Vivek Singh Economy 2020
Vivek Singh Economy 2020
Vivek Singh Economy 2020
ECONOMY
MAINS-2020
by
VIVEK SINGH
/VivekSingh_Economy
UPSC is changing pattern and asking offbeat questions and for that you need a
balanced approach covering the entire syllabus including static and current.
The original copy of this booklet can be downloaded from the telegram channel
“Economy by Vivek Singh” link “ /VivekSingh_Economy”
Anyone who wants personal guidance regarding economy mains then they can
contact Vivek Singh sir on telegram userid @viveksingheconomy or mail id
[email protected]
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INDEX
SN DESCRIPTION
1 Farmers’ Produce Trade and Commerce Act 2020
2 Electronic-National Agriculture Market (e-NAM)
3 Farmer Producer Organizations (FPOs)
11 Protected Cultivation
20 Fertilizer Subsidy
24 Minimum Wages
26 Make in India
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29 E - Commerce
37 Road Sector
41 Electricity Reforms
49 Strategic Disinvestment
53 Fiscal Council
55 FDI in Insurance
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Salient features:
Has overriding powers in case of any inconsistency with APMC acts of States
Any farmer/trader is free to do trade (buy/sell) his produce (including milk, livestock
etc.) across India (but outside APMCs or State regulated mandis). It will include trade at
any place like the farm gate, (processing) factory premises, warehouses, cold-storages
etc. or any online market platform
The trader should make payment to the farmer on the same day of transaction
Separate dispute resolution mechanism where the farmer or the trader may seek
conciliation from a Conciliation Board appointed by Sub-Divisional Magistrate
Impact:
Will help in the creation of “one nation one market” by directly connecting farmers with
buyers without any intermediary
Will reduce wastage, increase efficiency and will unlock value for our farmers and help
in increasing their income
Will result in timely payment to farmers and will reduce exploitation of farmers
Since, outside the APMC mandi trade will not have any tax by States, it will result in
competition for State APMC Mandis and will force them to improve
As there will not be any tax outside the APMC mandi, it will result in cheaper agri-
products for the consumer without reducing the prices for the farmers
As there will be more private mandis, it will result in better prices for farmers due to
increased competition
Opening of private mandis will result in more business opportunities for the
Commission agents (arathiyas) and other stakeholders (who already have experience of
agri trade) where they can venture out to offer additional services that can be useful to
local farmers like seed/soil testing facilities, sorting/grading facilities, warehousing,
cold storage and processing facilities and hence job creation.
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Salient features:
e-NAM is a Govt. electronic market platform and is linked to the APMC mandi at the
backend
There are taxes on trade through e-NAM also as it is done through physical APMC
mandis
If a farmer has to sell his produce on e-NAM platform, he needs to bring his produce to
the physical APMC mandi or FPO collections centers. Then the agent in the mandi does
the online auction of various agri-commodities (of a specified quality) every day and then
whatever price is discovered, the farmer will get the money in his account and then the
buyer can take the produce from the physical APMC mandi or FPO center.
The most challenging aspect for implementing e-NAM has been to ensure homogeneity
across states and dealing with the number of APMC mandis to be interconnected
electronically through e-NAM.
NITI Aayog has launched an index called “Agricultural Marketing and Farmer Friendly
Reforms Index (AMFFRI) which ranks States based on the degree of reforms they have
undertaken in agricultural marketing where Maharashtra has scored 1st rank in 2016.
FPOs can be a company, a cooperative society, Trust or any other form of legal entity
which provides for sharing of profits/benefits among the farmers. Ownership control is
always with the members/farmers and management is through the representatives of
the members. The main aim of an FPO is to ensure better income for the farmers
through an organization of their own.
FPOs enable member farmers to reap the benefits of economies of scale in purchase of
inputs, processing and marketing of their produce and can also provide access to timely
and adequate credit facilities and linkages to market
SFAC is running Equity Grant Fund (EGF) Scheme, under which it is providing equity
equal to the amount of shareholders/farmers equity in the FPO subject to cap of Rs. 10
lac
In order to ensure access of FPOs to credit from mainstream Banks and Financial
Institutions, a Credit Guarantee Fund (CGF) has been established by NABARD and
NCDC which will provide suitable credit guarantee cover to accelerate flow of
institutional credit to FPOs by minimizing the risk of financial institutions for granting
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loan to FPOs so as to improve their financial ability to execute better business plans
leading to increased profits.
NABARD provides loan to FPO members without any collateral for contribution towards
share capital up to a cap of Rs. 25000 per member. NABARD also provides credit
support for business operations of FPOs. NABARD also provides technical,
managerial and financial support for hand-holding, capacity building and market
intervention efforts of the FPO.
SFAC and NABARD provide training to top management of FPOs to enable them to
function effectively. Further, Indian Council of Agricultural Research (ICAR) is providing
technical support to FPOs through Krishi Vigyan Kendras (KVKs).
The primary producers have skill and expertise in producing. However, they generally
need support for marketing of what they produce. The FPO will basically bridge this
gap. The FPO will take over the responsibility of any one or more activities in the value
chain of the produce right from procurement of raw material to delivery of the final
product at the ultimate consumers’ doorstep. In brief, the PO could undertake the
following activities:
Procurement of inputs
Disseminating market information
Dissemination of technology and innovations
Facilitating finance for inputs
Aggregation and storage of produce
Primary processing like drying, cleaning and grading
Brand building, Packaging, Labeling and Standardization
Quality control
Marketing to institutional buyers
Participation in commodity exchanges
Export
An FPO will support the farmers in getting more income by undertaking any/many/all
of the activities above. By aggregating the demand for inputs, the FPO can buy in bulk,
thus procuring at cheaper price compared to individual purchase. Besides, by
transporting in bulk, cost of transportation is reduced. Thus, reducing the overall cost
of production. Similarly, the PO may aggregate the produce of all members and market
in bulk, thus, fetching better price per unit of produce. The PO can also provide market
information to the producers to enable them hold on to their produce till the market
price become favourable. All these interventions will result in more income to the
primary producers.
Centre has planned to set up more than 10,000 FPOs by 2024. Presently there are more
than 1000 FPOs registered and functioning. (Example: Potato papad making by Kashi
Vishwanath Farmer Producer Company Limited, Varanasi)
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Salient features:
The farmers (including FPOs) can enter into farming agreements with buyers (also called
Sponsors) for sale of farm produce (including dairy and livestock etc.) and provision of
farm services (like supply of seeds, inputs, machinery, technology by buyers to farmers)
Farming Agreements entered under this Ordinance between farmer (including FPOs)
and buyer shall be exempt from the application any State Act
Minimum period of the agreement will be one crop season and maximum five years
The acceptable quality and grade may be provided in the agreement to be signed
between the farmer and the buyer
The price to be paid to the farmer for the produce should be mentioned in the farming
agreement, and in such case where price is subject to variation then it should have two
parts. One is a guaranteed minimum price component and an additional amount linked
to APMC prices, or any electronic trading platform or any benchmark prices.
The buyer should make payment of agreed amount at the time of accepting the delivery
of farming produce
Any stocking limit issued under Essential Commodities Act 1955 or any other Act shall
not be applicable to the produce purchased under this agreement
This farming agreement can be linked with insurance or credit instrument to ensure
risk mitigation or flow of credit to the farmer or buyer
Every State may notify a ‘Registration Authority’ to provide for electronic registry of
registration of farming agreements
Every farming agreement shall provide for a conciliation process and formation of a
conciliation board to resolve the disputes
Impact:
This was earlier prohibited by most of the states, so it has given freedom to farmers
Farmers cannot be forced to sign the agreement for long time (max 5 years) and will
prevent exploitation of farmers
As the prices are mentioned in the agreement, farmers will be protected of their income
Farmers will be ensured of timely payment
Buyers and sellers (farmers) can sign agreement for sale of produce without any hiccups
as the terms and conditions of the agreement are standardized by Govt.
A dedicated State agency (Registration Authority) will help both farmers and buyers and
no one can be denied in future of the terms and conditions signed in the agreement and
will minimize disputes
Timely settlement of disputes outside the courts will the farmers
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Stocking limit restrictions can be imposed only in case of extraordinary price rise
(100% increase in case of perishables and 50% increase in case of non-perishable food
stuffs over the price prevailing immediately preceding 12 months, or average retail price
of last five years, whichever is lower). But the good thing is that, regulation regarding
stocking limit shall not apply to a processor or “value chain participant” of any
agriculture produce, if the stock limit of such person does not exceed the overall ceiling
of installed capacity of processing, or the demand for export in case of an exporter.
[“Value chain participant”, in relation to any agricultural product, means and includes a
set of participants, from production of any agricultural produce in the field to final
consumption, involving processing, packaging, storage, transport and distribution,
where at each stage value is added to the product.]
Impact:
This Act was enacted at a time when India was facing scarcity in food production and
was dependent on import of foodstuffs and there was a need to prevent hoarding and
black marketing. But now the situation has changed and we have moved from an era of
food scarcity to become a major exporter of agri-commodities.
The stocking regulation under the Act has hurt private investments in agri-
infrastructure because of which there is huge wastage of food items every year. The
amendments will remove unnecessary regulation and will help attract private and
foreign investments in the supply chain infrastructure like warehouse/cold
storage/packaging of agri-commodities.
Exporters & food processors are exempt from stocking limit which will help in
development of modern food processing infrastructure and smooth supply chain for
exporters
The freedom to produce, hold, move, distribute and supply will lead to vertical
integration in the agriculture supply chain and achieve economies of scale resulting in
lower prices of agri-products for the consumers
It will transform the farm sector and increase the farmers’ income
While liberalizing the regulatory environment, the govt. has insured that interest of
consumers is safeguarded. During war, famine, any natural calamity or extra ordinary
price rise, the supply of agricultural food stuffs can be regulated and Govt. can impose
stocking limit also in case of excessive price rise.
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The original intent of the restrictive tenancy laws no longer holds any relevance. Today,
these restrictions have detrimental effects on not only the tenant for whose protection the
laws were originally enacted but also on the landowner and implementation of public policy.
The tenant lacks the security of tenure that she would have if laws permitted her and the
landowner to freely write transparent contracts. In turn, this discourages her from making
long-term investments in land and also leaves her feeling perpetually insecure about
continuing to maintain cultivation rights. Furthermore, it deprives her of potential access to
credit by virtue of being a cultivator. Landowner also feels a sense of insecurity when
leasing land with many choosing to leave land fallow. The latter practice is becoming
increasingly prevalent with landowners and their children seeking non-farm employment.
Keeping these things in mind, Central Government got a model act drafted on land leasing
by the committee (Chairman Dr. Haque) constituted by the NITI Aayog in April 2016 and
has forwarded it to States to implement it. It secures the rights of landowners while
allowing tenant farmers access to facilities like insurance, credit and compensation for crop
damage.
