Economics Concept Classes

Part 1

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 Blue Economy

#1 What is the concept of blue economy?

(1) Leveraging economic potential of the oceans in a sustainable way → includes green economy in it
(2) According to World Bank, Tri-components → a) economic growth b) improved livelihoods and jobs
c) ocean health ecosystem.
(3) First given by Gunter Pauli in 2010 in his book “The blue economy, 10 years, 100 innovations, 100
million jobs”

#2 What potential exists in the global blue economy?

(1) Multi-dimensional uses → a) Renewable energy, b) Fisheries c) minerals d) tourism e) climate
(2) World wide ocean economy → $1.5trillion/year
(3) Share of global trade by volume through oceans → 80%
(4) 350 million jobs → fisheries.

#3 Why so much stress on blue economy in recent years?

(1) 1st global conference on sustainable blue economy → Nairobi 2018
(2) Equity + Public participation in marine and coastal decision making is rising.
(3) United Nation sustainable development goals (UN-SDG – 14) → Life below water.
(4) Land as a source of economic sustainability → deteriorating.

#4 What are the challenges in harnessing its true potential?

(1) Mindset → focussing on “economy” and ignoring the “blue” component.
(2) No concrete definition of blue economy. International rules and norms → still evolving.
(3) Technological constraints; eg collecting polymetallic nodules, D2O etc.
(4) Natural disasters → tsunamis, cyclones, earthquakes and submarine volcanic eruptions.
(5) Maritime security → piracy, smuggling, drugs peddling, arms trade, human trafficking.
(6) Climate change impacts on marine life, habitats and communities.

#5 What should India do to harness the potential and increase its stake in global
blue economy?
(1) India’s geography → unprecedented opportunity of improving living standards, energy security and
ecological resilience.
(2) Develop “blue diplomacy cadre” → SAGAR, IORA, BIMSTEC, SAARC and Indo-Pacific area.
(3) Strengthen “blue infrastructure” in terms of ports (sagarmala), ship building industry (make in India),
multi logistics parks, naval bases etc.
(4) Integrated coastal zone management + O-SMART strategy.
(5) Increasing R&D → deep sea mining, underwater vehicles and robotics.

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 Green Revolution

#1 What is the Green revolution?

(1) Green revolution refers to the transformation of methods/operations in agriculture in order to
boost the production and productivity with the introduction + development of HVY seeds.
(2) Agricultural system converted = industrial system.
(3) The three important components a) Irrigation facilities b) Chemical fertilizers c) Machines
(4) Objectives: a) short term – to address India’s hunger crises b) long term – agricultural
modernisation, industrial development and rural development.
(5) Rice + Wheat = key crops in India’s green revolution.

#2 What was the historical context?

(1) Seeds of green revolution → Mexico in 1960s
(2) Term “green revolution” was coined by William S. Gadd in 1968. But the father of GR = Norman e
Borlaug
(3) India specific → After independence → population rise, wars, inflation, poverty => food insecurity
• PL 480 programme where India relied on USA for its food needs.
• 1961-india on brink of mass famines
• 1960s-beginning of green revolution in India.

#3 What have we gained from the green revolution? (MERITS)

(1) Rise in production + productivity → India = “self-reliant” in food grain production.
(2) Increased exports + reduced imports =>Reduced current account deficit.
(3) Raised farm income + employment diversification => Better socio-economic outcomes in health and
education sector.
(4) Mechanisation and commercialisation of agriculture → Support to Industries => developing inter-
industrial linkages. Food processing sector is the sunrise sector.
(5) Regional development; especially the north-west India.
(6) PDS-MSP-NFSA system started in later years to ensure food security

#4 What cost have we paid? (CRITICISMS)

(1) Reduced inter crop and intra crop diversity → nutrition rich crops (pulses, fruits and vegetables)
lagged behind.
(2) Regional inequalities rose → the western and eastern India.
(3) Income inequalities rose; small and marginal farmers, landless labourers were at disadvantage.
(4) Deterioration of natural resources a) depletion of groundwater (rise in uranium, arsenic and fluoride
contamination (b) Soil erosion + land degradation (c)eutrophication
(5) Environmental pollution due to stubble burning and delaying of sowing of kharif crops.
(6) Health impacts → imbalanced use of chemicals (NPK) (a) disorders like methemoglobinemia
(b)biomagnifications + bioaccumulation (c) rising cases of cancer in states like Punjab
(7) Food mismanagement due to violation of buffer stock norms.

