Current Affairs Focus Class| IAS

INDIAN ECONOMY

MAY 2022 TO JUNE 2022

 DISCOM REFORMS: NEED, INITIATIVES AND
STRATEGIES NEEDED

Prelims
Concept of Reverse Auction
 Syllabus
GS Paper III: Public Distribution System- Objectives, Functioning,
Limitations and Revamping

Prelims Mains
Various aspects related to Food grain PDS: Initiatives, Challenges and Reforms
Management- Procurement, Allocation, needed.
Distribution etc.
 PUBLIC DISTRIBUTION SYSTEM (PDS)- PRELIMS
PRELIMS 2019
The economic cost of food grains to the Food
Corporation of India is Minimum Support Price and
bonus if any) paid to the farmers plus (Prelims 2019)
(a) transportation cost only
(b) interest cost only
(c) procurement incidentals and distribution cost
(d) procurement incidentals and charges for godowns
PRELIMS 2018
With reference to the provisions made under the National
Food Security Act, 2013 consider the following statements:
1. The families coming under the category of ‘below poverty
line (BPL)’ only are eligible to receive subsidised grains.
2. The eldest woman in a household, of age 18 years or
above, shall be the head of the household for the purpose
of issuance of a ration card.
3. Pregnant women and lactating mothers are entitled to a
take-home ration’ of 1600 calories per day during
pregnancy and for six months thereafter.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 3 only
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
PRELIMS 2020 PRELIMS 2020
Which of the following factors/policies were affecting Consider the following statements :
the price of rice in India in the recent past? 1. In the case of all cereals, pulses and oil-seeds, the
procurement at Minimum Support Price (MSP) is
1. Minimum Support Price unlimited in any State/UT of India.
2. Government's trading 2. In the case of cereals and pulses, the MSP is fixed in any
3. Government's stockpiling State/UT at a level to which the market price will never
4. Consumer subsidies rise. Which of the statements given above is/are correct?

Select the correct answer using the code given below: (a) 1 only
(a) 1, 2 and 4 only (b) 2 only
(b) 1, 3 and 4 only (c) Both 1 and 2
(c) 2 and 3 only (d) Neither 1 nor 2
(d) 1, 2, 3 and 4
 PUBLIC DISTRIBUTION SYSTEM (PDS) - MAINS

PREVIOUS YEAR MAINS QUESTIONS

1. What are the reformative steps taken by the government to make food grain distribution system more effective? (MAINS
2019)

2. What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in
eliminating hunger and malnutrition in India? (MAINS 2021)

MAINS QUESTIONS FOR PRACTICE

1. There is a need for radical shift in the management of Food grains in order to make it financially sustainable, less
distortionary and more agriculture friendly. Discuss. (15 Marks, 250 Words)

2. The Open-Ended Procurement policy needs to be replaced with Closed ended procurement policy to benefit both the
Farmers as well as Indian agriculture. Analyse (10 Marks, 150 Words)
 Functioning of PDS
PROCUREMENT
FCI: Economic Cost of Food grains- 3 components:
• Pooled Cost of grains (Weighted MSP of stock of Food grains)
• Procurement Incidentals- Labor Charges, Transport charges, Storage cost etc.
• Cost of Distribution
Decentralized Procurement of Food grains by States

FOOD GRAIN STOCKING NORMS

2 Components:
• Operational Stocks- For meeting the monthly distributional requirement under TPDS and other Welfare
Schemes
• Strategic Reserves: To meet emergency situations.
Defined for a quarter of financial year.

