ASWM NOTES

ECONOMICS

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INCLUSIVE GROWTH places India first, with an estimated 23 crore people
living in multidimensional poverty.
As per OECD (Organisation for Economic Co-operation 2. Wealth inequality: The richest 1% in India now
and Development), inclusive growth is economic growth own more than 40% of the country’s total wealth,
that is distributed fairly across society and creates while the bottom half of the population together
opportunities for all. share just 3% of wealth.Combined wealth of India’s
100 richest could fund the entire Union Budget for
Elements of inclusive growth : more than 18 months.
3. Unemployment:According to the Periodic Labour
Force Survey (PLFS) conducted by the NSSO, the
unemployment rate in urban areas was 7.8%, while
the rate in rural areas was 5.3%, bringing the overall
rate to 6.1 percent. India has low employment quality
and quantity due to illiteracy and an overreliance on
agriculture.
4. Agriculture Backwardness:Even while it only
contributes 16.5 percent of the nation’s GDP,
agriculture employs nearly 44 percent of Indians,
which leads to a high level of poverty.
5. Regional Disparities:(a)Bihar has a literacy rate of
only 63.82 percent, whereas Kerala has the highest
literacy rate in the nation at 93.1 percent.
a) Goa has a per capita income of Rs. 4,67,998,
while the per capita income in Bihar is only
Rs.43,822.
6. Skill Development: The economic survey indicates
that in 2021, more than 31% of youth in India were
not enrolled in any type of training or work.
7. Social issues:(a)Social issues like gender disparity,
Salient features of Inclusive growth: caste system,and religious disparity are also causing
hindrance to inclusive growth . (b)Malnutrition
1. Address the constraints of the excluded and among children is another worry affecting the future
marginalized and participation from all sections of of the country.In the 2022 Global Hunger Index,
society India ranks 107th out of 121.
2. Reduction in disparities among per capita incomes
Steps taken by the Government:
between:
a) Different sectors of economy 1. Food and nutrition –PM Garib Kalayan
Yojna,Annapurna, Antyodaya, Mid-Day Meal,
b) Different Sections of society,Rural And Urban
National food security act etc.
Areas and Different genders.
2. Healthcare and sanitation –Ayushman Bharat,
3. Non – discriminatory
Swachh Bharat Abhiyan, Mission Indradhanush etc.
4. Higher potential of poverty reduction
3. Housing:PM -Aawas Yojna,Indira Aawas Yojna etc.
5. Ensure access to basic infrastructure and basic
4. Drinking water:Jal Jeevan Mission,National rural
services/capabilities such as basic health and
drinking programme etc
education. This access should include not only the
5. Financial inclusion : JAM (Jan-Dhan-Aadhar-
quantity, but also quality of these basic services.
Mobile)Trinity,PM-Jan-Dhan Yojna etc.
6. Include poor, lagging socio – economic groups and
6. Employment:Mgnrega,Skill India,PM-Kaushal-
lagging regions as well as they are partners in this
Vikas Yojna,Start-Up India,National Education
growth.
Policy etc.
Need of inclusive growth in India/Challenges of inclu- 7. Technology:Digital India,Upi,Cowin etc.
sive growth in India:

1. Poverty: The Multidimensional Poverty Index 2022

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Way forward:
1. Malnutrition, poverty, rural-urban divide, and
other issues are being addressed through various
programmes and schemes, but they still require more
vigor and funding.
2. To better the lives of India’s citizens, the Indian
government, along with the state and local
governments, should continue to prioritise ending
poverty and attaining sustainable development.
3. Innovative partnerships with a global organisation,
civil society organisations, and private businesses
can be used to target inclusive and equitable growth. 1. Reduce Poverty: Financial inclusion means greater
access to financial services and an increase in savings.
4. Taxing the super rich more through wealth tax and
This would help in decreasing income inequality &
Policies such as universal basic income should be
poverty and would lead to increase in employment
considered.
levels.
Thus Inclusive growth is not just an increase in GDP 2. Growth: It encourages the habit to save, thus
figures but it creates employment opportunities, enhances enhancing capital formation in the country and giving
the potential of citizens to use these opportunities through it an economic boost.
provisioning of quality education, skilling and health
3. Entrepreneurship culture:The availability of
services; reduce poverty and empower people.
sufficient and transparent credit from formal
banking institutions will promote the entrepreneurial
Financial inclusion:
spirit among the people, leading to an increase in
productivity and prosperity in rural areas.
Financial inclusion may be defined as the process of
4. Service delivery: Direct cash transfers to beneficiary
ensuring access to financial services and timely and
bank accounts rather than physical cash payments
adequate credit where needed by vulnerable groups
against subsidies have become possible. Thus funds
such as weaker sections and low income groups at an
actually reach the targeted beneficiaries instead of
affordable cost.
being siphoned off along the way.
Elements of financial inclusion: 5. Banks’ efficiency: Banks which are operating in a
financial inclusion sector could experience higher
operating efficiency in financial intermediation.

Challenges to financial inclusion in India:

1. Illiteracy – In India, where nearly 1/4th of the

population is illiterate and below the poverty line.
Thus ensuring financial inclusion is a challenge.
2. Low income and the inability to provide collateral
security especially among marginalized communities.
3. Lack of enough bank branches in rural areas continues
to be the roadblock to financial inclusion e.g. only
6% of villages have bank branches in India.
4. More reliance on informal lending.
Significance of financial inclusion for India:
5. Difficulty in understanding different product
offerings, financial terms, and conditions.
6. A lot of hidden bank charges have demotivated poor
persons from availing financial services.
Steps taken by the government:
1. Priority Sector Lending: is an important role given
by the RBI to the banks for providing a portion of the
bank loans to few specific sectors such as agriculture
or small scale industries.
2. Jan Dhan, Aadhaar and Mobile (JAM): It is a three-

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part strategy based on using digital technologies- According to the World Bank, public-private
Jan Dhan (banking), Aadhaar (Biometric Identity) partnership (PPP) is a long-term contract between a
and Mobile (transactions). private party and a government entity, for providing
3. Establishment of MUDRA bank to refinance micro- a public asset or service, in which the private party
finance institutions to lend to non-formal sectors such bears significant risk and management responsibility, and
as MSMEs through PM Mudra Yojana. remuneration is linked to performance.
4. Self-Help Group (SHG) – Bank Linkage Programme
(SBLP) was launched by NABARD to provide door- PPP:
step banking to the poor with the help of SHGs.
5. Pradhan Mantri Jan Dhan Yojana: PMJDY has Features of PPP
ensured universal access to bank accounts and India 1. The private sector is in charge of carrying out or
now has 180 billion accounts. However, 48% of operating the project, and it bears a significant
those accounts haven’t seen any transaction in the percentage of the project’s risks.
last one year. 2. During the project’s operating life, the public
6. Atal Pension Yojana: Focus on unorganized sector. sector’s responsibility is to supervise the private
Way forward: partner’s performance and enforce the contract’s
requirements.
1. Reviving Banking Correspondent Model:Since
3. The costs of the private sector may be recovered in
opening of branches every where is not possible
whole or in part from charges connected to the use
Thus, there is a need to create better monetary of the project’s services, as well as through payments
incentives for banking correspondents as well as to from the public sector.
provide them better training. 4. Payments in the public sector are dependent on
2. Leveraging JAM Trinity:With the adoption of contract performance standards.
appropriate technology a new data-sharing framework 5. Although this is not always the case, the private
(using Jan Dhan and Aadhaar platforms), to enable sector frequently contributes the majority of the
easier access to credit, with adequate safeguards for project’s capital costs.
maintaining data privacy. Models of PPP
3. Need For Data Protection Regime:
1. BOT(Build Operate Transfer): This is a traditional
In addition to greater digitization, there is also a
PPP model in which the private partner is responsible
need to strengthen cyber security and data protection
for designing, building, operating (during the
regime in the country.
contracted period), and transferring the facility back
4. Leveraging Differentiated Banks
to the public sector.
Differentiated Banks like Payment banks and small 2. BOO(Build Own Operate): Under this model, the
finance banks can be leveraged to scale up payments private party will own the newly constructed facility.
systems in underserved areas. 3. BOOT(Build Own Operate Transfer): In this variant
of BOT, the project is transferred to the government
PPP(Public -Private Partnership)
or a private operator after a predetermined period of
time.
4. BOLT(Build Operate Lease Transfer): In this
approach, the government grants a concession to a
private entity to build (and possibly design) a facility,
own the facility, lease the facility to the public
sector, and then transfer ownership of the facility to
the government at the end of the lease period.
5. DBFOT(Design Build Operate Transfer): In this
model, the private party is solely responsible for
the project’s design, construction, financing, and
operation during the concession period.
6. LDO(Lease Develop Operate): In this type of
investment model, either the government or a public
sector entity retains ownership of the newly created
infrastructure facility and receives payments from the
private promoter under a lease agreement.

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7. Operation and Maintenance Contract (O&M): Limitations of PPP
Under this model, a private-sector partner operates
a publicly-owned asset for a set period of time. The 1. Uncertainties:Uncertainties: PPPs often cover a
assets remain in the hands of the public partner. long-term period of service provision (eg. 15-30
8. Hybrid Annuity Model (HAM) years).If the requirements of the public sponsor or
the private sector change during the lifetime of the
In this arrangement, the private company is required PPP, the contract may need to be modified . This can
to invest the remaining 40% of the project cost after entail large costs to the public sector.
paying 40% of it from the public entity.The public
company continues to be in charge of ownership and 2. Crony capitalism: In many sectors, PPP projects
operations; the private business is simply required to have turned into conduits of crony capitalism.
contribute engineering knowledge. Many firms use their political connections to win
contracts.
Public-Private Partnerships (PPP) – Recent 3. Stressful banking sector:The long term finance
Developments for PPP projects has dried up due to excessive
1. Health Sector:As per this PPP model developed dependence on banks and lack of a proper corporate
by NITI Aayog, the gap in medical education will bond market in the country. Banks are further
be addressed and the shortage of qualified doctors stressed due to high NPAs and governance issues.
will be addressed by linking government and private 4. Clearance issues for projects – land acquisition
medical colleges with district hospitals. and environmental clearances for projects have
been difficult to obtain.
2. Power Sector – Government of India is planning to
launch the Atal Distribution Transformation Yojana 5. Corruption:Many PPP projects have been used
(ADITYA) Scheme. As per this scheme, if states by the private players to grab the land of the
will involve private sectors to improve the efficiency government e.g. Delhi Metro .
of state distribution companies (discoms), then the Way forward:Following recommendations of Vijay
Central Government will provide incentives to the kelkar committee should be implemented
States.
1. Periodic reviews - Such reviews should ideally
3. Railways – Tejas Express is the 1st private train therefore be done frequently, perhaps once every
in India. Under the Public-Private Partnership (PPP) three years.
model, the services in the Tejas Express will be
provided by private players. 2. Change in attitude and in the mind-set - The
Committee urges all parties concerned to foster trust
4. Urban Housing – Through Public-Private
between private and public sector partners when they
Partnerships (PPP), Government-funded housing
implement PPPs.
in cities or urban areas will be converted into
Affordable Rental Housing Complexes (ARHC). 3. The Government may take early action to amend
This will be done so that migrants can avail housing the Prevention of Corruption Act, 1988 which does
at concessional rates in cities or urban areas. not distinguish between genuine errors in decision-
making and acts of corruption.
Advantages of PPP 4. Structured capacity building programmes. The
need for a national level institution to support
institutional capacity building activities must be
explored.
5. Optimal allocation of risks across PPP stakeholders
- Project specific risks are rarely addressed by
project implementation authorities in this “One-
size-fits-all” approach.

MSME(Micro -Small -Medium enterprises)

MSME stands for Micro, Small, and Medium Enterprises.

It was introduced by the Government of India in
agreement with the MSMED (Micro, Small, and
Medium Enterprises Development) Act of 2006.

Classification of MSME:

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demand side) and structural reforms like GST rollout
and demonetisation (on the supply side), which also had
adverse effects on the MSME sector.
4. Financial Constraints: This is a significant
impediment for the MSME sector. Only 16% of
SMEs have timely access to finance, forcing small
and medium-sized businesses to rely on their own
resources.
5. Access to Technology: Lack of access to IT
education contributes to the technological gap.
Another significant factor is a lack of awareness,
which reduces willingness to invest in advanced
technology solutions.
Importance of MSME:
Steps taken by Govt for MSME:The government has
implemented various initiatives to support the MSME
1. MSME sector is the backbone of the country’s
sector, including:
economy, contributing 30 percent of India’s GDP
and 40 percent of exports 1. Emergeny crAyurveda e Guarantee Scheme
2. They are also accountable for one-third of India’s (ECLGS): This scheme provided unsecured loans
manufacturing output. of Rs. 3 lakh crore to MSMEs and firms to revive
3. It contributes about 11% of GDP from manufacturing economic activity.
and 24.63% of GDP from service activities. 2. Priority sector lending for Non-Banking Financial
4. According to the 2018-19 Annual Report of the Companies (NBFCs): The RBI allowed bank
Department of MSMEs, there are 6.34 crore funding to NBFCs for on-lending to agriculture,
MSMEs in the country. Around 51 per cent of MSMEs, and housing, categorizing it as priority
these are situated in rural India. 99.5 percent of all sector lending.
MSMEs fall in the micro category. 3. Stimulus plan under Atmanirbhar Bharat
5. These MSMEs employ more than 11 crore people. Abhiyan: The government announced a stimulus
MSMEs are recognized for having the highest rate of plan focused on the MSME sector.
economic growth. 4. Revised MSME definition and establishment of a
6. They account for approximately 45% of India’s fund: A new definition for MSMEs was introduced,
total exports. along with establishing a fund with a corpus of Rs.
7. MSMEs have propelled India to new heights due 50,000 crores.
to their low investment requirements, flexibility in 5. Credit guarantee and state-level initiatives:
operations, and ability to develop suitable native Measures such as a credit guarantee of Rs. 3 lakh
technology. crore, Andhra Pradesh’s ReStart program, policy
8. MSMEs promote inclusive growth by creating job for smart industrial villages, and promotion of the
opportunities, especially for people from lower “Swadeshi” ideology were implemented.
socioeconomic backgrounds in rural areas. 6. Bombay Stock Exchange (BSE) announced that it has
collaborated with the All-India MSME Association
Challenges faced by MSME in India: (AIMA MSME) to encourage and promote the listing
1. Mounting NPAs of MSMEs: of MSMEs and start-ups.
7. Meta India has announced the launch of online
According to the RBI, bad loans of MSMEs now account
resource center ‘Grow Your Business Hub‘, to
for 9.6 per cent of gross advances of Rs 17.33 lakh crore
help MSMEs find relevant information, tools and
as against 8.2 per cent in 2020.
solutions curated to cater to their business goals
2. Lack of Formalization: 8. Government schemes: Various government
Almost 86% of the manufacturing MSMEs operating schemes like -MSME Samadhan,ASPIRE
in the country are unregistered. Out of the 6.3 crore scheme,Zero Defect Zero Effect model ,Credit
MSMEs, only about 1.1 crores are registered with the Guarantee Scheme etc
Goods and Services Tax (GST) regime and the number of Way Forward:
income tax filers are even less.
1. There is a need to push for Digitisation of MSMEs.
3. New Emerging Concerns: Digitising the sector could help in enhancing
Significant signs of a slowdown due to Covid-19 (on the efficiency and reliability, cutting costs, and keeping

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up with latest technological trends. like environmental disaster, job loss and severe
2. The National Logistics Policy can also be used to health problem.
boost the competitiveness of MSMEs.Lower costs 4. Generational Poverty: It is handed over to
will encourage more MSMEs to use logistics services individuals and families from one generation to
powered by technology. the next. This is more complicated as there is no
3. The Government could enlist India Post as a escape because the people are trapped in its cause
technologically advanced last-mile delivery partner and unable to access the tools required to get out of
capable of facilitating cash-on-delivery transactions it.
at competitive rates. Reasons for poverty in India:
4. Similarly, the unparalleled reach of Indian Railways
can be leveraged to quickly and cost-effectively ship
goods to the most remote parts of the country. This
can expand the reach of products manufactured by
MSMEs.
Thus MSMEs can play a vital role in growth of the
economy as India enters the Amrit Kaal phase. They can
help in inclusive and balanced development and make
India a global manufacturing hub. The Government has
been supporting the MSMEs through various initiatives,
the need is to focus on the implementation and realizing
the outcomes.

