Atmanirbhar Bharat

The meaning of the term ‘Atmanirbhar Bharat’ is self-reliant India.

Significance of Atmanirbhar Bharat Abhiyan

It is turning a crisis into an opportunity. One such example is that the production of PPE kits
and N-95 masks in India has gone up from almost being negligible to 2 lakh each, daily.

Remaking that self-reliance is the only way out for India. Self-reliance will make
globalization human-centric. The definition of self-reliance has changed in a globalized
world and it is different from being self-centred. India’s fundamental thinking and tradition of
“Vasudhaiva Kutumbakam” provides a ray of hope to the world.

Self-reliance does not mean cutting India off from the world. India believes in the welfare of
the world and India’s progress is linked with the world. The world trusts that India has a lot
to contribute to the development of the entire humanity.

It also stressed on the need to be vocal for local products and urged people to buy only local
products.

Pillars of a Self-reliant India

Bold reforms across sectors will drive the country’s push towards self-reliance.

To shoot growth and to build a self-reliant India, Atmanirbhar Bharat Abhiyan rests on 5
important pillars:

Economy: contemplates not an Incremental change but a quantum leap so that we can
convert the current adversity into an advantage.

Infrastructure: that can be an image of modern India or it can be the identity of India.

Systems: driven by 21st-century technology, and that is not based on old rules.

Democracy: a vibrant democracy that is the source of energy to make India self-
reliant.

Demand: where the strength of our demand and supply chain is utilized intelligently.

Recently, the government announced an economic stimulus package of Rs 20 lakh crore and
big-bang systemic reforms under the Atma Nirbhar Bharat Abhiyan (self-reliant India).

The intended objective of this plan is two-fold. First, interim measures such as liquidity
infusion and direct cash transfers for the poor will work as shock absorbers for those in acute
stress.
The second, long-term reforms in growth-critical sectors to make them globally competitive
and attractive.

Together, these steps may revive the economic activity, impacted by Covid-19 pandemic and
create new opportunities for growth in sectors like agriculture, micro, small and medium
enterprises (MSMEs), power, coal and mining, defence and aviation,etc.

However, there are several challenges that are needed to be addressed in order to fulfil the
vision of this plan.

Impact of this Stimulus Package

Primary Sector: The measures (reforms to amend APMC, Contract framing, etc)
announced for the agricultural and allied sectors are particularly transformative.

These reforms are steps towards the One Nation One Market objective and help India
become the food factory of the world.
These would finally help in achieving the goal of a self-sustainable rural economy.
Also, the MGNREGA infusion of Rs 40,000 crore may help in alleviating the distress of
migrants when they return to their villages.
Secondary Sector: Given the importance of MSMEs for Indian economy, the Rs 3 lakh
crore collateral-free loan facility for MSMEs under the package will help this finance-
starved sector and thereby provide a kickstart to the dismal state of the economy.

Also, as the MSME sector is the second largest employment generating sector in India,
this step will help to sustain the labour-intensive industries and thereby help in leveraging
India’s comparative advantage.
Additionally, limiting imports of weapons and increasing the limit of foreign direct
investment in defence from 49% to 74% will give a much-needed boost to the production
in the Ordnance Factory Board, while reducing India’s huge defence import bill.
Tertiary Sector: The government has adopted a balanced approach in addressing concerns
across sectors. For example:

The newly launched PM e-Vidya programme for multi-mode access to digital online
education provides a uniform learning platform for the whole nation, which shall enable
schools and universities to stream courses online without further loss of teaching hours.
Public expenditure on health will be increased by investing in grass root health institutions
and ramping up health and wellness centres in rural and urban areas.

Associated Challenges

Issues Related to Liquidity: The package of Rs 20 lakh crore comprises both fiscal and
monetary measures, the latter being in the nature of credit guarantees and liquidity infusions
into banks and other financial sector institutions rather than the economy per se.

Majority of the package is liquidity measures that are supposed to be transmitted by RBI
to Banks and Banks to Citizens. This transmission wouldn’t be as smooth owing to
inefficient transmission of monetary policy.
Lack of Demand: The lockdown has lowered aggregate demand, and a fiscal stimulus is
needed. However, the package, by relying overwhelmingly on credit infusion to boost the
economy, has failed to recognise that investment will pick up only when people across
income segments have money to spend.
Lack of Backward and Forward Linkages: Unless the rest of the domestic economy is
revived, the MSME sector may face a shortage of demand, and its production may soon
sputter to a close.
Burgeoning Fiscal Deficit: Government claims that the stimulus package is around 10% of
India’s GDP. However, financing it would be difficult as the government is worried about
containing the fiscal deficit.
Difficulty in Mobilising Finances: The government seeks a disinvestment to mobilise the
finances for the plan.

However, the majority of Indian industries are already a bit debt-laden to take up the stake
in PSUs.
Further, it is difficult to borrow the foreign markets, as rupee with respect to dollar is all
time low.
Steps to Be Taken

Enhancing Demand: The economic package for the country emerging out of the lockdown
requires a stimulus enhancing demand across the economy.

The best way for this is to spend on greenfield infrastructure.

Infrastructure spending uniquely creates structures that raise productivity and extends
spending power to the section of the population most affected by the lockdown, namely
daily wage labourers.
Mobilising Finances: For financing of the stimulus package, India’s foreign reserves stand
at an all-time high which could be strategically used to finance its needs.

The rest may have to come from privatisation, taxation, loans and more international aid.
Holistic Reforms: Any stimulus package will fail to reflect the trickle-down effect, until and
unless it is backed by reforms in various sectors.

Thus, Atma nirbhar plan also encompasses the unfinished agenda of holistic reforms
which may include reforms in Civil services, Education, Skill and Labour, etc.
Business Environment and its salient features
India is a country of land and people. It has a huge customer base. It is rich in its natural
resources and is highly adaptive to changing business environment. In some areas like
technology and political stability, it requires some wise steps. With all these virtues India has
become a favourite destination of other countries to expand their business. India is expanding
domestically as well as globally to compete with other powerful business nations so as to get
its desired share of world economic growth.

The term business refers to the development and processing of economic values in society.
The scope of business is very wide. Business enterprise is a part of society and the business
environment has direct relationship with the policy of the enterprise. Business enterprise
possesses the following characteristics: a. Dealings in Goods and Services b. Production
and/or Exchange, c. Creation of form, time and place utility d. Regularity and Continuity in
Dealings. i.e. Profit Motive

The environment may impose several constraints on the enterprise. The enterprise on the
other hand, has very little control over its environment. Therefore, the success of an
enterprise depends to a very large extent on its adaptability to the environment, i.e., its ability
to identify itself with the environment and fit in with the environmental framework.

Environment literally means the surrounding external objects, influences of

circumstances under which someone or something exist. Business environment exhibits many
characteristics since it is composite, self-motivated, multi-layered and it has far reaching
impact. For all these reasons dividing environment into external and internal components
enables us to understand it better. Every business enterprise thus consists of a set of internal
factors and is confronted with a set of external factors.

The environment of business is an extremely complex and dynamic phenomenon as the

environmental factors vary from country to country. In order to cope with the complexity of
the environment it is feasible to divide it into different components and sectors. Let us
consider the importance of the study of the business environment:
a. The study of the business environment helps an organization to develop its broad strategies
and long-term policies.
b. It enables an organization to analyse its competitors' plans and thereby formulate effective
counter tactics.
c. Knowledge about the changing environment will keep the organization dynamic in its
approach.
d. The study of the business environment enables the organization to foresee the impact of
the socio-economic changes at the national and international level on its stability.
Finally, as a result of the study, executives are able to adjust to the prevailing conditions and
thus influence the environment in order to make it congenial to business.

The business activities may be grouped under two broad headings, viz., (1) Industry and (2)
Commerce. A business undertaking, which deals with growing, extracting, manufacturing, or
construction is called an industrial enterprise. On the other hand, a business undertaking,
which is concerned with exchange (buying and selling) of goods and services, or with
activities that are incidental to trade, like transport, warehousing, banking, insurance and
advertising, is called a commercial enterprise.
The Scope of business environment
Business environment consists of factors that are internal and external which poses threats to
a firm or these provide opportunities for exploitation. In business all the activities are being
organized and also carried out by the people to satisfy the needs of the consumers. So, it is an
activity carried out by the people for the people which means people occupy a central place
around which all the activities revolve. It poses a huge challenge for today’s and especially
tomorrow’s businessmen and managers to be aware of specific changes so as to keep
themselves well-informed with the latest happenings in the field of business to maintain their
survival and sustainability in the market. Therefore, the study of business environment is of
extreme importance for the managers and practitioners.
There are two more factors which are which exercise considerable influence on business.
They are physical or natural environment and global environment. Therefore, we will study
the following environmental factors one by one.
• Global Environment
• Natural Environment
• Political – Legal Environment
• Economic Environment
• Socio-Economic Environment
• Technological Environment

Business environment is becoming very complex day by day as some environmental issues
such as deforestation, global warming, depletion of the ozone layer, pollution of land, air and
water. The leading politicians and managers around the world have picked up the
environmental banner.
The green marketing movement has been gaining momentum around the world. The
businesses are challenged today to develop creative ways to make profits without unduly
harming the existing environment. Considering the variety of these sources of change in the
environment, global managers are challenged to keep themselves abreast and adjust as
necessary. Some companies like Daewoo, Hyundai, Maruti, Tata and Hero-Honda in India,
with their pollution prevention programmes are leading the way. Indeed, cleaning up the
environment promises to generate whole new classes of jobs in the future.
Disappeared are the days when business was heavily protected and subsidized, licenses,
quotas and restrictions were the order of the day. Now competition is the name of modern
business. Businessmen always stand on the brink of a fear to eliminate from the market. They
stand on their feet to cut down costs, to eliminate deficiencies and incessant improvement in
the quality are order of the day. But by the competition, consumer is obviously benefited by
the diverse openings of different competitors.

Business Environment: Emerging Order

Internationalization or globalization of business has become a subject of very serious
discussion in the national economic policies and corporate board room. International trade is
growing faster than world output and international investment is growing much faster than
global trade.
Business Environment can be segregated into two parts: Micro and Macro factors
Micro environment of Business:

There are following components of micro environment of business

Suppliers:
Suppliers or vendors are those persons or firms who supply inputs like new materials, certain
parts, cutting tools etc., to the company. The vendor quality and reliability is a must for the
smooth functioning of the business. They must supply all attributes of right quality and stated
quantity in time. In order to be on safe side, adequate stock of input elements should be
preserved in the company and services should be taken of more than one vendor to supply the
goods.

Customers:

Today with the advancement of technology and because of foreign collaborations, it has
become easy to manufacture any product, but it is still very difficult to sell i.e., to create,
increase and sustain the customers. Every day we watch a new advertisement thus monitoring
the customer sensitivity is, therefore, a prerequisite for the business success. How many
different categories of customers shall be there to buy a product, depends upon the product
itself? Customers should be many, because it is risky to depend upon a single customer, who
tomorrow may shift to another competitor or press for reduction in price or may close his
business to undertake another more profitable venture, etc.

c. Competitors:
This factor is based upon the desired competition amongst the sellers. In other words, the
primary task of firm is to influence the basic desire of the customer to buy only their product
and no other product. This desire can be created in the customer by giving various incentives.
Another factor is the brand competition i.e., the competition between the different brands of
the same product form.

d. Public:
Public means a group of people. Public opinion can be a threat to a business firm whereas it
can be an opportunity for another business firm. Public normally forms an opinion about
different brands of the same product after using the same.

Opinion travels from friend-to-friend, neighbour-to-neighbour etc. This is consumer publics

which has an important effect on any companies’ business.

The second is the Media publics where media tries to impact the image of a business firm by
giving own reasons or logic, and this adversely affects the business of the firm. Its share price
may also get affected and the third is Local publics.

e. Marketing Intermediaries:

Marketing Intermediaries are those firms/individuals who help the company in promoting,
selling and distributing its goods to final buyers.
Macro environment of Business

Technological There are two more factors which are which exercise considerable influence
on business. They are physical or natural environment and global environment. Therefore, we
will study the following environmental factors one by one.
• Global Environment
• Natural Environment
• Political – Legal Environment
• Economic Environment
• Socio-Economic Environment
• Technological Environment

Business environment is becoming very complex day by day as some environmental issues
such as deforestation, global warming, depletion of the ozone layer, pollution of land, air and
water. The leading politicians and managers around the world have picked up the
environmental banner.
The green marketing movement has been gaining momentum around the world. The
businesses are challenged today to develop creative ways to make profits without unduly
harming the existing environment. Considering the variety of these sources of change in the
environment, global managers are challenged to keep themselves abreast and adjust as
necessary. Some companies like Daewoo, Hyundai, Maruti, Tata and Hero-Honda in India,
with their pollution prevention programmes are leading the way. Indeed, cleaning up the
environment promises to generate whole new classes of jobs in the future.
Technological Environment of business
It is obvious that technology must attend to the basic problems of food, clothing, health and
housing of people. At the same time rapid industrial development through latest technology is
necessary to catch up with advanced countries. With these objectives in mind, Government of
India set-up series of R &D establishments, space research centre, Medical research centres,
agricultural research establishments, oil explorations centres, power development projects
and the council of scientific and industrial research. Besides, several universities and
institutes have been set-up to provide higher education in science, technology and
management.
Economic Environment of Business
It is difficult to be precise about the factors which constitute the economic environment of a
country. But still there are some factors which have considerable influence. These factors are:
(a) Growth strategy(b) Economic system(c) Economic plannin(d) Industry(e) Agriculture(f)
Infrastructure(g) Financial and fiscal sector(h) Removal of regional imbalances(i) Price and
distribution control(j) Economic Reforms
While studying business environment it is also important to understand the economic systems
under which business works.
1. Economic System: The scope of a private business and the extent ofgovernmentregulation
of economic activities depends to a very large extent on the nature of economic system,
which is an important part of business environment. Broadly the economic system is divided
into three groups:
(a) Capitalism(b) Socialism(c) Communism
(a) Capitalism
The system of capitalism stresses the philosophy of individualism believing in private
ownership of all agents of production, in private sharing of distribution processes that
determine the functions rewards of each participant, and in individual expression of consumer
choice through a free market place. The capitalist system is also known as free enterprise
economy and market economy.
Two types of capitalism may be distinguished, viz., (i) The old, laissez-fair capitalism, where
government intervention in the economy is absent or negligible; and
(ii) The modern, regulated or mixed capitalism, where there is a substantial amount of
government intervention.
(b) Socialism
Under socialism, the tools of production are to be organized, managed and owned by the
government, with the benefits occurring to the public.
A strong public sector, agrarian reforms, control over private wealth. Socialism believes in
providing employment to all and emphasizes suitable rewards to the efforts put in by every
worker.
(c) Communism
Communism goes further to abolish all private property and property rights to income. The
state would own and direct all instruments of production. Sharing in the distributive process
would have no relationship to private property since this right would not exist. Communism
was followed in Russia, China and East European Countries.
Political Environment
The influence of political environment of business is enormous. The political system
prevailing in a country decides, promotes, fosters, encourages, shelters, directs and controls
the business activities of that countries. A political system which is stable, honest, efficient
and dynamic and which ensures political participation of the people, and assures personal
security to the citizens, is primary factor for growth of any business.
Socio-economic Environment
Social and cultural environment refers to the influence exercised by certain social factors. All
such factors come under one head that is culture.
Culture:
In its true sense culture is understood as that complex whole which includes knowledge,
belief, art, morals, law, customs and other capabilities and habits acquired by individual as a
member of a society. Culture of a society is shared by its members. Cultural ethos is passed
from one generation to other generation. It is not confined to one particular period of time.
The interface between business and culture can be concise as
follows: a) Culture creates people. b) Culture determines goods and services. c) It defines
people’s attitude to business and to work. d) Explains the spirit of collectivism and
individualism. e) Defines whether people are Ambitions or complacent. f) Education g)
Family h) Authority i) Marriage j) Time Dimension k) Cultural Resources.

Natural Environment
Equally significant, are the factors like climate, minerals, soil, landform, rivers and oceans,
coast lines, natural resources, flora and fauna etc. Which have considerable influence on the
functioning of a business. It is the natural environment which decides the resources for any
business. Manufacturing, which is one of the aspects of business, depends on physical
environment for inputs like raw material, labour of various skills, water, fuel etc. Trade
between two regions of a nation or between two nations is the result of geographic factors.
Because of natural factors, certain areas are more suitable for production of certain goods and
other areas are in need of such goods. Transportation and communication, the main properties
of business, depend to a larger extent on geographic factors. Uneven landforms, desserts,
oceans, forest, rivers etc. are barriers to develop this vital infrastructure. Some businesses like
mining of coal and ores, drilling of oil and most important agriculture which depends most on
nature. Thus, the impact of natural environment cannot be ignored moreover it should be
given top priority for any successful business.

