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Important Questions : ECONOMIC SURVEY 2016-17

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Hi Aspirants,

We have come up with some Important Questions from ECONOMIC SURVEY 2016-17. Hope it helps 🙂


List of Questions: Economic survey summary 2016-2017


Chapter 2: The Economic Vision for Precocious, Cleavaged India


1) India is a “precocious” and a “cleavaged” democracy. Discuss the above statement in the context of the “remarkable” economic growth witnessed in India based on “Washington Consensus”.

2) Is redistribution an answer to the “cleavage” that has emerged out of the economic reforms undertaken in India post 1991? How has redistribution worked in India so far? Analyze.

3) While the Indian economy has gained in robustness in the post reforms period, the Indian Sate has remained weak in its capacity. Discuss.


Chapter 3: Demonetization: To Deify or Demonize?


1) What do you understand by the term “Demonitization”? What are the factors that have led to the implementation of Demonitization? Discuss its long term and short termimplications.

2) Demonetisation is the culmination of a series of steps taken to curb black money in the economy. Explain.

3) “Digitization is not a panacea against black money”. Analyze.

4) Examine the impediments, the recent initiatives and the way forward for digitization of economy in India.


Chapter 4: The Festering Twin Balance Sheet Problem


1) What is the “Twin Balance Sheet “problem? What are the reasons that have given rise to this problem in the Indian economy? Discuss its implications.

2) What are Non-Performing-Assets (NPA’s)? Discuss the various initiatives undertaken to tackle the problem of increasing Non-Performing-Assets (NPA’s) in the Indian banking sector.


Chapter 5: Fiscal Framework: The World is Changing, Should India Change Too?


1) Discuss the importance of a fiscal policy. Analyse the impact of fiscal policy in India and make suggestions for the future.


Chapter 6- Fiscal Rules: Lessons from the States


1) Discuss how Fiscal Responsibility Legislations (FRL’s) have brought about some degree of fiscal discipline in the states. Also, discuss the various external factors that have contributed in improvement in fiscalmanagement of states.


Chapter 7: Clothes and Shoes: Can India Reclaim Low Skill Manufacturing?


1) The Apparel and Leather sectors generally have the potential to create low skilled jobs required in India. However, various impediments have ensured underperformance of these sectors in India. Discuss.

2) Discuss the various initiatives and measures undertaken by the government for promotion of apparel and leather sectors in India.


About ECONOMIC SURVEY 2016-17

Economic Survey 2016–17 reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. This document is presented to both houses of Parliament during the Budget Session.


Economic Survey 2016-17 summary is very important for UPSC Civil Services Exam Preparation.


Download Summary of Economic Survey 2016-17 Here

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ECONOMIC SURVEY 2016-17 Summary Chapter 14 – From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos


economic survey 2017


Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 14 – From Competitive Federalism to Competitive Sub-Federalism: Cities as Dynamos


Introduction

India, urbanisation is rapidly on the rise. As recently as 1991, there were only 220 million Indians living in cities, equivalent to about one-quarter of the population.

By 2011, there were no less than 380 million, living in around 8,000 cities/towns, at least 53 of which were home to over 1 million people.

Urban Indians now form about one-third of the population – and they produce more than three-fifths of the country’s GDP.

Cities that are entrusted with responsibilities, empowered with resources, and encumbered by accountability can become effective vehicles for unleashing dynamism so that to competitive federalism India can add, and rely on, competitive sub-federalism.

Background

Contrary to perception, India’s urbanisation rate appears to have been similar to that in other countries. Countries have followed a pattern of urbanisation where the level of urbanization has increased with the per capita GDP.

Contrary to perception, India and China have had very similar trends of urbanization.

In India many of the smaller cities are unusually small. And contrary to what one might think, so are the bigger ones. There are many reasons why the large cities are unusually small.

  • One explanation might be that their infrastructure is overburdened.
  • Another is that India is land-scarce relative to most countries, discouraging migration particularly because distorted land markets render rents unaffordable.
  • By 2050, its land-to-population ratio will have declined fourfold relative to 1960, and India will be among the most land-scarce countries in the world.
  • Further mobility in India is limited by strong place-based preferences embedded in deep social networks in India.

India’s urbanisation rate should begin to converge with those in similar emerging markets, rising to 40 per cent by 2030. And much of this urban growth is likely to take place in the bigger cities. This will create opportunities – and risks.

Key Challenges

  • Urban local bodies (ULBs) face major and inextricably linked problems: poor governance capacities, large infrastructure deficits and inadequate finances.
  • ULBs face a governance challenge.
  • Cities do not have a single city government or a local self-government, leading to functional overlap.
  • There is a significant fragmentation of responsibilities and service delivery across a gamut of institutions
  • The second challenge is the infrastructure deficit.
  • Addressing this infrastructure deficit will require resources, some of which could come from the Centre and the states.
  • The Fourteenth Finance Commission (FFC) has recommended a grant of around $ 87,000 crore to the municipalities for the period 2015-20, but raising sufficient resources has not proved easy.
  • The 74th Constitutional Amendment Act of 1992 leaves it to the discretion of state legislatures to devolve finances so that ULBs can fulfil these functions.
  • ULBs by and large have not been able to levy adequate user charges to cover even the operation and maintenance costs.
  • Issuing municipal bonds has been challenging owing to the poor state of ULB finances and governance.
  • As a result of these challenges, cities face grave difficulties in securing sufficient revenues.

Lessons from Across India

According to the data provided by Janaagraha Centre for Citizenship and Democracy, Bengaluru, and the 2011 Census, we can now examine the links between service delivery and fiscal strength, with the latter measured in four different ways.

Greater service delivery is correlated with more:

  1. Staffing
  2. Capital expenditure per capita
  3. Resources
  4. Own revenue

The correlation is especially strong with staffing and expenditures. A clear conclusion is that more resources seem to be associated with better outcomes.

In contrast, it is difficult to find a relationship between service delivery and governance.

  • On the other hand there is actually a negative relationship between having a directly elected Mayor and the availability of services.
  • There also does not seem to be a strong correlation between mayoral tenure and outcomes.
  • One possible reason could be that a directly elected Mayor can function effectively only if he/she has the support of majority members of the municipal council, which is not always the case.
  • Considering this fact, two state governments namely, Rajasthan and Tamil Nadu, have amended their respective municipal act to provide for indirect mayoral elections.

Mobilizing Resources

  • One striking correlation (or its absence) is between formal taxation powers and actual mobilisation of resources.
  • ULBs like Mumbai and Pune even with low scores on taxation powers do very well in own revenue while, at the same time, ULBs like Kanpur, Dehradun etc. even with relatively higher taxation powers perform badly in terms of own revenue.
  • At first, this may seem counter-intuitive, which, at closer inspection would reveal that it is not the case.
  • This is because having the powers to impose a greater number of taxes do not necessarily mean greater revenues for an ULB.
  • Many other factors are important for being able to collect greater revenues such as the size of the tax base, the efficiency in tax collection and the level of economic activity in the city area.
  • Perhaps the greatest immediate scope for revenue comes from the property tax. Property tax as a share of own revenue is above 50 per cent in Kanpur and Lucknow, but it is less than 15 per cent in Bhopal and Ranchi. So, the problem is not necessarily that ULBs cannot raise resources because they are prevented from doing so.
  • The major factors contributing to poor realisation from property tax are the poor assessment rate, weak collection efficiency, flawed methods for property valuation, loss on account of exemptions, and poor enforcement.

Conclusion

Urbanisation will pose considerable challenges for municipalities over the coming decades. But these challenges can be – indeed, must be – overcome, and the analysis in this chapter points to some priority areas.

The first task is empowering ULBs financially.

  • The analysis shows that municipalities that have generated more resources have been able to deliver more basic services. The
  • states should, therefore, empower cities to levy all feasible taxes.
  • Municipalities also need to make the most of their existing tax bases. There is a need to adopt the latest satellite based techniques to map urban properties. The Government should leverage the Indian Space Research Organization (ISRO)/ National Remote Sensing Agency (NRSA) to assist ULBs in implementing GIS mapping of all properties in the area of a ULB. Property tax potential is large and can be tapped to generate additional revenue at city level.
  • It is true but tiresome to repeat that ULBs need to be empowered but the political economy challenges—higher level bodies (state governments) needing to cede power and sharing resources–are daunting. The big question here is whether Finance Commissions should take cognizance of this political economy challenge identified by Professor Chelliah and allocate even more resources to ULBs or whether to respect the sovereignty of states and hope that they will themselves be forthcoming in decentralizing down – fiscally and goverancewise – commensurate with the needs of urbanisation.

