Economy - interview
Economy - interview
BIG PICTURE
1. HIGH FREQUENCY INDICATORS
a. Poverty
i. Since 2021, calculated using National MPI by Niti Ayog, earlier based on Poverty lines
ii. Faster decline in poverty since 2004-05
Head-Count ratio 2004-05 37%
Or Poverty ratio
2011-12 22%
iii. Niti Ayog claim for last few years - NMPI based poverty ratio has fallen from about 25% (2015-16) to
15% in 2019-21
iv. Higher share of population are accessing basic requirements like 12 indicators of NMPI
v. 1% increase in real wages could translate into 1.12% increase in PFCE, its multiplier effect could lead
to 64 bp increase in GDP
vi. HOWEVER, OUR INEQUALITY IS STILL HIGH
vii. Why govt shying away from conducting consumption expenditure survey?
1) HH Consumption Expenditure survey (HCES) 2022-23
i. Food share in Average monthly per-capita consumption expenditure (MPCE) is 46% (rural)
and 39% (urban)
ii. Expenditure on cereals = <5% of MPCE, Expenditure on high value items (eggs, fish, meat,
F&V) = >11% of MPCE
iii. Differences between item share in CPI (Retail) and item share in MPCE
iv. 9 states have numbers less than MPCE - BIMARU EXCEPT RAJASTHAN
viii. Recent poverty data in India is absolute or relative? - MPI attempt for absolute measurement of
poverty, not in comparison to others like poverty line approach
b. Unemployment
i. India Unemployment report 2024 by ILO and Institute for human development (IHD)
1) 7-8 Mn join Workforce every year
2) Working age population (15-59) proportion increased to 64%
3) Unemployment majorly a youth problem (15-29) - 83% share in Unemployed, 65% of
unemployed are educated youth
4) More educated women unemployed than educated men
5) Most jobs in 2023 informal - 90%
ii. Data from PLFS by NSSO (part of NSO) - annual data on both rural and urban UER/ER + Quarterly
surveys for urban workforce
iii. Annual data
Rural Urban Overall
2022-23 a. LFPR - 61 (M 80, W 41) a. LFPR - 50 (M 75, W 25) a. LFPR - 58 (M 78, W 37)
b. UR - 2.4 (M 2.7, W 1.8) b. UR - 5.4 (M 4.7, W 7.5) b. UR - 3.2 (M 3.3, W 2.9)
2021-22 a. LFPR - 57 (M 78, W 36) a. LFPR - 49 (M 74, W 24) a. LFPR - 55 (M 77, W 33)
b. UR - 3.2 (M 3.8, W 2.1) b. UR - 6.3 (M 5.8, W 7.9) b. UR - 4.1 (M 4.4, W 4.3)
1) Increasing trend of LFPR for both genders in both rural and urban areas
2) HOWEVER, key challenge is Women urban LFPR
3) Decreasing trend of UR for both genders in both rural and urban areas
4) HOWEVER, Urban UR higher for both genders than rural, esp. high values for women
iv. LFPR urban
Male Women Total
LFPR Q2 2023-24 73 23 48.8
LFPR - 2022-23 74 25 50
UR Q2 2023-24 6 9 6.6
UR - 2022-23 4.7 7.5 5.4
1) For Urban India - Comparing Q2 of 2023-24 with annual data of 2022-23
2) Increased UR and decreasing LFPR for women a cause of concern
v. Oct 2023 - Urban UER has fallen
c. Inflation
i. Monetary policy
a. Overall contractionary - Repo Rate has remained unchanged for last 3 quarters DESPITE lower
inflation
b. Done mainly due to Inflation targeting goal - main culprit is food inflation (6.6% FY 24 and 6.8%
FY 25)
c. Concern - Monetary policy can impact mainly the demand pull inflation / Core inflation /
industrial goods. But only a limited impact on cost push inflation / food and fuel
d. CMP in India is also due to higher interest rates in developed countries, to remain an attractive
destination for investments