The model law allows consolidation of farm land so that small plots of land that are
economically unviable can be leased out (using tractors and farm equipment is not
economically viable for small plots of 2-3 acres). Large operational holdings will reduce
the cost of cultivation and increase profitability of farming.
The duration of the lease and the consideration amount will be decided mutually by the
owner and the tenant.
There will be no ceiling on the amount of land that can be leased out or consolidated as
the state wants market forces to determine the size of operational holdings.
Under the new law, land can also be leased out for allied activities like livestock or
animal husbandry for a maximum period of five years.
The Model Act proposes quicker litigation process in case of disputes, by suggesting
recourse through criminal proceedings and special tribunal. The dispute settlement will
be taken up at the level of the Gram Sabha, Panchayat and Tehsildar and are kept
outside the jurisdiction of courts.
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Exporter
Wholesaler
/Retailer
SF
SF
SF
AP SF
SF
SF
VA
SF
SF
AP
SI
SF SF
VA
Agriculture Cluster SI
SSP SSP
Salient features:
Agriculture in the twenty-first century is reinventing itself as a new global business
reshaped by globalization, standardization, high-value production, massive growth in
demand, retail and packaging innovations, and a ramp up in efficiency. Faced with
constant productivity and market pressures, the “new agriculture” needs new tools to
enhance its competitiveness and innovation capacity. One of these tools is the
promotion of agriculture based clusters.
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ACs seem to generate a number of advantages for small producers and agribusiness
firms, from agglomeration economies to improving access to local and global markets,
to higher value addition production. Consequently, ACs raise the competitive advantage
of farmers and agribusiness firms as they increase their current productivity and their
innovative capacity.
ACs constitutes an important tool for the economic and social development of a given
territory. They can have positive impacts on income enhancement, employment
generation and well-being of workers and entrepreneurs of the cluster and, more
generally, they offer great potential for improving the local economy.
Our Prime Minister in his address to the Indian Chamber of Commerce in June 2020
highlighted the role of agriculture based clusters in rural development.
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In order to provide an impetus to agricultural exports, the Government has come out with a
comprehensive “Agriculture Export Policy” aimed at doubling the agricultural exports and
integrating Indian farmers and agricultural products with the global value chains.
Infrastructure and Logistics: Expenses towards logistics handling in India is about 14%
to 15% of the cost of exports as compared to 8% - 9% in some of the developed
economies. Robust infrastructure remains a critical component of a strong agricultural
value chain, which involves pre-harvest and post-harvest handling facilities, storage &
distribution, processing facilities, roads and world class exit point infrastructure at
ports.
Cluster Development: Export oriented cluster development across States will be key to
ensuring surplus produce with standard physical and quality parameters which meet
export demands.
Promoting Value Added Exports: India’s export basket is dominated by products with
little or no processing or value addition. Industry estimates also suggest a significant
quantity of our exports head to countries which conduct limited value addition and re-
export it. There is a huge demand for processed products in the global market. India
can look at exports of a whole range of value- added fruits and vegetables, ready to eat
products etc.
Ease of Doing Business: Exporters reveal that lengthy and cumbersome documentation
and operational procedures at ports are a constant challenge. There is a requirement to
implement 24x7 single window clearances of perishable exports at key ports across
nation.
Developing Sea Protocol: A sea protocol indicates at what maturity level harvesting can
be done for transportation by sea. Philippines has been shipping Bananas to the Middle
East which takes around 18 days while India has only been able to ship produce
around 2-4 days transit period. Thus, developing sea protocol will go a long way in
promoting trade.
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To double the farmers’ income, Dalwai Committee has recommended the following
seven measures:
5. Diversification towards high value crops: Diversification towards high value crops (HVC)
offers great scope to improve farmers' income. Average productivity of HVCs (fruits,
vegetables, fibre, spices, sugarcane) was estimated as Rs. 1,42,000 lakhs per hectare as
compared to Rs. 41,000 per hectare for staple crops (cereals, pulses, oilseeds).
The recent agriculture reforms will help in better price realization by the farmers which will
ultimately lead to achieve the target of doubling farmers’ income.
Govt. of India changed the name of “Ministry of Agriculture” to “Ministry of Agriculture and
Farmers Welfare” to signify that it now focuses on farmers income (welfare) and not just on
agriculture production.
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The word ‘budget’ refers to credit and expenses, thus the phrase 'Zero Budget'
means without using any credit, and without spending any money on purchased
inputs. 'Natural farming' means farming with Nature and without chemicals.
Features of ZBNF
The premise of ZBNF is that soil has all the nutrients plants need. To make these
nutrients available to plants, we need the intermediation of microorganisms. For this,
“four wheels of ZBNF” have been suggested:
Bijamrit is the microbial coating of seeds with formulations of cow urine and cow
dung
Jivamrit is the enhancement of soil microbes using an inoculum of cow dung, cow
urine, and jaggery
Mulching is the covering of soil with crops or crop residues which creates humus
and encourages the growth of friendly microorganisms
Waaphasa is the building up of soil humus to increase soil aeration
According to ZBNF principles, plants get 98% of their supply of nutrients from the air,
water, and sunlight. And the remaining 2% can be fulfilled by good quality soil with
plenty of friendly microorganisms. (Just like in forests and natural systems)
The system requires cow dung and cow urine obtained from Indian breed cow only. Desi
cow is apparently the purest as far as the microbial content of cow dung, and urine
goes.
In ZBNF, multi-cropping is encouraged over single crop method.
Organic farming requires basic agro practices like ploughing, tilling, mixing of
manures, weeding, etc. to be performed. While in natural farming there is no ploughing,
no tilting of soil and no fertilizers, and no weeding is done just the way it would be in
natural ecosystems.
Organic farming is still expensive due to the requirement of bulk manures, and it has
an ecological impact on surrounding environments; whereas, natural agriculture is an
extremely low-cost farming method, completely molding with local biodiversity.
Subhash Palekar, who has coined the term ZBNF is training farmers in different states
regarding the techniques of ZBNF. But experts claim that yield is less in ZBNF.
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Crops grown in the poly houses are protected from intense heat, bright sunlight, strong
winds, hailstones and cold waves. Every factor influencing a crop can be controlled in a
poly house. High tech poly houses even have heating systems as well as soil heating
systems to purify the soil of unwanted viruses, bacteria etc.
Ministry of Agriculture and Farmers’ Welfare is providing various investment (project cost)
subsidies for the creation of different structures like polyhouses, shadenet etc. through
various schemes like Mission for Integrated Development of Horticulture, National Horticulture
Mission, Horticulture mission for North East & Himalayan States.
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Sub-Mission on Fodder and Feed Development: It will address the problems of scarcity
of animal feed resources, in order to give a push to the livestock sector making it a
competitive enterprise for India, and also to harness its export potential. The major
objective is to reduce the deficit to nil.
Sub-Mission on Livestock Development: Under this sub-mission there are provisions for
productivity enhancement, entrepreneurship development and employment generation,
strengthening of infrastructure of state farms with respect to modernization, automation
and bio security, conservation of threatened breeds, minor livestock development, rural
slaughter houses, fallen animals and livestock insurance.
A separate ministry “Ministry of Fisheries, Animal Husbandry and Dairying” has been carved
out of “Ministry of Agriculture and Farmers’ Welfare” which emphasizes the focus of
government in these areas.
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The strategy of the MIDH will be on production of quality seeds and planting material,
production enhancement through productivity improvement measures along with support
for creation of infrastructure to reduce post-harvest losses and improved marketing of
produce with active participation of all stake holders, particularly farmer groups and FPOs.
India’s horticulture production is estimated at 315 MT in 2019-20, surpassing the food grain
production of 295 MT for the consecutive 8 years.
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The Department of Agriculture and Cooperation (DAC), along with NABARD, has
introduced a scheme for establishment of agri-clinics / agri-business centres / ventures
by the agricultural graduates.
The ICAR is also associated in agriculture extension activities through Krishi Vigyan
Kendras (KVKs) and the Institute Village Linkage Programme (IVLP) all over the country.
FPOs, NGOs and the corporate sector
National Mission on Agricultural Extension & Technology (NMAET), launched during the
12th plan period, consists of 4 Sub Missions:
The aim of the Mission is to restructure & strengthen agricultural extension to enable
delivery of appropriate technology and improved agronomic practices to the farmers.
'Custom Hiring Centers (CHC): CHCs are basically a unit comprising a set of costly,
advance and bigger farm machinery, implements and equipments (used for tillage, sowing,
planting, harvesting, reaping, threshing, plant protection, inter cultivation and residue
management) meant for custom hiring (on rental basis) by farmers on rental basis who
could not afford to purchase the high-end agriculture machineries and equipment. Govt.
through SMAM is providing funds/subsidy to Rural level entrepreneurs, SHGs etc. to set up
CHCs. Under the SMAM scheme, subsidy is being provided by Govt. @ of 40% of the project
cost to individual farmers up to a project cost of Rs.60 lakh and 80% to the group of
farmers up to a project cost of Rs. 10 lakh for setting up Custom Hiring Centres.
As per Economic Survey 2019-20, farm mechanization in India is only about 40 per cent as
compared to about 60 per cent in China and around 75 per cent in Brazil.
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Agriculture Infrastructure Fund is a Central Sector Scheme which shall provide medium to
long term debt financing facility for investment in viable projects for post-harvest
management Infrastructure and community farming assets through interest
subvention and financial support.
Under the scheme, Rs. One Lakh Crore will be provided by banks and financial
institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing
Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Group (SHG),
Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-
entrepreneurs, Start-ups, Aggregation Infrastructure Providers and Central/State
agency or Local Body sponsored Public Private Partnership Projects.
For all the loans under this financing facility, Government will provide interest
subvention of 3% per annum for loans up to Rs. 2 crore and the subvention will be
available for a maximum period of seven years.
The total budgetary support from Govt. of India against subvention and guarantee will
be Rs. 10,736 crores.
The scheme by way of facilitating formal credit to farm and farm processing-based
activities is expected to create numerous job opportunities in rural areas. The duration
of the Scheme shall be from FY2020 to FY2029 (10 years).
The eligible beneficiaries under the Scheme would FPOs, MSMEs, Not for Profit
Companies, Private Companies and individual entrepreneur with minimum 10%
(margin) money contribution by them for the project and the balance 90% would be the
loan component to be made available by scheduled banks.
There will be 2 years moratorium period for principal loan amount and 6 years
repayment period thereafter.
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18. SAMPADA
(Scheme for Agro-Marine Processing and Development of Agro-processing clusters)
The objective of SAMPADA scheme is to supplement agriculture, modernize processing (of
marine and agri-produce) and decrease agri-waste. With an allocation of Rs. 6,000 crore,
the scheme is expected to leverage investment and create a handling capacity of 33.4
Million Tonne, benefiting 20 lakh farmers and in the process generating 5 lakhs of direct
and indirect jobs in the country by the year 2019-20.