Finally, data and transparency can play an important role here.

  • MoUD should give greater priority to compile and publish comprehensive data on ULBs and urban sector. Perhaps, grants to ULBs should be more tightly linked to comprehensive and updated data disclosure and transparency by ULBs.
  • NITI Aayog should compile comparative indices of municipalities’ performance annually based on the actual accountability and administrative capacity to deliver the core public services.

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ECONOMIC SURVEY 2016-17 Summary Chapter 13 – The ‘Other Indias’: Two Analytical Narratives on States’ Development


economic survey 2017


Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 13 – The ‘Other India’: Two Analytical Narratives on States’ Development


Overview:

This chapter looks into

  • If the problems associated with foreign aid and natural resources internationally also cause issues in the Indian states.
  • If the redistributive resource transfers (RRT) from the Centre and revenue from natural resources for Indian states produce state outcomes, including per capita consumption, GDP growth, development of manufacturing, own tax revenue effort, and institutional quality.
  • Can RRT be tied to fiscal and governance efforts of the states as provided for by the Thirteenth Finance Commission?
  • Can a universal basic income (UBI) be provided directly to households in states receiving large RRT and reliant on natural resource revenues?

Introduction:

The Indian growth take-off since 1980 is associated with Peninsular India, the states of Gujarat, Maharashtra, Tamil Nadu, Karnataka, Kerala, and Andhra Pradesh—which have grown faster and advanced more rapidly economically when compared to the so called ‘Other Indias’ the states including not just hinterland India, but also the India of forests, of natural resources, and states with ‘Special Category’ status.

The success of Peninsular Indian states has offered three interesting and different models of development:

  • The traditional East Asian mode of escape from development based on manufacturing (Gujarat and Tamil Nadu);
  • The remittance-reliant mode of development exemplified by Kerala;
  • The distinctive, “Precocious India” model based on specializing in skilled services (Karnataka, Andhra Pradesh and Tamil Nadu)

Other states have been relatively less successful, but they are interesting in their own right because they have conformed to other models of development. This chapter studies two such models of development:

  • Those based on “aid” or special status,( North-eastern states and Jammu and Kashmir and Himachal Pradesh)
  • Those based on natural resources. (Jharkhand, Chhattisgarh, Odisha, and Rajasthan.)

The definition of natural resources includes coal, onshore oil and natural gas, major and minor minerals but excludes forest cover.

This chapter examines in an analytical manner the experience of these states.

Impact of Redistributive Resources

  • At the time of India’s independence, most economists held that developing countries were poor because they lacked capital, so the key to development was foreign aid.
  • There was only one possible exception to this rule- countries with vast amounts of mineral resources could mine and sell them, allowing the proceeds to be invested in physical or human capital
  • India was never completely convinced of this paradigm. For many years, it accepted aid, but tried to rely on its resources as much as possible, with the aim of winding down its aid dependence as quickly as possible.

This strategy has proved successful for us.

Why Aid doesn’t work?

  • Aid perpetuates resource dependency, recipient countries may fail to develop their own tax bases or their institutions more generally.
  • And it is institutions, tax revenues, and incentives that have been found to be critical for growth, much more than overall resource availability.
  • Another potential downside of aid is that it could trigger “Dutch disease”, named after the impact that discovery of natural gas in the North Sea had on the domestic economy in the Netherlands.
  • This windfall caused the real exchange rate to appreciate as the extra income was spent domestically, pushing up the price of non-tradables, such as services geared to the local economy.
  • The higher prices for services then eroded profitability in export and import-competing industries, de-industrialising the economy, with the share of manufacturing in the economy falling.
  • Similar effects have occurred in Canada, Australia, Russia, and Africa.

Despite these international examples and the lessons of India’s own experience with foreign aid, it has provided extensive transfers to certain poorer states in an attempt to spur their development.

What is “aid” in the Indian internal context?

State governments up to now have received funds from the Centre via different channels:

  • a share of central taxes, as stipulated by Finance Commissions;
  • plan and  non- plan grants;
  • Plan and non-plan loans and advances.

These funds constitute “gross devolution to states”.

The ‘Special Category’ states have been heavily dependent on such flows for their developmental needs vis-à-vis other states. However, redistributed resources from the Centre differ from traditional “aid” in two important aspects.

  • These are intra-country transfers and do not increase overall national disposable income like foreign aid does;
  • The donor- recipient relationship is also very different because states benefiting from transfers are part of national governance structures that determine them.

So this chapter utilizes the concept of ‘Redistributive Resource Transfers’ (RRT) instead of ‘aid’.

RRT to a state is defined as gross devolution to the state adjusted for the respective state’s share in aggregate gross domestic product.

In the descending order of RRT received in per capita terms and also per-capita gross devolution. The top 10 recipients are: Sikkim, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Meghalaya, Tripura, Jammu and Kashmir, Himachal Pradesh and Assam (all ‘Special Category’ states).

Has RRT helped states perform better?

  • The results are striking. The higher the RRT:
  • The slower is growth.
  • The smaller is the share of manufacturing in GSDP.
  • The lower is own tax revenues.

What about the quality of overall governance?

  • Transmission and distribution (T&D) losses in the distribution of power is used as an indicator of governance.
  • Such losses reflect the quality of both infrastructure and institutions in a given state.
  • Again it emerges that the highest RRT recipient states have lagged behind on overall governance. In the northeast Mizoram stands out as a significantly better performer.


What are the causes behind this?

  • After all, poor performance is not necessarily the consequence of RRT.

Impact of natural resources

Initially, economists saw natural resources as a way out of the low saving-low capital development trap. But with the benefit of hindsight it has become clear that economies with abundant natural resources have actually tended to grow less rapidly than resource- scarce economies. (Economists call it Resource curse)

Three possible channels of causation have been identified.

  • First, the exploitation of natural resources generates rents, which lead to rapacious rent-seeking (the voracity effect) and increased corruption.
  • Second, natural resource ownership exposes countries to commodity price volatility, which can destabilise GDP growth.
  • Finally, natural resource ownership – like foreign aid — makes countries susceptible to “Dutch Disease”.

Natural resources and Evidence from Indian States

  1. The value of minerals is the sum total of fuels (coal, lignite, crude petroleum and natural gas), all metallic minerals, non-metallic minerals as well as other minor minerals.
  • As per this definition the mineral resource rich states are: Jharkhand, Chhattisgarh, Odisha, Rajasthan and Gujarat.
  • One way to assess the impact of natural resource availability is to estimate whether populations in mineral rich areas have emerged out of poverty better than other areas.
  • The Scheduled Tribes (ST) population of the mineral-rich states, which actually forms the predominant population in these areas, saw only a 17 % point decline in poverty, when compared to 22 % point’s fall in the other states.

Figure 1 Per-capita value of minerals 

  • It is clear those resource-rich states, especially Jharkhand, Chhattisgarh and Odisha (with the exception of Gujarat) are at low levels of per-capita GSDP, with low levels of monthly per-capita expenditure.
  • Another important indicator  of  the  same  will  be  a decline  in  the  share  of  manufacturing  in GSDP (the “Dutch disease”). The relationship between the value of resources and the average share of manufacturing to GSDP is observed that the relationship is weak.
  • This implies that the resource rich states need to bolster efforts to counter any possible downsides of a “resource curse” that may emerge in the future. 
  • As is clear from the diagrams above, despite significant resource endowments, some states, most prominently Gujarat has performed better than average on many indicators.

Infrastructure and Connectivity:

  • It is, of course, possible, that the “RRT curse” and “natural resource curse” could be a result of poor connectivity in particular and poor infrastructure – physical, financial, and digital- in general that most of these states suffer from.
  • This is clearly true of the north-east but also true of many parts of resource-rich India.