e. IMF Article 4 country report 2023 on India
i. ER Mgt - from Dec 2022 to 2023, Rupee-$ exchange rate has moved in a closed range or
Rupee value has fallen marginally wrt $. It implies that there is more Forex intervention by
RBI, hence the Indian exchange rate regime was re-classified from 'floating' to 'stabilised
arrangement' - CLAIM REJECTED BY RBI CITING SHORT TERM CLAIMS OF IMF
ii. Higher debt-to-GDP ratio in India - maybe >100% ratio in medium term (within 2-3 years),
INDIAN REP AT IMF HAS REJECTED THIS CITING:
1) Major part of public debt is in Rupee terms
2) The ratio was 81% in 2005-06, 84% in 2021-22, 81% in 2022-23
f. NK Singh committee recommendation - Public debt-to-GDP ratio (stock variable like wealth)
should be used as a target for fiscal mgt instead of Fiscal Deficit (flow variable like income)
d. Economic Overview of India (or MAYBE world) - Performance in terms of following indicators
i. Comparison of last decade with previous decade
Indicator 2004-2014 2014-2024
GDP gr 6.8% 5.8%
Agri GDP gr 3.5% 3.7%
CPI 8.1% 5.1%
Food inflation 9.2% 4.9%
ii. GDP growth -
1) For Q2 of 2023, Real GDP growth = 7.6%, higher than even RBI estimates
2) This is mainly contributed by the secondary sector (industry)
2. INTERIM BUDGET
a. Not mentioned in Constitution - Vote on Account (Article 116, expenditure side) + Revenue side
a) Increased mfg
i) PLI (favor for long term, see automobile where we started in assembly segment but
now in complete mfg)
ii) Reduced input costs and improved profits compared to covid phase
b) Increased construction - a) and b) reduced UR
c) All sectors except agri, hospitality services
i) REMEMBER agri 1.8%, mfg 6.7%
ii) Agri laggard mainly due to weather related conditions - shown declining trend
iii) Mfg - increasing trend (short term), mixed trend (long term)
iv) Services - decreasing trend (short term), mixed trend (long term)
v) Construction - decreasing trend (short term), mixed trend (long term)
d) Investment led recovery
e) Deft control over inflation - average CPI (Headline) in last 5 years below 6%
3) Unemployment
a) Declining trend (given till 2022-23) - if general trend asked it is increasing after 2022-23
b) GoI conducts PLFS every quarter and calculates Unemployment. It is reported in 2 ways
i) On a quarterly basis, urban Unemployment is reported using CWS method
Reference period is 1 week
Any individual who works for atleast 1 hour on any particular day in last 1
week is called employed, otherwise unemployed
ii) Annual figures of Unemployment are reported for both rural and urban areas using
CWS and Usual principal and subsidiary status (UPSS) method
Usual status (reference period = 1 year)
• UPS = Principal status >= 183 days
• USS = Subsidiary status >= 30 days - USS used for this diagram given in
Interim budget (weaker criteria)
ii) FDI
d) PM-SVANidhi
1) Central SS for Urban street vendors by MoHUA extended till 2024
2) Technical partner - SIDBI
3) Only those States/UTs which have notified Rules under Street Vendors Act, 2014
4) Collateral free working capital (Interest subsidy @ 7%)
1) 10k (1 year)
2) 20k (1.5 years)
3) 50k (3 years)
5) 57 L street vendors benefitted
e) PM JANMAN 2023
1) By MoTA for PVTG
2) To provide basic needs to PVTG under Development Action Plan for Scheduled
tribes (DAPST)
3) 11 critical interventions - Ekalavya schools, housing etc.