Business environment is becoming very complex day by day as some environmental issues
such as deforestation, global warming, depletion of the ozone layer, pollution of land, air and
water. The leading politicians and managers around the world have picked up the
environmental banner.
The green marketing movement has been gaining momentum around the world. The
businesses are challenged today to develop creative ways to make profits without unduly
harming the existing environment. Considering the variety of these sources of change in the
environment, global managers are challenged to keep themselves abreast and adjust as
necessary. Some companies like Daewoo, Hyundai, Maruti, Tata and Hero-Honda in India,
with their pollution prevention programmes are leading the way. Indeed, cleaning up the
environment promises to generate whole new classes of jobs in the future.
Important characteristics of business environment in India
Co-Existence of Public and Private Sector:
Indian business environment is characterized by the co-existence of both public and private
sector in respect of its participation in various economic activities in the country.

Low Income Level:

Another features of Indian business environment is that it has to face low income level of the
people in general as an important economic parameter for determining its economic
activities.

Poor Rate of Capital Formation:

Capital deficiency is one of the important features of the Indian business environment. Both
the amount of capital available per head and the present rate of capital formation in India is
very low. This low level of capital formation in India is due to weakness of the inducement
to invest and also due to low propensity and capacity to save.

Low-slung Level of Technology:

Prevalence of low level of technology is another important feature of Indian business

environment. The business environment of the country is thus suffering from technological
backwardness. Obsolete techniques of production are dominantly being applied in agriculture
and industrial sector of the country. Sophisticated modern technology is being applied at a
very limited scale. Also, the huge unskilled and untrained labour force is also an important
impediment to technological modernization in India.

Under-Utilization of Capacity:

Under-utilization of productive capacity of Indian industries is another important feature of

Indian business environment. As a result, the industries in India are suffering from higher unit
costs and low profitability syndrome.
Absence of Divergence:

The business environment of the country is also subjected to the problem of lack of
diversification in its industry, trade and other related activities.

Financial Market:
Indian business environment is also supported by under developed financial market. Financial
market is suffering from lack of resilience and adequate and free uninterrupted flow of
institutional credit towards business units.

Industrial Clashes and Slow Pace of Labour Reforms:

Growing industrial disputes and the slow pace of labour reforms introduced by the
Government has affected the business environment of the country.

Government Interference:

There is lack of single window clearance and lack of administration efficiency in respect of
industrial licensing. The business enterprises have to face the problem of red-tapism,
harassment, corruption, undue delay etc

Extent of Market:

The business enterprises of the country is also suffering from lack of diversification of its
export market. However, considering the natural advantage available in the country, the
country would be able to diversify its export market particularly in respect of its agro-
processed industries, services sector, information technology sectors etc.

Transportation Bottle Neck:

Although the country has developed a wide network of transportation system throughout the
country but its frequent interruption as a result of natural calamities like flood, landslides etc.

Tardy Flow of Foreign Investment:

Promotion of business environment also depends on the smooth flow of foreign investment in
various sectors. But the country is suffering from tardy flow of foreign investment, which
goes against the promotion of business environment in the country.

Disturbed Law and Order Conditions:

Another important feature of business environment in India is its disturbed law and order
conditions in some particular regions leading unbalanced growth interrupting the smooth
flow of business.
Business Environment
SALIE NT F E ATURES
Business Environment defined
Business Environment exists in a world of concrete places and things, natural resources,
important abstractions and living persons. The sum of all these factors and forces is
called the business environment. Although business environment constitutes both
internal and external factors, yet external factors are included and studied under its
purview because external factors are beyond the control of the firm whereas internal
factors are controllable in nature.
Role and differences between Primary, Secondary and Tertiary Sector

Primary Sector Secondary Sector Tertiary Sector

It is known as the agricultural and allied It is known as the manufacturing sector It is known as the service sector
sector services
This sector provides raw materials for This sector transforms one good into The tertiary sector provides useful
goods and services another by creating more utility from it services for the primary and secondary
sectors
The primary sector is unorganized and The secondary sector is organized and This sector is well organized and uses
uses traditional techniques uses better methods of production modern-day logistics techniques to
perform its functions
Activities in this sector consist of It includes manufacturing units, small Banking, insurance trade and
agriculture, forestry and mining scale units, large firms and multinational communications come under this sector
corporations
In most developing nations such as India, The employment rate is in equilibrium as This sector’s employment share has
this sector is where a large section of the a specialized set of skills is required to increased in the ensuing years
workforce is employed, in comparison to find employment in this sector
developed nations
Business Environment
Business Environment
 Business Environment
Business environment can be better understood by looking at its following salient characteristics:
Environment is complex
The environment is the aggregate of various factors, events, conditions, and influences arising
from different sources. All these do not exist in isolation but interact with each other to produce
entirely new types of influences. Environment is a complex phenomenon relatively easier to
understand in parts but difficult to understand in its totality.
Environment is dynamic:

That change is the law of nature squarely applies to environment also. The various influences
operating on an unabated manner make the environment continuously changing. This, in turn,
makes the environment dynamic in nature.
Environment is multi-faceted:

The environment is perceived differently by different perceivers or observers. For example, the
new development like business agreement between America and India, is perceived as opportunity
by some while threat by others .
Environment has far-reaching impact:

Business enterprise operates within a given environment and gets affected by it. The growth and
profitability of business depends critically on environment. Thus, the environment has a far-
reaching impact on business organizations.
Economic Environment
Economic environment consists of economic factors that influence the business in a country.
These factors include gross national product, corporate profits, inflation rate, employment,
balance of payments, interest rates, consumer income, etc.
Social Environment:

It describes the characteristics of the society in which the organization exists and operates.
Literacy rate, customs, values, beliefs, lifestyle, demographic features, and mobility of population
form the social environment of a business. It is important for entrepreneurs to notice the direction
in which the society is moving and formulate progressive business policies according to the
changing social scenario.
Political Environment

It comprises the political stability and the policies of the government. Ideological inclination of
political parties, personal interests of politicians, influence of the party forums etc. on business
create political environment.
Legal Environment:

This consists of legislation that is passed by the parliament and state legislatures relating to
business enterprises. Examples of such legislation specifically aimed at business operations include
the Trade Mark Act , Essential Commodities Act , Standards of Weights and Measures Act , and
Consumer Protection Act etc.
 Technological Environment:

It includes the level of technology available in a country. It also indicates the pace of research and
development and progress made in introducing modem technology in production. Technology provides
capital-intensive but cost-effective alternatives to traditional labour-intensive methods.

In a competitive business environment, technology serves as competitive advantage and is considered

as the key to industrial and economic development of a country. Hence, increasing emphasis has been
given to research and development in every country.
Characteristics of business environment in India

Co-Existence of Public and Private Sector

Low Income Level Poor Rate of Capital Formation

Low-slung Level of Technology

Under-Utilization of Capacity
Absence of Divergence
Financial Market Shortcomings
Characteristics of business environment
in India
Government Interference
Transportation Bottle Neck
Industrial Clashes and Slow Pace of Labour Reforms
Government Interference
Transportation Bottle Neck
Tardy Flow of Foreign Investment
Disturbed Law and Order Conditions
COVID-19 and its impact on Business environment
Coronavirus outbreak was first reported in Wuhan, China on 31 December, 2019. Before
reading in detail about the impact, first, let us understand about coronavirus.

Coronavirus is a large family of viruses that causes illness. It ranges from the common cold
to more severe diseases like Middle East Respiratory Syndrome and Severe Acute
Respiratory Syndrome. The novel coronavirus is a new strain of virus that has not been
identified in human so far.
WHO is working closely with global experts, governments, and other health organisations to
provide advice to the countries about precautionary and preventive measures.

Impact on Indian economy

To combat with COVID-19, Indian Government extended the date of lockdown time to time.
Recently an industry survey that is jointly conducted by industry body FICCI and tax
consultancy Dhruva advisors and took responses from about 380 companies across the
sectors. It is said that businesses are wrestling with "tremendous uncertainty" about their
future.

According to the survey, COVID-19 is having a 'deep impact' on Indian businesses, over the
coming month's jobs are at high risk because firms are looking for some reduction in
manpower. Further, it is added that already COVID-19 crisis has caused an unprecedented
collapse in economic activities over the last few weeks.

The present situation is having a "high to very high" level impact on their business according
to almost 72 per cent respondents. Further, 70 per cent of the surveyed firms are expecting a
degrowth sales in the fiscal year 2020-21.Surveyed firms of around 60 per cent have
postponed their fund-raising plans for the next 6-12 months. Also, nearly 25 per cent of the
firms have decided the same.

According to Dun & Bradstreet, COVID-19 disrupted human lives and global supply chain
but the pandemic is a severe demand shock which has offset the green shoots of recovery of
the Indian economy that was visible towards the end of 2019 and early 2020.
The revised Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage
points for the fiscal year 2020 to 4.8 per cent and by 0.5 per cent for the fiscal year 2021 to 6
per cent. Further, it is stated that the extent of the actual impact will depend upon the severity
and duration of the outbreak.

There are three major channels of impact for Indian businesses according to the report
namely linkages, supply chain and macroeconomic factors. The data of the Dun & Bradstreet
shows that at least 6,606 Indian entities have legal linkages with companies in countries with
a large number of confirmed COVID-19 cases.

Business activity in the foreign markets is slow which implies a negative impact on the top
line of these companies. Sectors that would be much affected includes logistics, auto,
tourism, metals, drugs, pharmaceuticals, electronic goods, MSMEs and retail among others.

Further, according to the World Bank's assessment, India is expected to grow 1.5 per cent to
2.8 per cent. And IMF projected a GDP growth of 1.9 per cent for India in 2020 because the
global economy is affected by the COVID pandemic, the worst recession since the Great
Depression in the 1930s. Also, we can't ignore that the lockdown and pandemic hit several
sectors including MSME, hospitality, civil aviation, agriculture and allied sector.

According to KPMG, the lockdown in India will have a sizeable impact on the economy
mainly on consumption which is the biggest component of GDP.

Reduction in the urban transaction can lead to a steep fall in the consumption of non-essential
goods. It can be severe if disruption causes by the 21-day lockdown and affect the availability
of essential commodities.

Due to weak domestic consumption and consumer sentiment, there can be a delay in
investment which further add pressure on the growth.
Post-COVID-19, some economies are expected to adopt de-risking strategies and shift their
manufacturing bases from China. This can create opportunities for India.

According to KPMG, opportunities will largely depend on how quickly the economy
recovers and the pace at which the supply chain issues are addressed.

In terms of trade, China is the world’s largest exporter and second-largest importer. It
accounts for 13% of world exports and 11% of world imports.
Up to a large extent, it will impact the Indian industry. In imports, the dependence of India on
China is huge. Of the top 20 products (at the two-digit of HS Code) that India imports from
the world, China accounts for a significant share in most of them.

India’s total electronic imports account for 45% of China. Around one-third of machinery and
almost two-fifths of organic chemicals that India purchases from the world come from China.
For automotive parts and fertilisers China’s share in India’s import is more than 25%. Around
65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile
phones come from China to India.

Therefore, due to the current outbreak of coronavirus in China, the import dependence on
China will have a significant impact on the Indian industry.

In terms of export, China is India’s 3rd largest export partner and accounts for around 5%
share. The impact may result in the following sectors namely organic chemicals, plastics, fish
products, cotton, ores, etc. Also, it can’t be ignored that most of the Indian companies are
located in the eastern part of China. In China, about 72% of companies in India are located in
cities like Shanghai, Beijing, provinces of Guangdong, Jiangsu, and Shandong. In various
sectors, these companies work including Industrial manufacturing, manufacturing services, IT
and BPO, Logistics, Chemicals, Airlines, and tourism.
It has been seen that some sectors of India have been impacted by the outbreak of coronavirus
in China including shipping, pharmaceuticals, automobiles, mobiles, electronics, textiles, etc.
Also, a supply chain may affect some disruptions associates with industries and
markets. Overall, the impact of coronavirus in the industry is moderate.
According to CLSA report, pharma, chemicals, and electronics businesses may face supply-
chain issues and prices will go up by 10 percent. The report also says that India could also be
a beneficiary of positive flows since it appears to be the least-impacted market. Some
commodities like metals, upstream and downstream oil companies, could witness the impact
of lower global demand impacting commodity prices.

According to CII, GDP could fall below 5% in FY 2021 if policy action is not taken urgently.
It is said that the government should take some strong fiscal stimulus to the extent of 1% of
GDP to the poor, which would help them financially and also manage consumer demand.

In the third quarter (October-December) growth is slowed down to 4.7% and the impact of
COVID-19 will further be seen in the fourth quarter.

FICCI survey showed 53% of Indian businesses have indicated a marked impact of COVID-
19 on business operations. And 42% of the respondents said that up to three months could
take for normalcy to return.

Sector-wise impact on Indian industry

Chemical Industry:
Some chemical plants have been shut down in China. So, there will be restrictions on
shipments/logistics. It was found that 20% of the production has been impacted due to the
disruption in raw material supply. China is a major supplier of Indigo that is required for
denim. Business in India is likely to get affected so people securing their supplies. However,
it is an opportunity. US and EU will try and diversify their markets. Some of the business can
be diverted to India which can also be taken as an advantage.

Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement
service providers. As per the sources, per day per vessel has declined by more than 75-80% in
dry bulk trade.
Auto Industry: Its impact on Indian companies will vary and depend upon the extent of the
business with China. China’s business no doubt is affected. However, current levels of the
inventory seem to be sufficient for the Indian industry. If the shutdown in China continues
then it is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020.

Pharmaceuticals Industry: Despite being one of the top formulations of drug exporters in the
world, the pharma industry of India relies heavily on import as of bulk drugs. Due to the
coronavirus outbreak, it will also be impacted.

Textiles Industry: Due to coronavirus outbreak, several garments/textile factories in China

have halted operations that in turn affecting the exports of fabric, yarn and other raw
materials from India.
Solar Power Sector: Indian developers may face some shortfall of raw materials needed in
solar panels/cells and limited stocks from China.

Electronics Industry: The major supplier is China in electronics being a final product or raw
material used in the electronic industry. India’s electronic industry may face supply
disruptions, production, reduction impact on product prices due to heavy dependence on
electronics component supply directly or indirectly and local manufacturing.

IT Industry: The New Year holidays in China has been extended due to coronavirus outbreak
that adversely impacted the revenue and growth of Indian IT companies.

Tourism and Aviation: Due to the coronavirus outbreak, the inflow of tourists from China
and from other East Asian regions to India will lose that will impact the tourism sector and
revenue.

An outbreak of COVID-19 impacted the whole world and has been felt across industries. The
outbreak is declared as a national emergency by the World Health Organisation. In India the
three major contributors to GDP namely private consumption, investment and external trade
will all get affected. World and Indian economy are attempting to mitigate the health risks of
COVID-19 with the economic risks and necessary measures needed will be taken to improve
it.
Divergent performance in India after lockdown

At the end of the third quarter, the economy is showing a hugely divergent
performance.

Pharmaceuticals and chemicals are showing growth on their Year-To-Date numbers.

FMCG reached last year’s level in the second quarter.

Construction equipment are showing a huge recovery, with record sales numbers in
the last three months, driven by rural demand from sales to individuals.

Capital goods are still sluggish with YTD numbers well down on last year, but are
now showing some signs of life.

In contrast, travel and tourism, real-estate and construction, and retail, are all still at
under half last year.

These are high employment sectors, and salaried employment has correspondingly
taken a big hit, with potentially longer-term effects.

How to achieve ‘full recovery’

 Full recovery means getting back to the trend line of growth where we would have
been pre-COVID.
 We need to aspire to grow 9 per cent for three years, which is what will get us back to
our 5 per cent trend line of growth by 2024.
 The recovery underway is solid, but we need measures to sustain and deepen it.
 The government can do three things.

Suggestions to sustain the recovery

Stimulate the economy

 The most immediate fiscal stimulus possible is to put cash into the economy.
  Distribute the pending tax refunds, pay the bills of all companies, pay off the
arbitration awards pending where the government has lost cases, and pay state
governments their pending GST dues.
 All this will run into a few trillion rupees, and it will be cash that immediately
stimulates the economy.