POLICY RECOMMENDATIONS

  1. Enhancing connectivity 
  1. Physical – on a war footing (as the government has attempted for financial inclusion with the PradhanMantri Jan DhanYojana (PMJDY), expediting the optical fibre network, etc.) will have a moderating effect.
  2. The answer cannot be to remove RRT altogether, since in a federal system the Centre must play a redistributive role: it will always have to redirect resources to under-developed states.
  3. The centre will need to find ways of ensuring that the resources it redistributes are used more productively by following measure:-
  4. Redirecting flows to households: One possibility would be to redirect a certain portion of RRT and channel the resources directly to households as part of a Universal Basic Income (UBI) scheme as transfers directly to households could eliminate some of these problems.
  5. Conditioning transfers on fiscal performance: In which higher resource flow leads states to relax their own tax effort. We could revert to the practice of the 13th FC of conditioning transfers on the tax effort of states; in fact the weightage could be even greater than suggested by the 13th FC.
  6. Making governance- contingent transfers: Given that some high RRT recipient states have performed better than others, it is possible that the capacity of states to utilize funds optimally plays an important role. To encourage better governance and sound institutional practices, the fund transfer mechanism could explicitly include a few monitor-able institutional indicators as criteria for receiving transfers.
  7. Natural Resource Revenues
  8. Improve governance, to ensure a more productive use of the resources, especially in the states that are relying so heavily on them.
  9. The structure of revenue administration as it stands today is such that the government receives royalty from the mining of mineral resources. Robust mechanisms of citizen engagement will act as a constraint on large scale corruption and over-exploitation of resources.
  10. With the intention of ensuring that the revenue from minerals are utilized for the development and welfare of the citizens of the concerned states, the Mines and Minerals (Development and Regulation) Amendment Act, 2015 included the following in the Act:
    • Establishment of a trust, to be called the District Mineral Foundation (DMF) for districts affected by mining related operations.
    • The composition and functions of DMF are to be prescribed by the respective State governments. The foundation shall work for the benefit and interest of persons affected by mining related operations.
  11. One way to increase citizens’ participation is via creation of a dedicated Fund to which all mining revenue must be put into. The assumption here is that minerals are part of the commons, owned by the state as trustee for the people – including future generations. Therefore, the revenue from the natural resources should be saved in a non-wasting asset- in a Permanent Fund.
  12. The real income accrued by the Fund can be redistributed to citizens affected by and having a stake in the extraction of the resource.


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ECONOMIC SURVEY 2016-17 Summary Chapter 12 – India on the Move and Churning: New Evidence


economic survey 2017


Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 12 – India on the Move and Churning: New Evidence


Introduction

  • From ages, the people migrate for work and education and this has brought about structural transformation of economies of countries by distribution of surplus labour from low productive agriculture activity to high productive manufacturing or service sectors.
  • This kind of migration results in remittance flows and the remittances increase the household spending in the less-developed receiving regions. There by decreasing the inequalities
  • Ex: In China, high economic growth rates have been accompanied by mass migration from the rural hinterlands to urban hotspots, mainly along the coast.
  • It was earlier held that the internal migration in India is low (around 33 million) based on 2001 Census, and as not increasing very rapidly. But new methodologies used by economic researchers suggest the contrary evidence that India is on the move, and labour flows are increasing rapidly.

How are the new methodologies used?

  • Cohort-based Migration Metric (CMM) is developed to gauge net migration at the state and district level- which showsless affluent state see more people migrating out while the most affluent states are the largest recipients of migrants.
  • Migration is accelerating- The annual rate of growth of labour migrants nearly doubled to 4.5 per cent per annum in 2001-11 from 2.4 per cent in 1991- 2001.
  • Indians are increasingly on the move – the first-ever estimates of internal work-related migration indicate an annual average flow of close to 9 million people between the states.


What are the important findings of the new study methodologies?

Railway passenger data based migration metric-
Monthly data was obtained from the Ministry of Railways on unreserved passenger traffic between every pair of stations in India for the years 2011-2016;

  • The key idea is to use net annual flows of unreserved passenger travel as a proxy for work-related migrant flow. This class of travel serves less affluent people, who are more likely to travel for work-related reasons.
  • This acceleration has been accompanied by the surge of the economy.
  • Internal political borders impede the flow of people but language does not seem to be a demonstrable barrier to the flow of people.
  • Based on gravity model the labour migrant flows within states are 4 times the labour migrant flows across states, even when the neighbouring district is nearer.
  • A breakdown by gender reveals that the acceleration of migration was more for females.
  • In the 1990s female migration was low, and migrants were shrinking as a share of the female workforce.
  • But in the 2000s the picture turned around completely: female migration for work not only grew far more rapidly than the female workforce, but increased at nearly twice the rate of male migration.
  • Internal migration rates have dipped in Maharashtra and surged in Tamil Nadu, Karnataka and Kerala reflecting the growing pull of southern states in India’s migration dynamics.
  • Out-migration rates increased in Madhya Pradesh, Bihar and Uttar Pradesh.
  • Strong positive relationship between the CMM scores and per capita incomes at the state level.
  • Relatively less developed states such as Bihar and Uttar Pradesh have high net out- migration.
  • Relatively more developed states take positive CMM values reflecting net in- migration: Goa, Delhi, Maharashtra, Gujarat, Tamil Nadu, Kerala and Karnataka.
  • Districts with high net in-migration tend to be city-districts such as Gurugram, Delhi and Mumbai.
  • Districts with high net out- migration are located in the major sending states such as Uttar Pradesh and Bihar.

Figure 1- Average Net Flows at State Level

economic survey ias upsc exam   

Source: Survey Calculations


Figure 1 shows the net flows for the 26 states. Positive (negative) numbers denote in (out)-migration.

  • The largest recipient was the Delhi region, which accounted for more than half of migration in 2015-16.
  • Uttar Pradesh and Bihar taken together account for half of total out-migrants.
  • Maharashtra, Goa and Tamil Nadu had major net in-migration, while Jharkhand and Madhya Pradesh had major net out-migration.
  • India as a whole the annual net flows amount to about 1 per cent of the working age population.  Gravity model for migration

If these are the conclusions, let us find out answers for some questions that may arise from this.

Are these data points verifiable?

  • These data points agree with the Gravity model of Migration.
  • This model is an empirical observation which finds that the migrant/passenger flows between two geographies is directly proportional to the level of economic activity/population of these two geographies and inversely proportional to some measure of physical distance between the two geographies.

What is border-effect on Migration within the country?

  • ‘Border effect’ in the migration, refers to migrant flows between states are lower than flows within states.
  • The estimates suggest that on average flows within states are around four times the flows across states. This coefficient varies between 8 and 2.8 for same-state neighbouring districts vs. same state non- neighbouring districts.

Why is there no language effect on migration within the country?

  • There is little evidence that language is a barrier to the migration flows. When similar analyses are done internationally there is a strong language effect, namely that countries with a common language see larger migrant flows.
  • In trade, the common language effect is estimated to be about 16 to 30 per cent more than countries that do not.
  • But within India, in both trade and labour flows, language doesn’t seem to matter.
  • For example, flows from Gujarat to Tamil Nadu are about 7 lakhs annually. And southern states which don’t speak Hindi much seem to attract more in-migration that other Hindi-belt states.

Conclusion

Dr Ambedkar once said, “An India on the move is an India of churn.”

  • These new estimates, showing that migration within India is between 5 and 9 million annually, indicate that labour mobility in India is much higher than previously estimated.
  • This study predicts an increasing rate of growth of migrants over the years. The numbers show that internal migration has been rising over time, nearly doubling in the 2000s relative to the 1990s.
  • One plausible hypothesis for this acceleration is that the rewards (in the form of prospective income and employment opportunities) have become greater than the costs and risks that migration entails.
  • Higher growth and a multitude of economic opportunities could therefore have been the catalyst for such an acceleration of migration.

This acceleration despite problems like domicile provisions for working in different states, lack of portability of benefits, legal and other entitlements upon relocation.

To sustain this churn, however, these policy hurdles have to be overcome by the following measures:-

  • Portability of food security benefits, healthcare, and a basic social security framework for the migrant are crucial – potentially through an interstate self-registration process.
  • While there do currently exist multiple schemes that address migrant welfare, they are implemented at the state level, and hence require inter-state coordination of fiscal costs of migration.
  • The domestic remittances market, exceeds Rs. 1.5 lakh crores growing at an annual rate of 15% p.a, it can also be leveraged to enhance financial inclusion for migrant workers and their families in the source region.

Such measures would vastly enhance the welfare gains of migration and encourage even greater integration of labour markets in India.


 

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ECONOMIC SURVEY 2016-17 Summary Chapter 11 – One Economic India: For Goods and in the Eyes of the Constitution


economic survey 2017


Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 11 – One Economic India: For Goods and in the Eyes of the Constitution


On the basis of a new “Big Data” set available from the Goods and Service Tax Network (GSTN- invoice level data on interstate movement of goods), it seems (Contrary to perception) that India is highly integrated internally, with considerable flows of both people and goods.