ALLOCATION OF FOOD GRAINS TO STATES /UTs

National Food Security Act (NFSA)
• Coverage: 75% of rural population and 50% of the Urban Population.
• Cost: Rs 1/2/3 per kg for nutri-cereals/wheat/rice respectively.
• Households:
• Priority Households: 5 kg per person per month.
• Antyodaya Anna Yojana (AAY): 35 kg of food grains per household per month
Central Issue Price: The price at which the Centre allocates the food grains to the states.
State ranking Index for NFSA
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 9 Practice MCQ No. 10
Which among the following can be considered as the Which among the following factors have contributed to
problems with the Open-ended procurement policy of increase in Food Subsidy Bill in the recent years?
the Government?
1. Increase in MSP
1. Increase in Central Issue price (CIP) of Food Grains 2. Higher Buffer stocks
2. Inability of the Government to meet its food buffer 3. Decentralized procurement scheme
stock norms. 4. Open ended Procurement Policy
3. Shortage of agricultural commodities in the Open
market. Select the correct answer using the code given below:
(a) 1 and 2 only
Select the correct answer using the code given below: (b) 1, 2 and 4 only
(a) 1 only (c) 1, 2 and 3 only
(b) 1 and 2 only (d) 1, 2, 3 and 4
(c) 3 only
(d) 2 And 3 only
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 9 Practice MCQ No. 10
Which among the following can be considered as the Which among the following factors have contributed to
problems with the Open-ended procurement policy of increase in Food Subsidy Bill in the recent years?
the Government?
1. Increase in MSP
1. Increase in Central Issue price (CIP) of Food Grains 2. Higher Buffer stocks
2. Inability of the Government to meet its food buffer 3. Decentralized procurement scheme
stock norms. 4. Open ended Procurement Policy
3. Shortage of agricultural commodities in the Open
market. Select the correct answer using the code given below:
(a) 1 and 2 only
Select the correct answer using the code given below: (b) 1, 2 and 4 only
(a) 1 only (c) 1, 2 and 3 only
(b) 1 and 2 only (d) 1, 2, 3 and 4
(c) 3 only
(d) 2 And 3 only
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 11 Practice MCQ No. 12
Which among the following are the components of Food Consider the following statements:
grain stocking norms as defined by the Government?
1. The Central Issue Price (CIP) is the price at which the
1. Strategic Reserves of Food grains Centre allocates food grains to the states.

2. All the Food grains procured by the Food 2. The Food subsidy is the difference between the Economic
Corporation of India cost of food grains for the FCI and Central Issue Price.

3. Food grains for meeting the monthly distributional Which of the statements given above is/are correct?
requirement under TPDS (a) 1 only
(b) 2 only
Select the correct answer using the code given below: (c) Both 1 and 2
(a) 1 only (d) Neither 1 nor 2
(b) 1 and 2 only
(c ) 1 and 3 only
(d) 1, 2 and 3
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 11 Practice MCQ No. 12
Which among the following are the components of Food Consider the following statements:
grain stocking norms as defined by the Government?
1. The Central Issue Price (CIP) is the price at which the
1. Strategic Reserves of Food grains Centre allocates food grains to the states.

2. All the Food grains procured by the Food 2. The Food subsidy is the difference between the Economic
Corporation of India cost of food grains for the FCI and Central Issue Price.

3. Food grains for meeting the monthly distributional Which of the statements given above is/are correct?
requirement under TPDS (a) 1 only
(b) 2 only
Select the correct answer using the code given below: (c) Both 1 and 2
(a) 1 only (d) Neither 1 nor 2
(b) 1 and 2 only
(c ) 1 and 3 only
(d) 1, 2 and 3
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 13 Practice MCQ No. 14
Which among the following statements related to Which among the following is/are included in the Economic
National Food Security Act (NFSA), 2013 is incorrect? Cost of Food grains for the Food Corporation of India (FCI)?
(a) The NFSA seeks to provide food security to 75% of 1. MSP paid to the farmers.
rural population and 50% of urban population. 2. Procurement incidentals such as Transportation, storage
(b) All the households covered under NFSA are entitled and labour costs.
to get 35 kg of food grains per month at subsidised 3. Cost of Distributing Food grains.
prices.
(c) The NFSA seeks to provide for maternity benefit of Select the correct answer using the code given below:
Rs 6000 to pregnant and lactating mothers. (a) 1 only
(d) Eldest woman (18 years and above) would be (b) 1 and 2 only
considered as head of household for issuing ration (c) 1 and 3 only
cards under NFSA. (d) 1, 2 and 3
 PUBLIC DISTRIBUTION SYSTEM (PDS) - PRELIMS
Practice MCQ No. 13 Practice MCQ No. 14
Which among the following statements related to Which among the following is/are included in the Economic
National Food Security Act (NFSA), 2013 is incorrect? Cost of Food grains for the Food Corporation of India (FCI)?
(a) The NFSA seeks to provide food security to 75% of 1. MSP paid to the farmers.
rural population and 50% of urban population. 2. Procurement incidentals such as Transportation, storage
(b) All the households covered under NFSA are entitled and labour costs.
to get 35 kg of food grains per month at subsidised 3. Cost of Distributing Food grains.
prices.
(c) The NFSA seeks to provide for maternity benefit of Select the correct answer using the code given below:
Rs 6000 to pregnant and lactating mothers. (a) 1 only
(d) Eldest woman (18 years and above) would be (b) 1 and 2 only
considered as head of household for issuing ration (c) 1 and 3 only
cards under NFSA. (d) 1, 2 and 3
What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating
hunger and malnutrition in India? (MAINS 2021)