Note: Economic survey 2019-2020 has pointed out – “Agriculture growth is stagnant in last 6 years”

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#5 How to move from green revolution to ever green revolution?
(1) Diversification from farming to allied activities – livestock, fisheries, poultry and horticulture.
(2) Focus on eastern region => bringing green revolution to eastern India (BGREI)
(3) Implementing government schemes => krishnottiyojanaparamparagatkrishivikasyojna, mission for
integrated development of horticulture rashtriyagokul mission.
(4) Crop Diversification=> pulses, vegetables, fruits etc
(5) Extension services and intensive farmers awareness programs
(6) Field trials=> Innovative practices=>natural farming, zero budget farming, lee farming etc.

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 Indian Pharma Sector – Opportunities And Challenges

#1 What is the present status of India’s pharma sector?

(1) India = pharmacy of the world → supplies 50% of the global demand for vaccines.
(2) Largest provider of generic drugs; 3rd largest in terms of volume.
(3) Regulated → Drugs & cosmetics act1940; CDSCO = approval of new drugs, clinical trials,
coordination.

#2 What are its locational factors?

(1) Footloose industry → independent of specific local resources.
(2) Raw materials → proximity to petrochemical hubs or ports → inter industrial linkages
(3) Proximity to market →reduced transportation cost
(4) Capital availability
(5) Skilled labour
(6) Efficient transportation

#3 What are the challenges?

(1) High dependence on China for raw materials (APIs)
(2) Lack of research components
(3) Fragmented industry
(4) Fake version of high value brands → spurious medicines → competitiveness hurt
(5) Government policies like price capping, IPR policies → profits + investor confidence reduced
(6) Marketing malpractices → nexus among pharma companies and doctors, misleading advertisements,

#4 What are the opportunities?

(1) China facing shortage of raw material
(2) Huge population and diversity → suited to clinical trials and indigenous medicines
(3) Lifestyle diseases rising
(4) Health insurance (penetration + density) increasing
(5) Government focus → ayushman bharat, pharma vision, rashtriya arogya nidhi, national digital health
policy, national digital health mission (NDHM) and National biopharma mission.
(6) Medical tourism.

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#5 What recent opportunities have emerged due to Covid?
(1) India → supplier of medicines like hydroxychloroquine to USA
(2) Development of “vaccine diplomacy”
(3) Scope of R&D increased → private players participation boosted
(4) Market expansion → domestic + external

#6 What are the solutions?

(1) Small scale raw material manufacturing units/incubators industry-academia tie ups
(2) Integrating all the, medical systems → Ayush
(3) Promoting ease of doing business, e-pharmacy, pharma parks
(4) Developing “medical diplomacy”.
(5) Implementing Maleshkar committee recommendations → strengthen state drug control
organisations, setting national drug authority.

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 NATIONAL MONETISATION PIPELINE

#1 What is national monetisation pipeline?

(1) Process of unlocking the value of investment made in public assets.
(2) Part of 3 pronged strategy a) DFI b) Monetising assets of public sector banks c) Increasing capital
expenditure.
(3) Budget 2021 → launched to assess the value of unutilised/underutilised govt assets
(4) National asset monetisation plan → dashboard → tracking the progress + increase visibility to
investors.
(5) Niti Ayog to prepare the plan for FY21-24
(6) Target → raise 2.5 lakh crore.

