Pmay envisages building 20 million urban units by 2022.

Challenges
Land availability
Urban areas contribute 70% to the GDP but occupy only 4% of the land base
2.Quality developers
In India, without adequate urban land parcels to set up housing complexes or housing schemes
with private participation, meaningful supply creation will not happen.
India is largely a country of small-scale entrepreneurs and real estate is no exception. While
the establishment of the Real Estate Regulatory Authority is a step in the right direction to
safeguard consumer interests, the level of compliance and strict fund-usage conditions are
onerous for small-scale developers.
3.Archaic lending principles
The current practice of assigning a low rating to all new companies, and slowly upgrading them
over time, does not help in facilitating accelerated growth.
By assigning high importance to traditional parameters, such as scale and vintage, before taking
any exposure to new-age housing finance companies, lending institutions are not accelerating
growth.
Solutions
Solving land issue
Government should proactively allow urban public land holding to be utilized for affordable
housing projects.
The government can also explore the launch of an affordable rental housing scheme, wherein it
could create a stock of affordable housing units within urban areas.
Globally, countries such as Singapore and Sweden have huge public housing programmes that form
83% and 30%, respectively, of the country’s housing stock.
The private sector can play a role in implementing best construction practices, and in
maintaining the housing stock, as is the practice in New York.
2.Support to real estate entrepreneurs
By building a strong support system and hand-holding the real estate entrepreneurs, we could
create an ecosystem of quality developers.
3.Upgrading lending principles through use of technology
Since the rating drives the borrowing rate, which is a key cost for housing finance companies,
such a wait and watch approach creates a bottleneck for the good companies.
To stimulate demand, loans need to be provided at affordable rates. In order for housing finance
companies to lend at affordable rates, the financing ecosystem participants, such as large
lending institutions and credit rating agencies, need to evaluate the new-age credit frameworks
of housing finance companies.
In today’s technology era, the credit evaluation of customers is done very differently by
leveraging data and technology. For instance, tools like pincode-based customer mapping, social
behaviour analytics, and technology-led fraud prevention and control, are immensely helping
new-age housing finance companies to profitably lend to customers while controlling the credit
risk.
Instead, it would be immensely beneficial to rank companies on the fundamental soundness of
their new-age technology-led tools/practices, and downgrade those who demonstrate weak results.
Such a rating downgrade should be done swiftly in order to reflect the health of the company.
**Revolutionizing the Indian housing dream**
For the ‘Housing For All by 2022’ programme to fructify, the entire housing ecosystem needs to
be well developed and all stakeholders need a unified vision
Last Published: Wed, Dec 06 2017. 05 24 AM IST
Renuka Ramnath
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New-age housing finance companies deserve a fair chance to demonstrate their capabilities.
Photo: iStock
New-age housing finance companies deserve a fair chance to demonstrate their capabilities.
Photo: iStock
The government launched the “Housing For All by 2022” programme in 2015, with the Pradhan Mantri
Awas Yojana (Pmay) as a key anchor scheme. Pmay envisages building 20 million urban units by
2022. Global examples indicate that affordable housing activities generate direct and indirect
employment in the medium term and sustained consumption in the long term. A 2014 study by the
National Council of Applied Economic Research indicates that every additional rupee of capital
invested in the housing sector adds Rs1.54 to the gross domestic product (GDP) and every Rs1
lakh invested in residential housing creates 2.69 new jobs in the economy.
While the Indian government has provided for policy and budgetary support to make the plan work,
the actual execution on ground can be accelerated to realize the true potential. This article
is an attempt to explore the key bottlenecks and suggest ways in which we could address the
situation. For a national housing dream of such a magnitude to fructify, the entire housing
ecosystem needs to be well developed and all the stakeholders need to share a unified vision.
With a shared vision and clarity of purpose, all the participants in the ecosystem need to work
collaboratively with a high degree of conviction and risk-taking ability.
To explore possible solutions for jump-starting the housing boom, we need to examine both the
supply and demand side challenges. On the supply side, there are two key challenges, including
land availability and supply of quality developers. Given that urban areas contribute 70% to the
GDP but occupy only 4% of the land base, the government should proactively allow urban public
land holding to be utilized for affordable housing projects. The government can also explore the
launch of an affordable rental housing scheme, wherein it could create a stock of affordable
housing units within urban areas. Globally, countries such as Singapore and Sweden have huge
public housing programmes that form 83% and 30%, respectively, of the country’s housing stock.