The headline findings are:

  1. The first-ever estimates for interstate trade flows indicate that cross-border exchanges between and within firms amount to at least 54 per cent of GDP, implying that interstate trade is 1.7 times larger than international trade.
  2. A potentially exciting finding for which we have tentative not conclusive evidence is that while political borders impede the flow of people, language (Hindi specifically) does not seem to be a demonstrable barrier to the flow of goods.
  3. On trade as a per cent of GSDP, smaller states like Uttarakhand, Himachal Pradesh and Goa trade more; the net exporters are the manufacturing powerhouses of Tamil Nadu and Gujarat but otherwise agricultural Haryana and Uttar Pradesh are also powerhouses because of Gurugram and NOIDA, respectively which have become part of the great Delhi urban agglomeration.
  4. The costs of moving are about twice as great for people as they are for goods.

There is a potential dampener on our finding that trade in goods is high within India. This may be a consequence of the current system of indirect taxes which perversely favours interstate trade over intra-state trade.


Does India Trade More Than Other Countries?


  • India’s aggregate interstate trade (54 per cent of GDP) is not as high as that of the United States (78 per cent of GDP) or China (74 per cent of GDP) but substantially greater than provincial trade within Canada and greater than trade between Europe Union (EU) countries.
  • This is all the more striking given that the data here covers mainly manufactured goods, excludes agricultural products, and is therefore an underestimate of total internal trade in goods.
  • India’s internal trade is about 1.7 times its international trade of 32 per cent of GDP. China- 1.6 times and US- 2.5 times.
  • The intuition from standard gravity models of trade is that large countries trade more within their own borders than beyond them because of the size of their domestic markets.

Patterns of Interstate Trade: Arms-Length Trade


Openness to Interstate Trade (Exports + Imports)

  • The most open states by this measure are Uttarakhand, Goa, Himachal Pradesh and Gujarat with Assam, Bihar and Uttar Pradesh bringing up the rear.
  • High GSDP states such as Maharashtra and Tamil Nadu are conspicuous in their absence from the top of the list – though their trade to GSDP ratio is still substantial at 33 per cent and 24 per cent, respectively.
  • This is the first of many indications that while India’s borders seem porous, this might be because of its complex regulations rather than inspite of it.
  • Himachal Pradesh and Uttarakhand’s, exceptional trade volumes might be explained by the exemption from central excise tax for manufacturing in these states.
  • The outliers on the under-performing side are Assam (5.3 per cent), Bihar (9.9 per cent) and Kerala (17.9 per cent), who have much lower trade openness than what their size would predict.
  • It is because these states have small manufacturing share in their GSDP. The other possibility is the exclusion of north-eastern states that may be important trading partners for Assam and Bihar.

Balance of Interstate Trade: Net exporters and net importers


  • If the sum of exports and imports measures how open a jurisdiction is, the balance of trade is a useful, if imperfect, measure of that jurisdiction’s manufacturing competitiveness.
  • The large manufacturing states – Gujarat, Maharashtra and Tamil Nadu have a positive balance of trade highlighting their competitive manufacturing capabilities. This positive balance is also a feature of Delhi (7.4 per cent), Haryana (26.1 per cent) and UP (4.2 per cent).
  • Uttarakhand, Himachal Pradesh and Goa (seen earlier to possess the highest trade to GSDP ratios) are predominantly trade balance deficient. This may be because we do not observe import side intrafirm trade flows.
  • It is likely that these states’ special status (in terms of tax exemptions) would encourage firms to allocate some intermediate stages of their production process there, followed by intrafirm exports.

Is Indian Interstate Trade Unusual? Formal Evidence from a Gravity Model


  • The evidence shown so far suggests that contrary to the received wisdom, India’s internal trade does not seem unusually low.
  • The basic intuition is that trade between two jurisdictions will be greater: the richer they are, the closer together they are, and fewer the policy and other cultural barriers between them.
  • Data shows that richer states trade more with each other; states that are closer together trade more; contiguity matters as does the distance between economic agents.

The results from various models can be interpreted as follows:


  1. Distance – The most remarkable finding is that India’s elasticity of trade flows with respect to distance is much lower than one might have expected – a 10 percentage point increase in distances between economic capitals results in a fall in trade of only 5.65 percentage points.
  2. State GDP coefficients – The elasticity of trade with respect to income is positively correlated with trade flows: a 10 percentage point increase in GDP of an importing or exporting state is associated with an 8.2 and 9.6 percentage points increase in trade, respectively.
  3. Proximity coefficient – Adjoining states in India tend to trade with each other about 90 per cent16 more than other states.
  4. Language coefficient – In the international trade literature, the language dummy has been found to be persistently positive and significant, implying that countries with shared languages tend to trade with each other more than with others. There is insufficient evidence for this to be true within India; the Hindi dummy is insignificant for interfirm interstate trade but positive and weakly significant for intrafirm trade.

Explaining the puzzle: Why Does India Trade so Much?


  • Contrary to priors, it seems that India may have a pro-trade bias. One plausible answer is that the current structure of domestic taxes as well as area-based tax exemptions might actually bias economic activity towards more internal trade.

Area-based exemptions

  • Since our data is derived from declarations filed for tax purposes, this is particularly pertinent. The Central Excise Act exempts manufacturing in certain states from excise duty and this exemption creates a strong incentive to shift real or reported production to these areas.

The CST and VAT

  • Under the current system, states levy a value-added tax on most goods sold within the state, the centre levies a near VATable excise tax at the production stage. Sales of goods across states fall outside the VAT system and are subjected to an origin-based non-VATable tax (the Central Sales Tax, CST). It turns out that the CST – far from acting as a tariff on interstate trade – may actually provide an arbitrage opportunity away from a higher VAT rate on intra-state sales in some cases.

 

Conclusion

  • Contrary to the caricature, India’s internal trade in goods seems surprisingly robust. This is true whether it is compared to India’s external trade, internal trade of other countries, or gravity-based trade patterns in the United States. For example, the effect of distance on trade seems lower in India than in the US. Hearteningly, it seems that language is not a serious barrier to trade.
  • The analysis does leave open the possibility that some proportion of India’s internal trade could be a consequence of current tax distortions, which are likely to be normalised under the GST.

Section 2- One India: Before the Law

Introduction

  • The GST was justly touted as leading to the creation of One Tax, One Market, One India. But it is worth reflecting how far India is from that ideal. Indian states have levied any number of charges on goods that hinder free trade in India—octroi duties, entry taxes,Central Sales Tax (CST) to name a few. Others are cross-state power surcharge and Agriculture Produce Market Committee (APMCs).

India’s Constitutional Provisions and Jurisprudence

  • Articles 301-304 provide a layered set of rights and obligations. Article 301 establishes the fundamental principle that India must be a common market:
  • Article 301: Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
  • Article 302 gives Parliament the power to restrict free trade between and within states on grounds of public interest.’
  • Article 303 (a) then imposes a most-favored nation type obligation on both Parliament and state legislatures; that is no law or regulation by either can favor one state over another.
  • Article 304 (a) then imposes a national treatment-type obligation on state legislatures (apparently not on Parliament); that is, no taxes can be applied to the goods originating in another state that are also not applied on goods produced within a state. This Article refers only to taxes and not to regulations more broadly.
  • But then Article 304 (b) allows state legislatures to restrict trade and commerce on grounds of public interest.

Interestingly, this freedom to the states in Article 304 (b) is only different from that provided to Parliament in Article 302 in that states have to impose “reasonable restrictions” whereas Parliament may impose “restrictions.” Of course, states can only impose restrictions in areas that are either on the state or concurrent list.

The gist of these provisions is that both the Centre and the States have considerable freedom to restrict trade and commerce that hinder the creation of one India.

 

While the purpose of Part XIII was to ensure free trade in the entire territory of India, this is far from how its practical operation has panned out. Financial levies as well as non-financial barriers imposed by the States have become a major impediment to a common market.

Many of such levies are constitutionally valid and have been upheld, in principle, by the Supreme Court.

In several cases where entry taxes have been challenged, the Supreme Court has upheld their validity on the ground that these taxes are ‘compensatory’ in nature, which means that the proceeds from the taxes are used for facilitating trade in the charging State.