Invest in public health infrastructure

 Some preparation is underway to distribute vaccines, but there is need to go much

further.
 Centre should finance state government efforts to build an extensive public health
network so we are equipped to handle a possible second wave of the virus.
 If we demonstrate that we are much more prepared in February and March 2021 than
we were in April and May 2020, we will spread confidence.
 Government should work in partnership with private sector hospitals.

Invest in infrastructure

 There are dozens of projects stuck as funds are not available.

 The 20 trillion infrastructure pipeline needs to have some cash flow in it.
 The COVID crisis revealed awful things about living conditions in slums across our
cities.
 We can put in place the right public-private programme to provide decent, accessible
housing, with quick and cheap connectivity into our cities.
 This could trigger a building boom that would stimulate demand like nothing else.

How to finance the spending:

Privatisation program

 Government can manage the resource for spending through privatisation program.
 Our current stock market boom says that buyers are ready to invest. But public-sector
stock values are still depressed.
 The best way to see them take off is to announce that the government intends to
reduce its share-holding to 26 per cent across public-sector banks, steel companies, oil
companies, and every manufacturing company and hotel it currently owns.
 To avoid opposition to such reforms, we must operate consistent with our democratic
institutions.
Demonetisation

Demonetisation is the act of stripping a currency unit of its status as legal tender. It occurs
whenever there is a change of national currency and the current form or forms of money
is pulled from circulation and retired, often to be replaced with new notes or coins.

Demonetisation was an expeditious move to boldly counter the black money and parallel
economy (illegal economy, such as money laundering, smuggling, etc.) threat with visible
impact on how the government's policies are perceived in international circles of economic
power.

This move by the government achieved larger significance for a globally connected India as
it showed boldness in tackling an issue which has remained a thorn in the growth success
story of this generation.

8th November 2020 marked the four-year anniversary of demonetisation, when Rs. 500 and

Rs. 1,000 notes were withdrawn from the system in 2016.

Objectives of Demonetisation:

To discourage the use of high-denomination notes for illegal transactions and thus curb the
widespread use of black money.

To encourage digitisation of commercial transactions, formalise the economy and

so, boost government tax revenues.

The formalisation of the economy means bringing companies under the regulatory
regime of government and subject to laws related to manufacturing and income tax.

Operation Clean Money:

It was launched by the Income Tax Department (CBDT) for e-verification of large cash
deposits made during the period from 9th November to 30th December 2016.

The programme was launched on 31st January 2017 and entered into the second phase in
May 2017.
It aimed to verify cash transaction status (exchange/savings of banned notes) of taxpayers
during the demonetisation period and to take tax enforcement action if transactions do not
match the tax status.

Impact of the Move:

Currency with public stood at Rs. 17.97 lakh crore on 4th November 2016 and declined to
Rs 7.8 lakh crore in January 2017 after demonetisation.

Currency with Public: As per the Reserve Bank of India (RBI) definition, currency with
public is arrived at after deducting cash with banks from total currency in circulation.

Currency in Circulation: It refers to cash or currency within a country that is physically

used to conduct transactions between consumers and businesses.

Demands fell, businesses faced a crisis and gross domestic product (GDP) growth
declined nearly 1.5%, with many small units and shops being shut down and it
also created a liquidity shortage.

Liquidity shortages or crises arise when financial institutions and industrial companies
scramble for, and cannot find the cash they require to meet their most urgent needs or
undertake their most valuable projects.

Current Trends:

Currency with Public: On 23rd October 2020, the currency with the public stood at a
record high of Rs. 26.19 lakh crore, up 45.7% from November 2016.

The pace of rise in currency with the public has been very sharp over the last 10
months as it has risen from Rs. 21.79 lakh crore as on 3rd January 2020 to the current
number in October 2020.

The hike was mainly driven by a rush for cash by the public between March and May
amidst the stringent lockdowns to tackle the spread of the Covid-19 pandemic.
It shows that the cash in the system has been steadily rising, even though the government
and the RBI had pushed for a less-cash society, digitisation of payments and slapped
restrictions on the use of cash in various transactions.

Digitisation: According to an RBI study on digital payments, although digital payments

have been growing gradually in recent years, both in value and volume terms across
countries, currency in circulation to GDP ratio has increased in consonance with the
overall economic growth.

Tax Revenues: Along with demonetisation, the introduction of the Goods and Services
Tax (GST), the Insolvency and Bankruptcy Code (IBC), Real Estate (Regulation and
Development) Act 2016 and Benami Transactions (Prohibition) Amendment Act,
2016 encouraged compliance such that the number of income tax returns and the number
of income tax filers grew at a healthy rate in 2017 and 2018.

Counterfeit Currency: In the year 2015-16, more than 4 lakh fake notes of Rs. 500 and Rs.
1,000 were captured. This number reduced to 45,400 fake notes of Rs. 500 and Rs. 2,000
in 2018-19. However, the number of fake notes among the new design notes of Rs.
500 more than doubled with an increase of 121% whereas those of Rs. 2000 increased by
21.9% over the previous year during 2018-19, according to the annual report of RBI.

Terrorism: It was believed that stopping the high-value currency from circulating will
restrict funds used for terrorist activities which will gradually decrease the terrorist
activities in the country. But, on the contrary, the number of such incidences rose in the
years 2016, 2017, and 2018, compared to 2015.

While 728 people died in terrorist activities in 2015; the number of casualties rose to
905, 812, and 940 in such activities in 2016, 2017, and 2018, according to the South
Asia Terrorism Portal (SATP) data.

Merits of Demonetization
 Demonetization policy of the Government has been termed as the greatest financial
reform that aimed to curb the black money, corruption and counterfeit currency notes.
 All the people who are not involved in malpractices welcomed the demonetization as
the right move.
 Demonetization was done to help India to become corruption-free as it will be
difficult now to keep the unaccounted cash.
  Demonetization will help the government to track the black money and the
unaccounted cash will now flow no more and the amount collected by means of tax
can be better utilized for the public welfare and development schemes.
 One of the biggest achievements of demonetization has been seen in the drastic curb
of terrorist activities as it has stopped the funding the terrorism which used to get a
boost due to inflow of unaccounted cash and fake currency in large volume.
 Money laundering will eventually come to halt as the activity can easily be tracked
and the money can be seized by the authorities.
 Demonetization aimed to stop the running of parallel economy due to circulation of
fake currency as the banning of Rs.500 and Rs. 1000 notes will eliminate their
circulation.
 The unaccounted cash could be deposited in the Pradhan Mantri Garib Kalyan Yojana
after paying 50% tax. The money will remain deposited for 4 years with the bank
without incurring any interest. However, after 4 years the amount will be returned.
This amount can be utilized for social welfare schemes and making the life of low
income groups better.
 The Public Sector Banks which were reeling under deposit crunch and were running
short of funds have suddenly swelled with lot of money which can be used for future
finances and loans after keeping a certain amount of reserve as per RBI guidelines.
 The people who opened the Jan Dhan accounts will now use their accounts and
become familiar with banking activitiy. The money deposited in these accounts can be
used for the developmental activity of the country.
 The tax collected due to launch of demonetization policy will be put to developmental
activities in the country.
 Demonetization has driven the country towards a cashless society. Lakhs of the
people even in remote rural areas have started resorting to use the cashless
transactions. The move has promoted banking activities. Now even the small
transactions have started going through banking channels and the small savings have
turned into a huge national asset.
 The high rising price pattern and inflationary trends which the Indian economy was
facing are taking a down turn making the living possible within low income group
reach.
Demerits
The very next day of announcing the demonetization, the BSE Sensex and NIFTY 50 stock
indices fell over 6%. The severe cash shortages brought detrimental impact on the
economy. People trying to exchange their bank notes had to stand in lengthy queues causing
many deaths due to inconvenience and rush.
 The sudden announcement has made adverse impact on business and economy.
Instead of a growing economy India has become a standstill and no growth economy.
It is feared that a fall of 2-3% in the GDP growth will be recorded coming year.
 India is an agriculture-based economy. Due to the cash crunch, the farmers especially
small and marginal who largely depend on cash to buy seeds, fertilizers and to pay for
sowing, borrowing water for irrigation and for other related agriculture equipments
remained worst affected and could not complete the crop related activity.
 Since small branches of the banks were also not supplied with adequate cash within
time of sowing season of the crop, farmers could not get their crop loans disbursed.
This added to the woes of the farmers leading to a weak agriculture production the
coming year.
 Real Estate sector came to a stand still and is still gasping for buyers of the
constructed and half constructed inventory without buyers. This has resulted in poor
cash flow leading to a poor demand.
 Demonetization has made the situation become chaotic. Tempers are running high
among the masses as there is a delay in the circulation of new currency.
 Due to the inability to pay cash to poor daily wage workers, the small employers have
stopped their business activity.
 The poor planning on the part of the government has also added to the woes of the
common people with low incomes. The Rs.2000 currency note does not find many
takers as it is difficult to get the balance back when you are buying daily needs like
vegetables, milk, bread or paying for petty expenses like bus fare. While rs.100
currency notes were not available in sufficient number, Rs.500 note arrived in the
market very late.
 Demonetization is the 2 way sword in regard to incurring the public expenditure. On
the one hand huge cost is to be incurred on printing the new currency and on the other
hand managing the lakhs of crores of old currency volume has also become a big
expenditure incurring item.
 Many Economists are of the view that Rs.2000 currency note will be much easier to
hide and can be used to store black money in shorter space.
 Entire opposition has stood against demonetization and has called this decision a
draconian law.
Farmer’s Bill

In September 2020, the Indian government passed three agricultural bills, which are –
Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, Farmers
(Empowerment and Protection) Agreement of Price Assurance, Farm Services Bill, 2020, and
the Essential Commodities (Amendment) Bill, 2020.

Among the confusion by opposition party leaders and farmer groups, the controversial bills
were passed by the Indian Parliament. Along with rigid opposition, some voices have also
come out in support of these bills.

What is the Farmer’s Bill?

Since the time of three controversial new farmers’ bills got passed without much debate in
Parliament, people all over the country are protesting energetically against these.

The new farmers’ bill allows the farmers to sell their products directly to private buyers
breaking the monopoly of man is regulated by the government. The people get empowered to
get into a legal deal with the companies and produce agro-products for them. The farmers’
bill India also allows stocking of food articles by the agri-businesses removing the ability of
the government to impose arbitrarily.

Advantages of Farmers Bill 2020

According to the government, the recently passed bills for farmers will help in transforming
the agriculture sector as these are believed to increase the farmer’s income. The Centre
believes that the people engaged in farming will become independent and can get better
prices for their products.

A new system where the farmers and traders can do business outside the Mandis can be
created as per the bill. The intra-state business also gets encouraged here along with the
reduction of transportation cost.

The people also get the provision for entering into a legal framework with the companies,
exporters, retailers who are interested to buy their products. This will also give the farmers
access to modern technology thus improving their production.

As per the government, this bill can also prove to be beneficial for farmers of small and
marginal range with the land of fewer than five hectares. The bill also aims at attracting FDI
as it removes pulses and cereals from the essential commodities list.

Disadvantages of Farmers Bill 2020

The bill passed for farmers to allow trade of crops outside the government regulated mandis
or markets thus hampering the monopoly of the agricultural produce market committee.

MSP for crops is declared by the government but in the Promotion and Facilitation Bill 2020,
there is no statutory backing to MSP. There is no mention of this in the entire bill and this is
what concerns the people the most as they do not have anything to do with the legal system
but MSP matters to them.
Due to the pricing of sugarcane being governed under the Essential Commodities Act, the
Sugarcane (Control) Order, 1966, this crop has statutory MSP implementation.

Effects that are Disturbing the Farmers

The agriculture 2020 bills have triggered strong protests all over the country. Let’s have a
look at the issues that are triggering so many protests across the nation.

 Middlemen will be affected.

 These new farmers’ bills might end MSP or minimum support prices and this bothers
the farmers.
 Another concern is the lack of bargaining capability with big companies. The people
involved in farming might get the freedom to deal with the biggest of the companies
but due to the lack of knowledge, he/ she might not be able to negotiate the best
possible terms.
 Outside the mandis or government-regulated markets, there is hardly any regulation,
and grievance redressal system is also not present there.
 The new farmers’ bill may weaken the APMC system which is considered to be very
helpful for small farmers.
 As per the suggestions of agricultural economists, the focus should be given on
strengthening APMCs rather than transferring everything to private entities.
 Many are fearing that the people involved in agriculture might be turned into slaves
due to contractual farming.
 Due to the removal of restrictions on food storage, big companies may store agro
products in huge quantities and create artificial hikes in price.

Conclusion

The farmers’ bill 2020 has been creating a storm of protest all over the nation. While some
are supporting the bills as they believe that these will eventually modernize the Indian
agricultural sector, some are fearing the worst situation that these bills can lead to.
Fiscal policy
Fiscal policy is the guiding force that helps the government decide how much money it
should spend to support the economic activity, and how much revenue it must earn from the
system, to keep the wheels of the economy running smoothly. In recent times, the importance
of fiscal policy has been increasing to achieve economic growth swiftly, both in India and
across the world. Attaining rapid economic growth is one of the key goals of fiscal policy
formulated by the Government of India. Fiscal policy is the means by which the
government adjusts its spending levels and tax rates to monitor and influence the nation’s
economy. Fiscal policy is a result of several component policies or a mix of policy
instruments. These include the policy on taxation, subsidy, welfare expenditure, etc;
investment or disinvestment strategies; and debt or surplus management.
There are four key tools of the fiscal policy: Government income, expenditure, borrowings
and deficit financing. Among which following two are the most important:
Taxation: Funds in the form of direct and indirect taxes, capital gains from investment, etc,
help the government function. Taxes affect the consumer's income and changes in
consumption lead to changes in real gross domestic product (GDP).
Government spending: It includes welfare programmes, government salaries, subsidies,
infrastructure, etc. Government spending has the power to raise or lower real GDP, hence it is
included as a fiscal policy tool.
Objectives of Fiscal Policy
 First and the foremost objective is to maintain and achieve full employment in
the country.
 To stabilize the general price level in the economy.
 To stabilize the growth rate of the economy.
 To maintain equilibrium in the Balance of Payments.
 To promote the economic development of a country.
Types of Fiscal Policy

Expansionary Fiscal Policy: It is generally used for giving a boost to the economy i.e. to
speed up the rate of growth of the economy or during a recession when growth in national
income is not sufficient enough to maintain the present standards of living of the population.
A tax cut and/or an increase in government spending would be implemented to boost
economic growth and lower unemployment rates. This is not a sustainable policy, as it leads
to budget deficits and thus, should be used with caution by the government.
Contractionary Fiscal policy: It involves raising taxes or cutting government spending so
that government spending is less than the tax revenue. It cuts upon the aggregate demand in
the economy and thus economic growth leading to a reduction in inflationary pressures in the
economy.
Neutral Fiscal Policy: This implies a balanced budget where government spending is equal
to the tax revenue. It further means that government spending is fully funded by tax revenue
and, the overall budget outcome has a neutral effect on the level of economic activity.
Components of Fiscal Policy:
There are four key components of Fiscal Policy are as follows:
1. Taxation Policy – The government gets its revenue by imposing taxes both direct and
indirect. It is very important for the government to follow a judicious taxation policy
and impose correct tax rates because of following two reasons – higher taxes will
cause a reduction in the purchasing power of the people leading to decrease in
production and investment and lower taxes will leave more money with the general
public leading to high spending levels and thus high inflation.
2. Expenditure Policy – Government Expenditure includes Revenue expenditure and
capital expenditure. The government budget is the most important instrument
embodying the expenditure policy of the government. The budget is also used for
deficit financing i.e.filling the gap between Government spending and income.
3. Investment & Disinvestment Policy – Optimum levels of domestic as well as a
foreign investment are needed to maintain economic growth.
4. Debt and Surplus Management – If the government received more than it spends, it is
called a surplus. If the government spends more than income, then it is called a
deficit. To fund the deficit the government has to borrow from domestic or foreign
sources. It can also print money for deficit financing.
Economic Effects Of The Fiscal Policy
Governments use fiscal policy to influence the level of aggregate demand in the economy so
that certain economic goals can be achieved:

 Price stability;
 Full employment;
  Economic growth.
The Keynesian view of economics suggests that increasing government spending and
decreasing the rate of taxes are the best ways to have an influence aggregate demand,
stimulate it, while decreasing spending and increasing taxes after the economic expansion has
already taken place.
Additionally, Keynesians argue that expansionary fiscal policy should be used in times of
recession or low economic activity as an essential tool for building the framework for strong
economic growth and working towards full employment.
Few Methods to Fund Fiscal Policy
Governments spend money on a wide variety of things, from the military and police to
services such as education and health care, as well as transfer payments such
as welfare benefits. This expenditure can be funded in a number of different ways:
 Taxation
 Seigniorage, the benefit of printing money
 Borrowing money from the population or from abroad
 Dipping into fiscal reserves
 Sale of fixed assets (e.g., land)
Five Year Plans in India
The goals of the five-year plans are: growth, modernisation, self-reliance and equity. This does
not mean that all the plans have given equal importance to all these goals. Due to limited
resources, a choice has to be made in each plan about which of the goals is to be given primary
importance.

