cycle
b) Fictional unemployment – When a person loses their
job quickly moves onto another job, this is known as
frictional unemployment. It is short term and there will
always be frictional unemployment in most economies, and
it is not seen as a dangerous problem.
c) Cyclical unemployment – Most economies and
businesses go through cycles of high growth and periods of
slowdowns. During the slowdown phase, where profits and
revenues are falling firms will choose to make workers
redundant to offset the losses/decrease in profits.
d) Seasonal unemployment – Many people may work in
industries which offer jobs on a seasonal basis. An example
of this is a person working at a ski resort where, for the
most part of the summer, they would have no job as the ski
resort is not open, hence they will be laid off
 DIAGRAMS TO SHOW UNEMPLOYMENT
 We can use the PPF to show unemployment. The PPF below
shows that at point B there is unemployment because there
is an inefficient allocation of resources because point B is
inside the PPF. At point A there is no unemployment as it
lies on the PPF.

 It occurs during the period of recession and

depression
 Most economies and businesses go through cycles of
high growth and periods of slowdowns. During the
slowdown phase, where profits and revenues are
falling firms will choose to make workers redundant
to offset the losses/decrease in profits.
 SEASONAL UNEMPLOYMENT –
 Many people may work in industries which offer jobs
on a seasonal basis. An example of this is a person
working at a ski resort where, for the most part of the
summer, they would have no job as the ski resort is
not open, hence they will be laid off
 EMPLOYMENT DEFINITION:-
 Engagement in an economic activity is called as
employment (this economic activity must contribute
to GDP)
 FULL EMPLOYMENT DEFINITION:-
 All those willing and able to do work Must satisfy
these two conditions
a) They get work for specified time period
b) They get wages according to their skills
 UNDER EMPLOYMENT:-
 it means lack of full employment or also either of the
above two conditions are not satisfied
HAND-OUT MATERIAL
 CAUSES OF UNEMPLOYMENT
 There are many causes of unemployment. The following are
the main reasons why people are unemployed:
a) Structural unemployment – Structural unemployment
occurs when the demand of labour is less than the supply
of labour in a specific labour sector. An example of this is
when steel factories were moving overseas, away from
Britain, it caused unemployment because the demand of
labour was reduced.
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 52
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 EFFECTS OF UNEMPLOYMENT? c) Unskilled Labour:- it is because of lack of required
 Unemployment effects three different groups:
a) Consumers –
 Consumers will have lower incomes and therefore
living standards will fall. However, there are many
other non-financial related repercussions of
unemployment such as a decline in morale among
consumers and further problems for families.
b) Government –
 Governments will have to pay more in benefits and
will take in less tax in order to encourage spending to
try and stimulate the economy. However, in order to
run a deficit the government must sell bonds which
reduces the PPP in the future when they have to pay
back the bond owners.
c) Firms –
 Because people are unemployed, firms will find that
consumers will spend less. This may cause firms to
reduce prices which could reduce revenue unless the
increase in demand can offset the loss in revenue due
to lower prices.
 In conclusion, the distinction between
unemployment and underemployment is important
to understand because the rate of unemployment
may be misleading like during the 2008 Financial
Crisis. Furthermore, there many reasons why
unemployment can take place, some can be very
harmful to an economy and can have long-term
implications, and some causes of unemployment
occur due to the natural cycle of an economy.
 OCCUPATIONAL STRUCTURE
 The occupational structure of a nation refers to the
percentage of its workforce employed in various economic
ventures.
sector % share in employment % share
GDP
Primary 50% 15%
Secondary 16% 21%
tertiary 34% 64%
 QUESTIONS RELATED TO TABLE:-
 Normally the share in GDP and Share in
employment should be correlated but it is
reversed in India. Why?
a) Disguised unemployment:- under it, people are
employed more than the requirement. Additional
contribution keeps on decreasing and becomes nil
and person’s additional contribution is zero so
person seems employed but contributes zero to
production, so his share in income (GDP) is negligible
b) Dependent on family labour:- especially in
agricultural sector there is more dependency on
family labour , less people will go for skill
development which reduces their productivity and
share in income
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
skills , labours don’t get formal wages so their
remuneration (payment) depends upon the
bargaining power of the employers who always wants
to pay less
d) Construction as a part of tertiary sector:- many
countries/economists incudes construction
sector under secondary sector but in India it is
included under tertiary sector because of this
share of secondary sector declines and tertiary
sector increases
 India witnessed shifting of occupational
structure from primary sector to tertiary
sector while secondary sector almost
remained untouched, discuss ?