 

Provisions in Other Countries

  • The United States has a very strong interstate commerce clause in the Constitution. It vests Congress with the power: “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.
  • Also the US Supreme Court has largely interpreted the Commerce Clause liberally, ensuring that the power of Congress to regulate interstate commerce is not excessively curtailed, thereby leading to protectionist legislation from particular states.
  • On the other hand since the Maastricht Treaty that created the common market in Europe, it is now accepted that countries within the EU must not, except under narrow circumstances, restrict the four freedoms of movement: of goods, services, capital, and people.
  • Now, it could be argued that both the US and EU are very different from India because of their long and particular histories of nationhood.

Comparable WTO Law

  • The WTO has a membership of 164 countries with widely varying income levels and political systems: for example, the ratio of per capita GDP of the richest countries is more than 60 times that of the poorest, while the corresponding ratio within India is less than 5. Also, the WTO has democracies like the US and Europe and non-democracies like China whereas all Indian states are democratic. So, it cannot possibly be argued that the Indian states should have greater freedom than countries in the WTO on the issue of creating a common market.
  • If that is reasonable, then the comparison between WTO rules and the provisions of the Constitution is not inappropriate. That is, it is reasonable to compare the common-market/regulatory freedom balance provided for countries in the WTO with the same provided for states in the Constitution.
  • The two striking differences between the two are:-
  1. The reasons for invoking departures from free trade/common market principles are more clearly and narrowly specified in the WTO than in the Constitution which instead refers to an open-ended “public interest.”
  2. The criteria that have to be met before the departure can be justified. In the WTO, the measure must not constitute arbitrary discrimination; must not be a form of disguised protectionism; and above all must be “necessary.”
  • WTO jurisprudence has over the years elaborated on all these three criteria and others. For example, the burden of proof is on the party invoking the exception provision (i.e. invoking the right to depart from a common market).
  • The key point is that in the WTO the departures from a common market across widely varying countries is quite heavily circumscribed whereas similar departures between states within India is easily condoned by the Constitution and consequent constitutional jurisprudence.

Conclusion

  • At the time of the drafting of the Constitution, and given the considerable anxieties of holding together a large and disparate nation, the demands for respecting states’ sovereignty were understandably strong. Nearly 70 years on, the sense of nationhood and unity is strong, and anxieties about territorial integrity have faded. Cooperative federalism is becoming increasingly important governance dynamic. Reflecting this, the country has unanimously passed a landmark Constitutional amendment to implement the GST which should result in a common market for domestic indirect taxes.

Building on this, the country can go further and extend this principle of one economic India to other spheres.


 

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Economy

ECONOMIC SURVEY 2016-17 Summary Chapter 10 – Income, Health and Fertility: Convergence Puzzles


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Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter 10 – Income, Health and Fertility: Convergence Puzzles:


Introduction

Since 1980s India has been experiencing a rapid growth rate compared to its previous low levels of post-independence ‘Hindu Growth rate’. Thus India and its states should show convergence with other countries of the world in economic as well as health indicators.

 

Definitions of various terms used in this chapter

  • Life Expectancy at birth: Number of years a new born would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life.
  • Infant mortality rate: Number of infants dying before reaching one year of age, per 1,000 live births in a given year
  • Total fertility rate: number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age-specific fertility rates in a given year

Convergence

  • Astate that starts off at low performance levels on any relevant parameter, say the level of income or consumption, should see faster growth on that parameter over time, improving its performance so that it catches up with states which had better starting points

What does it mean?

  • In 1984 the per capita GSDP of Odisha in 1984 was 25 percent lower than the per capita GSDP of Kerala.Thus our convergence theory suggests that Odisha would experience higher growth rates over time, thereby reducing the gap between the two states

Convergence Puzzle

  • There is striking evidence of divergence, in income and consumption across the Indian states, in sharp contrast to patterns within China and across the world.
  • This trend is puzzling since that the forces of equalization—trade in goods and movement of people—are stronger within India than they are across countries, and they are getting stronger over time.

 

Analysis

This chapter will analyse two broad economic indicators namely

  • income
  • consumption and,
  • Three indicators of health and demographic outcomes
    • Life Expectancy
    • Infant Mortality Rate
    • Total Fertility Rate
  • And presents 3 Findings on them

Approach

  • Comparison of various Indian States with countries at comparative levels of development as well as provinces of china at similar levels, over a period of time

What does it mean?

  • Growth rate of poor states should be higher than that of rich states as well as that compared with international average growth rate for convergence

 

Finding 1: Income/Consumption Divergence within India

Income Convergence

Methodology

  • The growth rate of per capita GDP vs the log of per capita GDP (in PPP terms) is plotted
  • Indian states and provinces of China along with countries of the world are plotted

Desired result

  • For convergence to occur, the relationship should be negative because convergence theory says that the less developed you are to start off with the faster you should grow subsequently

Actual Observations

  • The relationship is strongly negative for the world and China, and weakly positive for India.

What does it mean?

  • Poorer countries are catching up with richer countries,
  • The poorer Chinese provinces are catching up with the richer ones,
  • But in India, the less developed states are not catching up; instead they are, on average, falling behind the richer states.
  • Internationally, growth rates of per capita GDP widened at least since the 1820s with poorer countries growing slower than richer countries, leading to the basic divide between advanced and developing countries. However, since 1980 this long term trend was reversed and poorer countries started catching up with richer ones.
  • In the 1990s, convergence patterns were not dissimilar across the world, China and India with either weak convergence or divergence. But things changed for both the world and China in the 2000s but not for India. This was despite the fact that less developed states such as Bihar, Madhya Pradesh and Chhattisgarh had started improving their relative performance.
  • These developments in Indian states were neither strong nor durable enough to change the underlying picture of divergence or growing inequality.

Consumption Convergence within India

Methodology

  • The growth rate of real consumption vs the log of Real consumption is plotted.

Observations

  • No sign of convergence was found.

Analysis

  • Convergence occurred within the United States and Japan over long periods at average rate of about 2% in income. This implies that a country will reach half the distance to the frontier in 35 years.
  • During the 2000s, China posted a convergence rate of nearly 3 percent in income which implies that the poorest province will catch up with half the level of the richest province in 23 years.
  • The evidence so far suggests that in India, catch-up remains elusive.

Forces of convergence

  • Convergence happens through trade and mobility of factors of production. If a country is poor, the returns to capital must be high and should be able to attract capital and labor, thereby raising its productivity and enabling catch up with richer countries.
  • Trade, based on comparative advantage, is really a surrogate for the movement of underlying factors of production
  • A less developed country that has abundant labor and scarce capital will export labor-intensive goods (a surrogate for exporting unskilled labor) and imports capital-intensive goods (a surrogate for attracting capital)
  • The driving force behind the Chinese convergence dynamic has been the migration of people from farms in the interior to factories on the coast, raising productivity and wages in the poorer regions faster than in richer regions.

 

Indian Situation

  • Trade within India is quite high
  • Mobility of people has also surged dramatically—almost doubled in the 2000s

 

Possible Explainations/hypothesis

  • Probably governance traps are impeding equalization within India.
    • If that is the case, capital will not flow to regions of high productivity because this high productivity may be more notional than real. Poor governance could make the risk-adjusted returns on capital low even in capital scarce states.
  • A second hypothesis relates to India’s pattern of development. India has relied on growth of skill-intensive sectors rather than low-skill ones
    • This is reflected not just in the dominance of services over manufacturing but also in the patterns of specialization within manufacturing
  • Unless the less developed regions are able to generate skills, (in addition to providing good governance) convergence may not occur, since the binding condition on growth in availability of skills.

 

Further Questions

  • These hypotheses raise another question. Since successful states serve both as models and magnets (attracting capital, talent, and people), why isn’t there pressure on the less developed states to reform their governance to be competitively attractive? Persistent divergence amongst the states is theoretically against the dynamic of competitive federalism which promotes convergence.

 

Finding 2: Health Convergence Within India

Methodology

  • The Average annual change in life expectancy vs Life expectancy levels in 2002
  • The Average annual change in IMR vs IMR levels in 2002
  • Indian states along with countries of the world are plotted

Desired Results

  • Intuitively, the worse the initial situation, the faster progress will occur because many medical “technologies” such as antibiotics and other medical practices are commonly available
  • Secondly there are clear bounds on health indicators that would naturally lead to convergence. For instance, once a country has reduced its infant mortality to near zero, it is fundamentally impossible for it to experience a drastic reduction while countries with high mortality rates have much more room for improvement.