Poverty

Poverty is a state or condition in which a person or

community lacks the financial resources and essentials 1. Population Explosion:. During the past 45 years,
for a minimum standard of living. it has risen at a rate of 2.2% per year, which
means, on average, about 17 million people are
Poverty in India: added to the country’s population each year. This
also increases the demand for consumption goods
1. As of 2011,data provided by CSO, 21.9% of the
tremendously.
Indian population belongs below the poverty line.
2. Low Agricultural Productivity: Chiefly, it is
2. According to a World Bank working paper,
because of fragmented and subdivided land holdings,
extreme poverty in India dropped to 10.2% in the
lack of capital, illiteracy about new technologies in
pre-Covid year of 2019 from as much as 22.5%
farming, the use of traditional methods of cultivation,
in 2011 .
wastage during storage, etc.
3. According to the economic survey of 2022-23 16.4
3. Inefficient Resource utilization: There is
percent of Indian population is multidimensionally
underemployment and disguised unemployment
poor
in the country, particularly in the farming sector.
Types of Poverty: This has resulted in low agricultural output and also
1. Absolute Poverty - Absolute poverty refers to when led to a dip in the standard of living.
a person or household does not have the minimum 4. Low Rate of Economic
amount of income needed to meet the minimum living Development: Economic development has been
requirements.The World Bank defined poverty low in India especially in the first 40 years of
as individuals living on less than $ 2.15 per day independence before the LPG reforms in 1991.
which is called the International poverty line.
5. Price Rise: Price rise has been steady in the
2. Relative Poverty - It is a measure of income country and this has added to the burden the
inequality. It is related to the living standard of a poor carry. Although a few people have benefited
person/family compared to the living standards of the from this, the lower income groups have suffered
population in surroundings. Eg. In a surrounding because of it, and are not even able to satisfy their
where everyone has 4 cars, a person with 2 cars basic minimum wants.
might be called in relative poverty. 6. Unemployment:. The ever-increasing population has
3. Situational Poverty: It is a temporary type of led to a higher number of job-seekers. However,
poverty based on occurrence of an adverse event there is not enough expansion in opportunities to

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match this demand for jobs due to jobless growth
post 1990.
7. Lack of Capital and Entrepreneurship: The
shortage of capital and entrepreneurship results
in low levels of investment and job creation in the
economy.
8. Social Factors: Apart from economic factors, there
are also social factors hindering the eradication of
poverty in India. Some of the hindrances in this
regard are the laws of inheritance, caste system etc
Impacts of poverty:
1. Effects on Health:
a) A high rate of infant death 4. Impacts on economy:
India has one of the highest child death rates a) Poverty trap:Poverty trap is a spiraling
in the world, with over 1.4 million children mechanism which forces people to remain
dying before their fifth birthday each year. poor. It is so binding in itself that it doesn’t
Pneumonia, malaria, diarrheal illnesses, and allow the poor people to escape it. Poverty
chronic malnutrition are the leading causes trap generally happens in developing and under-
of death. developing countries, and is caused by a lack of
capital and credit to people.
b) Malnutrition - When it comes to malnutrition,
India is at the top; more than 200 million b) Without an education, people are unlikely to
people, including 61 million children, are find a lucrative or rather a decent paying job.
malnourished.
2. Effects on Society as a whole: There are a lot of
challenges of poverty faced by society.
Violence and Crime:(a) Violence and crime
rate increases a lot. Due to unemployment and
marginalization, poor people usually indulge in
unfair practices like prostitution, theft and other
criminal activities.
d) Homelessness:People are generally homeless,
so they sleep on roadsides, making it unsafe
for them, mostly women and children.
e) Child labour:poverty forces people to send
their kids to work rather than putting A high unemployment rate will definitely slow down a
them in schools. According to a report of country from progressing in all aspects.
ILO(International labor organization) there
c) Most of the poor people are forced to work in
are 10.1 million working children between the
informal sector with very poor job profile and
age of 5 to 14 years.
their per capita incomes remain poor.
f) Impacts on women:According to a global study
by “World Bank Organisation”, there are 122 Steps taken by the government :
women living in poverty ridden conditions per 100 1. Mahatma Gandhi National Rural Employment
men. Guarantee Act (MGNREGA) 2005: The Act
g) An alarming study, recently covered by “The provides 100 days assured employment every year to
Hindu”, showed an unusually high number every rural household.
of cases of Hysterectomy(surgical removal of 2. Pradhan Mantri Jan Dhan Yojana: It aimed at
uterus) in Beed district in Maharashtra. This was direct benefit transfer of subsidy, pension, insurance
attributed to poverty . etc. and attained the target of opening 1.5 crore
3. Impacts on education:According to UNICEF, bank accounts. The scheme particularly targets the
over 25% of children in India do not receive an unbanked poor.
education. Girls are more likely than boys to be 3. Pradhan Mantri Kaushal Vikas Yojana: It will
excluded from school.

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focus on fresh entrant to the labour market, especially the numerous disadvantages that impoverished
labour market and class X and XII dropouts. people endure in terms of education, health, and
4. NRLM - National Rural Livelihood Mission living conditions.
(Deendayal Antyodaya Yojana) 2. The Global MPI measures both the occurrence
DAY-NRLM has been launched under the Ministry (the percentage of people in a population that
of Rural Development with an aim to reduce are multidimensionally poor) and degree of
rural poverty by providing them with employment multidimensional poverty (the average number of
opportunities. deprivations that each poor person experiences).
5. Pradhan Mantri Awas Yojana – Gramin 3. It enables for comparisons between countries,
(PMAY-G) regions, and the world, as well as within countries
by ethnic group, urban/rural location, and other
The scheme was launched for social welfare to
features of households and communities.
provide necessary housing facilities for the low
households in India. PMAY-G was established in Developed by:The global MPI was developed by
line with the government’s commitment to delivering Oxford Poverty and Human Development Initiative
by 2022 “Housing in all rural areas. (OPHI) with the UN Development Programme (UNDP)
for inclusion in UNDP’s flagship Human Development
6. Transformation of Aspirational Districts
Report in 2010.
The ‘Transformation of Aspirational Districts’
program intends to effectively transform the districts. It has been published annually by OPHI and in the HDRs
ever since.
Way forward
Indicators of MPI:
1. Creating more and better jobs:
Future efforts will need to address job creation
in more productive sectors, which has until now
been lukewarm and has yielded few salaried jobs
that offer stability and security.
2. Improving human development outcomes for the
poor:Better health, sanitation and education will not
only help raise the productivity of millions, they will
also empower the people to meet their aspirations,
and provide the country with new drivers of economic
growth.
3. Universal Basic income: Monthly assistance for the
people below poverty line should be considered.
4. Focus on manufacturing:This will create more jobs
which ultimately will help in reducing poverty.
5. Agricultural Growth and Poverty
Alleviation:Besides, higher agricultural growth
can be achieved in semi-arid and rain-fed areas 1. A person is multidimensionally poor if s/he is
by increasing public investment in infrastructure deprived in one-third/33% or more of the weighted
and ensuring adequate access to credit to the small indicators out of the 10 indicators.
farmers. 2. Those who are deprived of one-half or more of the
Multidimensional Poverty weighted indicators are considered living in extreme
multidimensional poverty.
The World Bank defines multidimensional poverty as Multidimensional poverty and India:
a state of deprivation in several aspects of life, such as
education, health, standard of living, access to basic Poverty in India:
services, and social inclusion. 1. India still has more than 230 million people who are
poor.
Global multidimensional poverty index: 2. India has some 18.7% population under this category.
1. The global Multidimensional Poverty Index (global India’s Progress in Poverty Reduction:
MPI) is a poverty indicator that takes into account 1. India is among 25 countries, including Cambodia,

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China, Congo, Honduras, Indonesia, Morocco, India has made remarkable strides in reducing
Serbia, and Vietnam, that successfully halved their multidimensional poverty in recent years. However,
global MPI values within 15 years. there is still a long way to go to achieve the SDGs and
2. Some 415 million Indians escaped poverty between ensure that no one is left behind. The MPI can serve
2005-06 and 2019-21. as a useful tool to guide India’s efforts towards this end.
3. The incidence of poverty in India declined
Inequality
significantly, from 55.1% in 2005/2006 to 16.4% in
2019/2021.
The United Nations describes inequality as “the state
4. In 2005/2006, approximately 645 million people
of not being equal, especially in status, rights and
in India experienced multidimensional poverty,
opportunities”.
a number that decreased to about 370 million in
2015/2016 and further to 230 million in 2019/2021. Types of inequality
5. About 135.5 million (13.5 crore) persons have exited
1. Economic inequality: Economic inequality is the
poverty between 2015-16 and 2019-21.
unequal distribution of income and opportunity
Specific Indicators of Poverty Reduction in India: between individuals or different groups in society.
1. Nutrition: The percentage of people who are 2. Social inequality: It occurs when resources in a given
multidimensionally poor and deprived under the society are distributed unevenly based on norms of
nutrition indicator declined significantly, from 44.3% a society that creates specific patterns along lines
in 2005/2006 to 11.8% in 2019/2021. of socially defined categories e.g. religion, kinship,
2. Child Mortality: Child mortality also witnessed prestige, race, caste, ethnicity, gender etc. have
a substantial decline, with the proportion of different access to resources of power, prestige and
multidimensionally poor children falling from 4.5% wealth depending on the norms of a society.
to 1.5% during the study period. Dimensions of Inequality in India:
3. Access to Cooking Fuel: The percentage of people
1. Gender
deprived of cooking fuel decreased from 52.9% in
2005/2006 to 13.9% in 2019/2021. a) The Global Gender Gap Report, 2023 ranks
4. Sanitation:The proportion of people deprived of India at 127 among 146 countries.
sanitation decreased from 50.4% in 2005/2006 to b) Gender wage gap is highest in India according
11.3% in 2019/2021. International Labor Organization women are
5. Drinking Water:Access to safe drinking water paid 34% less than men.
improved, with the percentage of multidimensionally
c) Women comprise over 42 per cent of the
poor and deprived individuals declining from 16.4%
agricultural labour force in the country, yet
to 2.7% during the study period.
they own less than 2 percent of its farm land
6. Electricity and Housing:The percentage of people according to the India Human Development
deprived of electricity decreased from 29% to 2.1%, Survey (IHDS).
while the proportion deprived of adequate housing
reduced from 44.9% to 13.6%. Caste:
Challenges for India 1. India’s upper caste households earned nearly 47%
1. Nutrition deprivation- It contributes close to 30% more than the national average annual household
the highest in calculation of MPI which results in income, the top 10% within these castes owned 60%
nearly 1/3rd of multidimensional poverty in India. of the wealth within the group in 2012, as per the
World Inequality Database.
2. Lack of education-It is due to lack of years of
schooling (16.65%), and less-than-desired school Religion:While minorities such as Christians, Parsis and
attendance (9.10%). Jains have a larger share of income/consumption than
3. Cooking fuel- Though it marked a significant their population share, Muslim and Buddhist populations
improvement, around 44% of Indian population is have significantly lower access to economic resources.
still deprived of.
Ethnicity:The National Family Health Survey 2015-16
4. Sanitation- Despite its improvement, sanitation (NFHS-4) showed that 45.9% of ST population were in
services are still deprived to around 30% of the the lowest wealth bracket as compared to 26.6% of SC
population. population, 18.3% of OBCs, 9.7% of other castes.
5. Access to housing- In India, 41% of the population
is still deprived of housing. Economic Inequality:The World inequality report 2022

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estimates that the wealthiest 10% of the people in the shifted online. Girl students were most vulnerable
nation own 57% of the national income, of which the top as there is a higher chance of forced marriage,
1% owns 22%. domestic violence, and early pregnancies.
c) Fourth, The report also mentions poor,
Digital inequality: According to National Sample Survey
marginalized, and vulnerable communities
(2017), only 6% of rural households and 25% of urban
have higher rates of Covid-19 prevalence in
households have a computer. Only 17% in rural areas and
India.
42% in urban areas have access to internet
d) Crowded agricultural sector: The migrant
Reasons for inequalities in India: workers who lost a job in the manufacturing
moved to the rural areas and demanded jobs
at very low wages. This made the agriculture
sector more crowded and also created Stagnation
in agricultural wages.
e) During the pandemic, white-collar workers
(person performs professional, managerial,
desk, or administrative work) isolated
themselves and worked from home. It led to
the closure of many small income avenues like
roadside vendors, smaller shops,

Consequences of Inequalities:

1. The slow economic and GDP growth,in the first

50 years after independence often called as Hindu
rate of growth.
2. Post 1990 reforms growth was mainly service led
or Tertiary sector led which do not produced enough
jobs.
3. Manufacturing sector issueswhich has the potential
of creating jobs and reducing inequalities is poorly
developed in India.eg its contribution to GDP is
stagnant since 1990 at around 16 percent.
4. Lack of digital access: Poor households are not
able to afford devices to ensure digital access for
their children. According to the Azim Premji
Foundation, ASER and Oxfam report, between
more than 60% students could not access online
classes, due to lack of devices, shared devices,
inability to buy “data packs etc.
5. Large numbers of the labour force work in sectors 1. Inequalities tend to produce social conflict among
with low productivity. Consider agriculture. It the social groups e.g. caste groups like Jaats,
provides 53 per cent jobs, while contributing only Maratha, Patels are demanding reservations but
17% to the GDP. this demand is opposed by caste groups already
6. Covid-19 and its impact on inequality in India:(1) claiming the benefits of reservations, such clash of
The wealth earned by the top 11 Indian billionaires interest due to perceived inequality tend to produce
during the pandemic alone is sufficient to sustain the violent conflicts between opposing caste groups.
MGNREGS or the Health Ministry’s budget for the 2. Inequalities among ethnic groups have led to
next 10 years. various ethnic movements demanding separate
a) Second, the Impact of Pandemic on Informal states or autonomous regions or even outright
sector: India’s earliest and stringent lockdown secession from India. North East has been rocked
made the Informal sector, the worst affected by numerous such ethnic movement e.g. by Nagas
sector due to Pandemic. for greater Nagalim etc.
b) Third, Digital divide worsened as education 3. Religious inequality tends to generate feeling of

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exclusion among religious minority groups. This workforce has formal skill training as compared
reduces their participation in mainstream, in India to 96% in South Korea.
religious minorities have large population their 6. There is a need for Universal
economic exclusion compromises the GDP growth Income Support. Economic Survey 2016-17 has
of nation as whole. suggested replacing all current cash transfers with
4. Poor development indicators like IMR, MMR, low universal basic income.
per capita income, lower education and learning
outcomes at schools, high rate of population growth Thus It is imperative that India frees itself from
can be traced to existing socio-economic inequalities. the shackles of income inequality so as to ensure
5. High economic inequality is detrimental to public prosperity across all economic classes.
healthcare and education. Upper and Middle
classes do not have vested interest in well functioning Unemployment
public healthcare and education as they have means
to access private healthcare and education. Unemployment occurs when a person who is actively
Steps taken by govt to remove inequalities: searching for employment is unable to find work.
1. Land Reforms: Extent of unemployment in India:
Land reforms have been introduced to remove Unemployment rate in India among people aged
inequality in the ownership of land. Land in excess 15 years and above was 7.7 per cent in May 2023,
of the ceiling limit has been distributed among the according to the data provided by CMIE(The Centre
tenant farmers, and among the small and marginal for Monitoring Indian Economy’).
holders.
2. Progressive taxation:More the income more the Types of unemployment:
taxes. 1. Disguised Unemployment:It is a phenomenon
3. Establishment of MUDRA bank to refinance wherein more people are employed than actually
micro-finance institutions to lend to non-formal needed.It is primarily traced in the agricultural and
sectors such as MSMEs through PM Mudra Yojana. the unorganised sectors of India.
4. To boost manufacturing:Make in India,PLI
Seasonal Unemployment: It is an unemployment that
scheme,Atamnirbhar bharat etc.
occurs during certain seasons of the year.Agricultural
5. To empower marginalized communities:Stand up labourers in India rarely have work throughout the year.
India,Ujawala scheme,etc.
6. Priority Sector Lending: is an important role Structural Unemployment:It is a category of
given by the RBI to the banks for providing a unemployment arising from the mismatch between the
portion of the bank loans to few specific sectors jobs available in the market and the skills of the available
such as agriculture or small scale industries. workers in the market.Many people in India do not
get jobs due to lack of requisite skills and due to poor
Way forward:
education level, it becomes difficult to train them.
1. Improving human development by fixing the gap in
health and education. Increasing public expenditure Cyclical Unemployment:It is a result of the business
on health and education should be the way forward. cycle, where unemployment rises during recessions and
Need to Prioritise universal health care and increase declines with economic growth.Cyclical unemployment
spending on health to 2%-3% of GDP. figures in India are negligible. It is a phenomenon that is
mostly found in capitalist economies.
2. Increase the income of small and marginal
farmers. For that, Farmer producer organizations Technological Unemployment.It is the loss of jobs
should be strengthened. States should have a bigger due to changes in technology.In 2022 World Bank
role in agri-marketing reforms. data predicted that the proportion of jobs threatened by
3. Expanding the number of days provided under automation in India is 69% year-on-year.
the Mahatma Gandhi National Rural Employment
Guarantee Act and a national employment Frictional Unemployment:The Frictional Unemployment
guarantee scheme for urban areas. also called as Search Unemployment, refers to the time
4. Creating 7 to 8 million productive jobs per year by lag between the jobs when an individual is searching for a
focusing on manufacturing. new job or is switching between the jobs.In other words,
an employee requires time for searching a new job or
5. Correcting the mismatch between demand and
shifting from the existing to a new job, this inevitable
supply of labor. For example, only 2.3% of India’s
time delay causes frictional unemployment.

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Vulnerable Employment:This means, people working household.
informally, without proper job contracts and thus sans any
legal protection.These persons are deemed ‘unemployed’ Start Up India Scheme:The primary objective of
since records of their work are never maintained.It is one Startup India is the promotion of startups, generation of
of the main types of unemployment in India. employment, and wealth creation.