a) Most of the jobs initially were in the agricultural
sector
 Temporarily shifted to secondary sector but its
survival also depends upon the service sector like
 For funds :- banking sector is needed
 To carry raw materials and final goods –
transportation service needed
 To get in information about raw materials , final
goods market and export market –
communication service need
b) Apart from the above factors, in tertiary sector there
is a surety of wages/ salaries / Job security along with
good reputation which is lacking in primary sector
and even in the secondary sector.
c) Lack of fund availability and ease of doing business
are also responsible for not preferring secondary
in
sector and shifted to tertiary sector
 INDICATORS OF EMPLOYMENT &
UNEMPLOYMENT:-
a) Labour force
 Refers to that part of population which is willing and
able to do the work
 Labour force :- Employed + Unemployed
 Work force:- only employed
 Total Population:- Labour force + VU + T.P
b) Labour force participation rate
 LFPR:- {(Labour force÷ total population) ×100}
c) Worker population ratio
 {(Number of employed persons (WF) ÷ total
population)× 100}
d) Unemployment persons ratio
 {(Number of Unemployed persons ÷ total
population)× 100}
e) Unemployment rate
{(Number of Unemployed persons ÷ Labour

force)× 100}
53
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 TRENDS OF EMPLOYMENT INDIA  WHY INDIA’S GROWTH IS
Phase
st
Period Employment growth rate (EGR) CONSIDERED AS A JOBLESS ONE?
1 1983-94 2.72%  {Jobless in itself means negative term, so examiner
nd
2 1995-2000 1.07% = Jobless Growth wants the question to be critically analysed}
rd
3 2000-05 2.62%
4
th
2005-10 0.40%
 Answer:- There are two dimensions of it
5
th
2011-21 0.39% A. INDIA DOESN’T NEED TO WORRY
st a) Demographic dividend:-
A. PHASE -1
 In India:- 15-59 years:- working population. 15-35
 Witnessed more employment because of more
years:- younger working population (India has this
govt expenditure which increased jobs population more). Just their skill development is
 Govt expenditures like needed, this will continue till 2030 means positive
 NREP:- National Rural Employment Programme - return will come till 2030. LFPR (labour force
1980 participation rate) decreased from 47% to 40%
representing more people are getting job. (However
 IRDP:- Integrated Rural Development
FLFPR is declining, it is 9.4%). According CMIE dec
Programme-1980 2021 report, for household activities women
 Another reason for more employment was more contribute 5 hours while male only 30 minutes
availability of labour intensive work representing MLFPR is high that is 67.4%
 Between 1998-2017, India witnessed fall in LFPR
B. PHASE-2nd JOBLESS GROWTH PERIOD (labour force participation rate) but it was
 Called as jobless period growth because of less because of decline in female LFPR (9.4% FLFPR)
govt expenditure on job creation while the male LFPR was still on rise (MLFPR=
 Economic crisis in some Asian Nations like 67.4%). According to the report of CMIE dec
Thailand also reduced investments in the 2021 (Center for monitoring Indian economy)
country but demographic dividend was positive and will
remain positive till 2030
 Also most of the govt initiatives during economic
 Positive returns from demography can be
reforms (1990) ignored agriculture sector where ensured through better education, better health
most of the jobs are created care, better skill development, creation of
 Reforms focused on “Capital intensive productive works
Production”, policies announced before 1991 b) Mechanisation of agriculture
were still working  This reduces labour requirements especially female
labours but this has increased production and GDP
 Policies announced under economic reforms which is good for the economy. Only there is a need
started showing results after the year2000 of a policy which combines both capital intensive
because every reform takes time to show a technology and labour intensive technology based
positive result production to accommodate more people
c) Decline in FLFPR (Female labour force
C. PHASE 3rd participation rate)
 New economic policies started showing positive  The proportion of FLFPR can be increased through
results. Export also increased and more foreign proper awareness and education programs
investors increased production in secondary and B. SOME GENUINE REASONS TO WORRY
tertiary sector a) Change in occupational structure
 Although Public sector role declined but private  There is a decline in employment in agriculture due to
mechanisation.