 

Observation

  • On both indicators of health, there is strong evidence of convergence within India

What does it mean?

  • It suggests that there are no governance or institutional traps that prevent technologies from flowing freely within the country
  • Internationally,there is strong evidence of convergence in life expectancy; However, all Indian states are making slower progress than the average countries. For IMR, all the Indian states posted larger declines in the IMR than the average country.
  • Another key comparison is simply to compare the level of these LE and IMR against per capita GDP of indian states and the world countries
  • In LE, the indian states doing about the same or better than their international counterparts; but for IMR, most states look worse in this international comparison thus India is doing reasonably well on life expectancy on an international scale, but on IMR has scope for improvement

 

Finding 3: Great Performance on Fertility

  • 12 Indian states out of the reporting 23 states have reached levels of fertility that are below the replacement rate
  • Like LE and IMR, there is evidence of strong convergence across the states
  • All the Indian states (with the exception of Kerala) are performing much “better” (in the sense of more rapid fertility declines) than their international counterparts at present

 

Implications

  • India should not expect to see growth surges or growth decelerations of the magnitudes experienced by China and korea etc. since compared to them our TFR has declined at a gradual pace
  • This does not rule out accelerations for other reasons, related to reforms and strength of domestic institutions.
  • India might be able to sustain high levels of growth (on account of the demographic dividend) for a longer time as india is projected to stay at its peak working age/non working age ratio for a longer period of time compared to China and Brazil.

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Economy

ECONOMIC SURVEY 2016-17 Summary Chapter 9 – Universal Basic Income: A conversation with and within the Mahatma


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Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter – 6 Fiscal Rules: Lessons from the States:


“ A Just society needs to guarantee to each individual a minimum income which they can count on and which provides the necessary material foundation for a life with access to basic goods and a life of dignity.”

What is UBI?

  • It is a radical and paradigm shift in thinking about social justice and a productive economy.
  • It requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens.

Underlying principles of UBI

  1. Universality: Every citizens gets it
  2. Unconditionality: No strings attached
  3. Agency: Explained below*

Why UBI is Relevant Today

  • Social Justice: It promotes liberty because it is anti-paternalistic, opens up the possibility of flexibility in labour markets.
  • Poverty Reduction: UBIis probably the fastest way of reducing poverty. It is more feasible in a country like India, where it can be pegged at relatively low levels of income but still yield immense welfare gains.
  • Agency*: The poor in India have been treated as objects of government policy. An unconditional cash transfer treats them as agents, not subjects. Thus poor can utilise the money in their own customised way to alleviate their condition

 Thus poor get a chance to work out his priorities and improve his condition

  • Employment: UBI has the potential to open up new possibilities for labour markets. It creates flexibility by allowing for individuals to have partial or calibrated engagements with the labour market without fear of losing benefits.

Explanation

When In dire need of job workers agree to work at huge discounted wages. With as assured UBI, such distressed acceptance of work would reduce also reducing functional unemployment.

  • Administrative efficiency: It promotes efficiency by reducing waste in government transfers.

Arguments against UBI

  1. UBI reduces incentive to work: This view was held by Gandhiji himself. However,
    • The UBIis likely to be minimal guarantee; It is unlikely to replace incentives to work.
    • No evidence to suggest that the only motivation for which people work is necessity
    • Rather the incentive to productive work is liberated only when individuals are not hostage to necessity
  2. It effectively detaches income from employment: Concept of inheritance already detaches income from employment in favour of the rich. So, receiving a small unearned income from the state shouldn’t be economically or morally problematic
  3. Unconditional income withoutany regard to peoples contribution to society: On the contrary it can be a way of acknowledging non-wage work related contributions to society, for eg, homemaking contributions of women.
  4. Fiscal cost due to political reasons: Once introduced it may become difficult for the govt to wind up UBI in case of failure. For e.g. NDA used to denounce NREGA of UPA, but once in power it categorised it as a core of the core scheme.
  5. Exposure to market risk: Unlike food subsidies, a cash transfer’s purchasing power may severely be curtailed by market fluctuations.

Analysis of existing programmes for poor

  • There are about 950 central sector and centrally sponsored sub-schemes in India. Top 11 schemes account for about 50 percent of total budgetary allocation.
  • Food Subsidy or PDS is the largest programme followed by Urea Subsidy and the MGNREGS. The other programs include Crop Insurance, Student Scholarships, National Handloom Development Programme etc.
  • Many of these schemes have diverse benefits beyond immediate poverty reduction – for instance, student scholarships have inter-generational consequences for individuals.
  • Considerable gains could be achieved in terms of bureaucratic costs and time by simply replacing many of these schemes with a UBI.

Misallocation of resources across districts:

The poorest areas of the country often obtain a lower share of government resources when compared to their richer counterparts.

Explanation:

  • In a state, districts with say 40% of total poor population of the state get less than 40% of funds for a given set of schemes. Thus poor districts / states are the one which are grappling with inadequate funds.
  • Resources allocated to districts are generally proportionalto the district’s ability to spend them efficiently; richer districts generally have better administrative capacities and thus get allocated more funds.
  • However, there has been some improvements in district-wise allocation for schemes in the recent past, probably reflecting improvements in state capacity.

Consequences of misallocations:

  • Misallocation affects targeting of resources to the poor, known as “exclusion error” wheredeserving poor and needy find themselves unable to access programme benefits.
  • If a state or a district with more poor is allocated very little resources, then it is almost certain that some deserving households would be excluded.
  • An estimate of the exclusion error from 2011-12 suggests that 40% of the bottom 40% of the population are excluded from PDS. For MGNREGS it is 65%.

India’s tryst with targeted schemes

  • Targeting commenced with the drawing up of lists of poor based on self-reported income in 1992
  • However, India’s record of targeting welfare programmes to the poor has been suspect
  • Identification of BPL households have been criticized for crowding out the poor and the truly deserving from BPL card ownership and instead providing leakages to the rich
  • Acknowledging issues inherent in targeting few states like TN, Chattisgarhuniversalised access to PDS and few other schemes
  • National Food Security Act(2013) mandated access to PDS to about 70% households
  • It was a gradual move towards greater inclusion error to avoid exclusion issues

Solutions provided by UBI on following issues:

  1. Misallocations to Districts: UBI will simply amount to transfer of money to beneficiaries account. A functional JAM system would help in direct benefit transfer. Thus bureaucratic hurdles and efficiency could be bypassed.
  2. Out of System Leakages: UBI reduces them as money is directly transferred to beneficiaries account thus making it harder to divert. Monitoring of UBI would thus be easier than other schemes
  3. Exclusion Error: As UBI is a universal scheme it should bring down exclusion errors compared to targeted schemes
  4. Psychological Benefits: The World Development Report (2015) argues that individuals living in poverty have
    1. A preoccupation with daily hassles and this results in a depletion of cognitive resources required for important decisions;
    2. Low self-image that tends to blunt aspirations;
    3. Norms that may require investments in social capital to the detriment of private opportunities.
  5. Access to formal credit: UBI can remove credit constraints as they increase one’s income. A recent analysis on farmers suggests that if their consumption levels increase to a certain level then there is sudden increase in access to formal credit

Concerns

  1. Last mile concern remain in accessing banking services as many times banking or post office facilities are located at a distance.
  2. Cash Transfers could promote spending on ‘temptation goods’ – alcohol, tobacco,paan etc. However NSS 2011-12 Data suggests that these goods form a smaller share of consumption as per capitaexpenditure increases
  3. UBI would become an add-on to, rather than a replacement of, current anti-poverty and social programs, which would make it fiscally unaffordable

WAY Forward

  1. Careful calculation of the potential cost of UBI should be done. For e.g. replacing the PDS will increase the market prices of cereals for the poor.
  2. UBI should be carefully indexed to inflation

Prerequisite of UBI

  1. Successful adoption of JAM
  • Crucial to the success of the UBI is effective financial inclusion.
  • In terms of JAM preparedness, considerable ground has been covered rapidly, but there is quite some way to go.
  • Failure to identify genuine beneficiaries results in exclusion errors.
  • The success of UBI hinges on the success of JAM.
  1. Consensus between Centre and states regarding funding
  • A key federal question will be the centre-state share in funding of the UBI
  • This would, like the GST, involve complex negotiations between federal stakeholders.