The private sector can play a role in implementing best construction practices, and in
maintaining the housing stock, as is the practice in New York. The New York City Housing
Authority owns 2,600 high-density buildings housing 400,000 tenants, with amenities maintained
at par with the rental market, managed by private agencies. In India, without adequate urban
land parcels to set up housing complexes or housing schemes with private participation,
meaningful supply creation will not happen. India is largely a country of small-scale
entrepreneurs and real estate is no exception. While the establishment of the Real Estate
Regulatory Authority is a step in the right direction to safeguard consumer interests, the level
of compliance and strict fund-usage conditions are onerous for small-scale developers. By
building a strong support system and hand-holding the real estate entrepreneurs, we could create
an ecosystem of quality developers.
On the demand side, while overall economic growth will create the right enablers to stimulate
demand, loans need to be provided at affordable rates. In order for housing finance companies to
lend at affordable rates, the financing ecosystem participants, such as large lending
institutions and credit rating agencies, need to evaluate the new-age credit frameworks of
housing finance companies. In today’s technology era, the credit evaluation of customers is done
very differently by leveraging data and technology. For instance, tools like pincode-based
customer mapping, social behaviour analytics, and technology-led fraud prevention and control,
are immensely helping new-age housing finance companies to profitably lend to customers while
controlling the credit risk. The lending institutions and credit rating agencies need to design
new frameworks/rating scales that benchmark companies on such new capabilities. Also, many new
housing finance companies are leveraging such tools better and faster than the others.
However, the current practice of assigning a low rating to all new companies, and slowly
upgrading them over time, does not help in facilitating accelerated growth. Since the rating
drives the borrowing rate, which is a key cost for housing finance companies, such a wait and
watch approach creates a bottleneck for the good companies. Instead, it would be immensely
beneficial to rank companies on the fundamental soundness of their new-age technology-led
tools/practices, and downgrade those who demonstrate weak results. Such a rating downgrade
should be done swiftly in order to reflect the health of the company.
It’s a new paradigm and hence, lending institutions need to change their approach to new-age
businesses. By assigning high importance to traditional parameters, such as scale and vintage,
before taking any exposure to new-age housing finance companies, lending institutions are not
accelerating growth. The new-age housing finance companies deserve a fair chance to demonstrate
their capabilities; lending institutions can always cut the exposure to companies that do not
perform well, but good new-age companies should not be starved of capital by tarring the entire
industry with one broad brush.
The need of the hour in this new paradigm is for the financing ecosystem participants to develop
new products in order to accelerate the housing opportunity that will drive large and
long-lasting economic benefits for the country.
Renuka Ramnath is the founder of Multiples Alternate Asset Managemen
**5.Topic: Indian Economy and issues relating to planning, mobilization of resources, growth,
development and employment.
7) Which are the ways through which government can capture data of informal sector? Examine the
importance of data collected through GST and demonetisation for policymakers. (150 Words)**
The Hindu
Introduction:
The informal sector is defined as that part of the economy where the establishment does not
maintain regular accounts.
It is informal because it is not subject to most of the traditional ways in which you can
capture data.
Capturing data from the informal sector
For the informal sector, the principle source of data is through establishment surveys.
Regular establishment surveys, as recommended by the taskforce under [Arvind] Panagariya, will
help.
Importance of GST in understanding informal sector
GST will certainly capture a lot more monthly data.
Types and scope of production
In GST form, every producer of a good or service makes his payment and also gives some details
about the production which is subject to tax. From that, policymakers can draw conclusions.
Because the entities who will be filing this regular monthly return will be the larger
companies, not the informal sector. We will get fairly quick disaggregated data for the larger
entities from the GST database.
However, the input tax credit where the larger entities outsource goods and services to smaller
entities in the informal sector will be of great help.
2.Spatial divergences of production
In addition to aggregates, you will also get data on inter-State transactions which was
previously not available.
This will give us a much better picture of a spatial spread of economic activity.
The spatial divergences in India can then be very easily traced and tackled with which does have
an impact on the informal sector.
That sort of information will be very useful to the policy establishment when they start looking
at GST data more closely.
**GST opens up a lot of data for policymaking, says T.C.A. Anant**
Vikas Dhoot T.C.A. Sharad Raghavan DECEMBER 06, 2017 00:15 IST
UPDATED: DECEMBER 06, 2017 01:22 IST
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T.C.A. Anant, Chief Statistician of India, and Secretary, Ministry of Statistics and Programme
Implementation.
T.C.A. Anant, Chief Statistician of India, and Secretary, Ministry of Statistics and Programme
Implementation.
The Chief Statistician of India on the economy, the meaning of the new series of GDP data, and
the need to wait for the impact of demonetisation to unfold
T.C.A. Anant is the Chief Statistician of India, and Secretary, Ministry of Statistics and
Programme Implementation. He has been in charge of several notable changes in the way economic
data has been recently presented, including the new GDP and Gross Value Added data series, and
the rebased Wholesale Price Index, updated to incorporate more recent items and methods. In this
interview, he speaks of capturing data and the effects of demonetisation. Excerpts:
What has been the impact of restocking on the growth of the manufacturing sector in Q2?