#2 Why is it launched?
(1) To give boost to infrastructure projects → potential brownfield infrastructure assets
(2) Covid pandemic → increased spending + reduced revenue → borrowing increased by 2.3 times
(3) Subdued private sector investments
(4) Recommended by Vijay Kelkar committee on roadmap for fiscal consolidation
(5) International experience → China, USA, France have effectively utilised this

#3 How will it work?

(1) Broader contours available
(2) Transferring of assets to a trust
(3) leasing / renting out of assets
(4) Awarding of assets to private players. Eg → 150 passenger trains.
(5) Leveraging InvITS + PPP models like tol-operate-transfer

#4 What are the core infrastructure assets that will be rolled out?
(1) NHAI operational toll roads
(2) Oil and gas pipelines of GAIL, IOCL, HPCL
(3) AAI airports in tier 2 and 3 cities
(4) Railway infrastructure assets
(5) Sports stadium
(6) Warehousing assets of CPSEs.

#5 What are the expected benefits?

(1) Driving investments in the economy
(2) Higher public sector capital expenditure → multiplier effect → crowd in private investments.
(3) Proceeds of this → can be used in fresh projects
(4) India’s vision of $5 trillion economy

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 LAND REFORMS (Part 1)

#1 What are land reforms?

1) Reforming the regulation of land → a) ownership b) rent/lease/sale/operations c) Inheritance

2) Redistribution of land from rich to poor.
3) Improving land tenure + institutional ecosystem.

#2 What are the objectives of land reforms?

1) Ensure redistributive justice → socio economic inequality

2) Develop system of peasant proprietorship → land belongs to tiller
3) India = agrarian economy → huge income inequalities → implement socialistic principles
4) Elimination of exploitation in land relations.
5) Increasing agriculture production + productivity

#3 What was the land tenure system during colonial period?

Permanent settlement system b) Ryotwari system c)Mahalwari system

1) permanent settlement system = fixed land revenue to be paid by zamindar to company
2) ryotwari system = revenue to be paid by farmers/ryots
3) mahalwari system = revenue to be paid by whole village (mahals)

note : British legislated laws → Rent act 1859, Tenancy and rent act 1885.

#4 What issues emerged out of such colonial policies?

1) Ownership rights stayed with the zamindars

2) High peasant indebtness
3) Rise in peasant revolts.
4) Rise in socio-economic inequalities → small farmers + labourers → most vulnerable
5) Rise in food insecurity

#5 What measures were taken in immediate post independence period?

1) bhoodan and gramdan movements → Vinoba Bhave

bhoodan = zamindars persuaded to gift their land to farmers
gramdan = collective village living → villagers to vest their all ownership rights to gram sabha
2) Abolition of zamindari system → to remove intermediaries between state and actual cultivators
3) Land consolidation → to bring together small plots of fragmented land.
4) Tenancy reforms → to protect the tenants → regulation of rent + security of tenure +
ownership rights
5) Land ceilings → fixing the maximum amount of land which individual/family can possess.

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#6 What were the merits/gains out of such reforms?

1) 2.5 cr farmers bought into direct relationship with the state

2) 61ha of land → distributed to landless farmers.
3) Large scale privately owned forests and wasteland → under state
4) Land consolidation → support to green revolution

#7 What were the limitations associated with such steps?

1) Landlordism abolished but “absentee landlordism” continued

2) Legislations not uniform; eg WB = uniform ceilings but Maharashtra, gujrat= different ceilings for
different classes.
3) Poorly designed legislations → ceiling not decided on the basis of soil quality, population density,
climate.
4) Poor enforcement mechanism → tenants denied of their rights
5) Large tracts of unused land under government.
6) Unclear titles → black money in real estate + benami property.

note : Planning commission – “land reforms remain an unfinished business”

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 LAND REFORMS (Part 2)

#1 What further steps were taken to tackle the issues originated out of poor
implementation of institutional reforms?