Causes of Unemployment in India: Establishment of MUDRA bank to refinance micro-

finance institutions to lend to non-formal sectors such as
1. Jobless Economic Growth: India’s GDP grown MSMEs through PM Mudra Yojana.
at about 7-8% in last decade, but growth does
not translated into creating more employment Aatmanirbhar Bharat RojgarYojana (ABRY) has been
opportunities for the labour force of the country. launched with effect from 1st October, 2020 as part of
2. Agriculture: Agriculture remains the biggest Atmanirbhar Bharat package 3.0 to incentivize employers
employer in the country contributing to 51% for creation of new employment.
employment. But the sector contributes a meagre 12- Way forward:
13% to the country’s GDP. The problem of disguised
unemployment is the biggest contributor behind this 1. One of the remedies of the unemployment situation
deficit. in India is rapid industrialisation. Increased number
3. Lack of skills: For example, only 2.3% of India’s of industries will translate into increased number of
workforce has formal skill training as compared employment opportunities.
to 96% in South Korea.According to Aspiring 2. The curriculum should be changed with increased
Minds, over 80% of engineers in India are unfit to focus on learning and skill development.
take up any job in the knowledge economy. 3. More institutions need to be established that offer
4. Increase in Population:India’s population is vocational courses that will translate directly into
predicted to exceed China’s by the year 2024; it will, relevant jobs.
furthermore, probably be the most populous country 4. Government as well as leading business houses
for the entirety of the 21st century.As the country’s of the country should seek to invite more foreign
economic growth cannot keep up with population collaboration and capital investment in every sector.
growth, this leads to a larger share of the society 5. There are number of labour intensive manufacturing
being unemployed. sectors in India such as food processing, leather
5. Low Rates of Saving and Investment:there is lack and footwear, wood manufacturers and furniture,
of investment in rural areas and tier 2 and tier textiles and apparel and garments. Special
3 cities as well, as a result of which there is exists packages, individually designed for each industry
large untapped employment are needed to create jobs.
Steps taken by govt: Thus India needs to focus on skilling, reskilling and
upskilling of labour force to reap the benefits of
1. Pradhan Mantri Mudra Yojana (PMMY)
demographic dividend before it’s too late and demographic
It was undertaken by the government to encourage dividend becomes liability.
self-employment. Under this scheme collateral-free
loans up to Rs. 10 lakh, are provided to small/micro Demographic Dividend
business enterprises and to individuals to enable them
to set up or expand their business activities. Demographic dividend is the phase in which the
2. Skill India Mission:Under the working population aged between 15 and 64 years is
Scheme, a short-duration skill development training greater compared to the dependent or non-working
program is being imparted to all prospective population.
candidates including candidates belonging to BPL in Demographic dividend of India:
the country
1. India has 62.5% of its population in the age
3. PM SVANidhi:This scheme was initiated by the
group of 15-59 years which is ever increasing and
Ministry of Housing and Urban Affairs.IThe vendors
will be at the peak around 2036 when it will reach
can avail of a working capital loan of up to Rs.
approximately 65%
10,000, which is repayable in monthly installments
in the tenure of one year 2. According to Economic Survey 2018-19, India’s
Demographic Dividend will peak around 2041,
Mahatma Gandhi National Rural Employment when the share of working-age,i.e. 20-59 years,
Guarantee Act (MGNREGA) 2005: The Act provides population is expected to hit 59
100 days assured employment every year to every rural

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Advantages offered by demographic dividend/Areas people are engaged in the agriculture sector, are
where it is felt. in the informal economy where not only they earn
lower wages, but with little social security and few
days of employment in a year.
4. Jobless growth: There is a mounting concern that
future growth could turn out to be jobless due
to deindustrialization, de-globalization, the fourth
industrial revolution and technological progress. As
per the NSSO Periodic Labour Force Survey 2017-
18, India’s labour force participation rate for
the age-group 15-59 years is around 53%, that is
around half of the working age population is jobless.
5. Asymmetric demography: The growth in the
1. Labour supply: The first benefit of the young working-age ratio is likely to be concentrated in
population is the increased labour supply, as more some of India’s poorest states and the demographic
people reach working age. dividend will be fully realised only if India is able
2. Capital formation: As the number of dependents to create gainful employment opportunities for this
decreases individuals save more. This increase in working-age population.
national savings rates increases the stock of capital in 6. Issue of tilted sex ratio: Declining female labour
developing countries and provides an opportunity to force participation: According to data from the
create the country’s capital through investment. International Labour Organization and World
3. Female Human capital: Decrease in fertility rates Bank, India’s female labour force participation rates
result in healthier women and fewer economic have fallen from 34.8 % in 1990 to 27 % in 2013.
pressures at home. This provides an opportunity to Without women participation India can’t dream of
engage more women in the workforce and enhance reaping demographic dividend.
human capital.
Steps taken by govt:
4. Economic growth: Another opportunity is produced
by increased domestic demand brought about by 1. Measures to enhance skills and productivity:
the increasing GDP per capita and the decreasing a) Setting up of National Skill Development
dependency ratio. Corporation (NSDC) under Pradhan Mantri
5. Infrastructure: Increased fiscal space created by Kaushal Vikas Yojana to offer meaningful,
the demographic dividend enables the government industry-relevant, skill based training to the
to divert resources from spending on children to Indian youth
investing in physical and human infrastructure.
6. Migration: It presents some opportunities that can b) Improving expertise to people from minority
arise from having demographic changes, particularly communities in their traditional arts is done
the demographic dividend and interstate migration to under USTAAD scheme.
overcome labour shortage in some parts. c) Enhancing the skills is done under the Skill
India Mission.
Challenges of demographic dividend in India:
2. Improving employability:Schemes as start up
1. Enhancing human capital: Poor human capital India, stand up India strive towards developing
formation is reflected in low employability among entrepreneurship qualities in people.
India’s graduates and postgraduates. According to 3. Improving educational
ASSOCHAM, only 20-30 % of engineers find a
job suited to their skills. Thus, low human capital performance:
base and lack of skills is a big challenge. a) Initiatives such as SWAYAM provide quality
2. Low human development: India ranks 132 out education to large number of students.
of 189 countries in UNDP’s Human Development
b) Padhe Bharat Badhe Bharat aims to improve
Index, which is alarming. Life expectancy at birth in
language development and increase interest in
India (68 years) is much lower than other developing
mathematics.
countries. The mean years of schooling and expected
years of schooling and need to be improved. 3. Focus on low-income population:
3. Informal economy: Informal nature of economy in a) Initiatives such as Grameen Kaushal Vikaas
India is another challenge in reaping the benefits of Yojana focus on skilling rural people in agro-
demographic transition in India. Nearly 216 million allied industry.

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b) Schemes such as Nai Manzil provide Gig economy
integrated input of formal education and skill
training along with certification. Gig Economy is the evolving economic model wherein
4. Women’s employment: the firms hire workers on a part-time flexible basis
a) Nai Roshni focus on improving leadership qualities rather than as full time employees. The Code on Social
of Women. Security, 2020 defines gig workers as those engaged
in livelihoods outside traditional employer-employee
b) Initiated the National Literacy Mission to raise the relationship.
literacy rate to 80% and reduce the gender gap to
less than 10%. Features of Gig economy:
1. Gig work consists of income-earning activities
Way forward: outside of standard, long-term employer-employee
1. Building human capital: India has to invest relationships.
more in human capital formation at all levels, from 2. A gig economy is a labor market that relies heavily
primary education to higher education, cutting-edge on temporary and part-time positions filled by
research and development as well as on vocational independent contractors and freelancers rather than
training to increase the skill sets of its growing full-time permanent employees.
working-age population. 3. The gig economy uses digital platforms to connect
2. Skill development: Skill development is needed freelancers with customers to provide short-term
to increase employability of young population. services or asset-sharing.
Government has established ‘Skill India’ as a
Size of Gig economy in India:
mission to skill India’s youth and the National Skill
Development Corporation (NSDC) with the overall
target of skilling/up skilling 500 million people in
India by 2022.
3. Education:, India needs to increase its spending
on health and education to at least 2.5 % in 6 %
of GDP respectively from its current levels.
4. Health: Improvement in healthcare infrastructure
would ensure higher number of productive days for
young labour force, thus increasing the productivity
of the economy.
5. Job Creation: The nation needs to create ten
million jobs per year to absorb the addition of
young people into the workforce. The number of
formal jobs have to be created, especially in labour
intensive, export-oriented sectors such as textiles,
leather and footwear, gems and jewellery etc.
6. Good governance: Effective avenues for citizen
input, well-functioning institutions, respect for
the rule of law, low level of corruption, respect
for property rights, sanctity of contracts etc. are 1. According to NITI Aayog Report, India’s gig
important aspects of good governance that enable workforce currently stands at 77 lakh (2020-21). It is
equal opportunity to all. expected to rise to 2.35 crore by 2029-30.
If India has to reap the benefits of ‘demographic 2. Report by the Boston Consulting Group expects
dividend’ in the years ahead, it is imperative that India’s gig economy to rise to 90 million jobs (9
investments in social infrastructure by way of education, crore) in the next 8-10 years.
skill development, training and provision of health care Examples of Gig economy: Workers in
facilities are made to enhance productivity of workforce Ola,Uber,Swiggy,Zomato,Plumbers,Carpenters etc.
and welfare of the population. Though India has initiated
all pertinent programmes and policies, to make the dream Reasons for a rise in Gig Workers/Pros of Gig economy
of demographic dividend a reality the key lies in their 1. Post Pandemic: The trend accelerated during
effective and efficient implementation. the 2020 COVID-19 pandemic, the gig economy
experienced significant increases as gig workers

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 AWSM NOTES
delivered necessities to home-bound consumers, and
those whose jobs had been eliminated turned to part-
time and contract work for income.
2. Freedom to work from anywhere: These types of
positions facilitate independent contracting work,
with many of them not requiring a freelancer to come
into an office.
3. Wide Range of Applicants: Employers also have a
wider range of applicants to choose from because
they don’t have to hire someone based on their
proximity.
4. Rise of Technology and Internet: Rise of fast
internet and smartphones have made it easier to work
from anywhere easily.
5. Convenient for Small Organisations: Employers
who cannot afford to hire full-time employees to do
all the work will often hire part-time or temporary
employees to take care of busier times or specific
projects. Challenges
6. More income with more work: People often find 1. Hurdle in growth of full time employee: While
they need to move or take multiple positions to not all employers are inclined to hire contracted
afford the lifestyle they want. It’s also common to employees, the gig economy trend can make it harder
change careers many times throughout a lifetime, so for full-time employees to develop in their careers
the gig economy can be viewed as a reflection of this since temporary employees are often cheaper to hire
occurring on a large scale. and more flexible in their availability.
7. Benefits Employers: Employers do not need 2. Work-life balance: For some workers, the
to provide related benefits, such as medical flexibility of working gigs can actually disrupt the
insurance, Provident Fund, and year-end bonuses work-life balance, sleep patterns, and activities of
which make it a better option for them to pay only daily life.
for work on a unit basis. 3. Can replace Full time employees: The number
8. Work for All: Students can choose lower-skilled of full-time employees required by the company
jobs and work without academic or professional can be reduced as freelance workers take over the
qualifications. Retirees, housewives, etc. may find work.
it difficult to find part-time jobs on weekdays, but 4. No job security: In effect, workers in a gig
now they can make good use of their spare time to economy are more like entrepreneurs than
earn extra money. traditional workers. While this may mean greater
9. Emergence of a Start-up Culture:The start-up freedom of choice for the individual worker, it also
ecosystem in India has been developing rapidly. means that the security of a steady job with regular
For start-ups, hiring full-time employees leads to pay and benefits.
high fixed costs and therefore, contractual freelancers 5. No regular job benefits: Many employers save
are hired for non-core activities. money by avoiding paying benefits such as health
Impacts of Gig economy: coverage and paid vacation time. because there is
no formal employment relationship with the platform
company, there are usually no employee benefits in
short-term contracts, which are less guaranteed than
full-time and part-time jobs, and are difficult to write
on resumes.
Steps taken by Govt for Gig workers:Code of Social
Security, 2020:
1. The Government has formulated the Code on
Social Security, 2020 which envisages framing
of suitable social security schemes for gig workers
and platform workers on matters relating to life
and disability cover, accident insurance, health and

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maternity benefits, old age protection, etc. However, Unorganised/Informal sector in India
these provisions under the Code have not come
1. Around 80% of India’s labour force is employed
into force.
in the informal sector and the remaining 20% in the
2. e-Shram Portal: The Government has also formal sector.
launched e-Shram portal in 2021 for registration
2. Of the 80% informal sector workforce, half work in
and creation of a Comprehensive National Database
agriculture and the remaining in non-agricultural
of Unorganized Workers including gig workers and
sectors.
platform workers.
Challenges of informal sector:
Way forward:
1. Gender Disparity: Women constitute the majority
1. Platform companies should explore ways to ensure
of informal participants, but they receive the least
that every gig worker, irrespective of the number of
benefits and are characterized by lower paying,
hours put in every month, will be paid an equivalent
income volatility, and the lack of a robust social
living/minimum wages.
safety net.The Periodic Labour Force Survey data
2. Uber UK has committed to provide the national shows that the female labor force participation
living wage, paid holiday time equivalent to about rate dropped to 21.2% in March 2021 compared
12% of driver’s earnings along with a pension plan to to 21.9% one year prior.
its driver. Other companies can replicate this model.
2. Economic Exploitation: The informal employment
3. The provisions of Code on Social Security should by definition has no written contract, paid leave
be put into effect. However, the implementation and hence pay no minimum wages, nor pay attention
should be undertaken in a gradual manner. to conditions of work.
Platform companies should be provided time to
3. Lack of Taxation: As the businesses of the informal
adjust their business to the new conditions that will
economy are not directly regulated, they usually
increase their costs.
avoid one or more taxes by hiding incomes and
Gig Economy has the potential to create jobs for expenses from the regulatory framework.
India’s large workforce, especially the low-skilled 4. No Fixed Working Hours: Long working hours
workers. The Government must take appropriate steps beyond labor standards are common in India in the
to support the expansion of gig economy and platforms. unorganized sector. In Particular, there is no fixed
At the same time, the interests of the gig workers must working time in the agriculture sector because there
be protected to provide them with just work conditions are no laws which can act as a guideline for farm
as well as social security benefits. Achieving the balance workers’ working conditions
will need some effort from all stakeholders. 5. Worst Hit at the Time of Disaster: Many natural
disasters such as floods, drought, famine,
Informal sector earthquakes and so on have devastating effects on
the informal sectors.This problem is exacerbated by
The Informal Economy refers to economic activities that the lack of social security.
are not regulated or protected by formal institutions, such
as government laws and regulations. Steps taken by the Government :
1. e-Shram Portal:Rs 2 lakh for accidental death and
Features of informal sector:It is characterised by small
permanent disability and Rs 1 lakh for partial
and scattered units which are largely outside the control
disability.
of the government.
Social security benefits will also be delivered through
1. There are rules and regulations but these are not
this portal.
followed. Jobs here are low-paid and often not
regular. 2. Skill development: To take care of the need for skills
of workers in the informal economy, the government
2. There is no provision for overtime, paid leave, has started various programs such as the Skill India
holidays, leave due to sickness, etc. Employment
Mission, Pradhan Mantri Kaushal Vikas Yojana,
is not secure.
Deen Dayal Upadhyay Grameen Kaushal Yojana,
3. People can be asked to leave without any reason. recognition of prior learning etc.
4. This sector includes a large number of people who 3. Pradhan Mantri Shram Yogi Maandhan (PMSYM
are employed on their own doing small jobs such
as selling on the street or doing repair work. It offers a voluntary and contributory pension
scheme, ensuring financial security for workers in
5. Similarly, farmers work on their own and hire
their old age.
labourers as and when they require.

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4. Labour Reforms this FTP is to gradually move away from an incentive-
Recent labour reforms aim to improve the welfare based regime and create an enabling ecosystem to
of workers, including those in the informal sector. support the philosophy of ‘Atma Nirbhar.
These reforms focus on simplifying labour laws, 6. The new policy will have no sunset date (ending
ensuring minimum wages, expanding social security date) and will be tweaked based on the emerging
coverage, and enhancing the ease of compliance for world trade scenario and industry feedback. While
businesses. the policy will be open-ended, the schemes sanctioned
under it will be time bound.
5. Unorganised Workers’ Social Security Act, 2008:
The Act empowers the Central Government to Pillars of Foreign trade policy:The policy is based on
provide Social Security benefits to unorganised sector these 4 pillars:
workers by formulating suitable welfare schemes
Way forward:
1. There is a need to give protection to informal
sector workers via social welfare schemes so that
the disruption they are facing does not lead to a
permanent fall in demand.
2. Agriculture cannot absorb more people. It is
already overcrowded. Engaging migrants in
building new agri-value chains has some potential
to create productive employment and protect
livelihoods.
3. In the meantime, the government can scale up its
“one nation, one ration card” scheme, and make Key features of the Foreign Trade Policy 2023:
subsidised grains available at places of work in 1. Process Re-Engineering and Automation:
cities and industrial towns.
a) The policy emphasizes export promotion and
4. Along with this, financial assistance under the
development, moving away from an incentive
Garib Kalyan Yojana can also be extended to the
regime to a regime which is facilitating, based
unorganised sector.
on technology interface and principles of
Foreign Trade policy 2023 collaboration.

b) Reduction in fee structures and IT-based schemes

Recently, Union Minister of Commerce and Industry, will make it easier for MSMEs and others to
Consumer Affairs, Food and Public Distribution and access export benefits.
Textiles launched the Foreign Trade Policy (FTP) 2023
which comes into effect from April 1, 2023. 3. Towns of Export Excellence:
a) Four new towns, namely Faridabad,
Goals and Targets/Major objectives: Mirzapur, Moradabad, and Varanasi, have
1. The government aims to increase India’s overall been designated as Towns of Export Excellence
exports to USD 2 trillion by 2030,from the present (TEE) in addition to the existing 39 towns.
760 billion USD.
b) The TEEs will have priority access to export
2. The government also intends to encourage the promotion funds under the Market Access
use of the Indian currency in cross-border trade, Initiative (MAI) scheme.
aided by a new payment settlement framework
introduced by the RBI in July 2022. 3. Recognition of Exporters:Star ratings will be
provided to the exporters .2-star and above status
3. To integrate India with the global markets: As
holders would be encouraged to provide trade-related
India is on the path to becoming a developed
training based on a model curriculum to interested
nation by 2047, the policy lays down a blueprint
individuals.
to integrate India with the global markets and make
it a reliable and trusted trade partner. 4. Promoting Export from the Districts: The
FTP aims at building partnerships with State
4. To build a future-ready India: To build a future-
governments and taking forward the Districts as
ready India and to fulfil India’s strategic vision of
Export Hubs (DEH) initiative.
making India one of the top exporting nations in
the ‘Amrit Kaal. 5. Facilitating E-Commerce Exports:Various
estimates suggest India’s e-commerce export potential
5. To create an enabling ecosystem: The approach of

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in the range of $200 to $300 billion by 2030.–FTP 2. Infrastructure and logistics:For instance, the high
2023 outlines the intent and roadmap for establishing cost of transportation and poor connectivity has
e-commerce hubs and related elements. led to perishable goods like vegetables and fruits
getting spoiled in transit, hurting exports.
Merchanting trade:
3. Global trade dynamics:For example, the ongoing
a) Merchanting trade involves the shipment of goods trade war between the US and China has disrupted
from one foreign country to another foreign country global supply chains, affecting Indian exporters who
without touching Indian ports, involving an Indian source raw materials or sell them to these countries.
intermediary. 4. Structural Changes in Global Export Order: The
b) Merchanting trade of restricted and prohibited FTP has not taken into account the structural changes
items under the export policy would now be in the global export order post-Covid, which could
possible. impact the effectiveness of the policy.
5. Limited Focus on Services Exports: The new FTP
Amnesty Scheme: Government is strongly does not delve much into services exports, which
committed to reducing litigation and fostering are becoming increasingly important for India’s
trust-based relationships to help alleviate the economy.
issues faced by exporters. Way forward:

Expected benefits of the new FTP 1. Focus on infrastructure:For instance, the

government can invest in developing industrial
1. Boost in exports: The new FTP aims to promote parks, improving connectivity and logistics, and
exports by reducing transaction costs, enhancing upgrading technology.
trade facilitation processes, and offering remissions
2. Promotion of innovation: For instance, the
on duties and taxes on export products.
government can provide grants and tax incentives
2. Encourage MSMEs: The reduction in to start-ups and MSMEs involved in research and
transaction fees for MSMEs and the creation development.
of towns of excellence will help MSMEs to 3. Address structural changes in the global export
expand their business and increase their exports. order: The new FTP should consider the structural
For example, with reduced transaction fees, changes that have occurred in the global export order
post-Covid to ensure that it remains relevant.
MSME can focus on product development
and marketing. LPG(Liberalisation,Privatization,Globalization)
3. Facilitate decentralization of manufacturing and Reforms
agriculture:For example, the promotion of local
handicrafts from a particular district can help to The LPG Reforms were a set of economic reforms
create employment opportunities and encourage announced by the Indian government in 1991. These
the growth of the handicrafts sector in that region. reforms were a part of the New Economic Policy of
4. Improving e-commerce exports:For example, India which was introduced to provide measures for
small businesses can take advantage of the new the Liberalization, Privatization, and Globalization of
policy to reach a global audience through online the nation’s economy.
marketplaces, leading to increased exports and
growth of the e-commerce sector. Why reforms were done:
5. Enhancing competitiveness:For example, the 1. Rise in Prices: The inflation rate increased from
development of efficient ports and logistics 6.7% to 16.7% and the country’s economic position
infrastructure will help businesses reduce the cost of became worse.
exporting and become more competitive. 2. Rise in Fiscal Deficit: Due to increase in non-
Challenges in implementing the new FTP. development expenditure, the fiscal deficit of the
government increased. Due to the rise in fiscal
1. WTO compliance: India needs to ensure that all its deficit there was a rise in public debt and interest.
export promotion schemes comply with WTO rules, In 1991 interest liability became 36.4% of total
as it has faced criticism and even lost disputes in the government expenditure.
past.
3. Increase in Adverse Balance of Payments: In
For instance, the WTO struck down India’s export 1980-81 it was Rs. 2214 crore and rose in 1990- 91
subsidy schemes last year, leading to a shift from to Rs. 17,367 crores. To cover this deficit a large
‘incentives’ to ‘remissions’ in the new FTP. amount of foreign loans had to be obtained and the

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 AWSM NOTES
interest payment got increased. USD in 2022.India at present is the fifth largest
4. Iraq War: In 1990-91, war in Iraq broke, which economy and is poised to become 3rd largest by
led to a rise in petrol prices. The flow of foreign 2028.
currency from Gulf countries stopped and this 8. Around 415 million people exited poverty within a
further aggravated the problem. span of just 15 years between 2005 to 2021 in India,
5. Dismal Performance of PSUs: These were not according to the latest Global Multidimensional
performing well due to political interference and Poverty Index (MPI). India is also one of the 25
became a big liability for the government. countries that have successfully halved their global
6. Fall in Foreign Exchange Reserves: India’s foreign MPI values within 15 years.
exchange reserve fell to low ebb in 1990-91 and it Challenges posed by reforms:
was insufficient to pay for an import bill for 2
weeks. 1. In 1991, agriculture provided employment to 72
percent of the population and contributed 29.02
Features of LPG Reforms:Major reforms: percent of the GDP. Now the share of agriculture
in the GDP has gone down drastically to 18 percent.
This has resulted in a lowering the per capita income
of the farmers and increasing the rural indebtedness.
2. LPG policies have led to widening income gaps
within the country eg 10 percent of the Indians have
57% of the Indian wealth.
3. The share of manufacturing in the GDP has largely
remained stagnant at around 15%.
4. Due to tertiary sector led growth,not enough job
opportunities are created .Unemployment rates in
India are around 7-8 percent and Indian growth is
termed as jobless growth.
5. Due to the opening up of the Indian economy
to foreign competition, more MNCs started
competing with local businesses. This led to highly
unequal business competition.
6. Globalization has also contributed to the
Positive outcomes: destruction of the environment through pollution
1. India’s GDP growth rate increased. During 1990- by emissions from manufacturing plants and the
91 India’s GDP growth rate was only 1.1% but clearing of vegetation cover eg in the 10 most
after 1991 reforms GDP growth rate increased polluted cities of the world 6 are from India.
year by year and in 2022-23 it was estimated to Way forward:
be 7.2% by the IMF and India is one of the fastest
growing major economies. 1. Boost manufacturing:Successful implementation of
Make in India,PLI scheme ,Atamnirbhar Bharat is
2. Since 1991, India has firmly established itself as a
important.
lucrative foreign investment destination.FDI equity
in 2022-23 was 84bIllion 2. Foreign investment can help drive economic
growth in India.Red tape and bureaucratic
3. Exports have increased and stood at USD 760 hurdles should be removed.
billion in 2022-23.
3. According to the World Bank, agricultural
4. Forex reserves in India stood at 578 billion USD
productivity in India is only 30-50% of its potential.
as on March 2023.
Investment should be encouraged in this sector.
5. The number of startups has grown from just
4. Invest in education and skills: Skill India should
around 350 before 2014 to more than 90,000 in
be implemented in letter and spirit.
2023 with over 100 unicorns.This shows growing
entrepreneurship culture in India. Cryptocurrency
6. Recently, India was ranked 40th position out of
132 in the Global Innovation Index (GII) 2022 Cryptocurrency is a medium of exchange, such as the
rankings released by World Intellectual Property rupee or the US dollar, but is digital in format and uses
Organisation (WIPO). encryption techniques to both control the creation of
7. Size of Indian economy has increased to 3.75 trillion monetary units and to verify the exchange of money.

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Examples of cryptocurrency:Bitcoin,Ethereum,Litecoin total global economic output of over $100 trillion,
etc. as fees for their services.Cryptocurrency donot need
them.
What is the Legal Status of Cryptocurrency:
4. Integrating blockchain into these sectors could result
1. In 2022, the Government of India mentioned in in hundreds of billions of dollars in savings.
the Union budget 2022-23 that-the transfer of 5. Investment oppurtunities:Profits can be made
any virtual currency/cryptocurrency asset will be from cryptocurrency investments. The value of
subject to 30% tax deduction. cryptocurrency markets has skyrocketed
2. At present, El Salvador and the Central African Concerns over Cryptocurrencies
Republic (CAR) are the only two countries in the
world where Bitcoin functions as a legal currency. 1. Sovereign guarantee: Cryptocurrencies pose risks
to consumers. They do not have any sovereign
Features of Cryptocurrency guarantee and hence are not legal tender.
1. Anonymous: Cryptocurrencies make it possible to 2. Market volatility: Their speculative nature also
lend, sell, buy, or borrow without an identity, credit makes them highly volatile. For instance, the value
score, or even a bank. of Bitcoin fell from USD 20,000 in December 2017
2. Highly secure: All records of its creation and when to USD 3,800 in November 2018.
it’s sent or received are stored in a sort of big digital 3. Risk in security: A user loses access to their
book that anyone can access, keeping it honest. It cryptocurrency if they lose their private key (unlike
can’t (easily) be stolen or seized and can be used traditional digital banking accounts, this password
anywhere in the world. cannot be reset).
3. Cheaper to transfer: Some coins are used to transfer 4. Malware threats: In some cases, these private
value (measured in a currency like dollars) cheaper keys are stored by technical service providers
and faster than using credit or conventional means. (cryptocurrency exchanges or wallets), which are
Meaning the cost to send someone crypto, which can prone to malware or hacking.
be converted into regular currency, is cheaper than 5. Money laundering: Cryptocurrencies are more
something like a check or wire transfer. vulnerable to criminal activity and money laundering.
4. Illegal and highly volatile: However crypto is NOT They provide greater anonymity than other payment
just used for illegal purposes. In fact, due chiefly to methods since the public keys engaging in a
its price fluctuation and other reasons it has fallen transaction cannot be directly linked to an individual.
out of favor on the black market. 6. Regulatory bypass: A central bank cannot regulate
5. No physical form: Cryptocurrency does not exist in the supply of cryptocurrencies in the economy. This
physical form (like paper money) and is typically not could pose a risk to the financial stability of the
issued by a central authority. However, it can be and country if their use becomes widespread.
many governments are working to create a crypto 7. Power consumption: Since validating transactions is
coin version of its respective fiat currency. energy-intensive, it may have adverse consequences
6. Decentralised: Cryptocurrencies typically use for the country’s energy security (the total electricity
decentralized control as opposed to a central bank use of bitcoin mining, in 2018, was equivalent to that
digital currency. of mid-sized economies such as Switzerland).
7. Blockchain technology used: A blockchain is a Way Forward:
database that stores encrypted blocks of data then
chains them together to form a chronological single- 1. Regulation is required to prevent serious problems,
source-of-truth for the data. to ensure that cryptocurrencies are not misused, and
to protect unsuspecting investors from excessive
Significance of Cryptocurrencies market volatility and potential scams.
1. Corruption Check: As blocks run on a peer-to- 2. A legal and regulatory framework must define
peer network, it helps keep corruption in check by crypto-currencies as securities or other financial
tracking the flow of funds and transactions. instruments under applicable national laws and
2. Time Effective: Cryptocurrencies can help save identify the regulatory authority in charge.
money and substantial time for the remitter and 3. Rather than outright prohibiting cryptocurrencies,
the receiver, as it is conducted entirely on the the government should regulate their trading by
Internet, runs on a mechanism that involves very instituting stringent KYC norms, reporting, and
less transaction fees and is almost instantaneous. taxation.
3. Cost Effective: Intermediaries such as banks, credit 4. To address concerns about transparency, information
card and payment gateways draw almost 3% from the availability, and consumer protection, steps such as

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 AWSM NOTES
record keeping, inspections, independent audits,
Will be legal tender in Not legal tender in India
investor grievance redressal, and dispute resolution
India
may be considered.
It will have intrinsic No such guarantee or
Thus Cryptocurrencies provide unique opportunities guarantee by the RBI for claim
for increasing people’s economic independence all payment to the holder.
across the world.Cryptocurrencies can serve as an
alternative to malfunctioning fiat currencies for savings Digital currency rates Cryptocurrency rates are
and payments in regions where inflation is a major issue. are stable and currencies highly volatile and they
are globally accepted. are not accepted every
CBDC(Central bank digital currency) where.
Digital currency Cryptocurrency
A Central Bank Digital Currency (CBDC), or transactions are transactions are publicly
national digital currency, is simply the digital form only known to the available on decentralized
of a country’s fiat currency. Instead of printing paper sender,receiver and bank ledger
currency or minting coins, the central bank issues
Since they are legal They can be denied by the
electronic tokens. This token value is backed by the
tender no vender can vendors.
full faith and credit of the government.
deny them
Features of CBDC: They are not encrypted They are encrypted.
1. It is a legal tender and a central bank liability in
digital form denominated in a sovereign currency Pros of CBDC:
and appearing on the central bank’s balance sheet. 1. Cost efficient management: CBDC will cut the
2. It is the same as a fiat currency and is exchangeable cost related to physical cash management. India
one-to-one with the fiat currency. Only its form is spent ₹4,984.80 crore on printing money in FY22
different. and ₹4,012.10 crore in FY2021.This money can be
3. It can be converted or exchanged at par with similarly saved.
denominated cash and traditional central bank 2. Safe money:People will have money in uncertain
deposits. times: Since e₹ is the central bank money, in
4. It can be transacted using wallets backed by the any uncertain situation like COVID-19, it’ll save
blockchain and is regulated by the central bank. people’s savings. Banks only insure deposits up
5. CBDCs enable the user to conduct both domestic to Rs 5 lakh. In case of defaults, people could lose
and cross border transactions which do not require their savings.
a third party or a bank 3. Cashless economy:India’s fairly high currency-
6. There will be no interest paid on CBDC because if to-GDP ratio holds out another benefit of
interest is paid then Banks will loose their deposits CBDC as to the extent large cash usage can
and credit creation will be difficult. be replaced by CBDC.
Similarities Between the CBDCs & Cryptocurrencies: 4. Rupee as international currency:The Digital Rupee
provides India with the opportunity to establish
1. If we consider the similarities between CBDCs and
the dominance of the Digital Rupee as a superior
cryptocurrencies, they both are virtual assets that
reduce the need for physical cash. currency for trade with its strategic partners, thereby
reducing its dependency on the dollar.
2. Their existence streamlines the process of making
payments for goods and services. 5. Detterence to cryptocurrency:CBDC will also help
3. Another similarity they both hold is the basic concept in distracting the investors from investing in the
of blockchain technology, allowing the storage of current crypto assets that are highly risky
transaction data in blocks. 6. Financial inclusion:The use of offline feature in
4. Cryptocurrencies and CBDCs are both blockchain- CBDC would also be beneficial in remote locations
based digital currencies. and offer availability and resilience benefits when
electrical power or mobile network is not available
Difference between CBDC and cryptocurrency: 7. Crimes: It will also help India in addressing the
malpractices such as tax evasion, terror funding,
CBDC Cryptocurrency money laundering, etc., as the central bank can
Will be issued centrally Decentralized creation by keep a check on every unit of the digital currency.
by the RBI private individuals and
organisations.

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Issues with CBDC : rural areas.
1. Cyberfrauds:In countries with lower financial 5. Increasing cyberfrauds:In FY2023, the total
literacy levels, the increase in digital payment number of fraud cases in the banking system
related frauds may also spread to CBDCs. were 13,530. Of this almost 49 per cent or 6,659
cases were in the digital payment – card/internet –
2. Privacy concerns: given that the central bank
category.
could potentially end up handling an enormous
6. Balance sheet management:In the past few years,
amount of data regarding user transactions.
many banks have tried to delay setting aside money
3. Problems for banks:If e-cash becomes popular
as provisions (for future bad loans). One reason for
and the Reserve Bank of India (RBI) places no
this is that a bank’s chief executives have a short
limit on the amount that can be stored in mobile
tenure, during which time they want to post higher
wallets, weaker banks may struggle to retain low-
net profits and cheer investors.In the past few years,
cost deposits.
many banks have tried to delay setting aside money
4. UPI already there:From a user’s standpoint, as provisions (for future bad loans). Deferring
there is no real incentive to switch to a CBDC provisioning is harmful in the long term. It reduces
as a growing proportion of retail transactions are the bank’s ability to withstand financial pressures.
already done digitally or by using UPI-based fast
7. Work force issues:
payment systems
Way forward:
1. Robust data security systems will have to be set up
to prevent data breaches.
2. The RBI should avoid paying interest on the
balances so that it remains only as a means of
payment and settlement system.

Banking Problems

Although India’s financial system has seen great

heights and has a relatable stable approach given the
current global economic outlook, this is not to say that
the banking system in India hasn’t faced issues.Some
of the most recent challenges that continue to have a
heavy influence on India’s financial system include the
following:
1. Non performing assets:The rise of Non-Performing
Assets (NPAs), including bad loans or problems in 8. Poor Govt policies:eg Schemes Like debt waiver
the agricultural and corporate sectors. Currently, also discourages people to return debt taken and this
the country’s NPAs have crossed ₹10 lakh crores, also increases bad credit of the banks.
with more than 70% being from the corporate Impacts of Banking problems:
sector.
2. Lack of banking services:Lack of banking for
the underserved and rural population, which is
approximately 69% of India’s total population.
Around 1.4 billion Indians do not have access to
formal banking, as per the World Bank report.
3. Frauds:The RBI in 2022 reported total fraud cases
of around 9103, the biggest being the PNB scam
of ₹11,000 crores, Vijay Mallya defaulting lenders
for Rs. 9000 crores, and several others that we
have witnessed recently.
4. Bank defaults and Bank Runs : e.g. Punjab &
Maharashtra Cooperative Bank was not able to
Steps taken by government:
provide cash to its depositors. Such issues are still
prevalent in the Indian banking sector especially in 1. Mission Indradhanush

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 AWSM NOTES
and more efficient banks, the government has
encouraged the merger and consolidation of public
sector banks.
6. Financial Technology (FinTech) and
Innovation:This includes the development of
payment systems, fintech startups, and regulatory
sandboxes to encourage experimentation and foster
innovation.
7. Financial Inclusion: Initiatives such as the Pradhan
Mantri Jan Dhan Yojana (PMJDY) aimed at
ensuring financial inclusion by providing access to
2. Banking and insolvency code:Insolvency
banking services to unbanked sections of society.
and Bankruptcy Code 2016 seeks to swiftly
restructure and end the insolvencies of partnerships, Way forward:
organizations, and individuals. 1. Need for Differentiated Banks:Essentially, these
3. 4R strategy: specialised banks would ease the access to finance
in areas such as RAM (retail, agriculture, MSMEs)
2. Blockchain Banking: Blockchain technology will
allow prudential supervision and control over the
banks may be easier.
3. Big Banks:The Narasimham Committee Report
(1991), emphasised that India should have three
or four large commercial banks, with domestic
and international presence, along with foreign banks.
4. Mitigating Moral Hazard:banking reforms should
focus on the need for higher individual deposit
insurance to mitigate systemic risks with least cost to
the public exchequer.

NPA Issue.

A Non-performing Asset (NPA) is a loan or advance for

4. EASE 5.0 : (Enhanced Access and Service which the principal or interest payment has remained
Excellence) overdue for a period of 90 days.

Classification of NPA:

1. Sub-standard: When the NPAs have aged <= 12

months.
2. Doubtful: When the NPAs have aged > 12 months.
3. Loss assets: When the bank or its auditors have
identified the loss, but it has not been written off.
Current status of NPAs in India
1. According to the Reserve Bank of India’s (RBI’s)
Financial Stability Report the Gross non-
performing assets (GNPA) ratio, has declined to
5% in September 2022.
2. The NPAs had risen from 3.8% in 2014 to 11.4%
5. Merger and Consolidation: To create stronger

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in 2018. However, since then the NPAs have Way Forward:
shown a declining trend.
1. There must be a sunset clause to the resolution
3. Despite the fall in the NPAs recently, the proportion process through Bad Banks. It is quintessential to
is still high compared to other economies. develop time-bound strategies for the resolution of
Reasons for NPA: assets, or else the bad bank will be reduced to a mere
parking space of bad loans.
2. Bad Banks should have a suitable mechanism in
place that can facilitate funding for maintaining
the quality of assets till their resolution.
3. Banks have to accept losses on loans (or ‘haircuts’).
They should be able to do so without any fear of
harassment by the investigative agencies.
4. The Indian Banks’ Association has set up a six-
member panel to oversee resolution plans of lead
lenders. To expedite resolution, more such panels
are required.
5. An alternative is to set up a Loan Resolution
Authority, if necessary, through an Act of Parliament.
Also, the government must infuse at one go whatever
additional capital is needed to recapitalise banks —
providing such capital in multiple instalments is not
Impacts of NPA on economy: helpful.

Internationalisation of Rupee

Internationalisation of rupees is a process that involves

increasing use of the local currency in cross-border
transactions.It involves making the rupee convertible,
acceptable and attractive for international transactions.