What is our data for restocking or inventory? There are two things. Let me go back a little to
the period just before the GST was launched and the Q1 estimates. There was a lot of colloquial
evidence that suggested that firms were clearing inventory because of the issues involved with
the tax treatment of goods produced prior to the GST rollout and selling products manufactured
pre-GST in the post-GST regime. The only statistical evidence that is available — because we
don’t really get data on inventories in any detail at this stage — is in the company filings
which were made available for Q1. There, the change in stock figures was sharply negative.
In manufacturing companies, the change in stocks figure is negative for Q2 as well. The way I am
interpreting the number is that it is suggesting that closing stocks at the end of Q1 were not
significantly larger than the opening stocks at the beginning of Q1. How does one explain this?
Very likely, most companies draw down their inventories during the festive season and maintain
an inventory balance in the slack season, partly to smooth production out.
My reasoning is that this time, because of GST, they would have postponed the production to Q2.
So it is very likely that Q2 production was principally meant for sales in the festive season.
Whatever inventory accumulation or restoration is going to happen will happen only after the
festive season sales are accounted for.
At this point, this is indicative. So, a lot of the statements that have been made saying that
this growth bump is because of restocking are essentially trying to undermine the boost that
would ordinarily happen on account of production for the festive season. This time, that
production has been compressed into a single quarter, so the boost was in fact larger. The
restocking boost will probably happen later, which means the attempt to say this is just a
one-off is not looking at the data.
What more can be done to capture data of the informal sector?
The informal sector is defined as that part of the economy where the establishment does not
maintain regular accounts. It is informal because it is not subject to most of the traditional
ways in which you can capture data. GST will certainly capture a lot more monthly data. And we
are looking at the GST forms very closely. We had earlier started an exercise with the CBEC
[Central Board of Excise and Customs], but that coverage was much less. We are now looking at
the same exercise with GST to see if GST reporting can be used to compile a more up-to-date
monthly or quarterly index. Formally, if you look at the GST form, every producer of a good or
service makes his payment and also gives some details about the production which is subject to
tax. From that, you can draw conclusions. We should be able to do this sooner rather than later.
But, even with GST, you are not going to get the informal sector in that sense because the
entities who will be filing this regular monthly return will be the larger companies, not the
informal sector. We will get fairly quick disaggregated data for the larger entities from the
GST database. Insofar as the smaller companies are concerned, some things will be possible with
the data from the composition scheme data, but it won’t be as granular as you get in the
non-composition scheme GST data. But for the informal sector, the principle source of data is
through establishment surveys. Regular establishment surveys, as recommended by the taskforce
under [Arvind] Panagariya, will help here.
So, GST opens up more data for policymaking?
GST opens up a lot. In addition to aggregates, you will also get data on inter-State
transactions which was previously not available. This will give us a much better picture of a
spatial spread of economic activity. We assume at the moment that when manufacturing has picked
up, it has picked up uniformly all over India. That is really an assumption, because we don’t
know what has happened. What GST will allow us to do is get a spatial perspective on this. And
our understanding from other areas, wherever we have good spatial data, is that here are spatial
divergences in India. You may well find that the pickup has taken place in X band of States and
not in Y band. That sort of information will be very useful to the policy establishment when
they start looking at GST data more closely.
With more than three quarters worth of data, can you now estimate the effect of demonetisation?
You can’t quantify the effect of demonetisation yet. To quantify what demonetisation did or did
not do, you would need to do a proper exercise where you would have a counterfactual compared to
the post-demonetisation exercise. Statistically, that will not happen for some time because you
will need long enough time series to generate counterfactuals and do the comparison.
It is important to note that all that demonetisation constituted was less than a two quarter
period in which there was a currency squeeze. By and large, large entities did not show much of
an impact, as revealed in corporate filings. Then everybody said that this will be taking place
in the informal sector. Not because there was any data for it, but because there must be an
effect, and if it’s not in the formal sector, it must be in the informal sector. Fair enough.
But the problem is that the informal sector is certainlycash dependent but it is also
relationship dependent.
There were as many colloquial stories of relationship credit taking over. Some media people
cited stories of people saying their paanwaala was willing to extend them credit because he was
unable to encash a ₹2,000 note. If you put the possibility of cash being substituted with
relationship credit, the logical assumption would be that the impact would be less than what
people are making it out to be.