1) Computerisation of land records (1988) → pilot project in 8 districts → resolve the issues of
manual system
2) PESA 1996 → Gram Sabhas given power to regulate their land + resources → implementation
of land reforms + land consolidation
3) Forests rights act 2006 → a) “title rights” on land to tribals b) “use rights” for minor forest
produce c)“relief and development rights” for rehabilitation in case of eviction.
4) Digital India lands record modernisation programme → integrated land information management
computerisation of land records + map digitisation.
5) Land acquisition act 2013 → higher compensation to those deprived of their land by govt (public +
private) projects.
6) Model land leasing act 2016 → balance the needs of landlords and lease holder → bring in
unproductive land to productive uses → recognising cultivators → provide credit
7) Swamitva yojna → mapping the land parcels in rural areas using drones.
8) Niti Ayog’s draft model land titles act 2019 → state guaranteed ownership.
9) ULPIN → unique land parcel identification number → link all property transactions

#2 What are the existing gaps in this context?

1) huge land lying vacant under govt, eg – 2.35 lakh acre surplus land under 58 underperforming CPSUs
2) 2/3rd of all the pending cases in courts → property disputes ; Niti Ayog → 20 years = avg time to
settle such cases
3) Recent agricultural census → size of operational landholding decreased since 1971 +
fragmentation of land expected to rise.
4) Absence of nationwide template ie standardised national registry of land records.

#3 What steps should be taken

1) Digitisation of land records eg- Bhoomi project (Karnataka)

2) Responsible legislations like Rajasthan’s urban land act which makes state as the guarantor of land
titles
3) Distributing ceiling surplus lands → land reforms division to fix annual targets
4) Monetisation of govt wastelands
5) Consolidation of landholding → kerala, TN, Gujrat
6) Promoting cooperative farming
7) Leveraging technology → Andhra Pradesh using block chain technology to prevent property frauds.

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 INDUSTRY 4.0/FUTURE OF WORK

#1 What do we mean by Industry 4.0/industrial revolution 4.0?

(1) Phases of industrial revolution ;
(a) phase1→ mechanisation + water and steam power
(b) phase2 →electricity + iron steel, rail lines
(c) phase 3 → cyber systems + automation
(d) phase4 → cyber physical systems.
(2) Key elements → fusion of technologies ranging from the physical, digital to biological spheres.
(3) Describes → growing trend of automation + data exchange in technology + processes within the
manufacturing industry.
(4) Four fundamental principles →
(a) interconnection
(b) information transparency
(c) Technical assistance
(d) decentralised decisions
(5) Includes→ Internet of Things (IoT) + Industrial Internet of Things (IIoT) + Cyber-physical Systems
(CPS) + Smart Manufacturing + Cloud Computing + Big Data + Robotics + Cognitive Computing +
Artificial Intelligence.

#2 Why is it called future of Work? (Impacts on nature of work)

(1) Technological revolution→fundamentally alter the way we live, work and relate to one another.
(2) Technology→ almost all the sectors → Improves efficiency and effectiveness; eg 3D printing used
for shoe manufacturing by adidas.
(3) Protects→ environment→ achieving SDGs
(4) Increase the volume+speed → accessibility
(5) Alternative to physical workplaces → professional + personal life balance.

#3 What are the challenges?

(1) Old pedagogy practices in schools colleges→ Lack of skilled personnel
(2) Fear of job losses → semi skilled + unskilled workers discriminated
(3) Income inequality + Gender inequality →digital resources limited to dominant sections.
(4) Digital divide → accessibility restricted
(5) Cyber attacks
(6) 3D manufacturing →ethical issues ; eg-piracy because files can be easily copied
(7) Poor funding for R&D→ indigenous base not developed→ dependence on foreign players.

#4 What are the ways to tackle these challenges?