Advantages:
The implementation of SAMPADA will result in creation of modern infrastructure with
efficient supply chain management from farm gate to retail outlet
It will not only provide a big boost to the growth of food processing sector in the country
but also help in providing better prices to farmers and is a big step towards doubling of
farmers’ income
It will create huge employment opportunities especially in the rural areas
It will also help in reducing wastage of agricultural produce, increasing the processing
level, availability of safe and convenient processed foods at affordable price to
consumers and enhancing the export of the processed foods
42 Mega food parks are being set up with an allocated investment of $2.38 billion out of
which 20 have become operational as of now.
232 cold chain projects are being setup to develop supply chain infrastructure out of
which 160 projects have become operational.
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Objectives:
Enhancing value realization of TOP farmers by targeted interventions to strengthen TOP
production clusters and their FPOs, and linking/connecting them with the market.
Price stabilization for producers and consumers by proper production planning in the
TOP clusters and introduction of dual use varieties.
Reduction in post-harvest losses by creation of farm gate infrastructure, development of
suitable agro-logistics, and creation of appropriate storage capacity linking consumption
centers.
Increase in food processing capacities and value addition in TOP value chain with firm
linkages with production clusters.
Setting up of a market intelligence network to collect and collate real time data on
demand and supply and price of TOP crops.
Strategy:
The scheme will have two-pronged strategy of Price stabilization measures (for short term)
and integrated value chain development projects (for long term).
Under Aatma Nirbhar Bharat Abhiyan, Govt. of India has introduced the scope of this scheme
from TOP to TOTAL for all fruits and vegetables.
In Oct. 2020, Ministry of Food Processing Industries gave 50% subsidy on transportation of
notified fruits and vegetables through ‘Kisan Rail’ trains under TOP to TOTAL scheme.
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Presently Govt. intervenes in the production and distribution of urea in the following ways:
Govt. sets a controlled Maximum Retail Price (MRP) at which urea must be sold to the
farmers which is Rs. 5.36/kg (imported/ international price is approximately Rs.
20/kg).
Government provides subsidy to urea plants based on the difference between the MRP
and cost of production (group-based norms) and is paid to the fertilizer company.
Only three companies are allowed to import urea into India (canalisation).
About half of the movement of fertilizer is directed (regulated) i.e. the government tells
manufacturers and importers how much to import and where to sell their urea.
DBT in Fertilizer: In January 2018, Government implemented DBT facility for fertilizer
subsidies in all States/UTs. The DBT model in fertilizers is different from the conventional
system of DBT being implemented in LPG. Under DBT system in fertilizer subsidies, the
farmers/beneficiaries continue to receive Urea at statutory subsidized prices (Rs. 5.36/kg)
and P&K fertilizers at subsidized prices in the market. The fertilizer companies which earlier
used to receive subsidy on receipt of fertilizers at the district level; now get the subsidy only
after the fertilizers are sold to farmers by the retailers through Point of Sale (PoS) machines
through biometric authentication by Aadhar Card or Voter ID Card or Kisan Credit Card.
Government has done a study to implement Direct Cash Transfer, DCT (which is basically
the DBT being implemented in case of LPG) where farmers will be purchasing the fertilizers
at the market price and govt. will be transferring the cash amount in the farmers account.
But most of the farmers do not want this mechanism of DCT, as the farmers will have to
pay upfront market price which may be quite high and they will have to wait for the
government money in their account which is generally delayed and in some case it has not
come. To remove this problem of upfront payment of market price by farmers, government
is planning to create e-wallet account for every farmer and transfer the money before the
sowing season in the e-wallet of every farmer and upon the actual purchase by farmers it
will be adjusted and carry forwarded to next year.
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Function wise, Technical textiles are categorized into four main aspects:
1) Mechanical functions: Pliability, resilience, tenacity and resistances are considered
2) Exchange functions: Substitutes, materials used for separation, heat transfer, and
absorptions are looked for
3) Utility (for day to day living) functions: Eco systems and health care products are wisely
pooled together to form utility functions
4) Protective functions: It includes fabrics which protect/shield us against electrical, IR,
UV and chemical harshness
Product wise, Technical Textiles products are divided into 12 broad categories like Agrotech,
Buildtech, Clothtech, Geotech, Hometech, Indutech, Mobiltech, Meditech, Protech,
Sportstech, Oekotech and Packtech depending upon their application areas. For example,
in aggrotech, the textile material is used in all types of fibre yarns and fabrics used in the
area of farming, gardening, fish rearing, landscaping and forestry.
Component I: It will focus on research and development and innovation. The research
will be at both, fibre level and application-based in geo, agro, medical, sports and mobile
textiles and development of bio-degradable technical textiles. Research activities will also
focus on development of indigenous machinery and process equipment.
Component II: The mission will focus on promotion and development of market for
technical textiles. It will aim at average growth of 15-20% per year taking the level of
domestic market size to $40-50 Billion by the year 2024; through market development,
market promotion, international technical collaborations, investment promotions and 'Make
in India' initiatives.
Component III: This component aims at export promotion of technical textiles enhancing
from the current annual value of approximately Rs.14000 Crore to Rs.20000 Crore by
2021-22 and ensuring 10% average growth in exports per year up to 2023-24 till the
mission ends. An Export Promotion Council for Technical Textiles will be set up for effective
coordination and promotion activities in the segment.
Component IV: This component will promote technical education at higher engineering
and technology levels related to technical textiles and its application areas covering
engineering, medical, agriculture etc. Skill development will be promoted and adequate pool
of highly skilled manpower resources will be created.
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“The enduring economic disparities surfaced under the public gaze when the nationwide
lockdown in India was announced following the Covid-19 global pandemic. The economic
divide was discernible in the images of India’s rich and middle class clapping hands on the
terraces and balconies of their homes and the gloomy images of millions of poor walking on
the roads with their kids, bereft of food, water and public transport, to reach home.”
In order to protect the interests of migrant labourers and avoid their exploitation, the Inter-
State Migrant Workmen (Regulation of Employment and Conditions of Service) Act,
was passed in 1979 which has now been replaced by The Occupational Safety, Health
and Working Conditions Code, 2020. The following are the various features/benefits for
migrant labourers incorporated in the new Code, 2020:
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Till now, companies used to hire Contract Workers through an external agency i.e.
contractor (basically the contractor has a pool of labours which they provide to the
companies on contract basis for non-core activities), and the company pays compensation
to the contractor/agency which then forwards the payment to the contract labourers. But
in-between, the contractor deducts a hefty amount and do not pass all the benefits provided
by the companies to the contract workers. In case of contract labour, the labour is not on
the "payroll"/employee of the company but is of the employee of the contractor.
In case of "Fixed Term Employment", the Company can hire the labour for a particular
project or for a particular time and the labour such hired will be on the payroll of the
company and the company will pay direct salary to the labour and company will offer all
such benefits like PF, gratuity, medical insurance etc. and other social security benefits to
the labour. And once the Project is over or the time period is over, the company will ask the
labour to leave. The clause (that companies need permission to fire workers if it has more
than 300 workers) will not be applicable on "fixed term employment" workers as they were
hired at the first place only for that particular project or fixed time period.
Central Govt. had introduced "Fixed term employment" provisions in the existing labour
acts but States did not notify that provision. The new Industrial Relations Code 2020 which
was passed by the parliament recently has included fixed term employment for all
industries which will now ensure a pan-India implementation.
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Central government announces National Floor Level Minimum Wage (NFLMW) which is
non-statutory but acts as a benchmark that pulls up the wages of the workers. NFLMW
does not operate as a conventional floor wage to protect the lowest paid workers.
Currently NFLMW is Rs. 176/day.
India was one of the first developing countries to introduce minimum wages with the
enactment of the Minimum Wages Act way back in 1948. The Act protects both regular
and casual workers. Minimum wage rates are set both by the Central and State
governments for employees working in selected ‘scheduled’ employment. Minimum
wages have been set for different categories of workers according to skill levels, locations
and occupations.
The second set of complexities arises from the lack of uniform criteria for fixing the
minimum wage rate.
In some states minimum wages are linked to the cost of living through a variable
dearness allowance (VDA), whereas other states do not include VDA component.
The third set of complexities arises from the fact that Minimum Wages Act does not
cover all wage workers.
One in every three wage workers in India is not protected by the minimum wage law.
Some major vulnerable categories – such as domestic workers – are presently
covered only in 18 States and UTs.
The main justification for persisting with different levels of minimum wages across
states is that they reflect different levels of economic development. The proliferation of
minimum wage rates and scheduled employments is a strong deterrent for compliance.
A simple system covering as many workers as possible, understood by all, and easily
enforceable is the key to improve the effectiveness of minimum wage. India’s growth
story has been powered by private consumption. Therefore, with more than 90%
workers in informal economy, a well-designed minimum wage system can reduce
inequalities in incomes, bridge gender gaps in wages and alleviate poverty.
But keeping the minimum rate at a much higher level may hurt investment in labour-
based industries in India as India will lose competitiveness in terms of cheap labour.
Pls also check the provision of minimum wages as per the new labour codes.
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The central government shall fix floor wage (which will be applicable for both
organized and unorganized sector) taking into account minimum living standards of
a worker in such manner as may be prescribed. Provided that different floor wage
may be fixed for different geographical areas. State governments will fix the
minimum wages (which may be different for different skill-category of workers) for
their states which cannot be lower than the floor wage (of the central government).
The code also provides that there would be a review/ revision of minimum wages at
intervals not exceeding five years. Further, the rate of wages for overtime work shall
not be less than twice the rate for normal wages. MGNREGA wages have been kept
outside the purview of Code on Wages.
The Code has expanded the definition of “employer” as well as “employee”, resulting
in a broad based applicability of the regulations and is now applicable to employees
in both organized and unorganized sectors.
The provisions of the previous Minimum Wages Act and the Payment of Wages Act
used to apply only to workers drawing wages below a particular ceiling and working
in scheduled employments only. However, under the Code, the minimum wages
and the payment of wages provisions cover all establishments, employees and
employers.
The definition of “wages” includes basic pay, dearness allowance and retaining
allowance. It specifically excludes components such as statutory bonus, utilities
(light, water, medical etc.), conveyance allowance, house rent allowance, overtime
allowance etc. The specified exclusions however may not exceed 50% of the total
remuneration. This is aimed at ensuring that companies do not adopt
compensation structures which result in wages being reduced below 50% of the
total compensation.
All employees whose wages do not exceed a specific monthly amount (to be notified
by the central or state government) will be entitled to an annual bonus. Bonus is
payable on higher of minimum wage or the wage ceiling fixed by the appropriate
government for payment of bonus. Minimum bonus prescribed under the Code is
8.33 percent and the maximum bonus payable is 20 percent of the wages.
The cut-off date for salary disbursement has been advanced to the 7 th of the
subsequent month.