Features of internationalization of rupee:

1. Convertibility:This means that the rupee can be
freely exchanged for other currencies without any
restrictions or controls by the authorities.
2. Acceptability:This means that the rupee is widely
used and accepted by other countries and entities
Steps taken by govt:
for trade and financial transactions.
1. Bad bank:The bad bank is an ARC or an Asset 3. Attractiveness:This means that the rupee is
Management Company (AMC) that takes over the preferred by other countries and entities over
bad loans of commercial banks, manages them other currencies for trade and financial transactions.
and finally recovers the money over a period of
Advantages of Internationalisation of rupee.
time.The bad bank in India will be called National
Asset Reconstruction Ltd (NARC). 1. Increased global acceptance:Internationalization of
2. Prompt Corrective Action :PCA is a framework the rupee can increase its global acceptance, which
under which banks with weak financial metrics are can lead to more international transactions being
put under watch by the RBI. conducted in the rupee, thereby reducing the demand
3. Scheme for Sustainable Structuring of Stressed for foreign currencies and reducing exchange rate
Assets (S4A):The scheme aims to resolve debt issues risks.
and restore credit flow to critical sectors, including 2. Reduced transaction costs: Internationalization of
infrastructure. the rupee can reduce transaction costs for Indian
4. Asset Quality Review:Asset Quality Review (AQR) businesses as they will not have to incur exchange
is an exercise conducted by the Reserve Bank of rate fees for converting rupees into foreign currencies
India (RBI) to assess the actual level of bad loans in for international transactions.
the industry. 3. Boost to trade and investment: Internationalization

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 AWSM NOTES
of the rupee can promote trade and investment by exercise in 2016, along with the recent withdrawal
making it easier for foreign businesses to invest in of the ₹2,000 note, has affected confidence in the
India and for Indian businesses to invest abroad. rupee, particularly in neighboring countries like
4. Diversification of reserves:Internationalization of Bhutan and Nepal.
the rupee can diversify India’s foreign exchange 4. Limited liquidity: The rupee is not yet a widely
reserves away from a concentration in US dollars, traded currency, which means there is limited
reducing the risks associated with holding a single liquidity in global markets making it difficult for
currency. investors to buy and sell rupee-denominated assets,
5. Geopolitical Advantages:It can strengthen which can limit the attractiveness of the currency.
economic ties with other countries, facilitate bilateral 5. Complicates Domestic Monetary Policy: The
trade agreements, and promote diplomatic relations. internationalization of the rupee could limit
6. Declining share of the dollar:The share of the dollar the effectiveness and independence of the RBI in
in foreign exchange reserves of countries is steadily controlling domestic money supply.
declining. Other currencies are increasingly used in Steps taken by Government:
trade invoicing and settlement
7. Geopolitical: In the wake of the sanctions imposed
on Russia, many countries have become cautious
of the potential costs if they are subjected to similar
sanctions by the Western governments. China,
Russia and a few other countries have become
more vocal in questioning the US dollar-dominated
global currency system.

Way forward:
1. Aim for full convertibility by 2060, allowing free
movement of financial investments between India
and abroad.
2. Develop a deeper and more liquid rupee bond
market to attract foreign investors and provide
investment options in rupees.
3. Encourage Indian exporters and importers to
invoice transactions in rupees to optimize trade
settlement formalities.
4. Establish additional currency swap agreements,
like the one with Sri Lanka, to settle trade and
investment transactions in rupees.
5. Offer tax incentives to foreign businesses to
encourage the use of rupees in operations within
Challenges : India.
6. Ensure currency management stability and improve
1. Limited International Demand:The daily average
the exchange rate regime to instill confidence.
share for the rupee in the global forex market is
only around 1.6%, while India’s share of global 7. Seek to make the rupee an official currency
goods trade is ~2%. in international organizations to enhance its
acceptability and profile.
2. Convertibility Concern:The INR is not fully
8. Implement recommendations from the Tarapore
convertible, meaning there are restrictions on its
Committees, including reducing fiscal deficits,
convertibility for certain purposes such as capital
inflation rates, and non-performing assets in the
transactions. This restricts its widespread use in
banking sector.
international trade and finance.
3. Demonetization Impact:The demonetization

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PM Gati Shakti Services provided by PM Gati-Shakti:
1. Planning and obtaining clearances: The portal
PM Gati Shakti Master Plan (2021), is a Rs. 100 lakh- will offer 200 layers of geospatial data, including
crore project for developing ‘holistic infrastructure’. on existing infrastructure such as roads, highways,
It aims to ensure the speed (Gati) and Power (Shakti) of railways, and toll plazas, as well as geographic
infrastructure projects in the next four years, with a information about forests, rivers and district
focus on expediting works on the ground, saving costs boundaries to aid in planning and obtaining clearances.
and creating jobs, and bringing down the logistics cost.
2. Centralised tracking of projects: The portal will
The vision of PM Gati Shakti: also allow various government departments to track,
1. PM Gati Shakti will incorporate the infrastructure in real-time and at one centralised place, the
schemes of various Ministries and State progress of various projects, especially those with
Governments like Bharatmala, Sagarmala, inland multi-sectoral and multi-regional impact.
waterways, dry/land ports, UDAN etc. 3. Prioritize projects: Through Gati Shakti, different
2. Economic Zones like textile clusters, pharmaceutical departments will be able to prioritise their projects
clusters, defence corridors, electronic parks, through cross-sectoral interactions”.
industrial corridors, fishing clusters, and agri 4. Project clearances: The portal will also highlight
zones will be covered to improve connectivity & all the clearances that any new project would need,
make Indian businesses more competitive. based on its location — and allow stakeholders to
3. It will also leverage technology extensively apply for these clearances from the relevant authority
including spatial planning tools with ISRO (Indian directly on the portal. The objective is to streamline
Space Research Organisation) imagery developed the process and shorten the period required for
by BiSAG-N (Bhaskaracharya National Institute clearances.
for Space Applications and Geoinformatics). 5. Gati Shakti Digital Platform: The scheme includes
4. To achieve a sustained 5 trillion dollar economy the development of a digital platform that facilitates
and an increase to 20 trillion dollar economy by real-time coordination and planning of infrastructure
2040. projects among various ministries and departments.
5. To facilitate the last-mile connectivity of Significance of Pm Gati-Shakti:
infrastructure and reduce travel time and cost for
1. Bring the economy out of pandemic impacts: If
people and businesses.
the Gati Shakti National Master Plan is implemented
Pillars of PM Gati -Shakti: swiftly, then the Indian economy can achieve a
significant growth trajectory by mitigating the
impacts of the pandemic
2. Ease of Doing business:India’s logistics cost burden
is 13-14% of GDP, compared to 6-8% in more
competitive economies.This makes our Goods and
services uncompetitive against China and western
countries .PM GatiShakti will help in lowering the
cost.
3. Make in India:It will boost the Make in India
initiative by providing better access to markets, raw
materials, skilled labour and technology for domestic
industries.
4. Innovation:It will spur innovation and
Engines of PM-Gatishakti: entrepreneurship by creating an ecosystem for
startups and MSMEs to flourish in various sectors.
5. Infrastructure and connectivity:It will foster
regional integration and cooperation by connecting
India with its neighbouring countries through land,
sea and air routes.
6. Employment oppurtunities:It will generate
employment opportunities for millions of people
directly and indirectly involved in the infrastructure
sector

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7. Help in reducing human intervention within the private sector to boost NIP sectors. So, the
ministry:The Gati Shakti portal would help reduce government has to address the issues associated with
the human intervention required as ministries will low credit offtake for successful private investments.
be in constant touch.Moreover resources will be used 4. Incorporate the digital features in all spheres:
efficiently. This can be done by adding optical fibres along
8. Tourism:Infrastructure is key to development of with railway lines and gas pipelines. India also
tourism, including spiritual and medical tourism needs digital solutions for aggregation of demand
.PM Gati Shakti with the focus on infrastructure and supply, which can be done by bringing the open
,will help in growth of tourism. network and open protocols under the Gati Shakti
initiative.
Challenges associated with the functioning of PM Gati
Shakti: 5. Improve the performance of roads: India needs
to improve the performance of roads for a smooth
1. Investments from states:The Economic Survey supply of goods. Roads should be made smart
projects maximum investments towards sectors such with automatic monitoring of traffic, drone-based
as energy, roads, urban infrastructure and railways support, including drone-based monitoring of
for FY 2021 and 22, with about ₹8.5-lakh crore to be maintenance of assets.
invested by either side annually. With the pandemic
and its associated challenges, the state governments National Monetization Pipeline(NMP)
don’t have enough finances to invest such large
amounts. This will delay the implementation of the National Monetisation Pipeline (NMP), announced
master plan. in budget 2021, is an asset monetisation programme
2. Low Credit Off-take: According to the RBI’s paper, that visualises to raise Rs 6 lakh crore by leasing out
the growth rate in credit off-take has steeply declined government owned infrastructure in over 4 years from
to 5.8% in November 2022, as against 14.2% in 2013. 2022 to 2025.
This will reduce private investment in infrastructure
projects. At present, there are concerns about the Key imperatives: The framework for monetisation of core
declining credit offtake trends from banks as they asset monetisation has three key imperatives:
don’t want to get into another Non-Performing
Asset (NPA) crisis in future.
3. Infrastructural challenges: The plan does not
address a few key infrastructural challenges
like Land acquisition,litigation issues, alienation
of local communities and the violation of
environmental norms, etc.
4. Issue of coordination:PM Gati Shakti involves
coordination among 16 ministries and departments
at the central level, 29 state governments. Salient features of the National Monetisation Pipeline
This requires effective communication, (NMP):
collaboration and consensus-building among 1. It aims to unlock the value of underutilized
all these actors to avoid conflicts and delays. brownfield government projects by private sector
participation.
Way forward:
2. It seeks to transfer only the revenue rights, while
1. Address certain key issues: To the proper ownership rights remain with the government.
implementation of PM Gati Shakti, India needs to 3. Rail, roads and power sector will comprise over
address structural and macroeconomic stability 66% of the total value generated under NMP.
concerns, emanating from high public expenditure.
4. States are incentivized by the Union government to
2. Tackle land acquisition decisions: With the pursue monetisation of their assets.
availability of Geographic Information Systems and 5. The revenue generated from NMP will be utilised for
remote sensing technologies under the master plan, the creation of greenfield projects.
the policymakers have to do well to reclaim lands
6. An empowered committee headed by a cabinet
already subjected to degradation and pollution, rather
secretary will oversee the implementation of the
than alienate controversial new parcels.
programme.
3. Solve the credit offtake challenge: The Economic
7. Real time monitoring will be possible through the
Survey for 2020-21 mentioned that India needs
asset monetisation dashboard.
₹4.5-lakh crore investments per year from

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Sector wise targets: will give it 50 percent of that amount raised
through listing.
c) If a state monetizes an asset, it will receive
33% of the amount raised from monetization
from the Centre.
7. Promoting Public-Private Partnership: The end
objective of NMP is to enable ‘Infrastructure
Creation through Monetization’ wherein the public
and private sector collaborate, each excelling in
their core areas of competence, so as to deliver
socio-economic growth and quality of life to the
country’s citizens.
Major Accomplishments under the National Asset
Monetization Pipeline:
1. Ministry of Coal:The Ministry of Coal, which
yielded a monetization value of nearly Rs.40,000
crore through auctioning 22 coal blocks and
granting contracts in the financial year 2022, was the
largest contributor to the asset monetization pipeline.
2. Mineral mining asset:Following the conclusion of
Merits of the NMP 31 mineral block auctions, the mineral mining
assets generated an estimated monetization value
1. Resource Efficiency: Resources are scarce with the
of Rs.18,700 crore in the financial year 2022.
government. Proper and effective channelization
of them is very important. NMP leads to optimum 3. Ministry of Road Transport and Highways:The
utilization of government assets. monetization value for the Ministry of Road
Transport and Highways was approximate Rs.23,000
2. Keeping Fiscal Deficit at check: The revenue
crore in 2022.
accrued by leasing out these assets to private sector
4. Ministry of Power:recorded a monetization
will help fund new capital expenditure without
accomplishment of Rs.9500 crores.
pressuring government finances.
5. National Hydroelectric Power Corporation
3. Streamlining the Process: Monetization of assets is
(NHPC):The National Hydroelectric Power
not new, but the government has finally organized it
Corporation finished monetizing one of its
in baskets, set targets, identified impediments, and
operational hydro assets, raising roughly Rs.1,000
put in place a framework.
crore.
4. Mobilizing Private Capital: Since the assets are
de-risked as brownfield projects, it will help Challenges to NMP:
in mobilizing private capital (both domestic & 1. Lack of identifiable revenue streams:eg
foreign). Global investors have revealed that they Monetization potential of toll road assets is limited
are keen to participate in projects to be monetized by the percentage of stretches having four-lane and
through a transparent/competitive bidding process. above configuration.
5. Less Resistance from the opposition: The plan
2. Level of capacity utilization :eg gas and petroleum
involves leasing to the private sector without
pipeline networks and regulated tariffs in power
transferring ownership or resorting to fire sale of
sector assets
assets. Therefore, it is going to face less resistance
3. Slow pace of privatization in government
from the opposition.
companies :Including Air India and BPCL, and
6. Cooperative Federalism: To encourage states to
less-than-encouraging bids in the recently launched
pursue monetization, the Central government has
PPP initiative in trains, indicate that attracting private
already set aside Rs 5,000 crore as incentive.
investors’ interest is not that easy.
a) If a state government divests its stake in a 4. Asset-specific challenges :eg Konkan Railway,
PSU, the Centre will provide a 100 percent for instance, has multiple stakeholders, including
matching value of the divestment to the state. state governments, which own stake in the entity.
b) If a state lists a public sector undertaking in Creating an effective monetization transaction
the stock markets, the Central government structure could be a bit challenging in this case.

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5. Issue of Taxpayers’ Money: The taxpayers have accounted for 83% of world manufacturing
already paid for these public assets and, so, why exports in 2018.
should they pay again to a private party to use
Importance of manufacturing sector.
them.
6. Cycle of Creating and Monetising Assets: The 1. Manufacturing industries contribute towards
NMP is quite likely to create a vicious cycle of modernizing the agriculture sector on which a
creating new assets and then monetising the same large volume of the workforce is dependent.eg in
when they become liabilities for the Government at India around 50 percent population depends upon
a later stage. agriculture for employment.
7. Lack of dispute resolution mechanism :It will lead 2. This sector reduces the heavy dependence of
to loss of time and resources in case of conflict. people on agricultural income by diversifying the
8. Risk of creation of monopolies :where a few firms jobs provided in secondary and tertiary sectors.
capture most of the assets. 3. A requisite for industrial development is the
eradication of unemployment and poverty from
Way Forward:
our country.
1. Strengthening Public Enterprises: As India needs 4. It also helps to decrease the regional disparities
to invest about $1.5 trillion on infrastructure by establishing industries in tribal and backward
development in order to aspire to become a $5 areas.eg Coastal States in India have been much
trillion economy by the year 2024-25, public developed than other States.
enterprises should be in focus. 5. Expansion of manufactured goods expands trade
2. Alternative Dispute-Resolution and commerce and brings in much-needed foreign
Mechanism:Efficient and effective dispute exchange.
resolution mechanisms will naturally and 6. It would aid in the alleviation of poverty and bring
automatically accrue to the design and execution of about equitable distribution of income and wealth.
NMP too. 7. Services sector share has gone more than 50
3. Multi-Stakeholder Approach: In this context, percent .However this sector has not created
the Fifteenth Finance Commission has enough jobs.That is why Indian growth is also
recommended the setting up of a High-Powered called as jobless.
Intergovernmental Group to re-examine the fiscal
Challenges in the manufacturing sector in India.
responsibility legislation of the Centre and States
4. Addressing Systemic Problems and Generating 1. Complex labour laws: The biggest hindrance is
Social Values: Private-public investment the labour laws and reforms in the country. The
structures make sense, but they must be modeled Global Rights Index (2016), published annually
to also generate social value. There are no shortcuts by the International Trade Union Confederation
to sustainable development. (ITUC), ranked India as one of the 10 worst
countries for working people.
Manufacturing in India
2. Complex taxation system: eg complex GST, which
has dampened investor sentiment and created
The manufacturing sector in India is significantly tremendous compliance burdens on small and
important for a developing nation like India that depend medium sized enterprises (SMEs).
on manufacturing from growth and development. The
3. Power deficit:India is running short of power with
manufacturing sector in India has underperformed
a deficit of 5.1%. The Comptroller and Auditor
in recent decades as compared to other countries,
General (CAG) has also recently claimed a loss
accounting for only 16-17% of GDP.
of $37 billion due to lack of transparency in the
Manufacturing Sector Scenario In India allocation of the coal blocks.
4. Educational Gaps:The NITI Aayog had
1. India’s contribution to world manufacturing
output is sixth while China is in the first position. released data showing that only about 5% of
2. As compared to the target of contributing Gross Indian youth have had any kind of technical
Domestic Product (GDP) to 25% by 2022, the training. The figure for South Korea was
share was at 15% in 2018. over 85%
3. Ever since the opening of the economy, the 5. Infrastructure issues:India faces challenges in
manufacturing sector has grown at the rate of 7% as reaching seaports, poor infrastructure at ports,
compared to the target of 12%. higher turnaround times, and lack of inexpensive
4. India is not a part of the top 10 exporters who power and industrial waste disposal services.