Guiding principles to implement UBI

  1. De jure universality, de facto quasi- universality: It means though we may want to provide a universal right of UBI to all, practically it will be difficult to justify passing benefits to the rich. Economic Survey suggests 4 ways to exclude the rich:
    1. Define the non-deserving based on ownership of key assets such as automobiles or air-conditioners or bank balances exceeding a certain size.
    2. Adopt a ‘give it up’ scheme wherein those who are non-deserving chose to opt out of the programme just as in the case of LPG
    3. Introduceasystem where the list of UBI beneficiaries is publicly displayed. this would “name and shame” the rich who choose to avail themselves of a UBI
    4. Self-targeting: Beneficiaries regularly verify themselves in order to avail UBI – Then rich, whose opportunity cost of time is higher, would not find it worth their while and the poor would self-target into the scheme. However it conflicts with the essence of JAM,whose appeal lies in its direct, costless transfer of the state’s welfare subsidies to beneficiaries’
  2. Gradualism: The UBI must be embraced in a phased manner. A key advantage of phasing would be that it allows reform to occur incrementally.For e.g. we can start off by offering UBI as a choice to beneficiaries of existing programs.

UBI for Women only

  • Womenfaceworse prospects in almost every aspect of their daily lives – employment opportunities, education, health or financial inclusion.
  • A UBI for women can, therefore, not only reduce the fiscal cost of providing a UBI (to about half) but have large multiplier effects on the household.
  • Giving money to women improves the bargaining power of women within households and reduces concerns of money being splurged on temptation
  • The UBI could also factor in children in a household to provide a higher amount to women. This addition, though, has three potential problems –
    1. It may not be easy to identify the number of children in a household;
    2. It may encourage households to have a greater number of children;
    3. Phasing out boys from beneficiary list once they reach a certain age (say 18 years) may not be easy to monitor and undertake.

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Economy

ECONOMIC SURVEY 2016-17 Summary Chapter 8 – Review of Economic Developments


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Download Complete Economic Survey 2016-17 Summary Here


Following is the Summary of ECONOMIC SURVEY 2016-17 – Chapter – 6 Fiscal Rules: Lessons from the States:


Introduction

  • As per the first Advance Estimates (AE) released by the CSO, the Indian economy is estimated to register a GDP growth rate of 7.1 per cent in 2016-17.

 

Sectoral level estimates

  • At the sectoral level, growth of agriculture & allied sectors improved significantly in 2016-17, following the normal monsoon in the current year.
  • The contraction in mining and quarrying largely reflects slowdown in the production of crude oil and natural gas.
  • As in the previous years, the service sector continued to be the dominant contributor to the overall growth of the economy, led by a significant pick-up in public administration, defence& other services that were boosted by the payouts of the Seventh Pay Commission.

 

Investment and trade scenario

  • Fixed investment (gross fixed capital formation (GFCF)) to GDP ratio (at current prices) is estimated to be 26.6 per cent in 2016-17, vis-à-vis 29.3 per cent in 2015-16.
  • Fixed investment rate has been declining since 2011-12.
  • Private consumption is also projected to grow at a reasonable pace during the year with plummeting imports of gold, silver and other bullion, acquisition of valuables by households is expected to contract in the current year.
  • Steeper contraction in imports, compared to exports, during the first half of 2016-17 led to a sharp decline in trade deficit.
  • Despite slowing services exports, the decline in merchandise trade deficit helped improve the position of net exports of goods and non-factor services in the national accounts.

 

Reasons of fiscal developments

The growth in revenue expenditure during April-November 2016, which prima facie seems very high, may be viewed against the background of a few developments:-

  • Firstly, the salary component of the revenue expenditure increased by 23.2 per cent owing to meeting the commitments under the Seventh Pay Commission.
  • Major subsidies budgeted for the current year increased by 5.0 per cent during April-November 2016, despite a decline in fertilizer and petroleum subsidy bills.
  • The third reason for the strong growth in revenue expenditure is an increase of 39.5 per cent in the grants for creation of capital assets (GCCA) during April-November 2016.
  • The investment push that the Central Government expenditure provides to the economy can be approximated by subtracting these grants from revenue expenditure and adding it to the capital expenditure.

 

 

Prices

  • The headline inflation as measured by the Consumer Price Index (CPI) remained under control for the third successive financial year.
  • Inflation hardened during the first few months of 2016-17, mainly due to upward pressure on the prices of pulses and vegetables. It dipped to two-year low of 3.4 per cent in December 2016 as a result of lower prices, especially of food items.
  • The average inflation based on the wholesale price index (WPI) declined to (-) 2.5 per cent in 2015-16 from 2.0 per cent in 2014- 15.

Food inflation

  • Pulses continued to be the major contributor of food inflation.
  • Sugar prices also firmed up on account of lower production and hardening of price in the international market.
  • Vegetable prices, which flared during the lean summer season, have also declined sharply as supply picked up during the post monsoon and winter season.
  • The CPI food inflation (CFPI) has, as a result, dipped to a two-year low of 1.4 per cent in December 2016.

Core inflation

  • While the headline inflation has dropped sharply in the recent months, the CPI based core inflation (exclusive of food and fuel group) has remained sticky so far during this fiscal year.
  • Inflation for the ‘Transport & communication’ group has been rising in recent months partly reflecting rise in global crude oil prices and its pass-through to domestic petrol and diesel prices.

 

Inflation outlook

  • In view of the deceleration in the wholesale and retail prices of key food items during the second half of the current financial year so far, the average inflation based on CPI is projected to remain below 5 per cent.
  • The food inflation is likely to remain subdued in the light of higher Rabi sowing acreage, projected increase in the production of pulses and key agri-products globally and astute food management and price monitoring by the Government.

Monetary Management and Financial intermediation

  • The Government amended the Reserve Bank of India Act, 1934 during the current financial year.
  • The amended Act provides for inflation target to be set by the Government, in consultation with the Reserve Bank, once in every five years and further provides for a statutory basis for the constitution of an empowered Monetary Policy Committee (MPC).
  • As per the revised monetary policy framework, the Government has fixed the inflation target of 4 per cent with tolerance level of +/- 2 per cent for the period beginning from 5th August, 2016 to March 31, 2021.
  • The Government has also notified the constitution of the MPC on 29th September 2016.

Liquidity situation

  • The RBI has been managing liquidity following its liquidity management framework.
  • In order to bring ex ante liquidity conditions close to neutrality it has pumped durable liquidity through open market operations (OMOs).
  • Post the withdrawal of specified bank notes (SBNs), RBI has conducted exceptional operations to mop the large surplus liquidity through variable reverse repo rate.
  • To complement the RBI’s efforts, the Government also increased the limit on securities under market stabilization scheme from Rs. 30,000 crore to Rs. 6 lakh crore.

Yield on Government bills/ securities

  • There was a sharp fall in the 91 days t-bill rate in April 2016 owing to 25 bps cut in repo rate.
  • Ten years government security (G-sec) yield however continued to tread high in spite of the rate cut and in fact increased marginally after the rate cut.

Banking sector

  • The performance of the banking sector, public sector banks (PSBs) in particular, continued to be subdued in the current financial year.
  • The asset quality of banks deteriorated further. The gross non-performing assets (GNPA) to total advances ratio of scheduled commercial banks (SCBs) increased to 9.1 per cent from 7.8 per cent between March and September 2016.

Credit growth

  • Credit growth to industrial sector remained persistently below 1 per cent during the current fiscal, with contraction in August, October and November.
  • However, bank credit lending to agriculture and allied activities (A&A) and personal loans (PL) segments continue to be the major contributor to overall NFC growth.

Measures to strengthen corporate bond Market

It accepted many of the recommendations of the Khan Committee to boost investor participation and market liquidity in the corporate bond market.

The new measures to strengthen corporate bond market as announced by the RBI include:

  • Commercial banks are permitted to issue rupee-denominated bonds overseas (masala bonds) for their capital requirements and for financing infrastructure and affordable housing;
  • Brokers registered with the Securities and Exchange Board of India (SEBI) and authorized as market makers in corporate bond market permitted to undertake repo / reverse repo contracts in corporate debt securities.
  • This move will make corporate bonds fungible and thus boost turnover in the secondary market;
  • Banks allowed to increase the partial credit enhancement they provide for corporate bonds to 50 per cent from 20 per cent. This move will help lower-rated corporates to access the bond market;
  • Permitting primary dealers to act as market makers for government bonds, to give further boost to government securities by making them more accessible to retail investors; and
  • RBI has allowed entities exposed to exchange rate risk to undertake hedge transactions with simplified procedures, up to a limit of US$30 million at any given time.