Objectives of the five-year plans

1) economic growth
2) Economic Equity and Social Justice:
3) Full Employment:
4) Economic Self-Reliance:
5) modernisation

First Five-Year Plan of India (1951-56)

On December 8, 1951, the Prime Minister Jawaharlal Nehru presented the first five-year plan to
the Parliament of India. This was based on the Harrod-Domar model. At that time, India was facing
three problems – the influx of refugees, a severe shortage of food, and also mounting inflation.

India had to recover from the partition and the disequilibrium in the economy due to the Second
World War. The First Plan, therefore, had the objectives of rehabilitating refugees, agricultural
development, and self-sufficiency in food along with controlling inflation.

Second Five-Year Plan of India (1956-61)

The focus of the Second Plan was rapid industrialization, especially the development of heavy
industries and capital goods, like iron, steel, chemicals, etc. and the machine building industries.
Professor Mahalanobis developed the plan.

Third Five Year Plan of India (1961-66)

The primary goal of the Third Plan was to establish India as a self-reliant and a self-generating
economy. However, the Second Plan had slowed the rate of growth of agricultural production in the
country which limited India’s economic development.

Therefore, the Third Plan included agricultural development as one of its objectives to achieve
balanced, regional development. Unfortunately, this period had many misfortunes which drained the
funds – Indo-China war in 1961-62, Indo-Pak war in 1965-66, and also a severe drought-led famine
in 1965-66. Therefore, this plan could not meet its objectives.
Three Annual Plans

From 1966-69, three Annual Plans were devised. While the Fourth Plan was designed in 1966, it
was abandoned under the pressure of drought, currency devaluation, and inflationary recession on
the economy. Therefore, the government opted for an Annual Plan in 1966-67 and the subsequent
two years. This is period is also called – Plan Holiday.

Fourth Five Year Plan of India (1969-74)

There were two principal objectives of this plan – ‘Growth with Stability’ and ‘Progressive
Achievement of Self-Reliance’. It aimed at a 5.5 percent average growth rate of the national income
and also the provision of the national minimum for the weaker sections of the society (called ‘Garibi
Hatao’ or ‘Growth with Justice’). However, another Indo-Pak war in 1971-72 created a financial
crunch for the plan.

Fifth Five Year Plan of India (1974-79)

This plan had two main objectives – the removal of property and attainment of self-reliance. This
was planned through the promotion of higher growth rates, better income distribution, and also a
significant increase in the domestic rate of saving.

It also focused on import substitution and export promotion. Further, it included a National Program
on Minimum Needs like housing, drinking water, primary education, etc.

Annual Plan (1978-80)

Also called the Rolling Plan, it helped to achieve the targets of the previous years.

Sixth Five Year Plan of India (1980- 85)

This plan focused on the socio-economic infrastructure in the rural areas. Further, it endeavoured to
eliminate rural poverty and reduce regional disparities through the Integrated Rural Development
Program (IRDP – 1979).

Seventh Five Year Plan of India (1985 – 90)

The country enjoyed a reasonable rate of economic growth (5.4 percent) during the Sixth Plan. The
Seventh Plan focused on the rapid production of foodgrains along with an increase in the creation of
employment and overall productivity. The guiding principles were growth, modernization,
self-reliance, and social justice.
Eighth Five Year Plan of India (1992 – 97)

The Eighth Plan was scheduled to be introduced in April 1990. However, there were many changes
in the Government at the Center, which led to the reconstitution of the Planning Commission and
the preparation of different versions of the approach to the Eighth Plan.

Finally, in 1992, the Eighth Plan was introduced (fourth version). At this time, the country was
going through a severe economic crisis and the Government initiated fiscal reforms to provide a
new dynamism to the economy.

Ninth Five Year Plan of India (1997 – 2002)

The South East Asian Financial Crisis (1996-97) caused an overall slowdown in the economy of
India too. While the liberalization process was still criticized, India was out of the fiscal mess of the
early 1990s. The Plan targeted a high growth rate of 7 percent and also directed itself towards
time-bound social objectives.

Further, the Plan focused on the seven Basic Minimum Services (BMS) with a view to achieving
complete population coverage in a time-bound manner. The BMS includes:

Safe drinking water

Primary health service

Universalization of primary education

Public housing assistance to shelter-less families

Nutritional support to children

Connectivity of all villages and habitations

Streamlining the public distribution system

Tenth Five Year Plan of India (2002 – 07)

Some major aspects of this Plan were:

Double the per capita income in 10 years

Higher growth rates must translate into better quality of life for people
 Set monitorable targets

Consideration of governance as a factor of development

Policy and institutional reforms in all sectors

Declaring the agriculture sector as the primary moving force (PMF) of the economy

Emphasis on the social sector (health, education, etc.)

Eleventh Five Year Plan of India (2007-12)

The title of the 11th Plan was ‘Towards Faster and more Inclusive Growth’. It envisaged a high
growth rate of around 9 percent implying a growth rate of around 7.5 percent in the per capita GDP.
It also ensured an overall improvement in the quality of life of people. The vision of the 11th Plan
includes:

Rapid growth with reducing poverty and increasing employment opportunities

Easy access to essential services in health and education for the poor

Empowerment through education and development of skills

Using the National Rural Employment Guarantee Program to extend employment

opportunities to all

Environmental sustainability

Reducing gender inequality

Improving the overall governance

Twelfth Five Year Plan of India (2012 – 17)

The objectives of this Plan were as follows:

A growth rate of 9 percent

Focus on the agricultural sector and have an average growth of 4 percent during the Plan
period

Restrain inflationary pressure

For the growth of GDP, ensure that the commercial energy supplies grow at a rate of
6.5-7 percent per year.

Develop a holistic water management policy

Suggest new legislation for the acquisition of land

Continue focus on health, education, and skill development

Large investments in the development of the infrastructure sector

Emphasis on the process of fiscal correction

Efficient use of available resources

Globalisation on Indian Society

Globalization is a significant factor in competitive world that integrate and mobilize cultural
values of people at global level. In the age of rapid technical progression, many countries are
unified and transformed due to the process of globalization. Globalization has a huge impact
on cultural, social, monetary, political, and communal life of countries. In broad sense, the
term 'globalization' means combination of economies and societies through cross country
flows of information, ideas, technologies, goods, services, capital, finance and people.

Concept of Globalisation

The concept of globalization means that the world is getting smaller as well as bigger.
Economists described that globalization can contribute to develop pattern of cross border
activities of firms, involving international investment, trade and strategic alliances for
product development, production, sourcing and marketing. These international activities help
companies to enter new markets, to exploit their technological and organizational advantages
and to reduce business costs and risks. Globalization has reduced barriers between countries,
thus resulting in strengthening of economic competition among nations, spreading of
advanced management practices and newer forms of work organization, and sharing of
internationally accepted labour standards.

Globalization is a term used to express the flow of ideas, culture, trade globally. with the aid
of technological enhancements such as in communication and transportation facilities
globalization has occurred more rapidly.
The three major folds of globalization are economic globalization, political globalization and
cultural globalization.

Globalization and its effects

Many theorists stated that change in environment has both positive and negative aspects.

India was main mover of globalization. The government of India made major modifications
in its economic policy in 1991 by which it allowed direct foreign investments in the country.
As a result of this, globalization of the Indian Industry occurred at large scale.
Effects of globalization in Indian Industry are observed as this process brought in large
amounts of foreign investments into the industry especially in the BPO, pharmaceutical,
petroleum, and manufacturing industries.

As a result, they boosted the Indian economy quite significantly. The benefits of the effects of
globalization in the Indian Industry are that many foreign companies set up industries in
India, especially in the pharmaceutical, BPO, petroleum, manufacturing, and chemical sectors
and this helped to offer great opportunities for employment to Indian people.

Also, this helped to reduce the level of unemployment and poverty in the country. It is
observed that the major forces of globalization in India has been in the development of
outsourced IT and business process outsourcing services. Since last many years, there is an
increase of skilled professionals in India employed by both local and foreign companies to
service customers in the US and Europe.

These countries take advantage of India's lower cost but highly talented and English-speaking
work force, and utilizes global communications technologies such as voice-over IP (VOIP),
email and the internet, international enterprises have been able to lower their cost base by
establishing outsourced knowledge-worker operations in India.

The foreign companies brought in highly advanced technology with them and this made the
Indian Industry more technologically advanced. Globalization in India has been beneficial for
companies that have ventured in the Indian market. It is recommended that India has to focus
on five important areas to enhance its economic status. The areas include technological
entrepreneurship, new business openings for small and medium enterprises, the importance of
quality management, new prospects in rural areas and privatization of financial institutions.

In terms of export and import activities, Many Indian companies have expanded their
business and became famous at global level such as fast food, beverages, and sportswear and
garment industries.

Marine products in recent years have emerged as the single largest contributor to the total
agricultural export form the country accounting for over one fifth of the total agricultural
exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the
other prominent products each of which accounts for nearly 5 to 10% of the countries' total
agricultural exports. Globalization speeded export of food items in India in the form of
increased consumption of meat, western fast food, sodas and cool drinks, which may result in
public health crisis.

The rich biodiversity of India has yielded many healthy foods prepared from locally available
entities. But the marketing by MNCs with large advertisement campaigns lead the people to
resort to their products.

Indian companies going global:

Impact of globalization in India

There is some negative impact of globalization such as this process made disparity between
rural and urban Indian joblessness, growth of slum capitals and threat of terrorist activities.
Globalization increased competition in the Indian market between the foreign companies and
domestic companies. With the foreign goods being better than the Indian goods, the
consumer preferred to buy the foreign goods. This reduced the amount of profit of the Indian
Industry companies. This happened mainly in the pharmaceutical, manufacturing, chemical,
and steel industries.
The negative Effects of Globalization on Indian Industry are that with the coming of
technology the number of labours required are decreased and this resulted increasing
unemployment especially in the arena of the pharmaceutical, chemical, manufacturing, and
cement industries. Some section of people in India that are poor do not get benefit of
globalization.

There is an increased gap between rich and poor that lead to some criminal activities. Ethical
responsibility of business has been reduced.

Another major negative effect of globalization in India is that youngsters of India leaving
their studies very early and joining Call centres to earn fast money reducing their social life
after getting habituated with monotonous work.

There is an increase of every daily usable commodities. This has an adverse effect on cultural
aspect. The institution of marriage is breaking down at fast rate.

Fortunately, due to improved agricultural techniques and productivity combined with

increased trade, if there is a crop failure in one part of the world, it does not necessarily mean
death and famine for those people involved. Global food production has gone up
dramatically during the past 50 years.

But, genetically modified food production, for example, can produce more food, but there are
some negative aspects to it as well. The methodology for producing those crops, such as the
use of pesticides, can have a harmful environmental side effect.

“If you have a pessimistic interpretation you could see the present system being a disaster for
humanity,” Paul said. “It is already clearly a disaster for most other species and their natural
habitat and that is almost certain to have a serious impact on humans sooner rather than
later.”

Countries heavily subsidize their producers, which results in dumping products like sugar on
the markets of the developing world at rates which totally undermine their agricultural
production. If truly had a globalized market in agriculture, then it would be to the benefit of
developing nations. It is not globalization that is bad as such, but how it is implemented.
Positive impacts

Globalization has considerable impact on the religious situation of India. Globalization has
brought about raising a population who is agnostic and atheist. People visiting places of
worship are reducing with time. Globalization has reduced nationalism and patriotism in
country.

Globalization is motivating factor in current business environment. There are few challenges
for companies due to globalization such as Migration, relocation, labour shortages,
competition, and changes in skills and technology. Globalization powerfully influences the
social partners' attitudes since traditional labour relations have to cope with completely new
and very dynamic situations. In political field, globalization helps to eradicate poverty,
malnutrition, illiteracy, ill-health and fighting cross border terrorism and global terrorism.

Globalisation in context of status of women implicates the relegation of the stereotypic

pattern of duties of the women like rearing and caring the children to the back ground and
taking up the various diversified occupation and thus making their living quite vibrant and
alive.

Globalisation benefits the schedule caste people in promoting cultural homogeneity in the
way of loosening of the ideas of pollution and purity and eradication of untouchability and so
many socio-cultural and economic disabilities associated with them. Globalisation of goods
has developed enthusiasm in India for western brand names. A consumerist mentality has
been carefully fostered. This leads to an adversative impact on the tendency to save or the
domestic accumulation of capital. Lastly, in Indian scenario, globalization developed a
consumer credit society. Today, people can buy goods and services even if they do not have
sufficient purchasing power and the prospect of raising a loan has become easy in the age of
globalisation. Credit cards have given boost to consumerism and pushed many households
into indebtedness. At the same time globalization has unfavourable impact on mass-media in
India. Currently, realistic coverage of events and happening doesn't receive much importance
because it doesn't determine the standing of a newspaper or TV channel. Globalisation has
brought violation of journalistic ethics in India.

The process of globalization has changed the industrial pattern social life of global people
and it has immense impact on Indian trade system. The globalization of the economic, social
and cultural structures happened in all ages. Previously, the pace of process was slow. Today
with the start of the information technology, new ways of communication have made the
world a very small place. With this process, there is a big market place. Globalization has
resulted in increase in the production of a range of goods. MNCs have established
manufacturing plants all over the world. It has positive effects and India will overcome many
obstacles and adopt global policies to expand business at international scale. India is gaining
international recognition and strengthening in economic and political areas.

Besides growing economy and strengthening our political infrastructure it affected our daily
lifestyle in numerous direct or indirect ways. like other countries India have grown into a
much larger economy due to globalization.

Impact of Globalization on urban lives of India

The main stimulus for globalization is the advancement in connectivity of globe through
transportation and communication which enables the policymakers and stakeholders to
consider the development of infrastructure and rapid transition towards cutting-edge
technology which attracts foreign investment in india and established industries and many
MNCs(Multi-National Companies) which requires Skilled and Unskilled labourer and
enables to generate new employment. It largely helped the urban lives access to technology,
infrastructure and in many ways improved living standard, imparted various foreign culture
i.e., western culture in urban India.

It created huge employment in secondary and tertiary sector activities.

It revolutionized the research facilities. It provided affordable, more efficient and easy access
to different basic needs such as easy money, infrastructure, healthcare facilities, different
edible and non-edible items. It fulfilled the communication gap by digitalization, provided
fast and easy transport facilities.
In rural areas, it revolutionized the primary sector activities mostly, agriculture, animal
husbandry, pisciculture, horticulture. by providing cheap and affordable machines, tools,
hybrid and different varieties.
It generated employment in these sectors, and elevated the standard of living by providing
basic facilities.

on the other side it created an employment gap in both the areas as creating more
employment in the urban areas which resulted in the migration of the rural population to
urban areas leading to over population in small urban areas, leading to over use of natural
resources rapidly in a small region which has again its own impacts.
Impact on rural lives of India
In rural India peoples are mainly dependent on Agriculture and Short-time wages (mining,
construction. etc).
Globalization enabled the people to access techno based highly efficient tools, hybrid seeds.
Improved communications help in exchanging ideas for maintaining the health of soil, seeds
and condition of weather.
It also opened the market access to sell their produce and even industries require raw
materials.

Since, the globalization has brought about great advancement in India however it has also
created many hectic problems such as mass migration from rural to urban. Which is causing
the expanding gap of availability of resources and population. The major industries in cities
causing Air and Water Pollution.
Massive foreign investment in India has created employment other hand it has been
dismantling the small local business due to incompetence.
However, it has a revolutionary impact on our society and benefited both rural and urban
lives of India hugely.

In rural areas, it revolutionized the primary sector activities mostly, agriculture, animal
husbandry, pisciculture, horticulture. by providing cheap and affordable machines, tools,
hybrid and different varieties.
It generated employment in these sectors, and elevated the standard of living by providing
basic facilities.

on the other side it created an employment gap in both the areas as creating more
employment in the urban areas which resulted in the migration of the rural population to
urban areas leading to over population in small urban areas, leading to over use of natural
resources rapidly in a small region which has again its own impacts.