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The code deals with the duties of the employer in respect of workplace safety and
working conditions, and makes issue of employment letter a must for all
employees, a move that will promote formalisation of employment.
The code specifies leave and working hours (which is limited at 8 hours, and any
overtime requires workers’ consent and wages have to be doubled), requires health
and safety norms including adequate lighting and ventilation and other welfare
facilities such as separate toilets for male, female and transgender employees.
The government may, in public interest, exempt any new industrial establishment
from “all or any of the provisions” of the Codes in the interest of increased economic
activity and employment generation.
Employment of women has been allowed in all establishments for all types of
works and in the night shift, subject to their consent and requires employers to
provide adequate safeguards. This will promote gender equality.
The Code proposes social security benefits to all employees and workers in the
country (around 50 crores) including those in the unorganized sector leading to
universalization of social security.
“Social Security Fund” will be created to fund social security schemes for extending
benefits like death and accident insurance, maternity benefit and pension cover to
all of the 90% (basically informal) of the country’s over 50 crore workforce who do
not till now come under any sort of social security cover.
Scheme will be framed for unorganized workers, gig workers, platform workers and
even those self-employed and the members of their families for providing benefits.
Establishments will be allowed to join Employees’ Provident Fund Organization
(EPFO) and Employees’ State Insurance Corporation (ESIC) on voluntary basis even
if they have fewer workers (less than 20 in case they use electricity or less than 40
in case they do not use electricity).
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A much larger segment of firms – those with workers up to 300 (as against 100
earlier) will be able to resort to closure and retrenchment/ lay off without prior
government permission. And the state governments are authorized to increase this
300 threshold just by a notification.
Companies having more than 300 workers need to apply for approval to layoff any
worker, but if authorities do not respond to their request then it will be deemed
approved.
The government may, in public interest, exempt any (existing or new) industrial
establishment from “all or any of the provisions” of the Codes for a specified period.
The Code prohibits the employment of contract workers in any core activity, and
specifically permits employment in a specified list of non-core activities including
canteen, security and sanitation services.
Fixed Term Employment has been made applicable for all industries which will
help those businesses that witness seasonal spurt/change in activities.
Requirement of mandatory 14-day notice for strikes and lockouts will now apply to
all units which was earlier for just public utility firms.
Definition of strike has been amended to include ‘mass casual leave’ within its
ambit. Concerted casual leave on a certain day by 50% or more workers will be
treated as a strike.
Proliferation of Trade Unions will be curbed, as only those unions with support of
more than 51% of the workers on the muster roll of the unit concerned will have
the right to negotiate the terms with the management.
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Will simplify the labour laws and ensure a conducive environment for doing
business which will immensely help the country in brining much needed economic
growth and will help in employment generation.
Will promote investment and will create harmonious industrial relations in the
country.
As a relaxation to small enterprises, the Occupational Safety Code (which prescribes
safety standards and maximum work hours) exempts small establishments from its
purview.
Labour issue is in the Concurrent list of the Constitution and therefore states have
been given the flexibility to make changes in the labour laws as they wish to attract
companies for investment. Many essential features which were present in the
previous laws are no longer specified in the new labour Codes but have been
delegated to be prescribed by the government through Rules (for example
retrenchment threshold, social security schemes, safety standards etc.)
The labour reform was two decades in the making. It drastically reduces complexity
and internal contradictions, increases flexibility & modernizes regulations on
safety/working conditions.
Criticism
Tilted in favour of the employers and would adversely affect industrial peace
Bargaining power of the worker has been diluted
The power given to States to exempt provisions of the codes can have serious
implications on workers’ rights and safety
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Defence Manufacturing: India is among top 5 military spenders and one of the emerging
defence manufacturing hubs in the world. To support the growth of the defence sector and
enhance manufacturing capacity in the sector, two Defence Industrial Corridors are being set
up in India, one in Uttar Pradesh and the other in Tamil Nadu.
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U K Sinha Committee proposed long-term solutions/reforms for MSMEs for its economic and
financial sustainability out of which some have been implemented.
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In similar way it is being implemented for pharma sector also. Under this scheme for
pharma sector, around 53 active pharmaceutical ingredients (APIs) — covering 41 products
— have been identified by the government, for which companies will be eligible for financial
incentives based on their additional sales, provided they set up indigenous Greenfield
investment.
The scheme intends to boost domestic manufacturing of identified Key Starting Materials
(KSMs), Drug Intermediates and APIs by attracting large investments in the sector and
thereby reduce India’s import dependence in critical APIs.
Fact: Indian pharmaceutical industry is the third largest in the world by volume and 14th
largest in terms of value. India contributes 3.5 per cent of total drugs and medicines exported
globally. Despite these achievements, India is significantly dependent on import of some basic
raw materials (from China), viz., bulk drugs and APIs used to produce finished dosage
formulations.
The requirement of TMR comes into picture as the market place is skewed, where suppliers
lure hospitals into buying and pushing their brands, based on profits to be made (by
suppliers) and not on the basis of cost savings to be made on procurement cost by a
hospital, thus leading to an artificial inflation of medical device prices. The main aim of
rationalization of trade margins in medical devices should be not only to help consumers,
but also allow rationalized and reasonable profits for traders, importers, distributors, and
wholesalers & retailers, and create a level playing field for domestic industry vis-à-vis
foreign manufacturers. Businesses need profits to grow and serve their clients adequately,
but profiteering (excessive unfair profit) should be a strict no-no for healthcare delivery. We
also have a responsibility towards the society where poor people should be able to afford
medical devices like stents etc. at affordable prices.
When trade margins are capped, the manufacturers’ margins are not impacted. So, there is
no issue of quality of medical devices getting compromised or innovation getting stifled.
Government is now contemplating two formulae-—one suggested by the Niti Aayog to fix trade
margins on medical devices at 65%, and other by the Department of Pharmaceuticals (DoP)
that seeks to fix trade margins at 50 %. Some kind of price caps already exists for medical
devices like stents etc.
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29. E - Commerce
E-Commerce includes buying, selling, marketing or distribution of (i) goods, including digital
products and (ii) services; through electronic network. Delivery of goods, including digital
products, and services may be online or through traditional mode of physical delivery.
E-commerce and WTO: India has thus far not been a party to negotiations on e-Commerce
at the multilateral level. These negotiations, under WTO, are intended to create binding
obligations on all the WTO member countries regarding (among other things) permanently
accepting the moratorium on imposing customs duties on electronic transmissions. By
agreeing to the permanent moratorium (India has agreed not to impose customs duty
temporarily for the time being), countries which have tariff schedules, which allow putting
duties on these kinds of products, will give up these rights forever and lose revenues.
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National Policy for Skill Development and Entrepreneurship 2015 supersedes the policy of
2009.
Objective: to empower the individual, by enabling her/him to realize their full potential
through a process of lifelong learning where competencies are accumulated via
instruments such as credible certifications, credit accumulation and transfer, etc. As
individuals grow, the society and nation also benefit from their productivity and growth.
Mission
Create a demand for skilling across the country
Correct and align skilling with required competencies
Connect the supply of skilled human resources with sectoral demands
Certify and assess in alignment with global and national standards
The objectives and targets under the Policy will be met in mission mode approach and for
that National Skill Development Mission was launched on 15th July 2015 (World Youth
Skills Day 15th July) to implement and coordinate all skilling efforts in the country
towards the objectives laid down in the policy. The Mission is housed under the Ministry of
Skill Development and Entrepreneurship (MSDE) and the key institutional mechanism for
achieving the objectives of the Mission has been divided into a three-tier structure:
State Level (State Skill Development Missions, Steering Committee, Mission Directorate)
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Government of India has launched various schemes over the past few years to promote a
culture of entrepreneurship, innovation and startups in the country:
Start Up India: Aimed at promoting bank financing for startup ventures to boost
entrepreneurship and encourage job creation. Rural India’s version of Startup India has
been named Deen Dayal Upadhyaya Swaniyojan Yojana
Priority Sector Lending (PSL): Startups have now been included under the priority
sector lending rules of RBI for credit from banks
Tax exemption: Startups can avail tax holiday for 3 consecutive financial years out of
its first ten years since incorporation
State Rankings: DPIIT provides ranking of States based on the various policy initiatives
regarding promotion and support of startups
Govt. Connect: Dept. of Animal Husbandary & Dairying has conducted a grand
challenge in association with Startup India to award top startups with Rs. 5 lakhs in 5
categories
Corporate Connect: Facebook in partnership with Startup India disbursed cash grants
of $50,000 each to the top 5 selected startups
With more than 70,000 startups registered, India has the 3 rd largest startup ecosystem in the
world. As per the Economic Survey 2019-20, Maharashtra, Karnataka and Delhi are the top
three performers in terms of State-wise distribution of recognized startups in India.
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As a nation today we stand at a very crucial juncture. Such a big disaster is a signal for
India and it has brought a message and an opportunity for India. For example, when the
Corona crisis started, there was not a single PPE kit made in India. The N-95 masks were
produced in small quantity in India. Today we are in a situation to produce 2 lakh PPE and
2 lakh N-95 masks daily and we are exporting it too. We were able to do this because India
turned this crisis into an opportunity.
We have been hearing since the last century that the 21st century belongs to India. We
have seen how the world was before Corona and the global systems in detail. When we look
at these two periods from India's perspective, it seems that the 21st century is the century
for India. This is not our dream, rather a responsibility for all of us. The state of the world
today teaches us that a (AtmaNirbhar Bharat) "Self-reliant India" is the only path.
But, today the meaning of the word self-reliance has changed in the global scenario. The
debate on Human Centric Globalization versus Economy Centralized Globalization is
on. India's fundamental thinking provides a ray of hope to the world. The culture and
tradition of India speaks of self-reliance and the soul is VasudhaivaKutumbakam.
India does not advocate self-centric arrangements when it comes to self-reliance. India's
self-reliance is ingrained in the happiness, cooperation and peace of the world.
This is the culture which believes in the welfare of the world, for all the living creatures and
the one which considers the whole world as a family. Its premise
is 'माता भू ममिः पुत्रो अहम् पृमिव्यिः' (land is our mother and we are her son)-the culture that
considers the earth to be the mother. And when the Bharat Bhumi, becomes self-sufficient,
it ensures the possibility of a prosperous world. India's progress has always been integral to
the progress of the world.
India's goals and actions impact the global welfare. When India is free from open defecation,
it has an impact on the image of the world. Be it TB, malnutrition, polio, India's campaigns
have influenced the world. International Solar Alliance is India's gift against Global
Warming. The initiative of International Yoga Day is India's gift to relieve stress. Indian
medicines have given a fresh lease of life to the people in different parts of the world.
These steps have brought laurels for India and it makes every Indian feel proud. The world
is beginning to believe that India can do very well, so much good for the welfare of mankind
can give.
The question is - how?