The National Food Security Act (NFSA), 2013 provides food and nutritional security by ensuring access to adequate quantity
of quality food at affordable prices. Thus, it strengthens Article 21 enshrined in Constitution.

NFSA Act, 2013: Salient Features

Coverage: Up to 75% of rural population and 50% of urban population (67% of total population)
Entitlement:
 Priority households: 5 kg/person/month
 Antyodaya households: 35 kg/household/month
Subsidized prices of Rs. 3/2/1 per kg for rice, wheat, and coarse grains.
Nutritional Support: Meals for Pregnant women and lactating mothers (PWLM) and children (6 months-14 years).
Maternity Benefit of Rs 6000 for PMLM.
Women Empowerment: Eldest woman (18 years and above) considered as head of household for issuing ration cards.
Grievance redressal at the District and State levels.
Accountability through social audits and Vigilance Committees.
Food Security Allowance in case of non-supply of food.
What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating
hunger and malnutrition in India? (MAINS 2021)

Role of NFSA in eliminating hunger and Malnutrition

Improved Coverage (67%) in comparison to TPDS. Out of maximum coverage of 81.34 crores, 80 crore people covered so far.
Improved outcomes
 Undernourishment reduced from 22% to 15% in last decade (FAO’s “State of Food Security and Nutritional 2021”)
 Percentage of stunted children reduced from 38% (NFHS-4) to 35% (NFHS-5)
Paradigm Shift from welfare to rights-based approach.
Life-cycle approach by guaranteeing access throughout the life cycle beginning from pregnancy to old age.
Addresses 3 dimensions of Food security- Availability, Accessibility and Affordability.

However, NFSA still faces number of challenges as evident in India’s lower ranking (101) on GHI, Global Food Security Index:

The NFSA has the potential to be a game changer. However, the Government must implement recommendations of committees
such as Shanta Kumar, Nandan Nilekani etc. to streamline distribution and make it more efficient.
The Open Ended Procurement policy needs to be replaced with Closed ended procurement policy to benefit both the Farmers
as well as Indian agriculture. Analyse ( 10 Marks, 150 Words)

Presently, Government is following open-ended procurement policy to offer fair and remunerative prices to farmers and
prevent them from distress sale. However, apart from making food grain management unsustainable, this policy has neither
benefitted farmers nor agriculture.

Presently, there is no limit on procurement of food grains such as Rice and Wheat leading to higher procurement. For
instance, Food grain stock of Rice and Wheat (65 MT) is almost 110% more than buffer stock requirements (30 MT).
Implications:
1.Higher economic cost for FCI (Rs 50,000 crores) leading to higher debt burden.
2.Artificial scarcity of food grains in open market leading to increase in prices.
3.Higher emphasis on procurement of water-intensive crops such as Rice and Wheat is adversely affecting agriculture-
skewed cropping pattern, higher water usage, soil erosion, lack of diversification etc.