(1) Promotion of investments in digital infrastructure.
(2) National education systems → development of competencies in ICT and STEM
(3) Capacity building programme→new skills
(4) Competitive grants→R&D promotion
(5) Regulatory frameworks → data protection (personal-BN srikrishna panel) + non personal data (Kris
Gopalkrishna committee)

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#5 Is India prepared for this revolution?
(1) Demographic dividend + Presence of skilled workforce in IT→ can be tapped.
(2) Fast growing market size →rise in investors confidence
(3) New education policy specifically focussing on practicle knowledge
(4) Digital India Mission → Improved Digital Infra
(5) Tele-density ~ 93% and ~ 50 crore Indians →mobile phones.
(6) MSME→ at forefront of 4IR→ Handholding by the government
(7) Dedicated govt focus →Samarth udyog bharat 4.0

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 GLOBAL VALUE CHAIN – INTEGRATING THE WORLD ECONOMY

Context → Covid pandemic has caused large scale disruptions in global supply chains.

#1 What do you mean by Global value chain?

(1) International production sharing →production broken into activities + tasks carried out in different
countries.
(2) Acc to World Bank→ GVC = series of stages in the production→ Each stage adds value.
eg- a bike assembled in France with parts from Germany, Italy, and Malaysia and exported to the
Arab Republic of Egypt is a GVC.

Note : supply chain = all parties in fulfilling a customer request → customer satisfaction,
value chain = interrelated activities a company uses to create a competitive advantage.

#2 How it leads to Integration of world economy?

(1) Multiple geographical locations→ countries working together→ globalization → Integration of the
world economies.
(2) Interdependency of the countries increase→ integration

#3 Why GVCs are important for overall growth of the world economy?
(1) Powerful driver of productivity + efficiency → country having specialities are involved
(2) Access to international market increase
(3) Diversification of export sector → number of products from diff countries increase
(4) Following international standards →Quality + R&D + Technological Advancement
(5) Improving Employment opportunities
(6) Knowledge and ideas sharing

#4 What measures countries can take to tap the potential of GVC?

(1) Upgradation of local companies
(2) Diversification of skill sets of workers
(3) Upgradation of Infrastructure→ Multimodal logistics, port facilities etc
(4) Conditional FDI→ eg : incentive to foreign companies giving employment with environmental
sustainability.
(5) Simple taxation regime.

#5 What is the future potential of India in global value chain?

(1) Shifting of global manufacturing base→India emerging as hub
(2) Low-cost labour + high class technology available
(3) Dedicated focus towards EODB
(4) Make in India mission + Start up India mission
(5) Mega infra projects → sagarmal, setubhartam, freight villages, INSTC, asian highway project, Blue
dots network and QUAD

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#6 Why integrating with global value chains crucial for India?
(1) GVC → Upgradation of infra→ policy reforms→ employment generation→ economic growth→
reduction of poverty. (1% increase in GVC participation → per-capita income increase by more than
1%)
(2) Improved Firm level productivity→ improved profits→ improved tax collection
(3) Interconnected regimes →build resilience, stability and flexibility in the production networks
(4) To mark its presence in the global economic order eg: pharmaceutical sector → reducing
dependence on China.

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 LABOUR REFORMS (Part 1)

#1 What do you mean by labour reforms?

(1) Steps to increase production + productivity + employment opportunities without compromising
worker’s interest.
(2) Protection + strengthening of worker’s rights.
(3) Balancing industrialist + workers interest.

#2 What were the major central legislations made in post independent period?
(1) Industrial Disputes Act 1947 → layoff + retrenchment + closure of industrial enterprises + strikes+
lockouts.
(2) Factories act 1948 → safety measures on factory premises + health and welfare of workers.
(3) The Minimum Wages Act, 1948 → skilled and unskilled labours.
(4) Employee providend funds act and employee state insurance act → social security

#3 What were the existing gaps?