The answer to this question is – A Combined resolve of 130 crore citizens for a self-reliant
India i.e. Aatma Nirbhar Bharat. Today we have the resources, we have the power, and we
have the best talent in the world. We will make the best products, will improve our quality
further, make the supply chain more modern, we can do this and we will definitely do it.
And this magnificent building of self-reliant India will stand on five Pillars.
First Pillar is Economy, an economy that brings Quantum Jump rather than
Incremental change.
Second Pillar is Infrastructure, an infrastructure that became the identity of modern
India.
Third Pillar is Our System. A system that is driven by technology which can fulfill the
dreams of the 21st century; a system not based on the policy of the past century.
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Fourth Pillar is Our Demography. Our Vibrant Demography is our strength in the
world's largest democracy, our source of energy for self-reliant India.
The fifth pillar is Demand. The cycle of demand and supply chain in our economy, is
the strength that needs to be harnessed to its full potential. In order to increase
demand in the country and to meet this demand, every stake-holder in our supply chain
needs to be empowered. We will strengthen our supply chain, our supply system built
up with the smell of the soil and the sweat of our labourers.
But today’s Aatma nirbhar Bharat is different as compared to the self-sufficiency model of
development followed in the post-independence period in the following ways:
In the post-independence period, we restricted our private sector and most of the
industries were reserved for Govt. But today we are encouraging entrepreneurs and
businesses and are disinvesting the PSUs and opening all the sectors for private
businesses like coal, railway, defence, space etc.
In the past we had license raj which required every industry to take govt. permission
but today we are focusing more on ease of doing business and giving timely clearance.
In the past we followed import substitution and isolationism and did not focus on
exports but today we are willing to participate in the global supply chain and
encouraging exports.
We are supporting our MSME enterprises by providing them credit guarantee and other
hand holding support rather than reserving products which could be produced only by
MSMEs, which we did in the period before 1991. This will help our MSMEs to
participate in the global supply chain and become competitive rather than making them
inefficient.
Thus today’s “Aatma nirbhar Bharat” reflects upon the idea of ‘self-reliance’ given by Swami
Vivekananda in the second half of the 19th Century, which was about resilience, leveraging
internal strengths, personal responsibility, and a sense of national mission. Atmanirbhar
Bharat is not just a slogan but a vision with deep roots in India’s intellectual tradition and
it means standing up confidently in the world, and not about isolationism behind “narrow
domestic walls”.
In Indian culture, it is said that 'सर्वम् आत्म र्शं सुखम्' i.e. what is in our control, is happiness.
Self-reliance leads to happiness, satisfaction and empowerment. Our responsibility to make
the 21st century, the century of India, will be fulfilled by the pledge of self-reliant India.
This responsibility will only get energy from the life force of 130 crore citizens. This era of
self-reliant India will be a new vow for every Indian as well as a new festival. Now we have to
move forward with a new resolve and determination. When ethics are filled with duty, the
culmination of diligence, the capital of skills, then who can stop India from becoming self-
reliant? We can make India a self-reliant nation. We will make India self-reliant.
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Investment
The produced items
must be exported
abroad because higher
savings will not allow
the produced items to
Savings Production be purchased/
consumed within the
country. The demand
of the production/
output should come
from export market.
Income
Investment, especially private investment, is the “key driver” that drives demand,
creates capacity, increases labour productivity, introduces new technology, allows
creative destruction (those firms which are less efficient gets closed down), and
generates jobs.
The triggering macro-economic “key driver” that catalyses the economy into a virtuous
cycle becomes critical and that key driver, in case of India, is the investment that can
create a self-sustaining virtuous cycle. This investment can be both government
investments in infrastructure (as such investment crowds in private investment) and
private investment in itself.
Exports must form an integral part of the growth model because higher savings
preclude (prevent) domestic consumption as the driver of final demand. Similarly,
job creation is driven by this virtuous cycle.
While the claim is often made that investment displaces jobs, this remains true only
when viewed within the silo of a specific activity. When examined across the entire value
chain, capital investment fosters job creation as the production of capital goods,
research & development and supply chains generate jobs.
When the economy is in a virtuous cycle, investment, productivity growth, job creation,
demand and exports feed into each other and enable animal spirits in the economy to
thrive. In contrast, when the economy is in a “vicious cycle”, moderation/reduction in
these variables dampens each other and thereby dampens the animal spirits in the
economy.
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There has been focus on poverty since last fifty years (Indira Gandhi gave the slogan “Garibi
Hatao” in 1971), but still we have not been able to eradicate it. This is because the
approach of public policy to the problem has been to initiate schemes which could serve as
no more than a palliative, as suggested by the term ‘poverty alleviation’ commonly used in
the discourse over time. These schemes failed to go to the root of poverty, which is
capability deprivation that leaves an individual unable to earn sufficient income
through work or entrepreneurship. Income poverty is a manifestation of the
deprivation, and focussing exclusively on income shortfall can address only the
symptom.
Rather than Universal Basic Income (UBI), from the perspective of eliminating poverty,
Universal Basic Services (UBS) from public/Govt. sources are needed. The original case for
a UBI came from European economists. This is not entirely surprising. Europe is perhaps
saturated with publicly provided UBS. Also, the State in some of its countries is
immensely wealthy. So, if a part of the public revenues is paid out as basic income, the
project of providing public services there will not be affected. This is not the case in
India, where the task of creating the wherewithal for providing public services has not
even been seriously initiated.
There is a crucial role for services in eliminating the capability deprivation that is poverty.
As these services cannot always be purchased in the market, income support alone
cannot be sufficient to eliminate poverty. It is in recognition of the role of services in
enabling people to lead a productive and dignified life that the idea of multi-dimensionality
has taken hold in the thinking on poverty globally. At a minimum these services would
involve the supply of water, sanitation and housing apart from health and education.
It has been estimated that if the absence of such services is accounted for, poverty in India
would be found to be far higher than recorded at present. The budgetary implication of the
scale at which public services would have to be provided, if we are to eliminate multi-
dimensional poverty, may now be imagined. This allows us to appraise the challenge of
ending effective poverty and to assess the potential of the income-support schemes
proposed by the main political parties.
There are no short cuts to ending poverty, but ending it soon is not insurmountable either,
if we can focus more on income generation rather income support.
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Generic Drugs: A generic drug is a medication that has exactly the same active ingredient
as the brand name drug and yields the same therapeutic effect. It is the same in dosing,
safety, strength, quality, the way it works, the way it is taken, and the way it should be
used. Generic drugs do not need to contain the same inactive ingredients as the brand
name product, say colour or taste can be different.
However, a generic drug is generally marketed after the brand name drug's patent has
expired, which may take up to 20 years. So, during the protection period of 20 years, the
patent owner tries to recover its cost which it has spent on research and development and
the drug is quite costly during this time as it is produced only by the patent owner under its
brand name and others can’t manufacture and sell. After the protection period is over, any
company can sell the generic versions of the drug and there is fierce competitive which
ultimately reduces the price of the drug.
But the (Indian Patent Act 1970) patent laws provide a remedy to the high price issue of
branded drugs in the form of licenses to the generic manufacturers even during the
protection period of 20 years. This remedy is available in the form of voluntary and
compulsory licensing of the drug.
1. Voluntary License: Under this arrangement, a patent holder may give license (on its
own) to the third party to manufacture, import and distribute generic versions of the
pharmaceutical product and much more. The licensee of the patent will act as an agent of
the company. The terms in a voluntary license may set price ranges, royalty from the
distribution of the sales etc. [There is no legal provision given under Patent Act 1970 as this
license access is done through mutual contractual agreement.]
2. Compulsory License: If the patent owner is exploiting its monopoly position and not
manufacturing and supplying the branded drugs in the market or if the drug is not being
made available at a reasonably affordable price in the market then government can give
compulsory licenses in two ways:
a) If a manufacturer himself approaches the government that he can produce the drug
(generic versions) at a very cheap price, but only after the negotiation between patent
owner and manufacturer has failed for voluntary license. [Section 84 of Patent Act 1970]
b) In case of National emergency (pandemic like Covid-19) or extreme urgency, Govt. can
give notification that it will give compulsory licenses to any manufacturer who wants to
manufacture generic versions of the drug with such terms and conditions. [Section 92 of
Patent Act 1970]
But in both the cases of compulsory license mentioned above, the manufacturer (the
compulsory license holder) will have to pay royalty to the patent owner as decided by the
government. "Trade Related Aspects of Intellectual Property Rights" (TRIPS) under WTO
allows for compulsory licenses.
India can think of giving Compulsory Licenses for some Covid-19 vaccines under section 92 of
the Patent Act 1970.
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Railways are found to possess strong backward linkages (i.e. when we develop railway, it
requires iron and steel as well as engineers therefore these industries will also develop with
the growth of railways). Increasing investment in railway by Rs. 1 would increase output in
the economy by Rs. 3.3. This large multiplier has been increasing over time and the effect is
greatest on the manufacturing sector i.e. it will be good for "Make in India" also.
Further there are sectors where railway services are input to production i.e. forward
linkages (with the development of railways other industries like power plant, tourism will
also get developed where railways is used as input). A Rs. 1 push in railways will increase
the output of other sectors by about Rs. 2.5. This forward linkage effect has declined over
time but this is largely due to the capacity constraint in the railways which has led to
reliance on other modes of transport mainly road.
Combining forward and backward linkage effects suggests a very large multiplier (over 5) of
investment in railways i.e. Rs. 1 increase in railways investment would increase economy
wide output (GDP) by more than Rs. 5. (As per Economic Survey 2014-15)
Railways are a capital intensive (i.e. huge amount of funds are required for development)
sector and its growth depends heavily on availability of funds for investment in rail
infrastructure. Currently, internal revenue sources (profit generated from Indian railway)
and Govt. funding through budget are insufficient to meet the capital requirement of the
cash strapped rail sector. Increased foreign investment cap of 100% in building and
maintenance of rail infrastructure will help in bringing the required capital for the highly
congested rail infrastructure.
As Indian Railway Trains (IRTs) are public service provider of railway transport services,
there will be private trains also running on the infrastructure provided by RIC. So basically,
on RIC infra, both Govt trains (IRTs) and private trains will run.
Since both govt. and private trains will be running, it will require a "Regulatory Body",
whose role will not be merely to set tariffs, but also ensure fair competition (such as access
to track) between IRTs (govt. trains) and private train operators. The Railway ministry will
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set up broad policy and the regulatory body will implement the principles of competition
determined by the policy and the present Railway Board will become a corporate Board for
just the IRTs.
Total cost of the two corridors is Rs. 1 lakh crore and is expected to be completed by next
year. There will be centralized control of operations on the DFC and double stacking
containers will be running along these corridors. The operation and maintenance cost is
expected to be half on DFC as compared with present IR network. It has been planned to
build multimodal logistics park along the corridors to provide complete transport solutions
to the customers.