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6. Land acquisition:Under the 2013 Act, land manufacturing.
acquisition is estimated to take minimally four to 3. Fostering Innovation: This could involve providing
five years. In addition, there remains uncertainty funding for R&D or implementing policies that
with respect to eventual successful completion of encourage the adoption of new technologies.
acquisition.eg Posco has to withdraw multibillion 4. Improving Access to Finance: This could involve
steel project in Orissa due to land acquisition issues. implementing policies that encourage banks and
7. MSME Issue’s:MSME sector is facing tough other financial institutions to lend to SMEs in the
competition due to the cheap imports from China manufacturing sector or providing government-
and other countries that have a free trade agreement backed loan guarantees to support SME lending.
with India. 5. Encouraging Skill Development:This could involve
8. Intellectual Property Protection and Enforcement: investing in vocational training programs, or
are risky and expensive in India. Currently, the implementing policies that encourage businesses to
government is undertaking significant IP Protection invest in employee training.
reforms, increasing uncertainty and complexity.
Jobless growth in India
Steps taken by government
1. Make in India initiative aims to make India the Jobless growth is a situation when the economy is
global manufacturing hub. It also aims to increase able to produce more goods and services without a
the sector’s GDP share to 25% from the existing simultaneous increase in employment opportunities.
16%, and create 100 million new jobs by 2022.
Indian scenario of jobless growth:
2. Skill India aims to create jobs and promote
entrepreneurship within India. 1. India experienced job growth of 3% p.a in the 70s
3. Sharm Suvidha is a web portal that provides a single at a time when our economy grew at 3-3.5% p.a
platform for all labour law compliances. but over the last 3 decades our economy grew at
4. Other labour reform initiatives include Random over 5-8% p.a but our job growth has been close to
Inspection Scheme, Universal Account Number and 1% p.a.
Apprentice Protsahan Yojana. 2. According to the Centre for Monitoring Indian
5. Defence Procurement Policy (DPP) prioritises the Economy (CMIE) in India to meet the current
promotion of indigenous defence technology. demand for employment, we need to create
6. National Manufacturing Policy (NMP) provides 20 million new jobs each year in India and
for Technology Acquisition and Development employment needs to grow at 5% per annum.But
Fund (TADF) that facilitates the acquisition of currently, we are adding less than 2 million jobs a
clean, green and energy-efficient technology by year .
MSMEs. Reasons for jobless growth in India:
7. Startup India scheme’s objective is to generate
1. Declining share of manufacturing in job
employment and promote economic development.
creation:According to CMIE, the manufacturing
8. Infrastructure Development Projects: National sector employed 51 million Indians in 2016-17,
monetization pipeline,Highways ,High speed which had come down to 27.6 million in 2020-21.
corridors etc
2. Problem in skilling ecosystem:large-scale surveys,
9. In addition, since 2020, a number of Production-
employers have said that less than 50% of the
Linked Incentive (PLI) schemes have been
college graduates entering the workforce have the
announced for various sectors to incentivize
cutting-edge skills they need or the ability to pick
manufacturing with the goal of achieving ‘Atma
them up in the workplace.
Nirbhar Bharat.
3. Service led growth:India’s economic growth has
Way forward: been largely services led in contrast. A leap from
1. Investing in Infrastructure: Improving the quality the primary to the tertiary sector hasn’t been able
and availability of infrastructure, such as roads, to generate sufficient jobs.
ports, and power supply, could help attract more 4. Emergence of new technologies:The enhanced
investment and businesses to the manufacturing adoption of new technologies like AI, Automation
sector. etc. is decreasing the demand for manpower.
2. Promoting Export-Oriented Manufacturing:This 5. Labour Laws:According to a World Bank study,
could involve providing support for businesses Industrial Disputes Act has lowered employment in
looking to enter new markets, or implementing organized manufacturing by about 25%.
policies that incentivize export-oriented 6. Policy issues:Various incentives provided by the

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 AWSM NOTES
government such as tax incentives, subsidies, investment into the industrial sector. Currently,
depreciation allowance etc. are solely linked to India has 163rd rank in enforcing contracts as per
the amount invested and not to the number of jobs Ease of Doing Business reports.
created. 4. Students should be encouraged to learn new-
Challenges associated with jobless growth age skills like 5G technology, Big Data, Digital
Marketing etc. that would enhance their probability
1. India has the advantage of youth, half the of employment.
population is under 30; but it will start ageing 5. local governments and community organisations
in the coming decades. Therefore a significant like women’s self-help groups and youth
number of jobs are desired to reap this demographic organisations should be fully involved in the
dividend. skilling plan for a local area.
2. In the absence of meaningful livelihood
Jobless growth remains the single biggest challenge to
opportunities, society will be susceptible to social
the Indian economy.A robust manufacturing sector is
unrest. This was evident by the protests that
a must for absorbing the excessive workforce of the
erupted in June over the Agnipath Scheme.
agriculture sector as well as enabling the nation to reap
3. To sustain growth and attract global investments,
its demographic dividend.
India needs to ensure there’s a trained workforce for
the industry. Indian economy transition directly from primary to
4. Jobless growth can lead to reduced productivity, tertiary sector missing secondary.
as workers who are unable to find employment
become discouraged and drop out of the labour The natural economic progression of a nation goes
force, reducing the overall level of economic from agrarian economy, to industrial economy to a
output. service economy. India leap-frogged from an agrarian
5. High levels of unemployment can lead to increased economy to a service economy because of following
social spending on unemployment benefits and reasons.
other social safety net programs, putting pressure
on government budgets. Pre independence reasons:
Steps taken by government: 1. India had a strong and bitter colonial experience
and a taste of capitalism’s exploitative nature.
1. The Union Government has announced plans to
British colonized India to serve as a source of raw
hire a million people by the end of 2023 to fill
material for its fast developing industries.
vacancies in government departments.
2. Indian manufacturing sector and crafts industry
2. National Education Policy, 2020: The Aim of the
broke down due to competition from cheap
policy is not only be cognitive development but
European products and exploitative policies of
also to build character and create holistic and
British, forcing people to move from industries to
well-rounded individuals equipped with the key
land-based activities.
21st-century skills.
3. The services like law, health, civil services , banking
3. Pradhan Mantri Kaushal Vikas Yojana (PMKVY:
etc grew lucrative and were widely respected as they
Under PMKVY, training and assessment fees are
provided employment and status in colonial India.
paid completely by the Government to provide skills.
4. Startup India scheme’s objective is to generate From 1947-1990 Reasons
employment and promote economic development. 1. Lack of investment in infrastructure: India has
Besides 10000 crore startup seed fund is created to a poor infrastructure, which makes it difficult
fund the startups in initial phases. for industries to operate effectively. This lack of
Way forward: infrastructure has led to a decline in the growth
rate of the industrial sector.
1. The private sector should be given greater support
2. High cost of doing business: India has a high
in form of subsidies and tax rebates, especially the
cost of doing business, which includes high
budding start-ups which have the potential to generate
taxes, bureaucratic red tape, and high energy
multiple jobs.
costs. These high costs have made it difficult for
2. Effective implementation of current schemes like industries to operate in the country, resulting in
MUDRA, Startup India etc. could be a game a decline in the growth rate of the industrial sector.
changer in this regard.
3. Lack of access to credit: Indian industries often
3. The commercial dispute redressal mechanisms have difficulty accessing credit, which makes it
need to be strengthened in order to attract more difficult for them to invest in new technologies

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and expand their operations. This has led to a Need of sustainable development:
decline in the growth rate of the industrial sector.
4. Protectionism: India has a long history of
protectionism, which has led to a decline in the
growth rate of the industrial sector. Protectionism
has created a closed market, which has prevented
foreign companies from competing with domestic
companies, resulting in a lack of innovation and
productivity.
Post 1990 reasons:
1. Skilled labor force: India has a large and well- Features of Sustainable Development:
educated labor force, which is well-suited for the
service The service sector, particularly the IT and 1. Sustained Rise in Real per Capita Income:
business process outsourcing (BPO) sectors, has been There should be a sustained rise in real per capita
able to take advantage of this skilled labor force. income and economic welfare on long term basis.
2. Low capital requirement: The service sector 2. Rational Use of Natural Resources:
requires relatively low capital investment
Sustainable development simply means that natural
compared to the industry sector. This has made
resources should be rationally used in a manner such
it easier for entrepreneurs to set up service-based
that they are not over exploited.
businesses, leading to a growth in the service sector.
3. Liberalization of the economy: India’s economy 3. Preserving the natural resources for future
was liberalized in 1991, which led to an increase generations:
in foreign investment and the growth of the Sustainable development aims at making use of
service sector. The service sector was able to take natural resources and environment for raising the
advantage of this liberalization, particularly in the existing standard of living in such a way as not to
areas of IT and BPO. reduce the ability of the future generations to meet
4. Government policies: The Indian government their own needs.
has implemented several policies to support the
Strategies for Sustainable Development
growth of the service sector, including tax breaks,
subsidies, and investment in infrastructure. 1. Efficient Technology: Use of production technologies
which are input efficient. It means more is produced
Thus Indian economy is already growth riding at the back
per unit of input.
of service sector, Governement has taken measures like
Make in India, Skill India, Start Up India, to promote 2. Use of Environment-friendly Sources of Energy:
manufacturing and industry sector. promotion of wind energy, solar energy and other
environment friendly sources of energy in place of
Sustainable development fossil fuels.
3. Promotion of Organic Farming: Adaption of
It is the Development which meets the needs of the present chemical free agriculture.
without compromising the ability of future generations to 4. Recycling of the Wastes
meet their own needs. Stringent Laws on the Disposal of Chemical Effluents
Core elements of sustainable development: 5. Creation of awareness to conserve natural assets for
inter-generational equity
6. Public Means of Transport: Public means of transport
are to be rapid, comfortable and economical.
Steps taken by the government for sustainable
development:
1. Ratifying Paris Agreement
a) India now stands committed to reducing the
emissions intensity of its GDP by 45 percent
by 2030 from its 2005 levels, as per the updated
NDC.
b) The country will also target about 50 percent of

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cumulative electric power installed capacity water pollution, deforestation, and inadequate
from non-fossil fuel-based energy resources by waste management contribute to the degradation
2030. of natural resources and pose obstacles to achieving
SDGs related to climate action and environmental
2. Focus on clean energy:As of Feb 2023, RE
preservation.
Sources, including large hydropower, have a
5. Defining the Key Indicators:The key definitions for
combined installed capacity of 178.9 GW. areas, such as poverty, hunger, safe drinking water,
The share of fossil fuels in the installed capacity has education need to be revised in order to effectively
reduced from 67% in 2017 to 57% in 2023. implement the SDGs
3. The net zero commitment:India has set itself 6. Financing Sustainable Development Goals: At
an ambitious long-term goal of reaching net today’s level of investment, there is a huge funding
shortfall that hinders the progress of attaining SDGs
zero emissions by 2070.
7. Measuring the Progress:.Incomplete coverage of
4. In our life time campaign:This campaign envisions
administrative data is yet another factor that has
to recognize youth between the ages of 18 to 23
hampered the measurement of progress for even
years to become message bearers of sustainable
the Millennial Development Goals (MDGs) that
lifestyles.
were the precursor to SDGs.
5. Schemes for removing poverty and
8. Region specific issues:
hunger:MGNREGA,Pm Aawas Yojna,Pm Garib
kalayan yojna,National food Security Act etc
6. Policies for Gender equality: Rashtriya Mahila
Kosh ,Stand up India,Pradhan Mantri Matru Vandna
Yojna,Ujjwala Yojana etc.
7. Policies for sustainable cities:Smart city
Project,Sustainable cities India program,Amrut
(Atal Mission for Rejuvenation and Urban
Transformation) etc.
8. International coordination:International
solar alliance,One Sun one world one Grid
(OSOWOG),India – United Nations Sustainable
Development Cooperation Framework 2023-2027
etc. Way forward
Challenges to sustainable development in India: 1. Developed countries need to change their
production and consumption patterns, including
1. Uneven Progress: India has made progress in some
by limiting the use of fossil fuels and plastics, and
areas, but there are disparities across districts.
to encourage public and private investments that
While certain indicators, such as neonatal and
align with the SDGs.
under-five mortality, improved sanitation, and
electricity access, are on track at the national 2. Environmental commons—such as the atmosphere,
level, many districts still lag. rainforests and oceans—must be safeguarded as
crucial sources of ecosystem services and natural
2. Inadequate Pace of Improvement: For several
resources. All stakeholders must work together
SDG indicators, the current pace of improvement
to conserve, restore and sustainably use natural
is insufficient to meet the targets. Issues such as
resources.
clean cooking fuel, improved water, and handwashing
3. The food system must undergo widespread changes
facilities, and women’s well-being require accelerated
to the infrastructure, cultural and societal norms,
progress
and policies that are supporting the current,
3. Gender Inequality: India struggles with gender
unsustainable, status quo
inequality, particularly concerning indicators
4. It also requires addressing social and economic
like girl-child marriage, teenage pregnancy, and
factors that contribute to environmental
partner violence. The prevalence of child marriage
degradation, ensuring inclusivity, and empowering
remains high, and achieving the SDG target by
communities to participate in sustainable
2030 seems unlikely in most districts.
development efforts.
4. Environmental Sustainability: India faces
significant challenges in achieving environmental
sustainability goals. Factors such as air and

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HDI (Human development Index) (NFHS-5) from 53% in 2015-16 (NFHS-4).
3. Lack of Social Security:Many workers lack access
The HDI is a composite statistical measure created to basic benefits such as health care, retirement
by the United Nations Development Programme to pensions, and job security.
evaluate and compare the level of human development in 4. Gender Inequality:Male-female ratio for Expected
different regions around the world. Years of Schooling (EYS) declined from 1.43 in
Indicators used: 1990 to 0.989 in 2021 and for Mean Years of
Schooling (MYS), it declined from 1.26 to 1.06.
As per the World Economic Forum’s Global Gender
Gap Report 2022, women make up only 22% of the AI
workforce.

Way forward:
1. Addressing Income Inequality and gender
inequality:Equal Pay, Education and
Skill Development, Affordable Childcare,
Empowerment programmes for women etc can be
Calculation of HDI: helpful.
1. The HDI is the geometric mean of normalized indices 2. Invest in Education:Governments can invest in
for each of the three dimensions. education by building schools, hiring teachers,
providing scholarships and improving access to
2. HDI is denoted by a number between 0 and 1. A
education for disadvantaged communities.
country’s HDI value increases with its level of human
3. Providing Healthcare:Government needs to focus
development. UNDP ranks countries based on their
on these schemes: Pradhan Mantri Jan Arogya
HDI reports every year.
Yojana (AB-PMJAY), Pradhan Mantri Swasthya
Indian Performance in HDI index of 2021-22 Suraksha Yojana (PMSSY), National Urban Health
1. The global HDI rank of India has slipped from 129 Mission (NUHM), Mission Indradhanush.
in 2019 to 131 in 2020 and to 132 in 2021-22 out of 4. Addressing Poverty: Governments can address
192 countries with a composite score of 0.633 poverty by implementing social welfare programs,
such as unemployment benefits, food assistance, and
Reasons for the poor performance of India: housing subsidies.
1. Unevenly Distribution of Economic Growth:The 5. Protecting Human Rights:Governments can
top 10% of the Indian population holds over protect human rights by ensuring that citizens
77% of the wealth.This has resulted in significant have the right to free speech, freedom of religion,
disparities in access to basic amenities, healthcare and freedom from discrimination.
and education. 6. Building Infrastructure:Governments can invest
2. Low Quality of Services:While India has made in infrastructure projects that improve access to
significant progress in reducing poverty and basic services, such as clean water and electricity,
increasing access to healthcare and education, and create job opportunities.
the quality of such services remains a concern.For
IMF(International Monetary fund)
example, while the country has achieved near-
universal enrolment in primary education, the
IMF is an international financial organization
quality of education remains low.
established to foster global monetary cooperation,
3. Lack of Effective Educational Infrastructure:Many
secure financial stability, facilitate international trade,
schools lack basic facilities such as adequate
promote high employment and sustainable economic
classrooms, clean water, and trained teachers.
growth, and reduce poverty around the world.
4. Lack of Proper Nutrition:
a) Over 70% of India’s population cannot afford Objectives of IMF
a healthy diet as of 2020 despite the fact that 1. To improve and promote global monetary cooperation
the cost of food remains relatively low by of the world.
comparison to other countries.
2. To secure financial stability by eliminating or
b) Among all women aged 15-49, the prevalence minimizing the exchange rate stability.
of anaemia has risen to 57% in 2019-21 3. To facilitate a balanced international trade.

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4. To promote high employment through economic succeeded in establishing a scheme of SDR for
assistance and sustainable economic growth. international liquidity. Further, fund also took
5. To reduce poverty around the world. many steps to improve international liquidity
7. The liberalization policies of IMF especially on
Functions of IMF:
trade have reduced problems of scarcity and
1. Regulatory functions: structural inflation.
IMF functions as a regulatory body and as per the 8. Policies such as privatization have helped to improve
rules of the Articles of Agreement, it also focuses efficiency, accountability, management and reducing
on administering a code of conduct for exchange corruption.
rate policies and restrictions on payments for current 9. IMF and Covid:
account transactions. 1. Emergency Financing – IMF has responded by
2. Financial functions: doubling the countries’ access to its Rapid Credit
IMF provides financial support and resources Facility (RCF) and Rapid Transfer Financing
to the member countries to meet short term (RFI)
and medium term Balance of Payments (BOP) 2. Grants for Debt Relief – With this initiative,
disequilibrium. IMF has reached out to the 29 of its poorest
and most vulnerable countries through its
3. Consultative functions:
Catastrophe Containment and Relief Trust
IMF is a centre for international cooperation for (CCRT).
the member countries. It also acts as a source of
3. Calls for Bilateral Debt Relief – IMF asked
counsel and technical assistance.
the bilateral creditors to suspend debt service
Achievements of IMF: payments from the low-income countries,
using its Debt Service Suspension Initiative
Floating exchange rates: (DSSI).
1. After the Bretton Woods system (system of fixed 4. Enhancing Liquidity – For the global
exchange rates) collapsed in the 1971, the IMF financial safety, the International Monetary
has promoted the system of floating exchange Organization approved the establishment of
rates. Countries are free to choose their exchange Short-term Liquidity Line (SLL).
arrangement, meaning that market forces 5. Adjusting existing lending arrangements –
determine the value of currencies relative to one The IMF’s focus is also on to adjust its lending
another. This system continues to be in place today. arrangements for new needs rising amid the
2. Oil crisis:During 1973 oil crisis,IMF administered pandemic.
a new lending program during 1974–1976 called Policy Advice – The organization is catering to the
the Oil Facility. Funded by oil-exporting nations need for policy advice to the countries to boost the
and other lenders, it was available to nations economy in the time of the pandemic.
suffering from acute problems with their balance of
trade due to the rise in oil prices. Capacity Development – The organization has reached
3. Transition of countries:The IMF played a central out to 160 countries to address urgent issues such as
role in helping the countries of the former Soviet cash management, financial supervision, cybersecurity
bloc transition from central planning to market- and economic governance.
driven economies. Criticism of IMF:
4. Financial crisis of East Asia:1997, a wave of
financial crises swept over East Asia, from 1. Issue of Governance:For decades, Europe and the
Thailand to Indonesia to Korea and beyond.The United States have guaranteed the helm of the IMF
International Monetary Fund created a series of to a European and that of the World Bank to an
bailouts (rescue packages) for the most-affected American.
economies to enable them to avoid default, tying the 2. Conditions placed on loans :compromise the
packages to currency, banking and financial system economic and political sovereignty of the receiving
reforms. countries.Many of these conditions are simply
5. Global Economic Crisis (2008):IMF undertook politically impossible to achieve because they would
major initiatives to strengthen surveillance to cause too much domestic opposition.
respond to a more globalized and interconnected 3. Imposition of Policies:IMF demands that countries
world during the global economic crisis. it lends to privatize government services rapidly.
6. Special Drawing Right (SDR): The Fund had It results in a blind faith in the free market that