The effects of globalization on health

The effect of globalization on health systems and individuals is complex. At first glance,
globalization has had an overall positive impact on peoples’ health. For instance, global
transportation and the communications revolution enable rapid response to epidemics and
catastrophes, saving thousands of lives.
But there also is a downside to the health and well-being of people as a direct or indirect
result of globalization. The flip side is that due to the rapid mobility of people across borders,
the spread of infectious diseases is a threat to everyone, particularly the poor

One of the negative sides of globalization is the increase in emerging and re-emerging
infectious diseases. For instance, tuberculosis was thought to have been eradicated in the
1950s, only to re-emerge in the 1980s. One of the reasons for this is the increasing resistance
to drugs. AIDS also is a great concern worldwide.

There are numerous ways to look at this downside of globalization and one way is to divide
it into communicable and noncommunicable diseases. For specimen, severe acute respiratory
syndrome (SARS) virus, a communicable disease, has the capability of rapidly spreading
around the world.

We are living in this globalized world where the flu virus starting anywhere on the globe
could within a few days be all over the world.

Noncommunicable diseases resulting from unhealthy lifestyles are now in places in the world
where they were either unheard of or rare just 50 years ago. Obesity, hypertension and type 2
diabetes are an enormous health problem today, and the incidences are increasing in
developing nations.

Obesity is increasingly becoming an issue in low-income countries. Cardiovascular diseases

and their nutritional risk factors including overweight and obesity, hypertension and elevated
cholesterol are among the leading causes of global mortality and morbidity.

Preventing obesity should be a priority from the early stages of a developing country’s
economic development, accompanied by population-level and personal interventions for
hypertension and cholesterol.

Another dilemma that seriously affects people in developing countries, as well as poorer
communities is a lack of health professionals.
Green economy

A green economy is defined as low carbon, resource efficient and socially inclusive. In a
green economy, growth in employment and income are driven by public and private
investment into such economic activities, infrastructure and assets that allow reduced carbon
emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss
of biodiversity and ecosystem services. Simply, the green economy is a concept which basic
principles revolves around addressing economic growth that is more environmentally
sustainable.

The role of Green Economy, Sustainable Consumption and Production and Resource
Efficiency for Sustainable Development: Sustainable Consumption and Production aims to
improve production processes and consumption practices to reduce resource consumption,
waste generation and emissions across the full life cycle of processes and products.

Resource Efficiency refers to the ways in which resources are used to deliver value to society
and aims to reduce the amount of resources needed, and emissions and waste generated, per
unit of product or service.

The Green Economy provides a macro-economic approach to sustainable economic growth

with a central focus on investments, employment and skills.

This concept is still largely up for grabs and is defined differently by different country at the
moment. Essentially how can a state grow economically while minimizing its environmental
impact. For instance, China is a focus in Energy, Indonesia in Forestry and South Korea in
trade.
it's important we keep in mind one of the key roles of a "green economy" -- supporting
"sustainability." As defined by the Brundtland Commission, in 1987, "Sustainable
development is the kind of development that meets the needs of the present without
compromising the ability of future generations to meet their own needs."
If the collective things done wisely and constructively, a "green economy" can be a
sustainable and stable economy, serving the greatest good for all of us inhabiting this
restricted planet.
Over the last decade global warming and the climate change become the prime concerns for
scientist, environmentalist and major international organizations. These issues become the
centre for global policy development. The ways in which we are utilizing
earth non-renewable resources have created the threat to human survival. This is one of the
imperative issues that call for green economy, an economy for people and planet. Green
economy concerned with the development of policies for using planetary
resources wisely.
Out of the 180 countries assessed, India ranks low in the Environmental Performance
Index (EPI) 2018, slipping from rank 141 in 2016, to 177 in 2018. The EPI is produced
jointly by Yale University and Columbia University in collaboration with the World
Economic Forum. In comparison, emerging peer economies, Brazil and China, rank 69 and
120, respectively. The EPI ranks countries on 24 performance indicators across 10 issue
categories. No index is perfect. But if an improvement in an index for ease of doing business
is cause for celebration, then, equally, a drop in an index ranking environmental performance
should be cause for concern and used as a context to examine our policy measures.

A look at recent initiatives shows that the government has set ambitious targets for
environmental protection. In December 2015, it notified new, strict environmental standards
for coal-fired power plants, to be effective from January 2018. An aggressive target was set
to implement Bharat Stage VI emission norms from April 1, 2020, skipping Stage V norms.
In 2017, the Minister of State for Power and Renewable Energy said that a road map was
being prepared so that only electric vehicles would be produced and sold in the country by
2030. In order to accelerate the transition to renewable sources of power, the government,
under the National Solar Mission, revised the target for setting up solar capacity from 20 GW
to 100 GW by 2021-22. The Centre has also assured the Supreme Court of India that the
highly polluted Ganga will be cleaned up by 2018.

What are we missing then? Unfortunately, there appears to be a big gap between policy goals
and action. While we seem to be moving in the right direction on solar targets, we are
seriously lagging behind in a number of other goals. For example, the government has gone
back on its promise of implementing strict power plant emission norms by December 2017,
and may even dilute the norms. The automobile industry has categorically stated that based
on current estimates, full conversion to electric vehicles is realistically possible only by 2047.
After setting electronics manufacturers a reasonable annual electronic waste collection target
of 30% of the products sold in the market, the figure has now been relaxed to 10%. And late
last year, the Comptroller and Auditor General, in a report, pulled up the government for not
developing an action plan and for its poor utilisation of allocated funds in the clean-up of the
Ganga. The list can go on.

A recent study by the World Bank and the Institute for Health Metrics and Evaluation,
University of Washington, Seattle, U.S., showed air pollution to be the cause of an estimated
1.4 million premature deaths in India, which translated into a welfare loss of significant
percentage of India’s GDP. A significant concern is also the fact that the poor are affected
disproportionately because of environmental degradation.

It is of course not the case that the current environmental mess we are in is entirely because
of our recent environmental policy failures. It is linked also to the lack of political will to
implement even existing environmental laws and regulations. It is not possible to restore
environmental quality overnight. However, we must ensure that we are moving forwards, not
backwards, in meeting our environmental targets. Being among the four worst countries in
the world in terms of environmental performance should hopefully serve as a wake-up call.

To ensure climate change is tackled effectively, the state government has introduced the
Green Index which will be made an integral part of policies and guidelines

Environmental Management & Policy Research Institute (EMPRI), developed the idea.
The index will be looked into the policy aspect in major schemes. Specially in
transportation, index assessment will be on environment-friendly measures like emission
reduction, GHG emission, energy efficient fuel and afforestation. The index, developed by
EMPRI and Indian Institute of Science (IISc), has been divided into four classes: dark
green (maximum attention to conservation measures), light green (some mention), orang e
(limited pollution) and red (no mention at all, maximum pollution). A score card with 0 -5
ranking has been created and the points obtained will decide the release of funds from the
state government to the departments.

What is the Green GDP?

The Green Gross Domestic Product, or Green GDP for short, is an indicator of economic
growth with environmental factors taken into consideration along with the standard GDP of a
country. Green GDP factors biodiversity losses and costs attributed to climate change.
Physical indicators like “carbon dioxide per year or “waste per capita” may be aggregated to
indices like the “Sustainable Development Index”
  Green GDP is a term used for expressing GDP after adjusting for environment
degradations.
 Green GDP is an attempt to measure the growth of an economy by subtracting
the costs of environmental damages and ecological degradations from the GDP
 The concept was first initiated through a System of National Accounts.
 The System of National Accounts (SNA) is an accounting framework for
measuring the economic activities of production, consumption and accumulation
of wealth in an economy during a period of time. When information on
economy’s use of the natural environment is integrated into the system of
national accounts, it becomes green national accounts or environmental
accounting.
 The process of environmental accounting involves three steps viz. Physical
accounting; Monetary valuation; and integration with national Income/wealth
Accounts.
 Physical accounting determines the state of the resources, types, and extent
(qualitative and quantitative) in spatial and temporal terms.
 Monetary valuation is done to determine its tangible and intangible components.
 Thereafter, the net change in natural resources in monetary terms is integrated
into the Gross Domestic Product in order to reach the value of Green GDP.

Green GDP and India

 While explicitly green GDP is not measured in India, but environmental accounting
has been done in India from last 2 decades
 A Framework for the Development of Environmental Statistics (FDES) was
developed by the Central Statistics Office (CSO) of India in the early 1990s. The
Compendium of Environment Statistics is being released since 1997.
 As per the recommendations of Technical Working Group on Natural Resource
Accounting (NRA) in the later 1990s, a pilot project on NRA in the State of Goa was
initiated during 1999-2000. Thereafter, resource accounting studies were carried out
in 8 states on a different set of natural resources. Later a Technical Advisory
Committee was constituted in the year 2010 under the Chairmanship of Dr Kirit
Parikh to bring out a Synthesis Report combining the findings of all these studies. The
report recommended the preparation of a National Accounting Matrix that would
 include environmental accounts. The High-powered expert group under Partha
Dasgupta was constituted subsequently in 2011 with the mandate of developing a
framework for green national accounts of India and for preparing a roadmap to
implement the framework.
 Following the guidance of International Organisation of Supreme Audit Institutions
(INTOSAI) on the framework for of environmental auditing, the supreme audit
institution of India (CAG) also conducts an environmental audit in India. This process
was formalised with the introduction of specialized guidelines for the conduct of
environmental audits. This laid down broad guidelines to enable India’s auditors to
examine whether the auditee institutions gave due regard to the efforts of
promulgating sustainability development and environmental concerns, where
warranted.
 Thus, in India, the Environmental audit is conducted within the broad framework of
Compliance Audit and Performance Audit at the central level by the Office of
Principal Director of Audit (Scientific Departments) and by the state Accountant
Generals (Audit) at the state level. Over the years, more and more states have taken
up environmental audits. This compliance as well as performance audits have been
printed in the respective state/ central audit reports and presented to
Legislature/Parliament. All these reports deal with the environmental themes of water
issues, air pollution, waste, biodiversity and environmental management systems. All
the environment audits done at the state level and at the central level since 2001 are
collated in the CAG report on environmental audit.

Blue Economy

Blue economy, through sustainable use of oceans, has great potential for boosting the
economic growth by providing opportunities for income generation and jobs etc.It can
support food security, and diversification to address new resources for energy, new drugs
valuable chemicals, protein food, deep sea minerals, security etc.It is the next sunrise sector.

It is the sustainable use of ocean resources for economic growth, improved livelihoods and
jobs, and ocean ecosystem health.It advocates the greening of ocean development strategies
for higher productivity and conservation of ocean's health.It encompasses–

1. Renewable Energy: Sustainable marine energy can play a vital role in social and
economic development.
 2. Fisheries: Sustainable fisheries can generate more revenue, more fish and help
restore fish stocks.
3. Maritime Transport: Over 80% of international goods traded are transported by
sea.
4. Tourism: Ocean and coastal tourism can bring jobs and economic growth.
5. Climate Change: Oceans are an important carbon sink (blue carbon) and help
mitigate climate change.
6. Waste Management: Better waste management on land can help oceans recover

Oceans cover three-quarters of the Earth’s surface, contain 97% of the Earth’s water, and
represent 99% of the living area on the planet. Oceans protect biodiversity, keep the planet
cool, and absorb about 30% of global CO2 emissions. At least 3-5% of global GDP is
derived from oceans.

Blue Economy for India

Blue economy presents India with an unprecedented opportunity to meet its national socio-
economic objectives as well as strengthen connectivity with neighbours.

1. Blue Economy can help in focusing on livelihood generation, achieving energy

security, building ecological resilience, and improving health and living standards of
coastal communities.

2. Blue economy would reinforce and strengthen the efforts of the Indian government
as it strives to achieve the SDGs of hunger and poverty eradication along with
sustainable use of marine resources by 2030.

3. India has a long coastline of 7,517 km covering nine states and two union territories
– with an Exclusive Economic Zone (EEZ) of 2.02 mn. sq.km.

4. Marine services sector could serve as the backbone of its blue economy and help
India become 10 trillion-dollar economy by 2022.

5. Indian Ocean is a major conduit of trade with as much as 80% of global oil trade
happening through it.

6. Better connectivity in the region will significantly cut the transport cost and
maritime wastage of resources making the trade sustainable and cost effective.
Developments Initiated by India

The Sagarmala project is the strategic initiative for port-led development through the
extensive use of IT enabled services for modernization of ports.

Project aims at developing Inland waterways and coastal shipping which will revolutionize
maritime logistics, creating million new jobs, reduce logistics costs etc.

It focuses on the development of coastal communities and people in the sustainable use of
ocean resources, modern fishing techniques and coastal tourism.

India has an umbrella scheme by the name of O-SMART which aims at regulated use of
oceans, marine resources for sustainable development.

Integrated Coastal Zone Management focuses on conservation of coastal and marine

resources, and improving livelihood opportunities for coastal communities etc.

Development of Coastal Economic Zones (CEZ) under Sagarmala would become a

microcosm of the blue economy, wherein industries and townships that depend on the sea
will contribute to global trade.

India has a National Fisheries policy for promoting 'Blue Growth Initiative' which focus on
sustainable utilization of fisheries wealth from the marine and other aquatic resources.

Future Prospects

Blue economy in India is the sum total of economic activities sourced from marine resources.
Fisheries, deep sea mining, and offshore oil and gas make up a large section of India’s blue
economy, said Rajeevan.

Currently, there are a few projects underway as part of the blue economy. Out of 2.3 million
square kilometres available to India, 1.5 million has been explored as part of an exclusive
economic zone (EEZ) across both the Bay of Bengal and the Arabian Sea.
India needs to adopt the Gandhian approach of balancing economic benefits with
sustainability for meeting the broader goals of growth, employment generation, equity and
protection of environment.

India must focus on marine ICTs, and transport (shipping) and communication services, and
the creation of a knowledge hub for marine research and development.

An effective response mechanism to address humanitarian crises and natural disasters

should be made for the evolving Indian Ocean security strategy.

India should not look at its oceans as just water bodies, but as global stage for continued
economic, social, and cultural dialogue.
Goods and Services Tax (GST)
The innovative goods and services tax (GST), which was launched on 1st July 2017. The
one-nation, the one-tax revolution has seen a few glitches, but it’s settling down and benefits
should start to flow sooner rather than later.
What is GST?

GST Law in India is a multi-stage, comprehensive, destination-based tax that is levied on

every value addition.

In simple terms the Goods and Service Tax is an indirect tax levied on the supply of goods
and services. This law has replaced many indirect tax laws that existed earlier in the
country.

GST is one indirect tax for the whole of India.

Current Status of GST

GST is currently levied on every product except petroleum, alcohol, tobacco, and stamp duty
on real estate in four slabs of 5, 12, 18, and 28 percent. Most of the articles that are used daily
have zero GST as per the latest revision of the tax rates last year.

97.5 percent of articles covered by 18 percent or lower GST slab. Under the previous, value-
added tax (VAT) regime, the standard taxation rate was much higher. Only luxury and sin
goods are now taxed at the highest 28 percent GST rate.
Achievements due to its implementation

The number of registered taxpayers: The number of registered taxpayers at the time when the
GST was rolled out was Rs 65 lakh, which today stands at approx.Rs 1.2 crore, a jump of 84
percent over the last two years. This shows a significant widening of the tax base and
formalization of the economy under the GST.

Monthly collection: Monthly GST collections for July 2017, the first month for GST, was Rs
92,200 crore. Subsequently, it dropped to Rs 83,700 crore in November that year. Collections
started rising from the 2nd year onwards with July 2018 collections at Rs 96,500 crore. In
2018-19, the average monthly collection was Rs 97,100 crore with collections breaching Rs 1
lakh crore regularly.

Compliances: After a slow start, the number of registered taxpayers who started complying
with GST timelines, grew. For the first month (July 2017), only 38 lakh out of 68 lakh
registered taxpayers had filed GSTR 3B returns by August 25. This amount has now almost
become double to 72.5 lakh by April 2019. E-way bill, an anti-evasion mechanism, came into
existence from April 1, 2018. The number of e-way bills doubled from 2.8 crores in April
2018 to 5.49 crore in March 2019.

Rate rationalization: At the beginning over 200 goods were kept in the 28 percent rate
bracket. The number of goods under 28 percent slab has been cut down to eight. There are
other goods and services whose tax rates have been reduced. For example, GST on restaurant
services has been brought down from 18 percent to 5 percent. GST rates on affordable
housing projects have been reduced from 8 percent to 1 percent and on non-affordable
housing projects from 12 percent to 5 percent.