sector role inclined  There is also a decline in employment in industry
 LPG started showing positive effects on employment sector because of capital intensive technology and
 Govt expenditure in the forms of programmes like also because of less incentives given by government
MGNREGA increased and promoted jobs further b) Less share of tertiary sector
D. PHASE 4th & 5th  The tertiary sector contributes the largest to the
overall GDP of India. However, the job creation by
 India reached to its saturation point with the this sector are mostly of formal type due to which
available resources and economic policies inclusion of informal workforce in this sector is
 Now there is a need of new set of economic reforms reduced
to lift this proportion of employment again c) Non-transition to export oriented growth
 Indian did not transit itself from an import
……..11th Class ended,12th started………
substitution to an export oriented development

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 54

 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
based nation. As a result the labour intensive
component of the industrial sector didn’t experience
considerable growth
d) Lack of credit to MSME
 Although the MSME has high labour but they are not
treated well in India as they have poor access to
credit
 According to economic survey of 2022-23, although
credit to MSME sector increased by 30.5% but there
is a need to give more focus on micro sector
 Economic survey 2022-23 further says that the GST
collection increased from 4.5lakh crore in 2019 to 5.5
lakh crore in 2022 which shows that economic
activities have increased but the sector needs more
support in terms of credit to contribute more in
employment
e) Strict labour laws
 Earlier it was under the labour laws that if a contract is for
120 days or more then industrialist will have to provide all
regular worker facilities as a result less than 120 days’ work
at the contract based on that were being created
 Also if an industrialist unit has 100 or more workers then
they need govt authorisation to fire them. So industrialist
use to appoint or hire less than 100 workers to avoid
regulations
f) Industrial dispute Act 1947 (IDA-1947)
 Any dispute b/w worker and industrialist could be
settled by three ways
a) Mutual talks
b) Labour tribunals
c) Judiciary
 Most of the ideal cases are resolved through judiciary
but most of the verdicts are in the favour of workers.
Because of this employers take utmost care in
employing a person which is itself promotes jobless
growth
 WAY FORWARD: MEASURES TO
AVOID JOBLESS GROWTH
a) Need of start-ups
 There is a need of start-ups in both industry and
service sector because start-ups are job creators and
they have potential to accommodate more and more
people
b) Service employment:-
 Some of the assignment based workers like Gig
workers, platform workers also contribute in jobs, so
there is a need to regularise them
c) Creating labour intensive sector
 Promoting labour intensive sector such as food
processing, textiles and upper ell
d) Removing capability deprivation
 This can be done through proper skill development
programs. It will turn workforce from job seeking to
job creating resource
e) Labour reforms
 Any reform which leads to less labour rigid laws could
ensure more employment
 New labour laws
 Four labour codes replaced old labour laws. They are
a) Industrial relation code
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
b) Code on wages
c) Code on social security
d) Code on occupational safety, health and working
condition (OSHC)
 LIMITATION OF THESE LABOUR REFORMS
 Most reforms are industry centric. So there is need to
give more priority to welfare of workers
 These are still heavily tilted in the favour of formal
sector
 It is due to the scale of production and lack of basic
infrastructure like roads, electricity etc , it is quite
difficult to shift from informal sector to formal sector
 Informal sectors have lack of credit because financial
institutions prefer giving more loans to formal sector
then informal sector
 Informal sector ha slack of marketing opportunity
because of less advertisement capability due to
shortage of funds
 These laws don’t offer any solution for the workers of
unorganised sector including agriculture
HAND-OUT MATERIAL
 NEW LABOUR CODE
 INTRODUCTION:
 Ninety per cent of workers in the unorganized sector
did not have access to all the social securities since
independence. Today, the total number of workers,
comprising of organized and unorganized sectors, is
more than 50 Crores. According to a 2002 report by
the Second National Commission of Labour, India has
many labour laws at the federal level. The
Commission recommended that these various labour
laws should be consolidated and simplified into only a
few central laws.44 central labour laws with over
1200 sections have been assimilated into just four
codes i.e. Wage Code, Social Security Code,
Occupational Safety, Health and Working Conditions
Code and Industrial Relations Code.