f) PM Vishwakarma 2023
1) By MoMSME for Artisans and craftsmen of 18 trades
2) Support
1) Toolkit upto 15k (grant)
2) Skill training for 15 days (Rs 500/day stipend)
iv. Tax
1) Tax to GDP to cross 18% in FY 24
2) Tax buoyancy - 1.2 in current year (increasing trend since last 5 years)
3) Gross tax revenue = 11.6% GDP
4) Direct tax collection
a) 6.6% GDP
b) 3X in last decade
c) Tax refunds faster from 93 days to 10 days
d) 1.7 L Cr in 2023-24
e) Outstanding DT demand foregone - 1 Cr taxpayers benefit
i) Upto 2010 - less than or equal to 25k (2010 = year of record modernisation in GoI)
ii) 2011-15 - less than or equal to 10k
5) Indirect tax
a) 5% GDP
b) Overall customs, excise, CGST to yield 16.22 L Cr next year
v. Sources of income - Borrowing (28%) - income tax (19%) - GST (18%) - Corporate tax (17%)
vi. Allocations
1) Village
a) MGNREGA - 86 K Cr = 2023-24 (RE) = 2024-25 (BE)
b) PMKISAN - 60 k Cr (unchanged)
c) FFF - Food (2.05 L Cr), Fuel (0.12 L Cr), Fertiliser (1.4 L Cr) - all reducing amid lower PDS
offtake, easing global fertiliser prices
d) PMAY-R - 2 Cr new houses in next 5 years, above 2.95 Cr target of 2024
2) Social sector
a) Increased allocation for PM-SHRI, PM POSHAN
b) Lakhpati Didis - now 3 Cr vs 2 Cr LD earlier
c) Extension of PM-JAY to all ASHA, Anganwadi workers
3) Green push
a) 300 Units free electricity for HH with Rooftop solar
b) VGF for Offshore Wind plants
c) Mandatory blending of Compressed biogas with Piped NG (PNG) and CNG
4) Defence
a) 6.2 L Cr = 13% of budget outlay
b) Capex increased to 1.72 L Cr from 1.62 L Cr
i. Some missed targets visible from Revised estimates of current year
i. Capex 9.5 L Cr vs planned 10 L Cr
ii. Disinvestment - 30 k Cr (RE) vs 51 k Cr (BE)
iii. 6.4% shortfall in meeting Education expenditure target
iv. 10.9% shortfall in meeting Health expenditure target
v. Shortfall in expenditure targets in core schemes like PMGSY, PMAY, PMGSY, PMABHIM, SBM, Mission
Shakti
j. If you are the Revenue secretary, what are the three suggestions you will give to the finance minister
regarding the budget?
i. Cure inverted duty structure
ii. Direct tax code
iii. Reducing cess% of GTR
k. What are the different ways by which a government raises money? - debt (internal, external), taxes, Non-tax
revenue, disinvestment
l. Fiscal federalism
i. Are you aware of the RBI study on state budgets?
1) States contribution to general govt parameters
4. Niti Ayog
a. 'Planning commission was a master of resources, but not a master of ideas'
b. Why PC abolished?
5. Finance commission
a. Let us talk about Finance Commission. What is Finance Commission?
i. Constitutional body under Article 280
ii. Responsible for prescribing how to divide net proceeds of taxes between Union and the states
b. What are the terms of reference for the 16th Finance Commission?
i. Distribution of net proceeds of taxes between Centre and states, and its allocation between the states
ii. Principles that should govern grants-in-aid to states by Centre out of CFI
iii. Measures needed to augment CFI of states to supplement resources of local govts based on State FC
recommendations
iv. Any other matters that President refers to it
c. Why do we need to redistribute funds?
i. Envisaged as a balancing wheel of Fiscal federalism by the Constitution
ii. States = 40% receipts = 60% expenditure, hence FC becomes important
d. Tax devolution to states- need based instead of making it performance based. Doesn't it disincentivise the
states which are performing well ?
i. Larger point here is that in our growth story, every citizen is responsible towards each other
(Fraternity), hence in the short run, need based devolution is key to reducing inter-state inequality
ii. States which are performing well are also in many ways dependent on underperforming states -
migration of skilled and unskilled labor, raw materials for industries, consumption demand for goods
iii. It is a collective aspiration and not pitching one state against other
e. What can be done so that the ones doing good don't have to suffer?
i. Increased Weightage for efficiency criteria in horizontal devolution (fiscal efforts and demographic
performance)
ii. Fix states' share in cess and surcharges
iii. Fix % of cess and surcharges in GTR
f. South Indian States alleged discrimination by centre, your take?