The number of returns: When the GST was rolled out, there was a provision for three
monthly returns – for sales, for purchases, and a composite return – and one annual return.
When businesses complained about a huge compliance burden due to the requirement of 37
returns being filed in a year, the GST Council did away with the purchase return. Now
businesses have to file two returns – GSTR1 for sales and GSTR 3B, a composite return.

Center-state Relations: It has proved to be a successful template for Centre-State Relations as

most decisions in the GST council have been unanimous. The Centre has taken the states
along in ironing out issues and also Council has proactively addressed issues as they arose.

Refund: The process of refund has been fairly streamlined. Exporters of goods have been
receiving refunds directly from the customs and exporters of service are getting 90% of the
refund immediately. The issue of working capital blockage due to refusal of the GST refund
in the initial period has now been fairly sorted.
Apprehensions and Prospects
The initial period was very stressful but over some time, it has stabilized to a large extent
through many issues remain unresolved.

Return filing: Initially there were issues and problems in filing monthly GST Returns but it
has now stabilized. However, the new return filing system should be introduced in a phased
manner and should not be implemented until the trade, professionals and the departmental
authorities are fully conversant with the same. Change in the process in the middle of the year
is cumbersome for all as accounting systems have to be amended for the same.

E-invoicing: The introduction of e-invoicing is a welcome move. However, its introduction at

this stage seems to be a difficult plan. Also, further clarity is needed for the process of
generation in case of system breakdowns.

Introduction of cess: Introduction of Kerala Calamity Cess has been a cause of concern for
all. Other states may also do the same and introduce a cess for some of their welfare
schemes.

Notices for reconciliation: Periodic notices even before the year is complete for differences in
Input Tax credit claimed by the traders and as appearing in the GSTN network are putting a
strain on trade and industry. Business and professionals are further confused as figures
appearing in their GST Return, GSTR 2A appearing on the GSTN network, and figures stated
in the notice sent by the department is different. The authorities also don’t have any break-up
based on which notice has been sent.

The requirement for centralized assessment: Business with multiple locations are finding it
difficult to appear for assessment or inquiries before authorities in various states. The entire
tax and accounting are generally centralized in big organizations. Hence, a longstanding
demand of the industry with locations in various states for assessment/audit in the main state
would be a welcome move.
Frequent changes: The trade and professionals are grappling with the frequent changes and
notifications issued in the past two years. Though changes and amendments are required for
clarity, major amendments impact the decision-making capacity of the trade.

Input tax credit: Eligibility of input tax credit has been a bone of contention between trade
and authorities from the pre-GST era. Some of the judgements were very clear about ITC
being an indefeasible right of the assessee, small procedural errors should not hamper them,
provisions cannot be used to extract money from the assessee, etc. The condition for
disallowability of ITC if vendors do not pay GST or file returns is a very harsh provision and
needs to be revisited.
GST has managed to subsume many local, state, and central taxes which should be
appreciated. Glitches were expected, but after three years there has to be a climate of
certainty with a smooth GSTN network and minimum changes in the law. The way GST is
progressing it appears that the journey is still midway for the authorities and businesses and
much has still to be achieved. It cannot be said that there are only negatives, there are
substantial positives. The emphasis should be on expanding the tax base, checking tax
evasion, simplification of procedures, and glitch-free GSTN system.
Industry 4.0
Industrial Revolutions: background

From the beginning of civilization, human beings have tried to increase their
capacity and power. At first, they were using equipment made of wood or rocks
but with the advancement of science they explored modern and efficient
equipment, and this process is going on.
Machines are one of the invention of humans. Use of machines was the cause of
first industrial revolution. It was termed as a revolution because it not only
increased production but also brought significant social and economic changes

There are four distinct industrial revolutions briefly mentioned below:

First Industrial Revolution: Happened between the late 1700s and early
1800s. During this period of time, manufacturing evolved from focusing
on manual labour performed by people through the use of water and steam-
powered engines and other types of machine tools.

Second Industrial Revolution: In the early part of the 20th century, the
world entered a second industrial revolution with the introduction of steel
and use of electricity in factories. The introduction of electricity enabled
manufacturers to increase efficiency and helped make factory machinery
more mobile.

Third Industrial Revolution: Starting in the late 1950s, it slowly began to

emerge, as manufacturers began incorporating more electronic—and
eventually computer—technology into their factories. During this period,
manufacturers began experiencing a shift on digital technology and
automation software.

Industrial Revolution 4.0

Commonly referred to as the fourth industrial revolution, it is a name
given to the current trend of automation, interconnectivity and data
exchange in manufacturing technologies to increase productivity.

Industry 4.0 is a complex Cyber-Physical Systems which synergizes

production with digital technologies, the Internet of Things, Artificial
Intelligence, Big Data & Analytics, Machine Learning and Cloud
Computing. Industrial Revolution 4.0 is the term that is used to describe the
transition from electronic-based industry to the one that is dominated by the
fusion of new and emerging fields and ideas like Intelligence, robotics, nano
technologies, biotechnology, Internet of Things, fast-paced internet, automation
of vehicles, green energy etc.It describes the huge changes that are brought
about in the current era across the globe due to the discoveries and inventions in
science and technology. Today, technology has advanced and we are moving
towards the Fourth industrial revolution. New technical breakthroughs like
Artificial Intelligence, Internet of things, Big Data etc. will change the entire
scenario of current industry. Industry 4.0 is going to change the way we work,
the way we live, the way we think and the way we relate things with other.
One of the major components of industry 4.0 is Artificial Intelligence (AI). It
enables machines to think, learn and in decision making also. It is expected that
AI will make a revolutionary change in space industry as well. In the near
future, robots will be sent to space instead of a man and hence will provide new
breakthroughs in space science. Not only the space industry but every sector
from agriculture to healthcare and education is going to be benefited by AI. On
the one hand, AI will be used to tackle challenging problems like security,
fighting terrorism, surveillance, traffic control etc and on the other hand, it will
bring dynamic changes in banking, airlines, medical technology and education
system. By the use of nanotechnology, we can conduct critical cancer
operations also.
In future normal classes, rooms are going to be replaced by smart classrooms
which will ensure better learning for students. Although now this technology is
less affordable, it is expected that it will be cheaper with the advancement of
technology. Not only this, AI and machine learning these skills will be installed
in future generation syllabus because learning about these is very essential for
the next generation.
India utilizing the trend of the Fourth Industrial Revolution

The Indian Government has already taken measures to make full utilization of
emerging technologies.

The Indian Government has institutionalized the concept by establishing the

Centre for the Fourth Industrial Revolution.

It is a hub for global cooperation to develop policy frameworks and

collaborations that generate and accelerate the benefits of the present era’s
technological developments and scientific discoveries.
This was an initiative of the World Economic Forum.
India is one of the four countries that have such centres. The other countries that
hold these centres include the US, China, and Japan.
The Indian Government has also taken various government initiatives to
promote Artificial Intelligence.

The current Union Budget focuses on the promotion of the Electrical

Vehicles that reduces the dependence on petrol and diesel and also promoted
zero-emission of the carbon dioxide – the major contributor for the global
warming and climate change.
The government is also encouraging the use and promotion of unconventional
and eco-friendly sources of energy in the manufacturing processes.
More than 80% of the fuel is being imported by India. The promotions of eco-
friendly energy sources help the government overcome this shortcoming.
The benefits of the Industrial Revolution 4.0
 It helps relieve poverty and improve people’s standard of living.
 With Artificial Intelligence and fast-paced internet like 5G, there will be
better diagnosis, cheaper and better medical services.
 The emergence of new and innovative technologies helps undertake
better security, surveillance and search and rescue operations.
 India has currently announced a new drone policy that allows for efficient
security, traffic, and mapping.
 It will help connect every last village in the country to ensure better
government services and improved infrastructure for all.
 AI will play a significant role in changing the lives of specially-abled
people.
 It promotes ease of living and ease of doing business.
 The improved early warning systems, weather forecasting systems, etc.,
assure improved disaster management, reduction of causality, faster
evacuations, etc.
 The improvement in the fields of biotechnology, AI, pest control
mechanism, innovative irrigation systems, etc., allows for increased crop
production.

Way Forward:
The above-mentioned benefits are very few among the vast opportunities that
exist within the Industrial Revolution 4.0. Currently, India is facing a
massive unemployment crisis. With the emergence of new technologies, new
skills are required to man these technologies. As a result of this, many may lose
their jobs or won’t have the skills that are in demand.
Industrial Revolution 4.0 can become a liability if proper government measures
aren’t taken to reduce the unemployment rate. However, if the Government
takes the needed initiatives to make full use of the huge population and the
technologies arising from the Fourth Industrial Revolution, India will soon
become a highly developed economy.

There is also a negative side of this technological advancement. Studies tell that
robots will turn humans lazy. Although human life will be longer due to
advancements in healthcare, it is also true that humans will become less fit and
lazier. In such a situation, those who use technology properly to maintain a
healthy life will be more benefited than others.
Human life costs a lot. That’s why in the future generation armed forces we
may find robot soldiers. But for countries like India where 10 lakh people are
employed in armed forces, this will create a major unemployment situation.
Also, if countries will start using robots to fulfill their expansionist policy then
it will be a major threat to world peace and may cause a third world war.
Internet of things (IOT) is another technical breakthrough where machines can
communicate with each other. IOT with the AI combination will transfer
factories into smart factories, cities into smart cities, cars into smart cars and
homes into smart homes. If so happens, then it will reduce human efforts to a
minimum.
Big data analytics is another crucial component of Industry 4.0. It is basically
developed to gather information and data of consumers so that producers can
manufacture proper items and services for them. In today’s digital world, data is
very important for us. Just imagine, if this huge data is processed properly then
there will be magical changes around. We will get proper on-time services;
hence it will save both money and time.
Actually, Big Data will completely transform the governance system. It will
make it more transparent and efficient. Policy implementation is a major
headache for governments. It is expected that Big Data with AI will work to
simplify this problem. The government will be able to reach every needy person
and no one will be excluded from justice. It means Big Data ensures inclusive
socio-economic development in the future.
But privacy is one of the human fundamental rights. Can we ensure privacy
while installing this technology? Is Industry 4.0 going to ruin our fundamental
rights? Actually, when we are considering Big Data, we are considering data of
millions of TB. In such huge amount of data, personal data doesn’t matter
much. But this data can be used to influence people politically and may hamper
democratic processes also. This data, if not properly guarded, may cause civil
wars or riots. So, this is going to be a big challenge in the future.
Industrial revolution puts a big impact on world economy and changes its basic
structure. For instance, the first industrial revolution transformed the agrarian
economy into the manufacturing economy; the second industrial revolution
reshaped it into the service-based economy and during the IT revolution the
world’s economy became a knowledge-based economy. But in this
advancement, if one had to sustain, he/she has to learn new skills and
techniques.
A huge question raises when we think about artificially intelligent machines:
“Will there be any job left for humans?” Actually, jobs are not dying but they
are evolving. It is obvious that Industry 4.0 will replace some jobs, but is also
creating new jobs like big data analytics, VR designer, blockchain auditor,
social media reporter, drone operator space visit guide and many more. it is
expected that high-skilled and low skill jobs will stay as before, but middle-tier
jobs will be replaced by AI robots. This is known as job polarisation in the
economic terms. If workers want to sustain then they have to learn new
technological skills.
In this era jobs which are related to manual dexterity, high cognitive skills and
social skills are difficult to be computerized, and workers should focus on
developing these skills. Doctors are going to be replaced by AI robots in future
but if a doctor is trained with hospitality skills and caretaking skills, then he/she
will be preferable over a robot-doctor. It means jobs are going to be knowledge-
centric and talent centric. A construction worker has to learn something about
electronics apart from construction skills if he/she wants to build an automated
smart home where sensors are used. Hospitality, condolence, politeness these
are some qualities which should be learned as these will value add our
character.
The progressive economies are heading towards a Gig economy. Gig means not
continuous. It is predicted that normal continuous jobs will be reduced and these
will be replaced by contractual jobs. If there will be no permanent jobs then
there will be no paid holidays and no insurance schemes and also no fixed
income. It may create unemployment like situation but it will become part of
habit. So, the beginning period is going to be tough and it is also expected that
the revolution may slow down the world economy for a small period.
Those who learn new skills time to time and update their work with new
technology will succeed and for the rest, fourth industrial revolution will be a
big challenge.
Make in India
 It is a national initiative launched in 2014 by the Government of India.
 Its ultimate aim is to transform India into a global design and manufacturing
hub.
 This initiative facilitates investments, skill development, encourages
innovation, protect intellectual property rights to achieve this objective.
 Under this initiative, both the Centre and the state governments are striving to
attract investments from across the world to strengthen India’s manufacturing
sector.
 Ministry of Commerce and Industry’s Department of Industrial Policy and
Promotion is the nodal agency for the implementation of this initiative.
 This initiative holds a highly significant position in India’s pursuit of
economic growth.

The following are India’s strengths to become the global manufacturing hub:

 India is one of the fastest-growing economies in the world.

 It is likely to be listed among the top 3 manufacturing destinations by 2020.
 India’s workforce is among the youngest in the world with an average age of
29 years. According to the Ministry of Labour and Employment, India has the
largest workforce population of about 470 million.
 India is a major destination for a cheap labour force.
 Also, it has the second-highest population in the world only after China.
Therefore, it has a strong domestic consumer base.

Objectives of this initiative

 It has subsumed targets listed out in the National Manufacturing Policy of

2012 like increasing the share of manufacturing from 16% to 25% of the GDP by
2020 (earlier target was 2022) and creation of employment opportunity for 100
million people by 2022.
 Its objective also includes improving India’s rank on the Ease of Doing
Business Index that is released by the World Bank as a part of its Doing Business
Report.
  To do so, the government is revoking redundant laws and regulations,
simplifying bureaucratic procedures and enhancing transparency, responsiveness
and accountability in the government services.
 To also aims to attract foreign investment and develop the already existing
industry base in India and surpass China.
 It also intends to promote export-led growth.
Sectors covered under this initiative
Make in India strives to create jobs and skill enhancement in the following 25 sectors:
Automobiles, Aviation, Chemicals, IT and BPM, Pharmaceuticals, Construction ,Defence
manufacturing ,Electrical machinery, Electronic system, Food processing, Textiles and
garments, Ports and shipping, Leather, Media and entertainment, Wellness and
healthcare, Mining, Oil and gas, Tourism and hospitality, Railways, Automobile
components
Renewable energy, Roads and highways, Space Thermal power, Bio-technology.
Outcomes of this initiative since its launch
 For the sectors like Railways, Defence, Insurance and Medical Devices have
opened up for higher levels of FDI.
 Investor Facilitation Cell (IFC) was created in 2014 to assist investors while
seeking regulatory approvals, assistance during the pre-investment phase,
execution and after-care support.
 Its website provides details about live projects such as industrial corridors and
gives information on policies in areas of FDI, intellectual property rights and
other related initiatives by the Indian government.
 Under the Make in India initiative, the following industrial corridors are
proposed to be created:

1. Delhi-Mumbai Industrial Corridor

2. Chennai-Bengaluru Industrial Corridor (first defence industrial corridor is

proposed to be developed along this corridor)