 LABOUR REFORMS UNDERTAKEN
SINCE-2014
 Prime Minister Modi has launched “Shramev Jayate”,
a welfare program for workers that aims to put the
UAN system in place to let them withdraw their
provident fund securely from any location.
 Through the Shram Suvidha Portal, industry members
were able to easily file their returns.
 In order to provide social security to old age workers
of the unorganized sector, The Pradhan Mantri Shram
Yogi Maan Dhan Yojana was started, in which
provision was made for pension benefit of Rs 3000
per month after reaching the age of 60.
 For transparency and accountability, the usage of IT-
enabled system for inspection has been made
mandatory.
 The ceiling limit of gratuity has been increased from
Rs 10 Lakhs to Rs 20 Lakhs on 29.03.2018.
 On 16.02.2017, Payment of Wages Act enabled
payment of wages to employees by cheque or
crediting it to their bank account.
 The Maternity Benefit Amendment Act came into
effect from 01.04.2017 and increased the paid
55
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
maternity leave from 12 weeks to 26 weeks.
 FOUR NEW LABOUR CODES:
1) Labour Code, 2019: Workers are entitled to a fair
minimum wage.
 The Union Budget for 2018-19 will give wage
security, social security and health security to 50
crore workers, whether they belong to the organized
or unorganized sectors.
 Guarantee of minimum wages.
 The committee decided that during every five years
of negotiating new agreements, there is a need to
review the minimum wage. If a worker is not paid
wages on time, they promise to guarantee a timely
payment and provide equal remuneration to male
and female workers.
 To remove regional disparity in minimum wages,
floor wages have been introduced.
 On 28th August 2017, the Payment of Wages Act was
amended to increase the wage ceiling from 18,000 to
24,000.
2) Social Security Code, 2020: Social Security for
everyone to secure the right of workers for
insurance, pension, gratuity, maternity benefit etc.
 The doors of Employees' State Insurance Corporation
(ESIC) will be standing open for the workers of all
sectors.
 The ESI plans to develop a network of hospitals and
dispensaries across the country, with each facility
located in every district. This will ensure that all the
740 districts have their own ESIC facility.
 Plantation workers and people in hazardous work
should be given ESIC. Workplaces that are considered
to be hazardous will be compulsorily registered with
ESIC.
 Opportunity to join ESIC for platform and gig workers
engaged in new technology.
 Benefit of pension scheme (Employees' Provident
Fund Organisation) to all workers. o Creation of social
security fund for providing comprehensive social
security to the unorganized sector.
 There used to be a requirement that employees in
certain cases could not receive gratuity without
fulfilling the minimum service requirement. This has
now been changed.
 Employees engaged on fixed term to get same social
security benefit as permanent employees.
 Registering workers in the unorganized sector on a
nationwide database is an important step that helps
to both identify and deal with them.
 o Employers employing more than 20 workers to
mandatorily report vacancies online.
 Aadhaar based Universal Account Number (UAN) for
ESIC, EPFO and Unorganized Sector workers to ensure
seamless portability.
3) Occupational, Safety, Health and Working
Conditions Code (OSH Code):
 to provide better and safe environment along with
occupational health and safety to workers at the
work place. The security of interests of workers
engaged in factories, mines, plantations, motor
transport sector, bidi and cigar workers, contract and
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
migrant workers has been ensured.
a) Anomalies of the Inter-State Migrant Workers Act,
1979 have been comprehensively addressed in the
OSH Code. Earlier only workers appointed by a
contractor were recognized as Inter-State Migrant
Workers. However, under the new provisions of the
Code, workers can now register themselves as Inter-
State Migrant Workers on the national portal. By this
provision, the worker would get a legal identity which
would enable them to get benefits of all social
security schemes.
b) Employers to provide travelling allowance annually to
an Inter-State Migrant Worker for undertaking to and
fro journey to his native place.