(1) Multiple and complex set of laws →high inter-state variations→technical language→ difficult
compliance and enforcement→foundation for corruption, rent seeking and exploitation
(2) Inflexible laws→firms (employing>100 workers)→require govt approval for firing workers→no new
hiring.
(3) High degree of informalisation→90% → laws not applicable→poor social security
(4) Gender discrimination→unequal wages → poor enforcement of minimum wages act
(5) Issues with trade unions→multiples numbers→ frequent strikes + inter-union rivalry + politicisation
→ industrial disputes act unclear about the union’s rights
(6) Lack of formal jobs + nexus with enforcement officers→ Contractualisation + exploitation of labour
(7) Share of manufacturing decreasing→16.6% in 1990→ 13.7% in 2019

#4 what steps were taken by the govt to fill these gaps?

(1) Legislative reforms→
(a) payment of bonus amendment act (the bonus bracket was increase→ more workers to get
bonus),
(b) maternity benefit act 2017(extended maternity leave, crèche facilities etc)
(c) child labour prohibition and protection act (complete prohibition of employment of children
below 14 years except family business + stricter punishment for violators)
(2) Governance reforms→ fixed term employment, ease of compliance for establishments etc
(3) EPFO initiatives →employee enrolment campaign, Reduction in administrative charges etc
(4) Number of schemes →labour identification number, atal pension yojna, national child labour
protection scheme, aids to child and women labour etc
(5) Codification of labour laws.

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 LABOUR REFORMS (PART-2)

#1 What are the labour codes recently formulated by the govt?

(1) Set of regulations→consolidating central labour laws in 4 categories
(2) Recommendations by Second Labour Commission (1999)
(3) Four codes → a) Code on wages b) Code on industrial relations c) code on social security d) Code
on occupational safety, health and working conditions.

#2 What are the features of these codes?

(1) Wage code→ a) Floor wage fixed by Centre, b) Fixing the minimum wage→ must be >floor wage
+ revised every 5years, c) Overtime Wages→ must be at least twice the normal rate of wages, d)
Wage deduction should not exceed 50% of the employee’s total wage, e) no gender discrimination.
(2) Code on industrial relations→ a) prior permission from the govt for closure, lay-off and
retrenchment for an establishment having at least 300 workers, b) Negotiating Union→one having
>51% of the workers as members = sole negotiating union c) Negotiating council→if no sole
negotiating union→representatives of unions that have at least 20% of the workers as members. d)
industrial tribunals for settlement of disputes.
(3) Code on social security → a) Social security fund by centre as well as states for unorganised
workers, gig workers and platform workers, b) National Social Security Board→recommend +
monitor schemes, c) In case of pandemic/epidemic/disaster→ contributions to PF/ESI can be
reduced.
(4) Code on occupational safety → a) occupational safety board at national + state level, b) valid for
establishment > 10 workers, c) welfare facilities at premises.

#3 What are the merits of these codes?

(1) Simplification of laws →reduction of overlapping + contradictory + multiple definition-based
provisions.
(2) Inclusive nature → for the first-time gig worker + migrant workers included + social security for
self-employment sector.
(3) Reduced chances of “unionisation” → collaboration →efficient dispute resolution
(4) Institutional mechanism → NSSB to recommend + monitor schemes
(5) Federal spirit respected → states given power to decide for their own minimum wage above floor
wage.

#4 What are the limitations in these codes?

(1) Lack of clarity→ in case no union has required support of at least 20% workers
(2) enforcement of tribunal award →govt may defer it on certain grounds →aim defeated
(3) No universal social security→ only the enterprises above certain threshold covered.
(4) Provisions on gig workers and platforms workers are unclear
(5) Size based threshold→burden on small establishments + firms remain small.

#5 What further steps can be taken to improve worker conditions?

(1) Labour Market Information System (LMIS) → identifying skill shortages + training needs + new
employment opportunities
(2) Implementing govt schemes → PM shramyogi mandhan yojna, Atal pension scheme, Shram suvidha
portal, transparent labour inspection scheme.