PPP in Dedicated Freight Corridor: When a section of the railway line or DFC is built on
PPP model then all the clearances and land acquisition is done by Indian railway (IR) and
design, build, construction & maintenance of the track is done by the private player.
Freight is collected by the Indian Railway (IR) and 50% of the freight of that section is given
by IR to the private party. The private party is selected through tendering process. If 50% of
the freight (which is going to the private party) is not expected to cover the full construction
and maintenance cost then the private party will ask for Viability Gap Funding (VGF) from
IR and that private party which asks for minimum funding will be selected. If 50% of the
freight is expected to cover the full construction and maintenance cost then that private
party will be selected which will give the maximum one time premium (funds) to the IR.
As per Economic Survey 2019-20, the share of transport sector in Gross Value Addition (GVA)
for 2017-18 was about 4.77% of which the share of road transport is the largest at 3.06%,
followed by the share of the Railways (0.75%), air transport (0.15%) and water transport
(0.06%).
Report of the Task Force on National Infrastructure Pipeline has projected total
infrastructure investment of Rs. 102 lakh crore (13% in rail infra) during the period FY 2020
to 2025 in India.
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(i) Engineering Procurement and Construction (EPC): The government gives the contract
only to build the road to a private contractor based on submission of the tender by the
party at the lowest cost. Private party builds the road and hands it over to the
government who then maintains the road. (It is not a PPP model)
(ii) BOT - Toll: The private party is selected to build, maintain and operate the road based
on the party submitting the tender for maximum sharing of toll revenue to the
government. In case the revenue from toll is expected to be not enough to cover the cost
of the project then the government gives one-time support in terms of upfront grant
called Viability Gap Funding (VGF) and the private party is selected based on who asks
for minimum VGF. All the traffic and commercial risk lies with the private party and the
private party is dependent on toll for its revenues. (It is a PPP model)
(iii) BOT - Annuity: The private party is selected to build, maintain and operate the road
project based on the party submitting the tender asking for minimum annual payment
from the government for the entire term of the contract. The private party recovers all
the cost of construction and maintenance of the project from the government yearly and
there is no traffic and commercial risk to the private party. Toll collection right will be of
the government and it may or may not collect toll. (It is a PPP model)
The major drawback of the annuity model is, the private party bears almost the entire cost
of the project during the initial construction period but it receives payment from the
government in equal annual installments and it takes a long time for the private party to
recover cost and become profitable. And because of this private party were becoming
reluctant to participate under the Annuity model. Hence, central government approved a
fourth model for the road sector in January 2016.
(iv) Hybrid Annuity Model: It is a mix of Annuity and EPC model. 40% of the bid project
cost shall be payable by the government to the private party during the construction
period (generally 2-3 years) linked to the physical progress of the project. Rest 60% of
the cost will be paid annually by the government after the completion of construction
i.e. during the operation and maintenance period. The benefit of hybrid annuity is that,
while the private partner continues to bear the construction and maintenance risks as
in Toll and Annuity projects, it is required only to partly bear the financing risk. (It is a
PPP model)
(v) TOT model: Under this model, bidder quoting the maximum upfront amount (to be
given to NHAI) wins the bid. The successful bidder will be responsible to collect the toll
for the lease period (generally for 30 years) and will operate and maintain the road.
NHAI is giving the public-funded highway projects through the TOT model to mobilize
funds for highway construction by transferring these operational projects on a long-
term lease basis to domestic and foreign investors. NHAI uses the upfront receivables
exclusively for funding construction of highways. (It is a PPP model)
NHAI has recently started awarding the already constructed EPC road projects (on which
NHAI was collecting the toll) to private companies on Toll – Operate – Transfer (TOT) model.
As per the National Transport Development Policy Committee Report, road transport is
approximately handling 69% and 90% of the countrywide freight and passenger traffic,
respectively.
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Why Multi Modal Logistics Parks? Multi Modal Logistics Parks are the way forward for
reducing logistics costs in India. They are expected to bring down logistics costs by serving
four functionalities - Freight aggregation and distribution, Multi Modal freight
transportation, Storage and Warehousing with modern, mechanized warehousing space
satisfying the special requirements of different commodity groups and value-added services
such as customs clearance with bonded storage yards, warehousing management services,
etc.
Developing a network of multimodal logistics parks to act as logistics hubs will address the
issues of unfavourable modal mix, inefficient fleet mix and an underdeveloped material
handling infrastructure. Logistics parks are expected to help transition from the current
situation of point-to-point freight movement to an ideal situation of hub and spoke
model of freight movement.
Challenges in logistics:
Indian logistics market suffers from higher costs due to poor quality of road and rail
infrastructure
Large number of small and unorganized players exist in road transportation, with no
industry consolidation and hence lack economies of scale
Rail freight tariffs in India are among the highest in the world
Rail freight lacks reliability and is deficient in terms of quality of operations, speed, and
customer orientation
There are inadequacies in gateway and hinterland connectivity of air freight and ports
through rail and road
There are inefficiencies and delays in loading and unloading of vessels at the ports
The Centre is reportedly planning to build 35 multi-modal logistics parks by investing more
than ₹50,000 crore.
On 20th Oct 2020, the Union Minister Nitin Gadkari laid the foundation stone for the first-
ever ‘Multi Modal Logistics Park’ in Assam at a cost of Rs. 694 crores, which will provide
direct connectivity through road, rail, air and waterways.
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So, in Feb 2015, Govt. came up with a new act, Coal Mines Special Provisions Act 2015,
where it said that now captive mines will be electronically auctioned on per tonne basis (the
company which will commit maximum rupees to govt. per tonne of coal extracted will get
the block). And it also introduced a clause for commercial mining (opposite of captive
mining) which means private companies can bid for block and can extract coal and sell in
market. But in Feb 2015, Govt. did not notify this clause. This clause was notified in Feb
2018.
Till now, Public sector undertaking Coal India Ltd. was so far the lone commercial miner in the
country for over four decades. The company accounts for 80% of India’s coal output while the
rest is met through captive mining and imports.
Impact on Economy:
This is the most ambitious reform of the coal sector since its nationalization in 1973
This move will bring efficiency and competition in coal production, attract investments
and best-in-class technology including for ‘safe and efficient mining’, and help create
more direct and indirect jobs in the sector
The new law gives highest priority to transparency, ease of doing business and ensures
that natural resources are used for national development
As the entire revenue from the auction of coal mines for sale of coal would accrue to the
coal bearing States, this methodology shall incentivize them with increased revenues
which can be utilized for the growth and development of backward areas (in the states
of West Bengal, Odisha, Jharkhand, Chattisgarh) and their inhabitants including tribals
Till now we used to spend billions of dollars of our foreign exchange reserves every year
for import of coal even if our country is endowed with the fourth largest coal reserves.
The volume growth and cost reduction from commercial coal development will reduce
imports and help in keeping import prices in check.
This reform will lead to industry consolidation and rise of large vertically-integrated
energy companies with interests in coal mining, power generation, transmission and
distribution to retail supply.
It will also help stressed power plants to attempt a turnaround/profit through better
fuel management and cheaper prices.
The utilities and manufacturing sector too will benefit from lower energy costs.
In Sept. 2020, Govt. auctioned 43 blocks (as part of Aatma Nirbhar Bharat reform package)
for commercial mining on revenue sharing basis which means that the company quoting
maximum share of the revenue to the Govt. will be selected.
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As per global practice, urban transport projects, including urban rail, are treated as public
projects which deliver public good. Therefore, appraisal of metro rail projects should entail
economic and social cost benefit analysis. Metro rail projects provide larger economic and
social benefits to the society in terms of:
The Metro Rail Policy seeks to ensure that metro projects are initiated for sound reasons.
The policy states that “the metro project can be proposed only if it is found to be more cost
effective as opposed to other mass transit projects such as tramways, light rail transit, or
bus rapid transit system (BRTS)”. The policy also states that for an integrated approach in
planning and management of urban transport, State Governments should constitute
Unified Metropolitan Transport Authority (UMTA) as a statutory body which would prepare
Comprehensive Mobility Plan for the city, organize investments in urban transport
infrastructure, establish effective coordination among various urban transport agencies etc.
Financing: The following are the various options under which a State government
implementing a Metro Rail project can avail central financial assistance.
PPP with central assistance under the Viability Gap Funding (VGF) Scheme
Grant by GoI in which 10% of the project cost will be given as lump sum central
assistance
The project will be undertaken under the equal ownership of GoI and respective State
Govt.
But in all the above cases private participation (Public Private Partnership) wherever
feasible either for complete provisioning of metro rail or for some unbundled components of
the project like implementation, operation and maintenance, fare collection etc. will form an
essential requirement for all metro rail project proposals seeking central financial
assistance.
Last Mile Connectivity (Feeder System to Metro Rail): One of the key aspects of the
policy is the last mile connectivity. Every proposal for Metro Rail should necessarily include
proposals for feeder systems that help to enlarge the catchment area of each metro station
at least to 5 kms. Last mile connectivity through pedestrian pathways, Non-Motorized
Transport infrastructure, and induction of facilities for para-transit modes will be essential
requirements for availing any central assistance for the proposed metro rail projects. State
governments will be required to commit provisioning of feeder systems for the metro rail
proposed for availing central financing assistance.
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Proposed reforms:
1. Determination of tariffs purely on costs basis without taking into account subsidies,
which would be directly paid to consumers. This could solve DISCOMs chronic cash-
flow woes, enabling them to invest in improving infrastructure and clear outstanding
dues. This should also ensure financial discipline across the value chain of the power
sector. (Most DISCOMs today are beset with operational inefficiencies and acute financial
crunch, with high Aggregate Technical and Commercial (AT&C) losses averaging around
22%).
4. Since, it is in our long term interest to promote green power and India is also a
signatory to the Paris Climate Agreement, it has been proposed to have a separate policy
for the development and promotion of generation of electricity from renewable sources of
energy.
5. Provisions have been added to facilitate and develop trade in electricity with other
countries.
The proposed reforms reflect the Government’s intent to create a robust power sector for
fuelling post-pandemic economic recovery. The proposed reforms can infuse much-needed
momentum into the power sector if properly implemented and this needs the Centre and
states to work in unison. This is an opportunity for the central and state governments to
bury political motives and cooperate in the larger national interest for a vibrant power
sector.
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There will be a uniform licensing system which will cover all hydrocarbons, i.e. oil, gas,
coal bed methane etc. under a single license and policy framework.
An 'Open Acreage Licensing Policy' (OALP) will be implemented whereby a bidder may
apply to the Govt. seeking exploration of any block not already covered by
exploration. The Govt. will examine the proposal and if it is suitable for award, Govt.
will call for competitive bids after obtaining necessary environmental and other
clearances. This will enable a faster coverage of the available geographical area.