c) Providing appointment letters to the workers has
been made mandatory.
d) Mandatory, free annual health check-up of workers
to be provided by the employers.
e) For a worker engaged in building and other
construction work in one State and moving to
another State, benefit from the Building and other
Construction Workers’ Cess fund will be provided.
f) Under the “One Nation - One Ration Card”, an Inter-
State Migrant Worker would get ration facility in the
State he is working in and the remaining members of
his family would be able to avail of the ration facility
in the State where they reside.
g) Mandatory helpline facility in every State for
resolution of Inter-State Migrant Workers’
grievances.
h) National database to be created for the Interstate
Migrant Workers.
i) Instead of 240 days, now if a worker has worked 180
days, he shall be entitled for one-day leave for every
20 days of work done.
 Women empowerment through the Labour
Codes:
 Right to women workers to work in all types of
establishments.
 Women have been given the right to work at night
with their consent and employer to make adequate
arrangements to provide safety and facilities to
women workers at night.
 Maternity Benefit Act amended in 2017
4) Industrial relations (IR) code, 2020: towards
end to disputes
 In case of job loss, a worker will get benefit under the
Atal Bimit Vyakti Kalyan Yojna - a worker of organized
sector who loses his job gets financial aid from the
Government. This is a type of unemployment
allowance, the benefit of which is admissible to the
workers covered under the ESI Scheme.
 At the time of retrenchment a worker would be
provided 15 days’ wages for reskilling. The wages
would be credited directly into the bank account of
the worker so as to enable him to learn new skills.
 Faster justice to the workers through the Tribunal.
 Workers disputes to be resolved within a year in the
Tribunal.
 Industrial Tribunals to have 2 members to facilitate
faster disposal of cases.
56
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 In industrial establishments, a Trade Union having 51
per cent votes shall be recognized as the sole
negotiating union which can make agreements with
employers.
 In industrial establishments in which no trade union
gets 51 per cent votes, a negotiating council of trade
unions shall be constituted for making agreements
with employer.
 BENEFITS OF CODIFICATION:
a) Single Registration; Single License; Single
Statement; Minimum Forms
b) Common definitions
c) Reduction of Committees
d) Web-based surprise inspection
e) Use of technology – Electronic registration and
licensing.
f) Reduction of compliance cost and disputes
 ORGANISED (FORMAL SECTOR)
 Any organisation/enterprise having 10 or more hired
workers along with electricity as an input or 20 or
more hired workers if electricity is not an input or
registered with the govt or registered under any
taxation system like GST
 All conditions are independent
 UNORGANISED (INFORMAL SECTOR)
 Not filling above conditions
 In 2004-05 central govt committee “Arjun sain Gupta
committee” named as –National Commission For
Enterprises in unorganised sector defined informal
workers as those who are employed in informal
sector + employed in formal sector but nature of
employment is informal (quality of job is poor)
 GIG WORKERS
 They are non-platform workers and generally causal
wage workers and own account workers in the
conventional sector like catering events, software
development etc, working part-time
 They are freelancers, independent and contractual
workers
 PLATFORM WORKERS:-
 Those workers who work in non-traditional sector
where work is done via an online platform directly to
individuals or organisations
 For example:-OLA, Uber drivers, Swiggy or zomato
delivery agents
 MOON LIGHTING/MOON LIGHT CHEATING
 It is a practice of working on a second job during or
outside of regular business hours
 It is a Kind of dual employment that is why termed as
cheating
A. PROS:-
a) It gives extra income
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
b) It gives a sense of security that it is a second job
if the main job is not same
c) It can bring psychological benefits such as the
feeling of not tied with one company only
d) Taking a part time job could be a way to boost
entrepreneur skills
B. CONS:-
a) It takes additional time which can physically
drain the workers
b) Conflict of interest:- consulting a direct or
indirect competitor may force your employer to
claim right to your intellectual property in a fear
of insider trading
c) Performance slippage:-even if the company
allows moonlight, it may result in under
performance because of improper rest and brake
to revive the body
 WAY FORWARD
a) Pick an unrelated work or field, through this
someone can reduce the risk of conflict of
interest
b) Many companies have moon-light policies and if
they don’t it is wise to see if a second job might
be a conflict
c) Supplementary income is fine but it is best if a
second job is a part of overall career plan
 MEASUREMENT OF UNEMPLOYMENT
 This is done by NSO
A. UPS (USUALLY PRINCIPAL STATUS)
 182days unemployed out of 365 days
 The usual Principal Status (UPS) approach relates to
the activity status of a person during the 365 days
preceding the date of the survey. The activity status
on which a person has spent a relatively long time
(182 days or more) during the period is considered
the usual principal activity status of the person.