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(3) Increase in quality apprenticeship (apprentice protsahan yojna) and self-certification of documents.
(4) Skill development under shramev jayate →key element under make in India.
(5) Other supplementary reforms→ raising income and demand, stabalising business climate,
infrastructure upgradation, skilling of workforce and consistent export - import policy to increase
overall investment and jobs.

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 VOCAL FOR LOCAL

#1 What do you understand by “Vocal for Local”?

(1) To popularise indigenous products (local products) → make them global (increase accessibility
and branding) → increase exports + reduce imports.
(2) To promote local manufacturing + local market + local supply chains.
(3) To make Indian products globally competitive.
(4) To make India self-reliant “AtmaNirbhar”
(5) Not against globalisation but new form of globalisation→Conversion from profit-driven to
people-centric.
(6) shifting the focus from ‘Make in India’ to ‘Make for World.’

#2 What is the current status of Localization in the country?

(1) Over 30 years ago→no much Indian brands were there + lack of trust on local brands
(2) Now→more than 60%of the brands in the food industry are local brands
(3) Local brands comprise 57% of shopper’s decision
(4) Indian brands not much popular → personal hygiene, cosmetic, and consumer durable segments.

#3 What does India need to do to achieve the goals of “vocal for local”?
(1) product quality improvement policies → zero effect zero defect
(2) “Brand India” promotion in foreign market by India brand equity foundation (IBEF)
(3) Focussing on emerging technologies→ robotics, 3D printing, artificial intelligence etc
(4) Link itself to global value chain
(5) Developing manufacturing clusters + start-ups + efficient forward-backward linkages
(6) Consumers Awareness about the local brands
(7) Government support to MSMEs + handholding

#4 How India is going to be benefitted by this call?

(1) Reduced current account deficit
(2) Rise in India’s presence in global market → strategic advantage vis-a-vis China
(3) High potential to boost employment
(4) Increased local consumption → increase in economic activities → increased GDP

#5 What are the risks involved in such scenario?

(1) Might be seen as “protectionist policy” by other countries
(2) manufacturing is still weak → dependence for raw materials like lithium on foreign countries
inevitable
(3) reduction in competition from foreign products → quality deterioration
(4) Global economy → works on GIVE & TAKE → India’s stance of only taking from global economy
→ not sustainable.
(5) Initial Demand-Supply mismatch due to reduced imports of certain necessary items.

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#6 Will it act as a counter to globalization?
(1) PM has made it clear → vocal for local = self reliance and not self-centeredness.
(2) Progress of India = progress of whole world
(3) Rise in global competition → innovation → strengthening of globalisation

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 MSME (Part 1)

#1 What do you understand by the term MSME?

(1) Micro, Small, and Medium Enterprises → first time defined under MSME development Act 2006.
(2) Redefined by the MSME Development (Amendment) Bill, 2018.
(3) Two categories: (i) Manufacturing; and (ii) Those engaged in providing/rendering of services.

Classification of enterprises into micro, small and medium enterprises (in Rs)

Kind of enterprise Act of 2006 Bill of 2018

Manufacturing Services All enterprises
Investment towards plant & Investment towards Annual Turnover
machinery equipment
Micro 25 lacs 10 lacs 5 Cr

Small 25 lacs to 5 Cr 10 lacs to 2 Cr 5 Cr to 75 Cr

Medium 5 Cr to 10 Cr 2 Cr to 5 Cr 75 Cr to 250 Cr

#2 What was the need of redefining the MSMEs?

(1) Investment criterion led to Pan Peter Syndrome → with increase in size → increase in
regulations and rules → discouraged MSMEs to become bigger.
(2) Classification based on Annual turnover → No need for frequent inspections →to check the
investment in plant and machinery.
(3) Differentiation between manufacturing and services MSMEs removed → Transparent, non-
discriminatory policy formation.

#3 What is the significance of MSMEs for Indian Economy?