3. Visakhapatnam-Chennai Industrial Corridor

4. Bengaluru-Mumbai Economic Corridor

5. Amritsar-Kolkata Industrial Corridor

 Steps are being taken to improve the ease of doing business such as Shram
Suvidha Portal, eBiz portal (single window access to 11 central government
services related to starting a business), etc.
Since its launch, the FDI inflow has increased significantly. According to DIPP,
it stood as $60 billion and $62 billion in 2016-17 and 2017-18 respectively.
However, the FDIs in the manufacturing sector is weakening. It came down to $7
billion in 2017-18 as compared to $9.6 billion in 2014-15.
FDI in the service sector, on the other hand, is $23.5 billion – more than three
times higher than the manufacturing sector.
This shows India’s traditional strong points are thriving.
India’s share on global exports of manufactured products remains around 2%,
which is less than China’s 18% share.
Challenges of the Program
Investment from shell companies: The major part of the FDI inflow is neither from foreign
nor direct. Rather, it comes from Mauritius-based shell companies that are suspected to be
investing black money from India.
Productivity: India’s manufacturing sector’s productivity is low and the skills of the labour
force are insufficient. According to McKinsey’s report, the Indian workers in the
manufacturing sector are, on average, almost four to five times less productive than their
counterparts in Thailand and China.
Small industries: The size of the industrial units is small. Therefore, it cannot attain the
desired economies of scale. It also cannot invest in modern equipment and develop supply
chains.
Complicated labour laws: One of the major reasons behind the small companies is due to the
complicated labour regulations for units with more than 100 employees.
The government’s approval is required under the Industrial Disputes Act of 1947 before the
industry can lay off the employees. Additionally, the Contract Labour Act, 1970 requires the
government’s and the employee’s approval for simple changes in an employee’s description
or duties.
Electricity: The cost of electricity is almost the same in India and China. However, the
outages are far higher in India.
Transportation: The average speed in China is about 100 km/hour. In India, it is about 60
km/hour. Also, the Indian railways are overloaded and the Indian ports have outperformed by
a lot of Asian nations.
Bureaucracy: India’s bureaucratic procedures and corruption within the government makes
India far less attractive for investors.
Though India has made progress in the World Bank’s Ease of Doing Business Index (EDB
index), it is only ranked 77 among th190 nations.
Although EDB rank has improved, the Make in India initiative has not succeeded in
increasing the size of the manufacturing sector relative to the domestic output.
India ranks 78 out of 180 countries in Transparency International’s Corruption Perception
Index.
Land acquisition to build a plant is very difficult. India has come down to 10 places in the
World Economic Forum’s latest annual Global Competitiveness Index.
Prior steps were not taken to improve India’s labour laws and land acquisition laws before
attracting foreign investments in India through the Make in India initiative.
Capital Outflow is a major challenge for Make in India’s initiative. The net outflow of capital
has increased as the rupee value has dropped from 54 a dollar in 2013 to more than 70 a
dollar in 2019. The economic slowdown and oil prices are also contributing to this major
challenge.
Government’s initiatives:
The FDI norms have been revised to make India more attractive for the investors. This is
necessary to enhance the competition with Southeast Asian nations and export growth.
Export-oriented growth is being prioritized.
The corporate tax has been reduced to increase foreign investment.
The US-China dispute has given India a renewed opportunity to attract the foreign
investments that are fleeing from protectionist measures by these nations.
India is taking steps to enhance diplomatic ties with the nations that are likely to enhance
investments in India.
However, this too is proving to be a difficult feat for India due to the current challenges.
According to the Japanese financial firm Noura’s report, only 3 of the 56 companies that have
decided to relocate from China have moved to India.
What can be the mode onward?
It is evident that India is not gaining the full potential of the Make in India initiative.
Government measures are currently seeing very limited results out of the steps taken by it to
deal with the current challenges faced by the Indian economy.
The core issues that are troubling the Indian economy need to be resolved before intending to
make India a global manufacturing hub. For instance, India is facing an unemployment crisis.
To solve this, the government can take steps to make full use of the potential of India’s young
labour force.
This can be done by enhancing their skills, training, education and providing them with better
health care. It doing so, the productivity of the labour force can be achieved.
Labour laws and land acquisition must be reformed so that there is an increase in the inflow
of the investments and establishment of manufacturing industries.
Prioritizing the MSME sectors can greatly enhance India’s GDP from the manufacturing
sector.
Bureaucratic procedures must be simplified in a way that ensures transparency and
accountability.
Assisting smaller industries to set up a supply chain within India.
Prioritizing the shift to renewable energy sources for electricity can boost the manufacturing
industry’s productivity.
Assisting startups through financial support, training, etc. can boost India’s manufacturing
sector.
Innovation must be encouraged and research and development must be supported by the
government.
Improving connectivity even in the isolated and difficult terrains in India is possible only if
the government takes the step to achieve it. It can not only improve India’s manufacturing
sector but also solve the problem of insurgency and other illegal activities in the nation.
In short, the government must ensure that there is a favourable environment for the growth of
industries within the Indian economy.
Conclusion
Make in India has the potential to make India a $5 trillion economy. If measures are not taken
by the Indian government to improve the FDI inflow and creating a favourable environment
for the manufacturing sector, it may only be a distant dream.
Monetary Policy

Monetary Policy defined

 Monetary Policy refers to the measures pertaining to policy undertaken by the Central
Bank (RBI) to influence the availability; determine the size and rate of growth of the
money supply in the economy.
 In other words, monetary policy can be defined as a process of managing a nation’s
money supply to contain/control the inflation, achieving higher growth rates and achieving
full employment.
 Generally, all across the globe, monetary policy is announced by the central banking
body of the country, for example the RBI announces it in India.
 The Monetary and Fiscal Policies had to be adjusted to the requirements of the planned
development in the country and accordingly, the economic policy of the Reserve Bank
was emphasized on two objectives:
o To speed up the economic development of the nation and raise the national
income and standard of living of the people.
o Control and reduce the “Inflationary” pressure on the economy.

Monetary policy is of two kinds:

 Expansionary Monetary Policy: It increases the supply of money in an economy by

making credit supply easily available. Money produced through such a policy is called as
cheap money. An expansionary monetary policy is required when an economy goes
through a phase of recession accompanied by lower levels of growth/high levels of
unemployment. But risk associated with EMP is inflation.
 Contractionary Monetary Policy: It decreases the supply of money in the economy.
Contractionary monetary is used to tackle the menace of inflation in the economy by
raising the interest rates.

Objectives of Monetary Polity

 In India the broad objectives of monetary policy are:

o To regulate monetary expansion so as to maintain a reasonable degree of price
stability; and
o To ensure adequate expansion in credit to assist economic growth
 Further the objectives of Monetary Policy are:
 o It leads to economic growth: The monetary policy can influence economic
growth by controlling real interest rates and its resultant impact on the
investment. If the RBI opts for a cheap credit policy by reducing interest rates, the
investment level in the economy can be encouraged. This increased investment
can speed up economic growth.
o Price Stability: Inflation and deflation both are not suitable for an economy. Price
stability is defined as a low and stable order of inflation. Thus, the monetary
policy having an objective of price stability tries to keep the value of money
stable.
o Exchange Rate Stability: If exchange rate of an economy is stable it shows that
economic condition of the country is stable. Monetary policy aims at maintaining
the relative stability in the exchange rate. The RBI by altering the foreign
exchange reserves tries to influence the demand for foreign exchange and tries
to maintain the exchange rate stability.
o It generates employment: Monetary policy can be used for generating
employment. If the monetary policy is expansionary then credit supply can be
encouraged. It would thus help in creating more jobs in different sector of the
economy.
o Equitable distribution of income: Earlier many economists used to justify the
role of the fiscal policy in maintaining economic equality. However, in recent
years economists have given the opinion that the monetary policy can play a
supplementary role in attainting economic equality.

Methods for Regulation of Monetary Policy

The methodology can be classified into two categories:

1. Quantitative Credit Control Methods:

These are the instruments of monetary policy that affect over all supply of money/credit in the
economy. Some are as follows:

Statutory Liquidity Ratio:

 The Statutory Liquidity Ratio refers to that proportion of total deposits which the
commercial banks are required to keep with themselves in a liquid form. The commercial
banks generally make use of this money to purchase the government securities.
  Thus, the Statutory Liquidity Ratio, on the one hand, is used to siphon off the excess
liquidity of the banking system, and on the other, it is used to mobilize revenue for the
government.
 The Reserve Bank of India is empowered to raise this ratio up to 40 per cent of
aggregate deposits of commercial banks. At present it is 18.5 per cent. It used to be as
high as 38.5 percent at one point of time.

Cash Reserve Ratio:

 The Cash Reserve Ratio (CRR) is the ratio fixed by the RBI of the total deposits of a
bank in India, which is kept with the RBI in cash form.
 CRR deposits do not earn any interest for banks.
 Initially, limits of 4% (lower) and 20% (upper) were set for CRR, but respective
amendments removed the limits, therefore providing RBI with much needed operational
flexibility. The more the CRR the less the money available for lending by the banks to
players in the economy. RBI increases CRR to tighten many supple and lowers CRR to
expand credit in the economy.
 CRR as a tool of monetary policy is used when there is a relatively serious need to
manage credit and inflation.
 Otherwise, RBI relies on signaling its intent through the policy rates of repo and reverse
repo. At present it is 4 percent.

Bank Rate:

 In basic terms, bank rate is the interest rate at which RBI provides long term credit facility
to commercial banks. A change in bank rate affects the other market rates of interest. An
increase in bank rate leads to an increase in other rates of interest, and conversely, a
decrease in bank rate results in a fall in other rates of interest. Bank rate is also referred
to as the discount rate. A deliberate manipulation of the bank rate by the Reserve Bank
to influence the flow of credit created by the commercial banks is known as bank rate
policy.
 An increase in bank rate results in an increase in the cost of credit or cost of borrowing.
This in turn leads to a contraction in demand for credit. A contraction in demand for credit
restricts the total availability of money in the economy, and hence results as an anti-
inflationary measure of control.
 Likewise, a fall in the bank rate causes other rates of interest to come down. The cost of
credit falls, i.e., borrowing becomes cheaper. Cheap credit may induce a higher demand
both for investment and consumption purposes. More money through increased flow of
 credit comes into circulation. A fall in bank rate may, thus, prove an anti-deflationary
instrument of control. Penal rates are linked with Bank Rates. For instance if a bank does
not maintain the required levels of CRR and SLR, then RBI can impose penalty on such
banks. Currently Bank Rate is 7%.
 Nowadays, bank rate is not used as a tool to control money supply, rather Liquidity
Adjustment Facility (LAF) (Repo Rate) is used to control the money supply in economy.

Repo Rate:

 If the RBI wants to make it more expensive for the banks to borrow money, it increases
the repo rate.
 Similarly, if RBI wants to make it cheaper for banks to borrow money, it reduces the repo
rate. Repo rate stood at 5.75%.

Reverse Repo Rate:

 Reverse Repo is the rate at which the Central Bank (RBI) borrows from the market. This
is called as reverse repo as it the reverse of repo operation. Reverse repo rate at present
is 50 basis points (or 0.5%) lower than the Repo Rate. Repo and Reverse
 Repo Rates are also referred to as the Policy rates and are often used by the Central
Bank (RBI) to send single to the financial system to adjust their lending and borrowing
operations.
 Repo rates and reverse repo rates form a part of the liquid adjustment facility.

Open Market Operations (OMOs):

 It refers to buying and selling of government securities in open market in order to expand
or contract the amount of money in the banking system. This technique is superior to
bank rate policy. Purchases inject money into the banking system while sale of securities
do the opposite.
 It is a common misconception that OMOs change the total stock of government
securities, but in reality they only change the proportion of Government Securities held by
the RBI, commercial and co-operative banks.
 The Reserve Bank of India has frequently resorted to the sale of government securities to
which the commercial banks have been generously contributing. Thus, open market
operations in India have served, on the one hand as an instrument to make available
more budgetary resources and on the other as an instrument to siphon off the excess
liquidity in the system.
Marginal Standing Facility:

 Marginal Standing Facility is a liquidity support arrangement provided by RBI to

commercial banks if the latter doesn’t have the required eligible securities above the SLR
limit.
 It is a window for banks to borrow from the Reserve Bank of India in an emergency
situation when inter-bank liquidity dries up completely.
 The MSF was introduced by the RBI in its monetary policy for 2011-12.
 Under MSF, a bank can borrow one-day loans from the RBI, even if it doesn’t have any
eligible securities excess of its SLR requirement (maintains only the SLR). This means
that the bank can’t borrow under the repo facility.
 In the case of MSF, the bank can borrow up to 1 % (can be changed by the RBI) below
the SLR (means 1% of Net Demand and Time Liabilities or liabilities simply).
 The working of MSF is thus related with SLR. For example, imagine that a bank has
securities holding of just 19.5 % (of NDTL). This is equal to its mandatory SLR holding.
The bank can’t borrow using the repo facility. But as per the MSF, the bank can borrow 1
% of its liabilities from the RBI. Sometimes the RBI increases the limit of borrowings to
2% of NDTL. As in the case of repo, the bank has to mortgage the securities with the
RBI.
 MSF rate and the Repo rate: The bank has to give higher interest rate to the RBI. The
interest rate for MSF borrowing was originally set at one percent higher than the repo
rate. As on November 2017, the RBI has lowered the difference between repo rate and
MSF to 0.25%. The MSF rate and Bank rate are equal.

2. Qualitative Credit Control Methods

These are those tools through which the Central Bank not only controls the value of loans but
also the purpose for which these loans are assigned by the commercial banks. Some of these
are:

Moral Suasion:

 Moral suasion means persuasion and request. To arrest inflationary situation Central
Bank persuades and requests the commercial banks to refrain from giving loans for
speculative and non-essential purposes. On the other hand, to counter defiation Central
Bank persuades the commercial banks to extend credit for different purposes.
 Under Moral Suasion, RBI issues periodical letters to bank to exercise control over credit
in general or advances against particular commodities.
 Periodic discussions are held with authorities of commercial banks in this respect.
  In India, from 1949 onwards the Reserve Bank has been successful in using the method
of moral suasion to bring the commercial banks to fall in line with its policies regarding
credit.

Rationing of credit:

 Rationing of credit is a method by which the Reserve Bank seeks to limit the maximum
amount of loans and advances, and also in certain cases fix ceiling for specific categories
of loans and advances. RBI also makes credit flow to certain priority or weaker sectors by
charging concessional rates of interest. This is at times also referred to as Priority Sector
Lending.

Regulation of Consumer Credit:

 Now-a-days, most of the consumer durables like Cars, Televisions, and Laptops, etc. are
available on instalment basis financed through bank credit. Such credit made available
by commercial banks for the purchase of consumer durables is known as consumer
credit.
 If there is excess demand for certain consumer durables leading to their high prices,
Central Bank can reduce consumer credit by (a) increasing down payment, and (b)
reducing the number of instalments of repayment of such credit.
 On the other hand, if there is deficient demand for certain specific commodities causing
deflationary situation, Central Bank can increase consumer credit by (a) reducing down
payment and (b) increasing the number of instalments of repayment of such credit.

Direct action:

 This method is adopted when a commercial bank does not co-operate with the central
bank in achieving its desirable objectives. Direct action may be as:
o Central banks may charge a penal rate of interest over and above the bank rate
upon the defaulting banks;
o Central bank may refuse to rediscount the bills of those banks which are not
following its directives;
o Central bank may refuse to grant further accommodation to those banks whose
borrowings are in excess of their capital and reserves.

Margin Requirements:
  Generally, commercial banks give loan against ‘stocks or ‘securities’. While giving loans
against stocks or securities they keep margin. Margin is the difference between the
market value of a security and its maximum loan value. Let us assume, a commercial
bank grants a loan of Rs. 8000 against a security worth Rs. 10,000. Here, margin is Rs.
2000 or 20%.
 If central bank feels that prices of some goods are rising due to the speculative activities
of businessmen and traders of such goods, it wants to discourage the flow of credit to
such speculative activities. Therefore, it increases the margin requirement in case of
borrowing for speculative business and thereby discourages borrowing. This leads to
reduction is money supply for undertaking speculative activities and thus inflationary
situation is arrested.

Limitations of Monetary Policy

The monetary policy of Reserve bank has played only a limited role in controlling the inflationary
pressure. It has not succeeded in achieving the objective of growth with stability.

 The existence of black money in the economy limits the working of the monetary policy.
Black money is not recorded since the borrowers and lenders keep their transactions
secret.
 Informal money lenders on a large scale in countries like India but they are not under the
control of the monetary authority. This factor limits the effectiveness of monetary policy in
such countries.
 An important limitation of monetary policy arises from its conflicting objectives. To
achieve the objective of economic development, the monetary policy is to be
expansionary but contrary to it is to achieve the objective of price stability and curb on
inflation. It can be realized by contracting the money supply. The monetary policy
generally fails to achieve a proper coordination between these two objectives.
 Another limitation of monetary policy in India is underdeveloped money market. The
weak money market limits the coverage, as also the effecient working of the monetary
policy.