Contracts will be based on "revenue sharing" model. Bidders will be required to quote
% of revenue share to the Govt. in their bids which will be a key parameter for selecting
the winning bid. In this model the operator will have to share the revenue with the
government from the first year of production notwithstanding the operator is making a
profit or loss. This model does not require auditing of costs incurred by the operator but
is more risky for investors as it requires sharing of the revenues with the government
from the first year itself before the operators have recovered their costs and even if they
are making losses.
The contractor will have freedom for pricing and marketing of gas produced in the
domestic market on arm’s length basis.
Advantages:
The new policy regime marks a generational shift and modernization of the oil and gas
exploration policy. It is expected to stimulate new exploration activity for oil, gas and
other hydrocarbons and eventually reduce import dependence.
It is also expected to create substantial new job opportunities in the petroleum sector.
The introduction of the concept of revenue sharing is a major step in the direction of
“minimum government maximum governance”, as it will not be necessary for the
Government to verify the costs incurred by the contractor. Marketing and pricing
freedom will further simplify the process.
These will remove the discretion in the hands of the Government, reduce disputes, avoid
opportunities for corruption, reduce administrative delays and thus stimulate growth.
As per Economic Survey 2019-20, India is the third largest energy consumer in the world
after USA and China. However, India’s oil production is one of the lowest among the major
economies of the world and has been declining over a period of time.
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Biofuels are fuels/energy derived from biomass which is basically organic material that
comes from plant and animals and it is a renewable source of energy. Biofuels can be
produced from any carbon source that can be replenished rapidly such as plant (or may be
animals).
The Goal of the Policy is to enable availability of biofuels in the market thereby increasing
its blending percentage. Currently the ethanol blending percentage in petrol is around
2.0% and biodiesel blending percentage in diesel is less than 0.1%. An indicative
target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel is
proposed by 2030. This goal is to be achieved by:
[Current blending target of bio-ethanol with petrol is 5%, which Govt. has planned to increase
it to 10% by 2022 and 20% by 2030.]
The policy encourages augmenting indigenous feedstock supplies for biofuel production
utilizing the wastelands for feedstock generation. However, depending upon availability
of domestic feedstock and blending requirement, import of feedstock for production
of bio diesel would be permitted to the extent necessary.
As the domestic biofuels availability is much lower than the Country’s requirement,
export of biofuels will not be allowed.
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But this practice was stopped in 1997 by signing a historic agreement between Govt. of
India and RBI and a scheme of ‘Ways and Means Advance’ (WMA) was started wherein govt.
can take advances to accommodate temporary mismatches in the government's receipts
and payments. So, basically direct monetization of deficit was stopped since then (1997).
[Fiscal Responsibility and Budget Management (FRBM) Act 2003 also prohibits direct
monetization of deficit but allows it in exceptional circumstances.]
And, it was also agreed that henceforth, the RBI would operate only in the secondary
market through the Open Market Operation (OMO) route. The implied understanding also
was that the RBI would use the OMO route not so much to support government borrowing
but as a liquidity instrument to manage the balance between the policy objectives of
supporting growth, checking inflation and preserving financial stability.
"Deficit Financing": It generally means that Govt. is having deficit (as expenses are more
than receipts) which can be financed from different sources like from market borrowing or
borrowing from abroad or there can also be the case that Govt may ask RBI to finance its
deficit by printing more money. (So, in deficit financing there can be various options to finance
Govt.’s deficit and one of the options could be from RBI by printing cash)
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Base Rate was introduced in July 2010 replacing the Benchmark Prime Lending Rate
(BPLR) system. Base Rate used to be the minimum rate below which Scheduled
Commercial Banks were not allowed to lend. RBI used to publish guidelines for
calculation of Base Rate and every bank used to calculate their own base rate. But the
main criteria to calculate base rate was bank’s average cost of deposits/funds.
On 1st April 2016, RBI introduced a new methodology for calculation of the Base Rates
based on marginal cost of funds rather than average cost of funds. This new
methodology is called Marginal Cost of Funds based Lending Rate (MCLR). Here the
main criteria to calculate MCLR are the new rates on deposits rather than the past
average.
When RBI reduces the repo rate, generally banks reduce their deposit rate. Earlier the
calculation of lending rate was based on average cost of deposits to the banks. So, due to
reduction in repo rate and further reduction of deposit rates by banks, the average cost of
deposits of the banks did not reduce immediately (it used to reduce in future when new
depositors used to deposit money at lower deposit rate) because still banks need to pay the
higher deposit rate to all its previous depositors. In the new method (of MCLR) banks will
calculate the lending rate based on marginal cost of deposits i.e. the new deposit rate or new
cost of deposit. So, when RBI will reduce the repo rate and banks reduce the deposit rate, the
marginal cost of deposits will get reduced and the banks will have to generally reduce the
lending rates). This was expected to help in better monetary policy transmission.
But, the transmission of policy (repo) rate changes to the lending rate of banks under the
MCLR framework was also not very satisfactory due the various reasons like:
Banks feared that they will lose the depositors/customers if they will reduce the deposit
rate first, and since deposit rate was not reduced, MCLR was also not coming down.
Government offering higher interest rates on its own small savings schemes like Kisan
Vikas Patra, Sukanya Samriddhi Scheme, PPF etc.
Hence, RBI made it mandatory for banks to link all new floating rate personal or retail
loans and floating rate loans to MSMEs to an external benchmark effective October 1,
2019. Banks can choose one of the four external benchmarks – repo rate, three-month
treasury bill yield, six-month treasury bill yield or any other benchmark interest rate
published by Financial Benchmarks India Pvt. Ltd. Banks are not mandated to link their
deposit rates with an external benchmark rate.
Now, suppose Axis Bank links its home loan rate as per following:
Here, the loan rate is linked to repo rate, which is an external benchmark, on which Axis
Bank do not have any control. So, the moment RBI changes the repo rate, it will
automatically get transmitted to the lending rate at the same moment for the new loans
(and within 3 months for the existing loans as per RBI mandate).
Banks are free to decide the components of spread and the amount of spread. But in
general, the spread consists of credit risk premium, business strategy, operational costs of
banks etc. and can be changed only after three years.
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1. ECLG scheme is a loan facility for which 100% guarantee would be provided by
National Credit Guarantee Trustee Company (NCGTC) to Banks/NBFCs/Financial
Institutions for lending to MSMEs.
2. *It will be extended in the form of additional working capital loan or term loan
facility to MSMEs/Pradhan Mantri Mudra Yojana borrowers/Self employed/
Professions who have taken loans for business purposes.
3. This facility will be available to those who have already borrowed (till 29th Feb 2020)
but have not been able to repay and their outstanding (yet to be paid) loan is less
than Rs. 50 crore and their Turnover (annual sales) is less than 250 crores. The
maximum the businessmen can borrow is up to 20% of the outstanding loan. (For
ex, if some business had borrowed Rs. 60 crore and the amount that is yet to be
repaid is Rs. 40 crores then they can borrow Rs. 8 crores (20% of Rs. 40 crore). The
scheme will be applicable from May 23rd 2020 to 31st Oct 2020 or until Rs. 3 lakh
crore has been sanctioned.
4. The scheme is a specific response to the unprecedented crisis resulting from Covid-
19, which has impacted the small business the most and thereby enabling MSMEs
to meet their operational liabilities and restart their business. The main objective of
the scheme is to provide an incentive to Banks/NBFCs/FIs to increase access to and
enable availability of additional funding facility to MSME/business borrowers.
5. The total loan that will be given through this scheme by Banks/NBFCs/FIs would be
up to Rs. 3 lakh crore. Government will pay Rs. 41,600 crore to NCGTC to provide
guarantee on loans worth maximum Rs. 3 lakh crore (as all the loans will not be
default, so Rs. 41,600 crore may be sufficient to provide guarantee for Rs. 3 lakh
crore loan). NCGTC will not charge anything from lending institutions to provide
guarantee.
6. It is a pre-approved loan (you will be asked to take loan and if u don’t want you can
opt out) and hence no processing charges and no collateral will be required from the
borrowers. It is a 100% credit guarantee scheme which means the total amount of
loan given under the scheme will be guaranteed by NCGTC.
7. The interest rate charged by Banks/NBFCs/FIs will be capped under the scheme.
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Important features:
Earlier, for the resolution of stressed assets there were different forums like High
Courts, Company Law Boards, Board for Industrial and Financial Reconstruction and
Debt Recovery Tribunals (DRT), which had overlapping jurisdictions, which gave rise to
systemic delays and complexities in the recovery/resolution process. The IBC has
overcome these challenges and has reduced the burden on the courts as all litigation is
now filed under the code before NCLT for corporate insolvency and before DRT for
individual insolvency.
The resolution process could be initiated by a corporate debtor who has defaulted on
dues or by creditors, whether financial or operational but there is a thrust on creditor
driven insolvency resolution.
Time bound (in normal cases 180 days and in complex cases 270 days) and market
linked resolution of stressed assets.
During the resolution process, management of the company passes on to resolution
professionals who will prevent any siphoning off funds or manipulation by debtors.
IBC tries for maximization of value of assets by prioritizing resolution (where the
company will continue to function) rather than liquidation (company cease to exist and
assets are sold in the market). Some business ventures will always fail, but they will be
handled rapidly and swiftly which will promote entrepreneurship, availability of credit,
and balance the interests of all stakeholders.
The code makes it easier to exit or attempt revival of a business, thereby improving the
NPA scenario for the financial services sector. Entrepreneurs and lenders will be able to
move on, instead of being bogged down with decisions taken in the past.
The IBC has provided a major stimulus to ease of doing business, enhanced investor
confidence and has given a boost to both foreign and domestic investors as they now
look at India as an attractive investment destination.
The implementation of IBC has helped in pushing economic growth higher by a few
percentage points by saving various companies from premature death.
Performance:
The success of the IBC is not just in numbers, rather its performance lies in the
behavioral change of the companies (debtors). Credible threat of the IBC process that a
company may change hands has changed the behaviour of the debtors. Thousands of
debtors are settling defaults in early stages of the life cycle of a distressed asset.
190 companies have been rescued till Dec 2019 through resolution plans under IBC.
They owed Rs. 3.8 lakh crore to creditors but the realizable value of the assets available
with them, when they entered the IBC process, was only Rs. 0.77 lakh crore. Creditors
recovered Rs 1.6 lakh crore, which is 207 per cent of the realizable value of assets of the
companies. Any other option of recovery or liquidation would have recovered at best 100
per cent of the realizable value i.e. Rs. 0.77 lakh crore.
Challenges:
Out of all the cases admitted to NCLT under IBC, only 15% ended in Resolution and rest
went for Liquidation
Very few benches of NCLT to admit the insolvency cases, resulting in delay in resolution
Cross border insolvency has not yet been implemented
Comment: The code aims at early identification of financial failure and maximizing the
asset value of insolvent firms. The Code is thus a comprehensive and systemic reform,
which will give a quantum leap to the functioning of the credit market. It would take India
from among relatively weak insolvency regimes to becoming one of the world's best
insolvency regimes giving a big boost to ease of doing business in India.