i. Share of cess, surcharges
g. Union Finance Minister claimed: “whatever the Finance Commission has recommended [as the rate of
devolution], I follow it to the last word”. How robust is this claim?
i. The average of the annual shares of devolution was 31.1% during the 13th FC period (32%), 40.3%
during the 14th FC period (42%) and 38.1% during the 15th FC period (41%)
ii. If we add cesses and surcharges to the net proceeds — to create a revised divisible pool — the share
of devolution would fall even further to 28% during the 13th FC period, 35.1% during the 14th FC
7. Demonetisation
a. Do you think monetisation was a good step?
b. So it was not successfully implemented, it couldn't achieve its purpose, you still support it?
c. Recently, RBI withdrew ₹ 2000, if there is a plan to withdraw ₹500 would you be supporting?
d. How will the liquidity crisis could be resolved in such a case?
e. If you are reintroducing a currency already withdrawn like ₹1000, what is the entire point of
demonetisation.
f. How do you think by withdrawing ₹500 black money could be curbed, they can still change it for new
currency right?
8. GST
a. Objective - raise tax, tax base, ONOT, reduce cascading, transparency in tax incidence
b. Taxes subsumed, govt revenue sources - CENVAT, SLVAT, CVD, Luxury tax, entertainment tax, Octroi tax
c. Achievements of GST
i. Improved indirect tax, tax base (both doubled by 2022)
ii. Improved growth of States' indirect tax revenue (14.8% vs 9% pre-GST)
d. Is GST violating the federal structure in India? Has not it taken away rights of states?
i. Not violated as ultimate goal of GST is not curtailing states' revenue but public well-being
ii. Adequate provisions in favor of states
1) GST Council - feedback based taxation
2) GST Compensation + 50 year interest free loans
3) SC - CG, SG have equal power to make GST related laws
iii. Freedom of Inter state trade and commerce
e. 6 left-out items under GST, your take?
i. Fuel = base + excise + VAT + freight + dealer commission
ii. Should be kept out of GST, affect fiscal position of govt
iii. Need - diversification and strong supply chains to reduce inflation
f. In USA, states have different tax laws and they have ultimate taxing powers. In India there is an integrated
tax. Why? Which fiscal federalism is stronger?
i. Systems different
g. What is the share of states in GST council?
h. Has any resolution been passed that required voting in the council?
i. What is the share of Union in GST council? What is the majority required to pass a decision?
j. Any reforms that you suggest in GST council? (I said consensus)
i. More often meeting
ii. Conflictual decisions of State Appellate bodies
iii. Ocean and Sun
iv. Rationalise rates
v. IT - tax evasion
k. Consensus cannot be a law. How will you enforce it?
l. Has GST benefitted small businesses? Their issues and what can be done?
m. Exemption based on turnover
n. Has GST impacted the power of CM to levy and collect Sales tax ?
9. Inequality
a. Is inequality increasing in India?
b. Why so much inequality?
c. What is Gini Coefficient?
10. Misc
a. As a Chemical engineer, tell me where do u see our economy at 2047?
b. We have some ministries at central level, even if those subjects fall in state list. Why, what's the need,
should we do away with them?