My assessment is that the demonetisation effect has been overblown insofar as the negative
effect is concerned on account of neglect of this channel of credit. Further, the demonetisation
story is more complicated than just the cash change story. There is a larger narrative hidden
behind it in trying to promote digital transactions. What those impacts are going to be, we are
still trying to see. What you do see is that the trajectory of digital transactions has changed.
There is a bump up which you got in digitalisation, which you would not have got but for this.
That has sustained. And that is a good 8-10% increase.
Since the release of the new series of GDP data, the government has received criticism regarding
the back series of the data sets using the new computation methods. By when can we expect this
to be released?
The Ministry of Corporate Affairs (MCA) gave us a much bigger picture of the corporate
structure. The earlier data that we had about the corporate structure is what we had from the
listed companies. The problem we face is of using the longer series of data on listed companies
and deriving a growth pattern for the full corporate structure from it. This is analytically a
challenging exercise.
Eventually, you will get it, but as you add more years with MCA data, your ability to compare
the listed companies to the unlisted companies improves and therefore your ability to project
backwards will improve. This is not a case of reworking the data merely to compile. Had the data
existed, there would not be an issue. The difference between this revision and many of the
previous revisions is that we have taken on board new data sources for which analogues don’t
exist in the past.
A lot of the older revisions, the quantum of the data available, did not change very
dramatically. This is a problem which we are going to face again in the future as we get new
data sources coming in. GST is going to give us a database about the economy which is
qualitatively very different from anything we had in the past. It will give us, for example, a
transactional relationship across the country which we did not have earlier. We will be able to
build it into our GDP compilations and improve its quality enormously. But for somebody who asks
for a back series on this methodology, the answer is not going to be easy.
This is something that it is important to recognise. When you modernise a statistical system and
bring in new ways of capturing data which did not exist in the past, not simply updates of the
old data, the problem of backward projection is much more difficult. This is something that
time-series economists will have to live with.
How worried should one be about the Centre’s fiscal deficit numbers?
A lot of people have picked on the CGA report saying that the fiscal deficit is 96% of the
total. They have, as usual, jumped to all sorts of conclusions which in my judgment are wrong.
This is something you should have expected. Why? What did the government do this year? It
preponed the Budget calendar to allow government expenditure to start from April 1. There is
enough evidence to suggest that that did happen. The Q1 government expenditure compared to last
year was much better.
Therefore you would expect that by the end of Q2, the average government expenditure level would
be higher than what it was last year. Many expenditure management committees have pointed out
that the earlier tendency of delayed bunching expenditure in the last quarter is very bad for
both the quality of expenditure and fiscal management.
There were a number of recommendations about how the government should better manage its
expenditure so as to minimise the amount of expenditure that takes place in the last quarter and
last month.
One consequence of this is that, during the year, the fiscal deficit is going to rise because
the revenue profile has not changed due to this manipulation of budget dates. The government has
made some efforts to push the revenue profile back by changing the advance tax rules. Some of
that was done this year too, but those effects will be small. By and large, the revenue profile
would remain the same as last year but the expenditure profile has changed, so the logical
implication is that the fiscal deficit will rise at this stage. The surprise it generated
befuddled me.
The question is, will the government meet its revenue targets. Nobody has made any analysis so
far to suggest that it won’t.
**6.Topic: Indian economy; Infrastructure; Inclusive growth;
7) What are the prerequisites for India to achieve its full digital potential? What lessons
India can learn from European digital economies? Discuss. (250 Words)**
Livemint
Introduction:
In the next three years, India will add more than 300 million new mobile subscribers—and, by
2025, it is highly likely that the country will be the largest mobile market in the world.
Like other countries in Asia, India is developing a “mobile-first” digital culture, with
smartphones fuelling a boom in e-commerce and other forms of business.
With a rapidly growing middle class, and a young, tech-savvy population, online personal
services are about to take a big jump and international companies are ready to radically
increase their investment in India’s digital economy.
Just as many Indian information technology (IT) service companies have become global leaders,
there is a good chance that the next decades will see new Indian entrepreneurs shaking up the
global digital economy.
Prerequisites
Diffusing the digital revolution to wider masses
Digitization will boost the economy if it includes communities and regions that may have
previously been distant from the information and communication technology (ICT) advancement.
Improved telecom infrastructure as well as new affordable smartphones now give everyone the
opportunity to benefit from mobile digital technologies.
And that is helping to spur a revolution in how people can access services such as banking and
retail that so far have been closed to them.
India has about three million companies that are owned by women, and the lion’s share of those
are micro-enterprises whose No.1 barrier to growth is lack of access to formal financial
services.
2.Regulations be streamlined
It is equally important that sectors be opened up to new digital business models through
reductions in regulatory restrictiveness.