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“Even if government gives its management control in a PSU to another PSU (rather than a
private partner), it is also considered as strategic disinvestment”. For example, government
has transferred 100% of its ownership and management control in NEEPCO to NTPC and it is
considered as strategic disinvestment of NEEPCO.
As governments spend more than they earn through taxes and other sources, additional
income from the sale of stakes is always welcome especially for a developing economy as
government needs to spend higher amounts on infrastructure to boost economic
growth, along with its commitments on health and education.
But disinvestment/ strategic disinvestment is like selling the family silver/gold and in future
nothing will be left to sell and cushion the fiscal deficit or financial difficulties.
It gives revenue to government (capital account receipts in budget) and helps in meeting
fiscal deficit targets
Even if a PSU is profitable, it may not be profitable because it is more efficient. It can be
profitable because it has a monopoly presence and private companies are not allowed in
that sector. If government will privatize the PSU and allow other private companies then
prices will come down and consumers will benefit.
Example: Govt. of India in 1973 said that, in India only Govt. will produce and sell coal
through its PSU “Coal India Ltd. (CIL)”. No private company can sell coal. All the blocks
were given to CIL and CIL extracts coal and supplies to govt. and private power plants.
The price is decided by the govt. but the question is how? And the answer is, whatever
is the cost of coal extraction, Govt. on top of it puts some profit margin and fixes the
price and then it asks CIL to sell coal at that price. Now if the price is fixed on top of
cost of production and no private player exists then the PSU will always be profitable.
That is why, “CIL is one of the biggest coal company in the world, one of the most
profitable coal company and one of the most inefficient company coal company in the
world”
As per the new policy of 2019, Department of Investment and Public Asset Management
(DIPAM) and NITI Aayog jointly identify PSUs for strategic disinvestment and then it is
approved by CCEA.
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But the endeavour should be to first clean up the balance-sheets of PSBs. Over the next 2
to 3 years, managerial energies should focus resolutely on addressing the NPA problem
while, at the same time, also concentrate on building and nurturing talent in both old and
new areas. Consolidation can wait till the NPA situation gets better. Otherwise, mergers will
only end up diverting the energy of the top management from addressing the crucial NPA
issue, and the gains of consolidation may prove elusive.
Pros:
Merged banks are labour cost efficient relative to their smaller counterparts as the
former can reap the benefits of economies of scale
It will lead to better synergy, optimum utilization of resources, leading to reduced
borrowing rates and hence more competitive (Post-merger of SBI with its associates,
about 1,500 branches were shut because of duplication)
It will bring operating efficiencies over time by lowering combined operating and funding
costs while strengthening risk management practices
Healthy banks taking over weak banks will also help in handling the bad loan crisis
(just merging will not lead to reduction in absolute value of bad loan)
The country needs few large public sector banks, and several small banks to pursue
the path of financial inclusion and spur credit growth. These well managed public
sector banks can bear the mantle of rural banking and inclusive finance which cannot
be entrusted upon their more profit-minded private peers.
Cons:
Merger of banks may lead to ‘too-big-to-fail’ banks. Currently, we have one large bank
State Bank of India. If we create a large number of merged entities, it will lead to the
real problem in terms of concentration of risks
Many employees would fear job loss and disparities in the form of regional allegiances,
benefits, reduced promotional avenues, etc. and may lead to lower morale and create
problems which could come in the way of success of the merged entity
Harmonization and integration of technology will be a challenge as various banks are
currently operating on different technology platforms
Bank consolidation, if properly leveraged, can confer significant benefits to the economy.
But along with consolidation, government should also focus on improving and overhauling
governance and HR practices and credit appraisal processes for a long-term solution to the
PSU banking malaise. Consolidation should be a well thought out strategy, by looking at
synergies and assessing the likely costs and benefits, so that post-merger, there is a distinct
improvement in the balance sheet of banks.
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India began its financial inclusion journey as early as in 1956 with the nationalization of
Life Insurance companies. This was followed by nationalization of banks in 1969 and 1980.
The general insurance companies were nationalized in 1972. With a view to bring the rural
areas in the economic mainstream; Indira Gandhi government established Regional Rural
Banks (RRB) in 1975. A host of initiatives have been under taken over the years in the
financial inclusion domain. In August 2014, Pradhan Mantri Jan Dhan Yojana (PMJDY)
was launched to eradicate the financial untouchability from the country. Through this
scheme, financial inclusion of every individual who does not have a bank account is to be
achieved. Total around 37.87 crore accounts have been opened under PMJDY till January
2020.
Continuing its financial inclusion drives, RBI has announced a “National Strategy for
Financial Inclusion (NSFI)” for India 2019-2024. The NSFI sets forth the vision and key
objectives of the financial inclusion policies in India to help expand and sustain the
financial inclusion process at the national level through a broad convergence of action
involving all the stakeholders in the financial sector. The strategy aims to provide access to
formal financial services in an affordable manner, broadening & deepening financial
inclusion and promoting financial literacy & consumer protection.
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Accordingly, RBI published guidelines on 31st Dec 2019, as per which, the BoD of UCBs
with deposit size of Rs. 100 crore and above, shall constitute Board of Management (BoM).
It shall be mandatory for such banks to constitute BoM for seeking approval to expand their
area of operation and/or open new branches. These UCBs will also require prior approval of
RBI for appointment of their CEOs. UCBs with a deposit size less than Rs. 100 crore are
exempted from constituting BoM although they are encouraged to do so voluntarily. The
BoM shall report to the BoD and shall exercise oversight over the banking related functions
of the UCBs, assist the BoD on formulation of policies and any other related matter
specifically delegated to it by the BoD for proper functioning of the bank. The BoD will
continue to be the apex policy setting body and shall continue to be responsible for the
general direction and control of a UCB. It will continue to look after all the administrative
functions as spelt out in the respective Co-operative Societies Acts.
Recently the Banking Regulation Act 1949 was amended to introduce the following
reforms in cooperative banks:
1. With prior approval of RBI, cooperative banks can issue (either through public or private
placement)
Shares/equity
Bonds or unsecured debentures or any other security with maturity of not less than
10 years
3. RBI can supersede the management of the Urban Cooperative Banks (UCB), State
Cooperative Banks (StCB) and District Central Cooperative Banks (DCCB) if RBI feels
that the affairs of the bank are conducted in a manner detrimental to the interest of the
depositors. (Earlier this was applicable only for UCBs but now through the amendment
2020, StCB and DCCB have also been included)
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Favour
Research suggests that countries with independent fiscal councils tend to produce
relatively more accurate budget forecasts and stick better to fiscal rules. While most of
the fiscal council projections are not biding but are able to discipline lawmakers
through ‘comply or explain’ obligations ultimately resulting in better fiscal
performances.
Fiscal Council will give an independent and expert assessment of the government’s
fiscal stance, and thereby aid an informed debate in Parliament.
We have CAG, but it audits the accounts once government has done with the
expenditures and it has no role in forecasting and verifying the sustainability of the
budget numbers.
According to IMF, about 50 countries around the world have established fiscal councils
with varying degrees of success.
Against
As of now, both the NSO and the RBI give forecasts of growth and other macroeconomic
variables, as do a host of public, private and international agencies. Why should there
be a presumption that the fiscal council’s forecasts are any more credible or robust than
others? Why not leave it to the Finance Ministry to do its homework and defend its
numbers rather than forcing it to privilege the estimates of one specific agency? Besides,
forcing the Finance Ministry to use someone else’s estimates will dilute its
accountability. If the estimates go awry, it will simply shift the blame to the fiscal
council.
As per FRBM Act 2003, Government is required to submit to Parliament a ‘Fiscal Policy
Strategy Statement’ (FPSS) to demonstrate the credibility of its fiscal stance for the
coming year. Yet, seldom have we heard an in-depth discussion in Parliament on the
government’s fiscal stance. If the problem clearly is lack of demand for accountability,
how will another instrumentality such as a fiscal council for supply of accountability be
a solution?
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Now suppose there are 5 lakh such cases, out of which Govt. may pick randomly 50,000
cases for review/assessment (as all cannot be reviewed because of resource constraint). So,
Govt. will send notice and you will have to give clarifications. And Govt. may scrutinize such
cases in quite detail and if some wrong doings were found, you may be penalized.
1. Faceless Assessment: Earlier (before e-assessment scheme was launched), these cases
were selected by tax officials and there used to be face to face meetings between tax
officials and taxpayers and where taxpayers were used to be harassed. But now all such
cases will be randomly picked by computer and no face to face grilling would happen
but only through electronic mode of communication. So, this will improve transparency
and efficiency, and governance and thus improves the quality of assessment and
monitoring.
2. Faceless Appeal: In case a taxpayer files appeal against any assessment by the tax
authority.
Appeals to be randomly allotted to any officer in the country
The identification of the officers deciding appeal will remain unknown
The tax payer will not be required to visit the income tax office or the officer
The appellate decision will be team-based and reviewed
Income Tax Act 1961 has been amended to introduce faceless assessment and faceless
appeal.
3. Taxpayers’ Charter is a two-way document for the assessor (Govt.) and the assessee
(taxpayer). Through this document, the government has committed the following to the
taxpayers:
To provide fair, courteous, and reasonable treatment
Treat taxpayer as honest
To provide mechanism for appeal and review
To provide complete and accurate information
To provide timely decisions
To collect the correct amount of tax
To respect privacy of taxpayers
To maintain confidentiality
To hold its authorities accountable
To enable representative of choice
To provide mechanism to lodge complaint and provide a fair and just system
To publish service standards and report periodically
To reduce cost of compliance
The Taxpayers' Charter also highlights the obligations of the taxpayer. These are as follows:
To be honest, informed and compliant
To keep accurate records
To know what your representative does on your behalf
To respond in time and to pay in time
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Insurance Brokers represent the customer, and are licensed to give you policies from any
insurance company. They can provide expert advice on the insurance policies suitable to
you and are paid a brokerage by the company whose policy you finally choose. Government
has allowed 100% FDI in insurance intermediaries/brokers in Feb 2020.
Insurance Sector in India: The Indian insurance market is currently dominated by Life
Insurance Corporation (PSU), which captures nearly 75% of the market. Raising the foreign
investment limit to 49% is expected to generate inflows of $6-8 billion in the insurance
sector that is looking for growth capital.
The Indian insurance industry has evolved significantly over the past decade or so, but the
insurance penetration and insurance density levels are significantly lower than the
developed as well as comparable developing countries. The under-penetration is due to lack
of overall financial awareness, lack of understanding of insurance products, low perceived
benefits, and propensity to purchase insurance based on reactive drivers such as insistence
by financers, statutory requirements, etc.
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