B. CWS (CURRENT WEEKLY STATUS)
 Whole week (unemployed) , not employed even for
one hour or any day of the week out of a week
C. CDS (CURRENT DAILY STATS)
 Whole day (unemployed) , not employed even for
one hour or that day o out of that one day
 NOTE:-
 1 hour or less than 4 hours = half day employment
 4 hours to 8 hours = full day employment
HANDOUT MATERIAL
 HOW IS UNEMPLOYMENT
MEASURED?
 There are 2 main ways of measuring unemployment:
a) INTERNATIONAL LABOUR ORGANISATION (ILO)
 The International Labour Force uses the Labour Force
Survey. This is the official measure used in the UK and
57
 NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
is compulsory for every EU state to use the same
method
 The Labour Force Survey consists of surveys of 80,000
households every month. The survey asks questions
regarding the economic activity of the household as
well as basic demographic questions such as age,
gender, and ethnic background.
 To be classed as unemployed a person must be out of
work for the past 4 weeks and has not been looking
for a job during the 4-week period
b) T H E C L A I M A N T C O U N T
 The claimant count measures unemployment by
counting the number of people who are claiming
benefits for being unemployed (known as the Job
Seeker’s Allowance).
 There are a few limitations with this approach to
measuring unemployment. For example, there is a
stigma against claiming benefits, therefore not
everyone who is eligible claims them making the
figure smaller than it should be.
 Also, there are very fine criteria in order to be eligible
for the benefit; if you resigned from your job you
cannot claim benefits.
 Furthermore, the figure is easily manipulated by the
government as they can change the way the claimant
count is calculated in order to reduce the political
pressure that may come with a high figure of
unemployment.
 Lastly, the claimant count is not a global measure of
unemployment and therefore it cannot be used to
compare the unemployment levels of countries.
 REASONS BEHIND INDIAN
 According to economist G.S. Bhalla :- problem in India
is not unemployment but quality in employment
d) Lack of skill development
e) Mismatch b/w available and required skills
 Like IT people getting lower wages and low quality
jobs because of not matching required skills
 Solution:- agreement b/w govt and industry to impart
required skills among the employees would work in
this favor . e.g an apprenticeship scheme would also
work in this favor , it is similar to internship and it
emphasis on learning by doing
f) Rigid labour laws
 CONCLUSION FROM ECONOMIC
SURVEY 2022-23
a) If export would grow by more than 3.4% instead of
1.7% to 2.1% of today, that unemployment problem
would be resolved
 India aims to raise the share of its exports in global
trade from 2.1% to 3% by 2027 and 10% by 2047
b) Half of the forex reserves we use in purchasing fossil
fuels , so there is a need to have energy replacement
to solar energy, electric vehicles to save that forex
reserve
c) Attract private investor in infrastructure , by 2030
more than 40% population will live in urban areas so
investment in urban infrastructure is essential
…………..12 class done, All classes done………..

EMPLOYMENT PROBLEM
a) Lack of industrial growth
 b/w 1950-1980, exceptions were the steel and
iron and pharmaceuticals
 post 1980 there were two problems
a) discontinuous industrial growth due to
balance of payment crisis, east Asian crisis
(1993-1997) and also unstable industrial
economy
b) from 2003-2008 we witnessed increase in
industrial production but it was not
continuous but negligible in employment
generation
b) capital intensive industries
 there was negligible presence of labour intensive
industries
 Solutions :-industrial growth is better solution for
jobless growth, so there should be more focus on
labour intensive industry
c) Productivity v/s job creation
 Productivity should be chosen over job creation
because sacrificing productivity means lower quality
of jobs
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 58
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 59