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ignores the fact that the ground must be prepared
for privatization.
4. Interference:has tended to interfere with the
internal economic affairs/conditions of the member
states. This is because the member countries have
to fulfil the IMF conditions to get financial assistance.
5. The IMF policies have instead widened the gap
between the poor and the rich. This is because its
programs favour the rich.
6. IMF policies have failed to protect the peasant
farmer in LDCs because of abolition of price
control programs such as minimum price legislation. Significance of World Bank:

Way forward: 1. Poverty reduction:

a) Progress towards poverty reduction has been
1. Refroming Quota System:
significant over the years. Income per person
a) For example, the quota of BRICS countries has doubled. Life expectancy has increased.
should increase and that of European Union
Countries should decrease. b) The World Bank is the world’s single largest
provider of external funding for education”
b) Also, it is important that the new quota
and it is “the largest external funding source
formula give more weight to PPP GDP to
for health.
better reflect the true economic strength of
emerging markets and developing economies. 3. Good Governance & fight against corruption:The
World Bank created a number of “products”,
3. Helping Lower Income Countries: The IMF should
such as a code of investment, a forestry code and
focus on lower income countries and support other
a mining code, which can be used to fight against
developing countries’ market funds raising activities,
corruption and to check good governance.
so that they can come out of poverty.
4. Debt relief:In 1996, the World Bank and the IMF
4. Management Reforms:
launched the Heavily Indebted Poor Countries
a) The IMF and World Bank group, there is an (HIPC) Initiative to provide debt relief to the
informal arrangement, that the head of the world’s poorest and most heavily indebted
IMF should be a European and the head of countries. It ensures that the savings from debt
the World Bank should be an American. relief are directed into areas such as health
b) The time has come to reconsider this, and the and education which are proven poverty-fighting
IMF probably should really rethink it. programs.
5. Inclusion of the poor:A central point in all the
World Bank actions of World Bank is putting the poor at the
centre of development.
The World Bank is an international organization 6. Largest research centers in development:
dedicated to providing financing, advice, and research
The Bank is also one of the world’s largest
to developing nations to aid their economic advancement.
research centers in development. It has specialized
Goals of World Bank:Currently, the World Bank has two departments that use this knowledge to advise
stated goals that it aims to achieve by 2030. countries in areas like health, education, nutrition,
finance, justice, law and the environment.
1. The first is to end extreme poverty by decreasing
the number of people living on less than $1.90 a 7. Funds India’s growth:Currently, the World
day to below 3% of the world population. Bank’s support to India is spread over 127 active
projects with a combined worth of over $28 billion.
2. The second is to increase overall prosperity by
increasing income growth in the bottom 40% of Criticism of the world Bank:
every country in the world. 1. Conditionality:The World Bank has been criticized
Institutions in the world Bank Group: for attaching conditions to its loans and assistance.
These conditions can deteriorate existing social
and economic inequalities in recipient countries.
2. Environmental and Social Impacts: Critics argue
that the Bank has funded projects that have

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had negative environmental and social impacts, U.S.A.
including forced displacement of communities, 4. They have the same membership as no admission
destruction of ecosystems, and human rights to the World Bank is possible without the IMF
violations. membership.
3. Lack of Transparency and Accountability:Critics 5. The management structure of the World Bank is
argue that the Bank has not been transparent in largely similar to that of the IMF. Voting rights in
its decision-making processes, and that it has not these institutions depend primarily on the capital
adequately engaged with civil society and other contribution of the member countries.
stakeholders in its operations.
Differences between the WB and the IMF
4. Influence of Major Shareholders: Critics argue
that the Bank’s decision-making processes are Despite similarities, however, the Bank and the IMF
influenced by major shareholders like United remain distinct. Following differences exist between
States which can lead to policies that reflect the them:
interests of those countries rather than the needs of
1. The World Bank is primarily a development
recipient countries.
institution but the IMF is a cooperative institution
5. Governance issue:It doesn’t reveal on a deal to
that seeks to maintain an orderly system of
deal basis at what interest rate is it lending. To
payments and receipts between nations.
which countries is it lending cheap. Why some
countries are favoured over the other. 2. The IMF exists to preserve an orderly monetary
system whereas the World Bank performs an
6. Under representation of Emerging countries like India
economic development role.
:New Development Bank was setup in 2015 with the
objective of countering the under representation of 3. The world bank gives loans for the development
emerging countries in World Bank and IMF. purposes whereas IMF gives loans when economy of
country is not doing well.
Way forward: 4. IMF is a single institution whereas world bank is
1. Poverty eradication:Poverty eradication and group of five institutions.
progress on shared prosperity remains slow and 5. They have different funding sources. The IMF
there is a dire need to step up financing capacity raises its money through membership fees, known
by $50 billion to move towards sustainable, resilient as quotas. Each member country pays a quota
and inclusive development. based on its relative economic size so that the
2. Addressing Climate Change: $125tn of climate larger economies pay more. The World Bank
investment is needed by 2050 to meet net zero targets. raises most of its money through borrowing by
3. Priority to poor countries: The poorest countries, issuing bonds to investors. It also receives grants
burdened by pandemic debts, must be given priority from donors
in the World Bank. 6. The IMF exists primarily to stabilize exchange rates,
4. Encourage rich shareholders: Encouraging richer while the World Bank’s primary goal is to reduce
shareholders to inject more capital can significantly poverty.
boost the World Bank’s lending capacity with only WTO (World trade organization)
modest increases.
5. Innovative funds: World Bank may need new The World Trade Organisation (WTO) is an
and more innovative sources of financing for this intergovernmental organization that regulates and
purpose, including green bonds (debt securities supports international trade.
designated to finance environmentally friendly
projects. Primary Goal
Compare and contrast world bank and IMF The World Commerce Organisation (WTO) is an
Similarities between the WB and IMF international organization whose main goal is to open up
trade for the benefit of everyone.
1. Both the International Monetary Fund and the
World Bank were formed together at Bretton Objectives:
Woods, New Hampshire, in July 1944. They are
The WTO has six main objectives:
called Bretton woods twins.
2. Both were created to support the world economy 1. To limit the trading barriers by negotiating. This
in their own unique ways. results in a reduction in the prices of goods and
3. Both are headquartered in Washington D.C, the services, which in turn results in a reduction in the
cost of living.

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2. Stimulating economic growth and development, and 5. The General Agreement on Trade in Services
employment opportunities. :The objective of the GATS is to build a sound
3. Limit the cost of international business activities. multilateral framework of principles and norms
4. To promote the concept of good governance. for service trade.
5. To reduce the trade disputes among the countries. Types of services:
6. Collaborating with leading financial institutions to
boost economic management. Mode 1: Cross Border

Principles of WTO: Distance learning, consultancy, and BPO services

are examples of services that cross borders from one
1. Non-Discrimination:It has two components.
country to another.
a) Most Favored Nation- All nations should be
treated equally. No one country can grant any Mode 2: Consumption Abroad
other member country any special favour.
Services are made available to foreign consumers within
For example, if one country lower tariff to
a country, such as tourism, educational students for
one country then it has to be lowered to all
students, medical treatment, and so on.
other member countries.
b) National Treatment- Same treatment to all Mode 3: Commercial Presence
products, either local or foreigners. Fair and Services provided by a foreign entity thatis commercially
equal treatment is given to local as well as the pressed in another country, such as banking, hotels,
products imported from other countries. and so on.
3. Reciprocity- Lowering of import duties and other
trade barriers in return for similar concessions Mode 4: Movements of natural persons
from another country. This is a foreign national who works as a consultant or
4. Predictability through Binding and enforceable employee in another country, delivering services such
commitments- To make the business environment as a doctor, nurse, IT engineer, and so on.
stable and predictable.
5. Transparency- The WTO members need to publish 1. The Agreement on Trade-Related Aspects of
their trade regulations and to notify changes in trade Intellectual Property Rights (TRIPS):TRIPS
policies to the WTO. defines minimum requirements for trademarks,
copyrights, geographical indications, patents,
6. Encouraging Development and Economic Reforms
industrial designs, layout designs for integrated
– All efforts are made by the WTO system to
circuits.
contribute to development.
2. The Agreement on the Application of Sanitary
Major agreements under WTO: and Phytosanitary Measures(SPS):Under the
1. Agreement on Agriculture (AoA):. The AoA has SPS agreement, the WTO sets constraints on
three central concepts, or “pillars”: domestic members’ policies relating to food safety (bacterial
support, market access and export subsidies contaminants, pesticides, inspection, and labelling)
as well as animal and plant health (imported pests
a) Domestic Support – It refers to subsidies such
and diseases).
guaranteed Minimum Price or Input subsidies
3. The Agreement on Technical Barriers to
which are direct and product specific. Under
Trade(TBT):The objective was to ensure that
this, Subsidies are categorized into 3 boxes
technical negotiations and standards, as well as
2. Green Box – Subsidies which are no or least testing and certification procedures, do not create
market distorting includes measures decoupled unnecessary obstacles to trade.
from output such as income-support payments 4. Agreement on Trade-Related Investment Measures
(decoupled income support), safety – net programs, (TRIMS),:(a)TRIMs deal with regulating
payments under environmental programs, and investment measures that may impact trade in
agricultural research and-development subsidies goods and services. It aims to create a level playing
3. Blue Box – Only ‘Production limiting Subsidies’ field for foreign investors.
under this are allowed. They cover payments a) TRIMs applies to all WTO member countries
based on acreage, yield, or number of livestock in a and regulates investment measures such
base year. as local content, trade balancing, export
4. Amber Box – These include subsidies which are performance, and technology transfer
trade distorting and need to be curbed. requirements.

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Achievements of WTO Way Forward:
1. Global Facilitation of Trade:The WTO has not only 1. Modernizing the WTO will necessitate the
enhanced the value and quantity of trade but has development of a new set of rules for dealing with
also helped in eradicating trade and non-trade digital trade and e-commerce.
barriers. 2. WTO members will also have to deal more
2. Improved Economic Growth:Since 1995, the value effectively with China’s trade policies and
of world trade has nearly quadrupled, while the practices, including how to better handle state-
real volume of world trade has expanded by 2.7 owned enterprises and industrial subsidies.
times. 3. Given the pressing issues around climate change,
3. Increased Technology Cooperation :Communication increased efforts to align trade and environmental
technologies have allowed the supply chains to sustainability could help to both tackle climate
become increasingly international which has led to change and reinvigorate the WTO.
technology transfer.
eg components of iPhone now are being manufactured Deglobalization
by 7-8 multinational operating in 40 countries.
Deglobalization is a movement towards a less connected
4. Upliftment of Poor Countries:The least-developed
world, characterized by powerful nation states, local
countries receive extra attention in the WTO. All the
solutions, and border controls rather than global
WTO agreements recognize that they must benefit
institutions, treaties, and free movement.
from the greatest possible flexibility, and better-off
members must make extra efforts to lower import Indicators of Deglobalization:
barriers on least-developed countries’ exports.
1. Trade: Measured as a share of global gross
5. Reduction of poverty: In 1995, over one in three
domestic product, trade doubled from 30 percent
people living around the world fell below the World
in 1973 to a high of 60 percent in 2008. But it
Bank’s $1.90 threshold for extreme poverty. Today
faltered during the crisis and has since dropped
the extreme poverty rate is less than 10%, the lowest
to 55 percent.
ever.
a) Moreover trade wars like US-China trade war
Challenges to WTO: are also increasing around the world.
1. China-US Trade war: China’s state-owned
2. The flow of capital - mainly bank loans - is
enterprises present a major challenge to the free-
retreating even faster.Capital flows have since
market global trading system and the rulebook of the
slumped to just under 2 percent of G.D.P. from a
WTO is inadequate for addressing these challenges.
peak of 16 percent in 2007.
It is due to this that USA-China are also engaged in
Trade war. 3. The flow of people is slowing, too. Despite the
flood of refugees into Europe, net migration from
2. Institutional Issues:The Appellate Body’s poor to rich countries decreased to 12 million
operations have effectively been suspended between 2011 and 2015, down by four million
since December 2019, as the USA’s blocking of from the previous five years.More over stricter
appointments has left the body without a quorum of visa regimes like H1B visa issue are also indicator
adjudicators needed to hear appeals. of decreasing flow of people.
3. Lack of Transparency:Members can currently self- 4. Decreasing FDI:According to World Investment
designate as developing countries to receive ‘special report by UNCTAD, FDI around the world is
and differential treatment’ – a practice that is the regularly decreasing.eg Foreign investment in least
subject of much contention. developed countries fell by 16% in 2022 whereas it
4. Agriculture and Development:Agreement on fell by 37 percent in developed countries.
agriculture is facing issues due to food security
and development requirements for developing Reasons for Deglobalization:
countries like India. 1. Unequal distribution of benefits of globalization,
5. Tilt towards developed world:The policies rising inequalities, job loss especially in developed
and rules appropriate or advantageous to the countries.
industrialised world are getting established as 2. MNCs across the countries and workers from
common rules to be obeyed by the developing developing countries benefitted the most leading to
world as well. As a result, ‘one size fits air perception that workers from developing countries
approach is increasingly getting embedded in the have stolen jobs from developed countries. This led
WTO rules and disciplines. to demands of stricter visa regime and relocation of

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industries. technological advancement of the world as whole
3. Global slowdown exacerbated the above mentioned and of developing countries in particular. Limited
situation and led to increase in demand for knowledge sharing, lack of flow of technology to
protectionist measures across globe. developing countries limit advancement in science.
4. Rise of ISIS, increased instances of terrorist 4. Impact on Environmental conversation:It would
attacks and emerging security threats across lead to lack of coordination at international
globe. Immigration crisis further accentuated the organisation like UN where countries may not
security situation and as it is happening at the come at a common point to various problems like
time of economic slowdown thus leading to anti- environmental change.
immigrant stand. 5. Impact on women employment:egLack of
5. Rise of populist leaders globally re-enforces the coordination will reduce opportunities for women
trend.eg slogans like USA first,India first etc. across the world.
6. Global institutions like World Bank,IMF and WTO 6. Impact on security: Due to lack of coordination
are blamed for their western dominance. among various nations, security around the world
7. Massive development of transport that has been the along with India would impact.
basis of globalization is also responsible for serious 7. Impact on farmers: A less coordinating world
environmental problems such as greenhouse gas means impact in agricultural exports and
emissions, global warming or air pollution. Indian farmers. Indian farmers would face
8. Covid 19 :The Pandemic and disruption of the double whammy of environment change and
global supply chains further added fuel to the deglobalisation.
deglobalization. Opportunities provided by De-globalization:
Disadvantages of Deglobalization: 1. This process aims to protect and promote local
1. Economic impact: (a)Deglobalisation will lead to industries by focusing on domestic production.
reduction in the rate of economic growth of the It leads to increased job opportunities within a
world. country and can help address unemployment
concerns and support domestic workers.
a) It will lead to protectionism with reduced
cooperation among countries that will hurt 2. It can encourage countries to diversify their
Indian trade and exports. economies by reducing dependence on a few
dominant industries or foreign markets.
b) Deglobalisation will lead to reduction in Governments can build more sustainable economies
competition and rise in general prices of the that are less susceptible to global economic shocks
goods and services. by promoting the development of diverse sectors.
c) It will destroy employment opportunities 3. One of the significant benefits of deglobalization is
because as it will prevent outflow of skilled that it may allow countries to preserve and protect
people due to protectionist measures like their cultural identity and traditions. Countries
visa regulations. This will impact their can safeguard their heritage, language, and values
employability and remittance to the nation. and boost cultural preservation.
d) It may lead to increased import costs due to 4. A more localized approach to production and
lesser choice and options and manufacturers consumption can lead to shorter supply chains,
and producers would have to pay more for minimizing the negative impact on the environment.
equipment, commodities, and intermediate Way forward:
products from foreign markets.
1. Govt should promote inclusive and sustainable
5. Social impact:(a)It will lead to decrease in growth so that discontent against globalization
standards of living as it will impact exports and reduces.
economic growth impacting welfare of poor and
2. Developing countries should be focused on
their standard of lives.
localized globalization .Global South and BRICS
a) It will lead to rise in conflicts economically and are good initiatives.
politically.
3. Global institutions should reform them and
2. Political impact: It would affect polity leading to should provide more voice to the developing and
instability in political framework of nations due developed world.
to rise in prices and cost of living may lead to civil 4. Western world which is the major beneficiary of
Uprisings. fossil fuel based economy should fund climate change
3. Impact on technology: These tendencies limit iniatives around the world.