(1) More than 6 crore MSMEs→ around 95% of total industrial establishment in India → backbone of
Indian economy
(2) Contributes 30% to India’s output/GDP + 45% to manufacturing output/GDP
(3) Contributes around half of the exports
(4) Employs more than 11 crore workers→ four times more labour intensive than normal industries.
(5) Provides diversity to manufacturing + services ranging from textiles to space equipments to food
processing.
(6) Presence in rural areas → reduced regional disparity

#4 How MSMES can help in achieving SDGs?

(1) Poverty alleviation →Local economic development → more jobs being created→ breaking
vicious cycle of poverty → SDG 1, 8, 10
(2) Bring diversity of business and risks→ strengthen resilience of the economy→ SDG 9
(3) Utilization of locally endowed natural resources →environmentally conscious→ SDG 12, 13, 14,
and 15.

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#5 What are the opportunities in India for MSMEs?
(1) Less Capital Intensive → suitable to India (low middle income country)
(2) Extensive Promotion & Support by Government→ single window registration + credit facilities
etc
(3) Reservation for Exclusive Purchase by Government → 25% procurement from MSMEs
(4) Export Promotion + branding →increase in accessibility of MSME products
(5) Growth in demand in the domestic market size due to overall economic growth

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 MSME (Part 2)

#1 What are the challenges faced by MSMEs?

(1) Policies creating Dwarfs (Firms = smaller + older than 10 years.) e.g. If the firms grow beyond
the thresholds that these policies employ→ unable to obtain the said benefit.
(2) Out of formal network → 90% of the MSMEs informal
(3) Lack of investment from private sector → funds shortage → low innovation
(4) Credit non-availability + delay in payments ; even after govt procurement, funds are not released
on time.
(5) Technology constraints + obsolete machinery → low production + productivity + quality (poor
economies of scale)
(6) obsolete marketing strategy → poor branding + skeptic attitude towards their products
(7) maximum presence of semi skilled + unskilled workforce

#2 What are the steps taken by the government for promotion of MSMEs?
(1) UdyogAadhar Number: unique identifier → one stop solution for MSMEs offered by all Ministries
+ Departments.
(2) ASPIRE (a Scheme for Promoting Innovation and Rural Entrepreneurs) → setting up network of
technology centers and incubation centers.
(3) Credit in 59 minutes scheme → cheap + fast access to credit → working capital and term loan
worth Rs. 1 lakh to Rs. 1 crore.
(4) Atma nirbhar bharat abhiyan→Special attention to MSMEs
(5) Udyam registration (based on self certification) → To deal with informal nature → incentives
attached to registration e.g. payment within 45 days.
(6) Subordinate debt scheme→ promoter will give credit to the MSME→government will bear the
risk of loan to promotor by the bank.
(7) Funds of Fund Scheme →corpus of `10,000 crore → financial relief and funding to MSMEs
(8) CHAMPIONS portal→to help the MSMEs in terms of finance, raw materials, labour, permissions,
etc.
(9) Trade Receivable System (TReDS) by RBI → for timely payment to MSMEs.
(10) Zero effect-Zero defect policy → for making MSMEs efficient and environment friendly.

#3 What measures you can suggest for further improvement of MSMEs

performance?
(1) Greening of MSMEs → Efficient technology + green sectors like renewable energies
(2) Clusterisation model → eg Kanpur leather industry/Ahmedabad textile industry

(3) Implementing new labour codes → balance full time/part time workforce
(4) Providing cheaper electricity + natural gas to MSME→ Currently, power DISCOMs and city gas
distribution companies do not permit MSMEs to procure their own electricity or natural gas →
charge them higher rates than their global counterparts.
(5) Promoting sectors with high spill-over effects on other sectors e.g. Tourism → impact on hotel
&catering, transport, real estate, entertainment etc. for job creation.
(6) Awareness generation regarding their IPR to register trademarks + patents.

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