Hence, as recommended by CACP, open-ended procurement has to be replaced by closed-ended procurement wherein FCI
should impose limits on procurement. Adoption of such a policy should also be accompanied by DBT to compensate the
farmers if they sell food grains in market below MSP.
 Factor Cost Vs Basic Price Vs Market Price

Labour
Capital Factor Cost: Cost of factors of
Land Production

Basic Price: Price expected to be

received by Producer
Production Enterprise Production
Factor Cost + Production Taxes-
Taxes Subsidies
Production Subsidies

Market Price: Price expected to be

Product Product paid by consumer
Product sold in the Market
Taxes Subsidies Basic Price+ Product Taxes- Product
Subsidies

• GDP at Basic Price= GDP at factor cost+ Production Taxes- Production Subsidies
• GDP at Market Price= GDP at Basic price + Product Taxes – Product Subsidies
 Practice MCQ No. 15 Practice MCQ No. 16
If the Gap between Gross Value added (GVA) at basic prices Which among the following factors are taken into consideration for the
and Gross Domestic Product (GDP) at market prices increases, calculation of Gross Domestic Product (GDP) at basic price?
what does it necessarily denote? 1. Cost of Factors of production
(a) Negative Rate of Inflation 2. Production taxes and subsidies
(b) Increase in cost of raw materials 3. Product taxes and subsidies
(c) Increase in Net Indirect Taxes
(d) Increase in Subsidies Select the correct answer using the code given below:
(a) 1 only
Practice MCQ No. 17 (b) 1 and 2 only
With reference to GDP estimation in India, consider the (c) 2 and 3 only
following statements: (d) 1, 2 and 3
1. The GDP at all India level is estimated at Market prices
instead of Factor cost. Prelims MCQ No. 18
2. The sector-wise contribution of different sectors is Which among the following correctly depicts the nature of relationship
estimated at GVA at Basic Prices. between the GDP at Factor Cost, Basic Price and Market Price?
3. The GDP is estimated by the National Statistical Office 1. GDP at Market Price = GDP at Factor Cost + Product Taxes – Product
(NSO). Subsidies
2. GDP at Basic Price = GDP at Factor Cost + Production taxes –
Which of the statements given above is/are correct? Production Subsidies
(a) 1 and 2 only 3. GDP at Market Price = GDP at Basic Price + Product Taxes – Product
(b) 1 and 3 only subsidies
(c) 2 and 3 only
(d) 1, 2 and 3 Select the correct answer using the code given below:
(a) 1 only (b) 1 and 2 only
(c) 3 only (d) 2 and 3 only
 Practice MCQ No. 15 Practice MCQ No. 16
If the Gap between Gross Value added (GVA) at basic prices Which among the following factors are taken into consideration for the
and Gross Domestic Product (GDP) at market prices increases, calculation of Gross Domestic Product (GDP) at basic price?
what does it necessarily denote? 1. Cost of Factors of production
(a) Negative Rate of Inflation 2. Production taxes and subsidies
(b) Increase in cost of raw materials 3. Product taxes and subsidies
(c) Increase in Net Indirect Taxes
(d) Increase in Subsidies Select the correct answer using the code given below:
(a) 1 only
Practice MCQ No. 17 (b) 1 and 2 only
With reference to GDP estimation in India, consider the (c) 2 and 3 only
following statements: (d) 1, 2 and 3
1. The GDP at all India level is estimated at Market prices
instead of Factor cost. Prelims MCQ No. 18
2. The sector-wise contribution of different sectors is Which among the following correctly depicts the nature of relationship
estimated at GVA at Basic Prices. between the GDP at Factor Cost, Basic Price and Market Price?
3. The GDP is estimated by the National Statistical Office 1. GDP at Market Price = GDP at Factor Cost + Product Taxes – Product
(NSO). Subsidies
2. GDP at Basic Price = GDP at Factor Cost + Production taxes –
Which of the statements given above is/are correct? Production Subsidies
(a) 1 and 2 only 3. GDP at Market Price = GDP at Basic Price + Product Taxes – Product
(b) 1 and 3 only subsidies
(c) 2 and 3 only
(d) 1, 2 and 3 Select the correct answer using the code given below:
(a) 1 only (b) 1 and 2 only
(c) 3 only (d) 2 and 3 only