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BRICS. BRIC as a forum to resolve the age-old mistrust
and complicated relationship with China.
BRICS is an acronym for 5 emerging economies of the 5. Support for Collective Fight against Terrorism:Its
world viz. – Brazil, Russia, India, China, and South working group on countering terrorism has
Africa. The term BRIC was coined by Jim O’Neil, the expanded its activities through five thematic
then chairman of Goldman Sachs in 2001. subgroups that deal with terrorist financing,
use of Internet for terrorist purposes, countering
Objectives of BRICS: radicalisation, issue of foreign terrorist fighters, and
1. The BRICS seeks to deepen, broaden and intensify capacity building.
cooperation within the grouping and among BRICS EXPANSION
the individual countries for more sustainable,
equitable and mutually beneficial development. Recently, during the 15th BRICS summit held in
2. BRICS takes into consideration each member’s Johannesburg, it was announced that the existing five-
growth, development and poverty objectives member BRICS grouping, consisting of Brazil, Russia,
to ensure relations are built on the respective India, China, and South Africa, had taken a significant
country’s economic strengths and to avoid step by inviting six new countries to join. These new
competition where possible. invitees are Iran, Saudi Arabia, and the United Arab
3. BRICS is emerging as a new and promising political- Emirates (UAE) from West Asia; Egypt and Ethiopia
diplomatic entity with diverse objectives, far beyond from Africa; and Argentina from Latin America.
the original objective of reforming global financial Significance of expansion:
institutions.
1. With the proposed expansion, BRICS will represent
Major achievements of BRICS: 46% of the world’s population. Its share of global
IMF Reforms:BRICs managed to push for institutional GDP will rise from 31.5% in PPP terms to 37%. It
reform which led to International Monetary Fund (IMF) is surpassing the GDP share of the G-7, which stands
quota reform in 2010 (finally implemented in 2016). at 30.7%.
4. New Development Bank:NDB’s achievement has 2. The five core BRICS members currently account
96 projects with its lending touching $33 billion for 23% of global exports and 19% of global
.Moreover it has been seen as substitute for IMF imports. With the addition of new members, these
and World Bank. figures will increase by 3.7% and 3%, respectively.
5. Contingent Reserve Arrangement:The BRICS CRA 3. The most significant impact will be on the energy
aims to provide short-term liquidity support to the sector. The five original BRICS members currently
members through currency swaps to help mitigating contribute to 20% of the world’s oil production. This
BOP crisis situation and further strengthen financial share is set to increase to 42%
stability.The initial total committed resources of the Geopolitical Significance:
CRA shall be US one hundred billion dollars (USD
100 billion 1. China and India receive 35% of Saudi Arabia’s oil
production. Russia, a major oil supplier to China
Importance of BRICS for India: and India, is exploring Brazil as a market. Despite
1. Multi-lateralism and multi-culturism: India can U.S. sanctions, Iran has considerably increased its
benefit from collective strength of BRICS by way oil production, and most of it going to China.
of consultation and cooperation on economic issues 2. Egypt and Ethiopia play essential roles in the
of mutual interests, as well as global issues, such strategically vital Horn of Africa and the Red Sea
as, international terrorism, climate change, food region. Argentina holds the position of being the
and energy security, reforms of global governance second-largest economy in Latin America.
institutions, etc. 3. Since 2020, both Saudi Arabia and the UAE have
2. Support for NSG Membership: India remains pursued independent foreign policies, distancing
engaged with the other BRICS countries on its themselves from U.S. influence.
NSG membership. 4. Since 2020, both Saudi Arabia and the UAE have
3. Support for achieving SDG and national goals:The pursued independent foreign policies, distancing
NDB has approved its first set of loans, which themselves from U.S. influence.
included a loan of US$ 250 million in respect 5. The UAE has normalized relations with Iran and
of India for Multitranche Financing Facility for is expanding its maritime presence across the
Renewable Energy Financing Scheme. Gulf, the Gulf of Aden, the Red Sea, and the
4. India-China Relations:India has also tried to use Horn of Africa.

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6. Iran’s inclusion in BRICS is significant. It opens De-dollarisation refers to reducing the dollar’s
opportunities for enhanced regional economic dominance of global markets. It is a process of
cooperation and the revitalization of long-dormant substituting the US dollar as the currency used for
north-south connectivity projects, including the Trading oil and/ or other commodities, Buying US
Chabahar port. dollars for the forex reserves, Bilateral trade agreements,
Dollar-denominated assets.
Implications of expansion for India:
1. Reduced dependence on the US dollar:BRICS Need of Dedollarisation:
currency would provide India with an alternative 1. Economic Sovereignty:Many countries believe
to the dollar, which would reduce its dependence that their economic sovereignty is threatened by
on the US and make its economy more stable the dominance of the dollar in global trade, as it
2. Increased trade and investment:This could lead to gives the US government a significant amount of
increased trade and investment between India and control over the global economy.
other BRICS countries, which would boost India’s 2. Currency Manipulation:The dominance of the
economy. dollar in global trade allows the US government
3. Reduced political pressure from the US:For example, to manipulate its currency to gain an economic
the US has imposed sanctions on countries that do advantage over other countries.
not cooperate with its sanctions on Iran. 3. Risk of Financial Crisis:The dominance of the
Challenges: dollar in global trade also increases the risk of a
global financial crisis, as a crisis in the US economy
1. BRICS new members Argentina and Egypt, to can have a ripple effect on the global economy.
name just two, are also members of the infamous
4. Dependence on US:Global trade is largely
“Coffee Club” (United for Consensus) —opposed
conducted in dollars, so countries that deal with
to India’s membership in the UNSC. They also get
the US a lot may become too dependent on the US
a lot of support from China.
economy.
2. With the SCO and BRICS, China dominates the two
most prominent “alternate” groupings — neither of
which includes the US. 5. Geo-Politics:Some countries wish to reduce their
3. The BRICS is a relatively young group; there are dependence on the US dollar as it is seen as a way
wide disparities in size, outlook and perceptions to reduce the US influence on their economy, and
of its members in some cases, as a form of resistance against the
4. The group has so far taken a non-confrontational US dominance.
stance and stayed away from the rivalry between Advantages of De-Dollarisation
the West and the China-Russia-Iran axis. Making
the group too big would make decision-making 1. Reducing Dependence on the US Dollar:By
more complicated and time-consuming. using other currencies or a basket of currencies,
countries can reduce their dependence on the US
Way forward: dollar and the US economy, which can help to
1. BRICS should prioritize economic and social mitigate the impact of economic and political changes
convergences among its member states and in the US on their own economies.
should focus on institution building, fostering 2. Improving Economic Stability:By diversifying
trust, sharing knowledge, promoting trade and their reserves, countries can reduce their exposure
development, and advancing developmental to currency fluctuations and interest rate changes,
finance. which can help to improve economic stability and
2. India has to find creative ways of blunting Chinese reduce the risk of financial crises.
strategy while opening up BRICS to countries that 3. Increasing Trade and Investment:By using other
will ensure equitable distribution of power in the currencies, countries can increase trade and
group. investment with other countries that may not have
3. Also, the expansion of BRICS should be based on a strong relationship with the US, which can open
rule-based order and the forum should not leave up new markets and opportunities for growth.
any room for ‘economic hegemony’ and ‘anti- 4. Reducing US monetary Policy Influence:By reducing
West agenda’ the use of the US dollar, countries can reduce the
influence of US monetary policy on their own
Dedollarisation economies.
Steps taken by Governments of Different Countries:

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Global Efforts: to expand internationally.
4. Dependence on the Dollar:Many countries are
Bilateral Currency Swaps:
heavily dependent on the dollar for trade and
1. Bilateral currency swaps among ASEAN countries, financial transactions, which can make them
China, Japan, South Korea are USD380 billion vulnerable to changes in the value of the dollar and
and rising. to the policies of the US government.
2. Similarly, the South African rand is used by several 5. Financial Instability:The dollar’s dominance in
African countries. the international financial system can contribute
3. The Latin American countries are moving towards to financial instability in other countries, as they
greater inter-regional trade may be more susceptible to financial crises.
4. Initiation of Trade in National Currencies: 6. Monetary Sovereignty:The hegemonic role of the
dollar limits the monetary sovereignty of other
a) Asian central banks have over USD 400
countries by making it difficult for them to use
billion of local currency swap lines and trade
monetary policy to stabilize their economies.
amongst themselves.
Way forward:
b) The BRICS’s New Development Bank
encourages trade and investment in national 1. Diversifying Foreign Exchange Reserves:
currencies by disbursing up to 50% of its loans Governments can reduce their dependence on the
in national currencies since 2015. dollar by holding a greater proportion of their
c) China developed the Renminbi in 2015 and foreign exchange reserves in other currencies, such
offers clearing and settlement services for as the Euro or the Chinese Yuan.
participants in cross-border yuan payments 2. Encouraging the Use of Domestic Currencies in
and trade. International Trade:Governments can promote
d) Russian banks have started using the China- the use of their own currencies in international
based Cross-Border Interbank Payment trade by providing incentives for businesses to use
System for international payments, as they them.Since 2019, India has been paying Russia for
are debarred from the SWIFT international fuel, oil, minerals and specific defence imports in
system. rupees on an informal basis.
3. Developing Alternative Payment
India’s Efforts: Systems:Governments can work to develop
a) In July 2022, the Reserve Bank of India alternative payment systems, such as the Chinese-
(RBI) unveiled a rupee settlement system for led Asian Infrastructure Investment Bank, that are
international trade by allowing special vostro not dependent on the dollar.
accounts in designated Indian banks, a step 4. Building Economic
towards internationalising the rupee. Alliances:Governments can form economic
alliances with other countries to reduce their
b) India has been paying In rupees for Russian oil.
dependence on the dollar.
c) UPI is now valid in
5. Investing in Other Currencies:Governments may
Challanges associated with dedollarisation. invest in other currencies to reduce the risk of
currency fluctuations or to counter the hegemony
1. Not Fully Convertible:The challenge for national of the dollar.
currencies is that these are not fully convertible.
Thus, despite the rise of alternate systems of Digital India
trade, and multiple currency circulation systems,
the dollar still dominates. Digital India was an initiative taken by the Government
2. Currency fluctuations:National currencies can of India for providing high-speed internet networks
fluctuate in value relative to the dollar, which to rural areas. Digital India Mission was launched by
can make it difficult for countries to plan their PM Narendra Modi on 1st July 2015 as a beneficiary
economic policies and for businesses to make long- to other government schemes including Make in India,
term investments. Bharatmala, Sagarmala, Startup India, BharatNet, and
3. Limited Use of National Currencies in International Standup India.
Trade:The dollar is widely used in international
Objectives of Digital India
trade, making it difficult for national currencies
to compete. This can make it harder for countries The major objectives of this initiative are listed below:
to conduct trade with one another and for businesses

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1. To provide high-speed internet in all gram in July 2022 to facilitate/provide citizens ease of
panchayats. access to government portals.
2. To provide easy access to Common Service Centre 9. Jeevan Pramaan: Jeevan Pramaan envisages
(CSC) in all the locality. digitizing the whole process of securing the life
3. India is an initiative that combines a large number certificate for pensioners.
of ideas and thoughts into a single, comprehensive 10. Pradhan Mantri Gramin Digital Saksharta Abhiyaan
vision so that each of them is seen as part of a larger (PMGDISHA): The Government has approved the
goal. scheme to usher in digital literacy in rural India.
4. The Digital India Programme also focuses on Significance of the Digital India campaign
restructuring many existing schemes that can be
1. Transparency: The transparency that has come due
implemented in a synchronized manner.
to Digital India has eliminated corruption at various
Pillars of Digital India levels adversely affecting the poor and the middle
class.
2. Direct Benefit Transfer: In the last eight years, more
than Rs 23 lakh crore has been transferred through
Direct Benefit Transfer (DBT) to beneficiaries.
3. The trio of Jan Dhan, Mobile and Aadhaar, or
JAM: It has provided maximum benefit to the poor
and the middle class.
4. Ending corruption: The Digital India campaign has
helped save Rs 2.25 lakh crore from falling into the
wrong hands in the past eight years.
Initiatives under digital India: 5. Eliminating middle-men: Digital India has saved
money for the common man by ending the network
1. Aadhaar: Over 135.5 crore residents have been of middle-men
enrolled.Target based subsidies are provided through 6. Digital India helped the government tackle the
this system. crisis arising out of the Covid pandemic: CoWin
2. Unified Mobile Application for New-age and Aarogya Setu are two mobile applications that
Governance (UMANG): For providing government helped provide 200 crore vaccine doses.
services to citizens through mobile. More than 7. Ending digital divide: Digital India has also helped
1668 e-Services and over 20,197 bill payment bridge the digital divide that exists between rural and
services are made available at UMANG. urban India.
3. Common Services Centres:Over 400 digital services
are being offered by these CSCs.So far, 5.21 Lakh Challenges:
CSCs are functional (including urban & rural areas) 1. Gender gap: Indian women are 15 per cent less
across the country likely to own a mobile phone and 33 per cent less
4. Unified Payment Interface (UPI): It is the leading likely to use mobile internet services than men.
digital payment platform. It has onboarded 376 Women constitute only one-third of internet users in
banks and has facilitated 730 crore transactions India.
(by volume) worth Rs 11.9 lakh crore.
2. Skewed penetration: Among states, Maharashtra has
5. Digi Locker: Digital Locker provides an ecosystem
the highest internet penetration, followed by Goa
with the collection of repositories and gateways
and Kerala, while Bihar has the lowest, followed by
for issuers to upload the documents in the digital
Chhattisgarh and Jharkhand.
repositories.Digital Locker has more than 13.7
crore users and more than 562 crore documents. 3. India’s global rank: According to the UN’s
e-participation index (2022), which is a composite
6. e-Sign: e-Sign service facilitates instant signing
measure of three important dimensions of
of forms/documents online by citizens in a legally
e-government, namely provision of online services,
acceptable form
telecommunication connectivity and human capacity,
7. MyGov: It is a citizen engagement platform that is
India ranks 105 out of 193 nations.
developed to facilitate participatory governance.
4. Online safety: According to a survey, more than half
Presently, over 2.76+ crore users are registered
of young women have experienced violence online,
with MyGov.
including sexual harassment, threatening messages
8. MeriPehchaan: National Single Sign-on (NSSO)
and having private images shared without consent.
platform called MeriPehchaan has been launched

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 AWSM NOTES
5. Women’s rights defenders and female journalists etc. to lure voters.
were targeted for abuse more than most. 2. Myopic opinion of masses: It is believed that Indian
6. Inadequate artificial intelligence: The third threat masses vote and react more on short term freebies
comes from badly designed artificial intelligence and less on long term policies. This encourages
systems that repeat and exacerbate discrimination. parties to offer more freebies.
Way forward: 3. Historical Baggage: Several State Governments
have been forced to continue power and irrigation
1. Infrastructure Investment: Continued investment subsidies due to political pressure. Governments
in digital infrastructure is crucial to ensure that fear that discontinuance will antagonize their voter
connectivity reaches all corners of the country. base.
This includes expanding broadband networks,
4. Concealment of Actual performance: Freebies
improving mobile coverage, and establishing data
are often used as a means to conceal the poor
centres that can support the increasing demand for
performance of incumbent Government on
digital services.
economic and social parameters. They provide an
2. Digital Skill Training: Focusing on digital literacy opportunity to alter the voter’s mindset from real
and training across all age groups is essential. issues to short term gains.
Educational programs and workshops should be 5. Domino Effect: The rise in coalition era politics
designed to equip citizens with the skills needed since the 1990s has witnessed a rise of new political
to effectively use digital tools and platforms. This parties. These small and new parties have to offer
empowers individuals to participate more fully in more freebies than larger parties to lure the voters.
the digital economy.
3. Cybersecurity Measures: Enhancing cybersecurity Advantages of Freebies
measures and data protection is paramount as digital 1. Public Outreach and Engagement:A study by the
interactions increase. This involves developing Centre for Policy Research found that freebies
strong encryption standards, promoting safe online such as laptops, bicycles, and cash transfers
practices, and implementing regulations that had a positive impact on voter turnout, political
safeguard user data and privacy. awareness, and satisfaction with the government
4. Local Language Content: Creating digital content in Uttar Pradesh and Tamil Nadu.
in various languages is critical to ensuring that 2. Economic Growth: A report by the NITI Aayog
digital services are accessible to all citizens, stated that freebies such as bicycles given to
regardless of their linguistic background. This schoolgirls in Bihar and West Bengal increased
includes translating government websites, their enrolment and retention rates, reduced
applications, and other content into regional dropout rates, and improved their learning outcomes.
languages. 3. Social Welfare:A study by the World Bank
5. Innovation Ecosystem: Fostering a supportive estimated that freebies such as food subsidies
environment for startups and innovation is essential under the Public Distribution System (PDS)
for the growth of the digital economy. Providing reduced the poverty ratio in India by 7% in 2011-12.
incentives, access to funding, and mentorship can 4. Income Equality:A report by the Reserve Bank
encourage entrepreneurs to develop innovative of India analysed that loan waivers relieved the
solutions that address unique Indian challenges. debt burden and improved the creditworthiness of
Freebie culture distressed farmers.
Disadvantages of Freebies
In a Reserve Bank of India report in 2022, freebies have
1. Dependency Syndrome:A survey by the
been defined as “a public welfare measure that is provided
Association for Democratic Reforms showed that
free of charge”. It adds that freebies are different from
41% of voters in Tamil Nadu considered freebies
public/merit goods such health and education, expenditure
as an important factor in voting, while 59% said
on which has wider and long-term benefits.
they were satisfied with the performance of the state
Reasons for the rise of freebie culture during elections. government.
2. Fiscal Burden:For example, freebies such as
1. Criminalization of Politics: According to the
farm loan waivers, unemployment allowances,
Association for Democratic Reforms (ADR), 233
or pension schemes can strain the budgetary
MPs in the current Lok Sabha are facing criminal
resources and fiscal discipline of the government
charges, up from 187 in 2014. These candidates
and affect its ability to invest in other sectors or
often resort to distribution of liquor, money, goods
repay its obligations.

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3. Resource Misallocation:A report by the NITI
Aayog criticised that freebies such as laptops given
by the Uttar Pradesh government diverted funds
from more urgent needs such as improving school
infrastructure, teacher quality, or learning outcomes.
4. Quality Compromise:For example, freebies such
as bicycles or laptops may be of inferior quality or
outdated technology compared to those available
in the market or those produced by other countries.
5. Impact on Environment:A report by the CAG
revealed that free electricity for farmers in
Punjab led to overuse and wastage of power, low
tax compliance, and poor quality of service delivery
by the state power utility.
Way forward:
1. Drawing a Line Between Welfare and
Freebie:Differences between subsidy and freebie
are also essential since subsidies are justified and
specially targeted benefits meant to meet specific
demands. The freebies, on the other hand, are
quite different.
2. Indication of Funds: Political parties should be
required to disclose the financing and trade-
offs of freebies to the voters and the ECI before
announcing them. This would include specifying
the sources of revenue, the impact on fiscal
balance, the opportunity cost of public spending, and
the sustainability of freebies.
3. Empower the Election Commission of India: ECI
should be provided more powers to regulate and
monitor the announcement and implementation of
freebies by political parties during elections. This
would include giving the ECI more powers to de-
register parties, impose penalties, or take contempt
action for violating the model code of conduct or the
court orders on freebies.
4. Voter Awareness:This would include creating
awareness campaigns, voter literacy programs,
civil society initiatives, and media platforms to
inform and empower voters to make rational and
ethical choices.
5. Focus on Inclusive Development: It would address
the root causes of poverty, inequality, and
exclusion that make people vulnerable to freebies.

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