AGRICULTURE
1. Land reforms
i. Ceiling reforms vs Consolidation reforms
1) Ceiling reforms
a) For equitable ownership of land
b) Leads to better incentive with the small landowners to increase agricultural production
c) J&K, WB, South Korea
d) Politically difficult
2) Consolidation
a) To consolidate very small landholdings and scattered landholdings
b) Gives benefits of economies of scale - productive use of inputs
ii. Farm size productivity debate
1) Whether smaller landholdings are always less productive? - not always
2) Both extremes in land size are bad - smaller ones lack economics of scale, bigger ones are diverted
away from agri for industries
iii. Modern Land reforms
1) Modernisation of land records - PM-SVAMITVA at Centre
a) Only concern = digitisation done by data entry operators unaware of agri in India
b) Need professionals in association with village admn
2) Land acquisition for public purpose
a) LAAR, 2013 - too much benefit to project affected persons (PAPs) and land losers
b) 2015 - Amendment bill to this act brought - it relaxed LAAR norms for selected sectors like
defence, rural infra, industrial corridors etc. thus considered anti-poor
c) Bill lapsed in NDA-1, not revived in NDA-2
v. Legalising MSP - not feasible, govt burden even when agri growth is higher (if agri growth lower, more govt
seems logical), Favourable terms of trade for agri b/c good price for farmers, Against WTO Agreement on
Agriculture (MSP = Amber box, trade distorting)
vi. PDS policy - food security and PMGKAY -
1) support b/c welfare state, post Covid food situation had worsened
2) Govt was already giving free grains till last year
3) K-shaped recovery as unorganised sector in problem so food front safe for them
4) Total food, fuel, fertiliser subsidy = 2 L Cr = total loan write-off by banks
5) Flexible NFSA where grain amount per HH will adjust as per actual annual production based on
monsoon
6) Some minimum payment could be present like 3/2/1
7) Maybe divert free food subsidy amount to social infra for the same destitute population
vii. Recap of 3 farm laws
i. Was their repeal justified?
ii. Were they void of advantages? - some govt role in 'free' agri market justified and desirable, states not
consulted, farmer GRM inefficient
viii. Why agri output is low? Is it due to lack of government support?
3. Millets
i. Millet man of India - Dr. Khader Vali
i. Padma Shri 2023, returned from US in 1997
ii. Proponent of Millets since last 25 years
ii. Do they cause certain problems
iii. Advantages compared to other cereals? Support with data
4. Agri investment
i. higher govt Capex in agri very much desired - eg public investment in irrigation
ii. MGNREGA can also assist in such infra creation
INDUSTRIES
1. Manufacturing
a. Why India lagging in mfg
b. What our country can do more for making it Developed Economy in Manufacturing?
c. What is your understanding about Make in India
d. What major things u can think about when it comes to increase our Exports and Manufacturing sector
contribution in GDP
2. Electronics
a. Targets
i. Electronics Exports expected $100 Bn by 2030 - mobiles and laptops mostly
ii. 6 sectors which will help realise $1 Tn exports by 2030 - Electronics, engineering goods (like Solar
modules, turbo jets, auto and auto-components, EV and parts), textiles, marine and agriculture, toys
and pharmaceuticals
b. Key challenges
i. Import dependence
a) Lack of SemiC chip mfg ecosystem - core components like Integrates chips are imported
b) No duty on imports of laptops and IT products as India is a signatory since 1997 to WTO’s
Information Technology Agreement (ITA)
c) Experience with the ITA has been most discouraging, almost wiping out the IT industry from the
country. The real gainer from the agreement has been China
ii. PLI worth 7350 Cr in electronics mfg - current allocation for IT hardware PLI needs to be increased
three-fold to around Rs 21,000-22,000 crore, also continuation for next 8 years
3. PMI
a. Have you heard about the PMI?
b. Who publishes it and what is India’s position?
SERVICES
1. Start ups - effect on economy? Is India on top?
2. Is it a good thing that the service sector is doing well?
3. Gig workers
a. Do u know gig worker
b. Name few gig platforms
c. Are they formal or informal
4. OPS vs NPS
a. Key differences
b. Is NPS bad? Any improvements needed in NPS?
c. Why OPS is termed as burden?
d. How would you convince others to move from OPS to NPS
e. Why some states announced reverting back to OPS? Is it a good move?
5. NPA problem
a. What is NPA?
b. What is Bad Bank? Name of the recently created institution?
c. Should NARCL be merged with IDRCL? - FinMin clarifies present structure works well so no need for it
6. Direct tax to GDP ratio rose to a 15 year high of 6.11% in 2022-23, accompanied by an increase in the number of
income tax return files to 7.4 crore which is an increase of 6.3% from financial year 2022
7. Adani issue
a. Hindenburg research accuse Adani group of making false, misleading claims about its financial practices
i. Hindenburg indulges in short selling
b. SEBI guidelines
1) Short selling allowed - Means selling a share you do not have actually (you borrow it), only to buy it
later at lower price
2) Naked Short selling banned - You do not even borrow