Monetary Policy Committee

 The Monetary Policy Committee (MPC) is a committee of the Central Bank in India
(Reserve Bank of India), headed by its Governor, which is entrusted with the task of
fixing the benchmark policy interest rate (repo rate) to contain inflation within the
specified target level.
 The MPC replaces the current system where the RBI governor, with the aid and advice of
his internal team and a technical advisory committee, has complete control over
monetary policy decisions.
 A Committee-based approach will add lot of value and transparency to monetary policy
decisions.
 Prior to MPC, the RBI governor, with the aid and advice of his internal team and a
technical advisory committee, had complete control over monetary policy decisions. This
lacked clear objective, accountability and transparency in decision making.
 All the important committees of namely the Y. V. Reddy Committee (2002), Tarapore
Committee (in 2006), Percy Mistry Committee (2007), Raghuram Rajan Committee
(2009), Dr. Urjit R. Patel (URP) Committee (2013) (discussed below) recommended for a
MPC to decide policy actions.
 They all opinioned that “Heightened public interest and scrutiny of monetary policy
decisions and outcomes has propelled a worldwide movement towards a committee
based approach to decision making with a view to bringing in greater transparency and
accountability in India.
 Monetary Policy Committee (MPC) as a statutory committee of the Central Bank in India
(Reserve Bank of India), headed by its Governor, which is entrusted with the task of
fixing the benchmark policy interest rate (repo rate) to contain inflation within the
specified target level. The MPC replaces the current system.
 The MPC will have six members; - the RBI Governor (Chairperson), the RBI Deputy
Governor in charge of monetary policy, one official nominated by the RBI Board and the
remaining three members would represent the Government of India. These Government
of India nominees are appointed by the Central Government based on the
recommendations of a search cum selection committee
 Government nominees of the MPC will hold office for a period of four years and will not
be eligible for re-appointment. These three central government nominees in MPC are
mandated to be persons of ability, integrity and standing, having knowledge and
experience in the field of economics or banking or finance or monetary policy.
 RBI Act prohibits appointing any Member of Parliament or Legislature or public servant,
or any employee / Board / committee member of RBI or anyone with a conflict of interest
with RBI or anybody above the age of 70 to the MPC.
 Central government also retains powers to remove any of its nominated members from
MPC subject to certain conditions and if the situation warrants the same.
Thalinomics
Context

The Economic Survey 2020 coined a new term called ‘Thalinomics’ and the government pitched
the term as “economics for the common man”.

About

 The Economic Survey 2020 made a unique attempt to quantify the cost incurred in
putting together one complete home-made meal — the healthy Indian thali.
 Thali prices represent the total money spent on preparing dishes for a meal in a
household.

Thalinomics captures the economics of a plate of food in India.

Rise in Affordability: Despite recent concerns about rising food prices, the Economic Survey
has stated that for a worker, a vegetarian thali is 29% more affordable since 2006-07. And
affordability of anon-vegetarian thali improved by 18 per cent.

It also looked at an industrial worker’s ability to pay for two thalis a day for his/her household
of five individuals.

Conclusion: Basically, the survey attempts to calculate the cost that an average worker
incurs based on his actual plate of food in India.

And on calculating that cost, the survey concludes that works were able to save due to
moderation in prices of items that form part of a regular Indian thali.
Financial Reforms
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

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 in the country.

o 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.
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.

o These include the opening of bank branches in remote

areas.
o Issuing Kisan Credit Cards (KCC)
o Linkage of self-help groups (SHGs) with banks.
o Increasing the number of automated teller machines
(ATMs)
o Business correspondents’ model of Banking, etc.
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.
Enhancing Financial Literacy

 The Reserve Bank of India has undertaken a project titled "Project

Financial Literacy".

o 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.
 o 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
Increased Access to Banks

 According to the World Bank’s Global Financial Inclusion Database

or Global Findex report 80% Indian adults have a bank account
against the 53% estimated in 2014.

o The Findex report also estimates that 77% Indian women

have bank accounts, against 43% in 2014.
Multiplier Effect

 These initiatives have brought about major changes to increase the

last-mile connectivity of financial services to its people.
 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.
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.
Integration of Financial Services

 The convergence of JAM trinity with the Direct Benefit Transfer

(DBT) scheme has largely been successful.

o Due to this, there has been a significant improvement in

terms of targeted and accurate payments.
o It has also helped in weeding out duplication of entries,
and bringing down the reliance on cash mode of
payments.
Associated Challenges
 Non-Universal Access to Bank Accounts

o 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.
 Digital Divide

o The most common barriers to the adoption of digital

technology which may promote financial inclusion:
o Non-availability of suitable financial products
o Lack of skills among the stakeholders to use digital
services
o Infrastructural issues
o Low-income consumers who are not able to afford the
technology required to access digital services
 Implement Deficit

o For instance, the Jan Dhan scheme has resulted in the

opening of many dormant accounts which never saw
actual banking transactions.
o All such activities incur costs on the institutions, and thus,
huge operative costs only proved to be detrimental to the
actual objective.
o 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.
 Informal and Cash-Dominated Economy

o India is the heavily dominated cash economy, this poses a

challenge for digital payment adoption.
 o Also, according to the International Labour Organization
(ILO), about 81% of the employed persons in India work
in the informal sector.
o The combination of a huge informal sector along with a
high dependence on cash mode of transaction poses an
impediment to digital financial inclusion
 Gender Gap in Financial Inclusion

o 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% females.
o This is attributed to socio-economic factors, including the
availability of mobile handset and internet data facility
being higher among men than women.
 Lack of Credit Penetration

o 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.
o 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
 Reviving Banking Correspondent Model

o 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.
o Thus, there is a need to create better monetary incentives
for banking correspondents as well as to provide them
better training.
  Leveraging JAM Trinity

o Technology should be used to improve the assessment of

credit-worthiness for households and informal businesses.
o 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.
 Need for Data Protection Regime

o In addition to greater digitization, there is also a need to

strengthen cyber security and data protection regime in
the country.
 Leveraging Differentiated Banks

o Differentiated Banks like Payment banks and small

finance banks can be leveraged to scale up payments
systems in underserved areas.
 Promoting USSD for Rural Areas

o 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.
o In India, USSD can be particularly useful in rural areas
where some segments still do not have reliable access to
the internet.
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.
Negative rate policy
once considered only for economies with chronically low inflation such as
Europe and Japan – is becoming a more attractive option for some other
central banks to counter unwelcome rises in their currencies.

Why have some central banks adopted negative rates?

 1. To battle the global financial crisis triggered by the collapse of
Lehman Brothers in 2008, many central banks cut interest rates near
zero.
2. A decade later, interest rates remain low in most countries due to
subdued economic growth.
3. With little room to cut rates further, some major central banks have
resorted to unconventional policy measures, including a negative
rate policy.
4. The euro area, Switzerland, Denmark, Sweden and Japan have
allowed rates to fall slightly below zero.

How does it work?

Under a negative rate policy, financial institutions are required to pay
interest for parking excess reserves with the central bank.
That way, central banks penalise financial institutions for holding on to
cash in hope of prompting them to boost lending.

What are the advantages of negative rates?

1. Lowers borrowing costs.

2. Help weaken a country’s currency rate by making it a less attractive
investment than that of other currencies.
3. A weaker currency gives a country’s export a competitive advantage
and boosts inflation by pushing up import costs.

What are the disadvantages?

1. Negative rates put downward pressure on the entire yield curve.

2. Narrow the margin financial institutions earn from lending.
3. If prolonged ultra-low rates hurt the health of financial institutions
too much, they could hold off on lending and damage the economy.
4. There are also limits to how deep central banks can push rates into
negative territory – depositors can avoid being charged negative
rates on their bank deposits by choosing to hold physical cash
instead.
MSME Program

On May 2020, the Centre has revised the definition of MSMEs by revising the investment
limit as follows:
Micro: Any firm with investment up to Rs 1 crore and turnover
under Rs 5 crore.
Small: A company with investment up to Rs 10 crore and turnover
up to Rs 50 crore.
Medium: A firm with investment up to Rs 20 crore and turnover
under Rs 100 crore.
The importance of MSMEs for Indian Economy
Employment creator:
nd
 MSME is 2 largest employment provider after agriculture sector.
 It provides 80% of jobs in the industry with just 20% of the investment.
 They also check rural-urban migration by providing people living in isolated
areas with a sustainable source of employment.
Economic growth and exports:
 It contributes about 31% to the nation’s GDP, 45% share in the overall exports
and 34% share in the manufacturing output as per the 2017 report.
 Non-traditional products like sports goods, readymade garments etc. account
for more than 95% of the MSME exports. As these products are mostly
handcrafted and hence eco-friendly, there exists an enormous potential to expand
MSME led exports.
 Moreover, MSMEs act as ancillary industries for large-scale industries since
they provide the latter with raw materials, important components etc.
Inclusive growth:
 MSMEs drive inclusive growth since it develops the lives of the most
vulnerable and marginalized sections in India who are the majority of MSME
owners.

 MSME sector in India mostly depends on people’s skills rather than their
wealth or capital.

Challenges faced by the MSME sector

 Lack of scaling up and expansion or confined to the rural area – due to the
following challenges.
 Access to capital: Around 40% of the small enterprises depends on the
informal sources of credit or loan.
 Lack of latest techs = Less productivity and Less competitive compared to
imported products and services.
 Deficiencies in basic infrastructural facilities: such as water, electricity, road
or rail and telephone connectivity etc.
 Bureaucratic red tape: difficulties in getting multiple statutory clearances with
respect to electricity, environment, labour etc.
 Lack of skilled labour
 Raw material availability
Measures taken by the government:
 Technology Acquisition and Development Fund (TADF)
  To facilitate the acquisition of clean, green and energy efficient
technologies by MSMEs.
 Launched under National Manufacturing Policy
 Implemented by the Department of Industrial Policy &
Promotion (DIPP)
 The National Apprenticeship Promotion Scheme: encourages third-party
agencies to provide basic training when in-house training infrastructure not
available.
 Indian Enterprise Development Service (IEDS):
 A special cadre established under MSME ministry
 To reform the prevalent regulatory regime that hindered the
MSME growth
 Trade-Related Entrepreneurship Assistance and Development
(TREAD): launched by MSME ministry to promote women entrepreneurs by
providing loan/credit.
 Zero Defect-Zero Effect (ZED) Scheme: to rate and handhold all MSMEs for
producing top quality products utilising clean technology.
 Mudra Bank
 MUDRA Bank = Micro Units Development and Refinance
Agency Bank.
 The Rs 20,000 crore MUDRA Bank seeks to provide
refinancing to small and medium enterprises, especially those from
SC & ST.
 The idea is to refinance micro-finance institutions (MFIs)
through Pradhan Mantri Mudra Yojana.
 This bank would be responsible for regulating and refinancing
all MFIs which are in the business of lending to MSME.
 .
 A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE) –
 Creates new jobs & reduce unemployment,
 Promotes entrepreneurship culture
 Facilitates innovative business solution etc.
 National Manufacturing Competitiveness Programme (NMCP) – to develop
global competitiveness among Indian MSMEs.
 MSMEs Cluster Development Programme – cluster development approach to
enhance productivity, competitiveness and capacity building of MSMEs.
 MSME Outreach Programme in 2018 T
 The key features of MSME Outreach Programme
The aim is to boost MSME sector by means of facilitating their growth and expansion.

Access to Facilities
 It will run for 100 days covering 100 Districts throughout the country.
 Various central ministers will visit these districts to assess various facilities
being extended to the MSME sector by the government.
 Under it, entrepreneurs will be encouraged to come forward and make the best
use of these facilities including access to credit and market etc.
Access to Credit
 The government will launch a 59-minute loan portal to enable easy access to
credit for MSMEs.
  Loans up to Rs. 1 crore will be granted approval through this portal, in just 59
minutes.
Interest Subvention
 The government will provide 2% interest subvention for all GST registered
MSMEs on fresh or incremental loans.
TReDS
 MSMEs with turnover more than Rs. 500 crore will now be mandatorily
brought under Trade Receivables e-Discounting System (TReDS).
 This will facilitate entrepreneurs to access credit from banks, based on their
upcoming receivables.
 This will help address their problem of cash delays.
Market access
 For access to markets for entrepreneurs, the government made it mandatory
for public sector enterprises to procure 25% of their purchases from MSMEs.
 Out of 25% procurement, 3% should be from women entrepreneurs.
Technology Upgradation
 The government will establish tool rooms across the country as a vital part of
product design.
Ease of Doing Business
 Clusters will be formed for pharma MSMEs. 70% of the cost for establishing
these clusters will be borne by the government.
 Simplification of government procedures in terms of filing returns, clearances
etc.
Social Security for MSME sector employees
 A mission will be launched to ensure that the MSME employees have Jan
Dhan Accounts, provident fund, and insurance.
Way ahead
 There is a growing number of schemes, portals, programmes etc. for the
MSME sector. But there is low awareness about these initiatives amongst the
targeted beneficiaries. Hence, there is a need to develop a better communication
strategy and the use of new age media tools like social media.
 To make the schemes more demand-driven, it is imperative to involve the
stakeholders at the design stage itself.
 Furthermore, the number of different decision-making levels in the
government needs to be reduced and enable flexibility on operational issues.
 Draft National MSME Policy should be implemented soon which proposes
National MSME Authority headed by the Prime Minister and also empowers the
centre to change investment limits instead of being forced to go the Parliament
every time.
Economic Reforms Of 1991
Economic Reforms 1991
The year 1991 saw India face an unprecedented financial crisis. The crisis was
triggered by a major Balance of Payments situation. The crisis was converted
into a golden opportunity to reform the country’s economic situation and make-
up and introduce fundamental changes in economic policy.
The government brought in structural reforms and stabilization policies. While
the former was aimed at removing the rigidities in the various sectors of the
Indian economy, the latter was aimed at correcting the weaknesses that had
emerged on the fiscal and BOP (Balance of Payments) fronts.
India’s Prime Minister, when the New Economic Policy (NEP) was introduced
was P V Narasimha Rao and the Finance Minister was Dr. Manmohan Singh.
Objectives of New Economic Policy 1991

 Enter into the field of ‘globalization’ and make the economy more
market-oriented.
 Reduce the inflation rate and rectify imbalances in payment.
 Increase the growth rate of the economy and create enough foreign
exchange reserves.
 Stabilize the economy and convert the economy into a market economy
by the removal of unwanted restrictions.
 Allow the international flow of goods, capital, services, technology,
human resources, etc. without too many restrictions.
 Enhance the participation of private players in all sectors of the economy.
For this, the reserved sectors for the government were reduced to just 3.

Steps under economic reforms of 1991

The branches of the new economic policy are threefold:

1. Liberalization
2. Privatization
3. Globalization

The government sought to open up the Indian economy through these measures
and gear India from a Soviet-model economy to a market economy. This is an
ongoing process and the initiation was done in 1991.

Steps taken under Liberalisation

 o Commercial banks were given the freedom to determine interest
rates. Previously, the Reserve Bank of India used to decide this.
o The investment limit for small scale industries was raised to Rs. 1
crore.
o Indian industries were given the freedom to import capital goods
like machinery and raw materials from foreign countries.
o Previously, the government used to fix the maximum production
capacity of industries. Now, the industries could diversify their
production capacities and reduce production costs. Industries are
now free to decide this based on market requirements.
o Abolition of restrictive trade practices: Previously, companies with
assets worth more than Rs.100 crore were classified as MRTP
firms (as per Monopolies and Restrictive Trade Practices (MRTP)
Act 1969), and were subject to severe restrictions. These were
lifted.
 Industrial licensing and registration were removed: as per this, the private
sector is free to start a new venture of business without obtaining licenses
except for the following sectors (which still need licenses):

 Cigarette
 Liquor
 Industrial explosives
 Defence equipment
 Hazardous chemicals
 Drugs

Steps taken under Privatisation

Privatization refers to opening up the private sector to industries that were
previously reserved for the government sector. This chiefly involved selling the
PSUs (private sector undertakings) to private players. This was meant to remove
the political interference in PSUs which was making them models of
inefficiencies.
The following steps were taken under the privatization reforms:

1. Selling shares of PSUs to the public and financial institutions. For

example, shares of Maruti Udyog Ltd. were sold to private parties.
2. Disinvestment in PSUs. This means selling PSUs to the private sector.
3. The number of industries that were reserved for the public sector was
decreased from 17 to only 3. These are:

 Transport and railway

 Atomic energy
  Mining of atomic minerals

Steps taken under Globalisation

Globalization refers to opening up the economy more towards foreign
investment and global trade.

1. Reduction in tariffs: a gradual reduction in the customs duties and tariffs

on exports and imports to make India attractive to global investment.
2. Long term trade policy: trade policy was enforced for a longer duration.
The main features of the trade policy are:

 Liberal policy
 Encouragement of open competition
 Controls on foreign trade were removed

3. Before 1991, imports to India were regulated by a positive list of freely

importable items. From 1992 onwards, the list was replaced by a limited
negative list. Almost all intermediate and capital goods were freed from
the list for import restrictions.
4. The Indian currency was made partially convertible.
5. The equity limit of foreign capital investment was raised from 40% to
100%. The Foreign Exchange Management Act (FEMA) was enacted
replacing the draconian Foreign Exchange Regulation Act (FERA).

The economic reforms of 1991 led to widespread economic development in the

country. Many sectors such as civil aviation and telecom saw great leaps from
deregulation and surged ahead. India is also home to many start-ups and
mushrooming businesses because of the end of the dreaded License Raj. The
process is, however, far from complete and many areas need improvement.