Indian markets performance

  • Indian markets recorded modest growth of 1.95 – 3 per cent (Sensex was up by 1.95 per cent while Nifty was higher by 3.0 per cent) for the calendar year 2016 as compared to losses registered in 2015.

 

Foreign Portfolio Investments

  • For the first time since the meltdown of 2008, Net Foreign Portfolio Investments (FPI) have turned negative (implying that there was an outflow from the Indian markets to the tune of Rs. 23079 crore).
  • The FPI outflow was not a phenomenon associated with Indian markets alone as FPIs pulled out of most EMEs in a big way due to higher returns in advanced economies.

India’s Merchandise Trade

Exports

  • In line with subdued global growth and trade, India’s exports declined by 1.3 per cent and 15.5 per cent in 2014-15 and 2015-16 respectively.
  • During 2016-17 (April-December) Petroleum, oil and lubricants (POL) exports constituting 11.1 per cent of total exports declined by 9.8 per cent to US$ 22.0 billion over corresponding previous period.
  • Region-wise, India’s exports to Europe, Africa, America, Asia and CIS and Baltics declined in 2015-16.
  • However, India’s exports to Europe, America and Asia increased by 2.6 per cent, 2.4 per cent and per cent respectively in 2016-17 (April- November), while exports to Africa declined by 13.5 per cent.
  • USA followed by UAE and Hong Kong were the top export destinations.

Imports

  • Value of imports declined from US$ 448 billion in 2014-15 to US$ 381 billion in 2015-16, mainly on account of decline in crude oil prices resulting in lower levels of POL imports.
  • POL imports declined by 10.8 per cent. Gold and silver imports declined by 35.9 per cent and non-POL and non-gold & silver imports by 2.0 per cent.
  • India’s imports from Europe, Africa, America, Asia and CIS & Baltics regions declined in 2015-16.
  • However, in 2016-17 (April-November), imports from CIS & Baltics region increased by 10.3 per cent while other four regions witnessed decline.
  • Top three import destinations of India were China followed by UAE and USA in 2016-17 (April-November).

Trade deficit

  • In 2015-16, India’s trade deficit declined by 13.8 per cent (vis-à-vis 2014- 15) to US$ 118.7 billion. Furthermore, it declined by 23.5 per cent to US$ 76.5 billion in 2016-17 (April-December) as compared to US$ 100.1 billion in the corresponding period of previous year.

 

Balance of Payments

Current account

  • Despite moderation in India’s exports, India’s external sector position has been comfortable, with the current account deficit (CAD) progressively contracting from US$ 88.2 billion (4.8 per cent of GDP) in 2012-13 to US$ 22.2 billion (1.1 per cent of GDP) in 2015-16.
  • The downward spiral in international crude oil prices resulted in a decline in oil import bill by around 18 per cent which together with a sharp decline in gold imports led to a reduction in India’s overall imports (on BoP basis).
  • However, growth of receipts of software was marginal and financial services receipts declined. Subdued income conditions in source countries, particularly in the gulf region due to downward spiral in oil prices continued to weigh down on remittances by Indians employed overseas as private transfers moderated to US$ 28.2 billion in H1 of 2016-17 from US$ 32.7 billion in H1 of 2015-16.

Capital/finance account

  • Despite higher net repayments on overseas borrowings and fall in banking capital (net) with building up of foreign currency assets by banks & decline in NRI deposits (net), robust inflow of foreign direct investment (FDI) and net positive inflow of foreign portfolio investment (FPI) were sufficient to finance CAD leading to an accretion in foreign exchange reserves in H1 of 2016-17.

Foreign exchange reserves

  • In H1 of 2016-17, India’s foreign exchange reserves increased by US$ 15.5 billion on BoP basis (e., excluding valuation effects), while in nominal terms (i.e., including valuation effect) the increase was to the tune of US$ 11.8 billion.
  • Cross-country comparison of external debt based on the World Bank’s annual publication titled ‘International Debt Statistics 2017’, which contains the external debt data for the year 2015, indicates that India continues to be among the less vulnerable countries.

Outlook for the Economy for the year 2017-18

  • CSO in its first AE estimated the economy to grow by 7.1 per cent in the current year. However, it has stated that these numbers have been projected taking into account the information for first seven to eight months.
  • It is therefore unlikely to have captured the impact of withdrawal of the high denomination currency.
  • Inflation could also be lower than what comes out from the implicit GDP deflator underlying the CSO’s first AE for 2016-17.

 

Agriculture and Food Management

  • As per the first advance estimates of the CSO, growth rate for the agriculture and allied sectors is estimated to be 4.1 per cent for 2016-17.
  • As per the First Advance Estimates (AE) released by Ministry of Agriculture and Farmers Welfare on 22nd September 2016, production of Kharif food-grains during 2016-17 is estimated at 135.0 million tonnes

 

Acreage under kharif and rabi crops

  • During 2016-17, area sown upto 14th October, 2016 under all kharif crops taken together was 1075.7 lakh hectares which was 3.5 per cent higher compared to 1039.7 lakh hectares in the corresponding period of 2015-16

 

Monsoon rainfall and its distribution

  • During the South West Monsoon Season (June-September) of 2016 the country as a whole received rainfall which was 97 per cent of its long period average (LPA). The actual rainfall received during this period was 862.0 mm as against the LPA at 887.5 mm.

 

Price policy of agricultural produce

  • Through Minimum Support Price (MSP) and Related Policies’ was set up under the Chairmanship of Dr. Arvind Subramanian, Chief Economic Adviser, which submitted its report on 16th September, 2016.
  • During 2016- 17, MSPs were raised substantially mainly for pulses to incentivize farmers to cultivate pulses.

 

Food-grain stocks and procurement in central pool

  • The stocks of food-grains (Rice and Wheat) was 43.5 million tonnes as on 1st December, 2016 compared to 50.5 million tonnes as on 1st December, 2015 vis-à-vis the buffer stock norm of 30.77 million tonnes as on 1st October 2015.

 

Agriculture credit

  • To improve agricultural credit flow, the credit target for 2016-17 has been fixed at Rs. 9 lakh crore against Rs. 8.5 lakh crore for 2015- 16.
  • As against the target, the achievement for 2016-17 (upto September 2016), was 84 percent of the target, higher than the corresponding figure of 59 per cent upto September 2015.

 

Industrial, Corporate and Infrastructure Sectors

  • As per the first advance estimates of the CSO, growth rate of the industrial sector comprising mining & quarrying, manufacturing, electricity and construction is projected to decline from 7.4 per cent in 2015-16 to 5.2 per cent in 2016-17.
  • Conversely, the production of capital goods declined steeply and consumer nondurable goods sectors suffered a modest contraction during April-November 2016-17.
  • The eight core infrastructure supportive industries, viz. coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity that have a total weight of nearly 38 per cent in the IIP registered a cumulative growth of 4.9 per cent during April-November, 2016-17 as compared to 2.5 per cent during April-November, 2015- 16.
  • The performance of corporate sector (Reserve Bank of India, January 2017) highlighted that the growth in sales was 1.9 per cent in Q2 of 2016-17 as compared to near stagnant growth of 0.1 per cent in Q1 of 2016-17.
  • The Government has liberalized and simplified the foreign direct investment (FDI) policy in sectors like defence, railway infrastructure, construction and pharmaceuticals, etc.
  • During April-September 2016-17, FDI equity inflows were US$ 21.7 billion as compared to total FDI inflows of US$ 16.6 billion during April-September 2015-16 showing 30.7 per cent surge.
  • Sectors like services sector, construction development, computer software & hardware and telecommunications have attracted highest FDI equity inflows.
  • Many new initiatives have been taken up by the Government to facilitate investment and ease of doing business in the country such as Make-in-India, Invest India, Start Up India and e-biz Mission Mode Project under the National e-Governance Plan.

Services Sector

  • As per the first advance estimates of the CSO, growth rate of the services sector is projected to grow at 8.8 per cent in 2016- 17, almost the same as in 2015-16.
  • As per WTO data, India’s commercial services exports increased from US$ 51.9 billion in 2005 to US$ 155.3 billion in 2015.
  • The share of India’s commercial services to global services exports increased to 3.3 per cent in 2015 from 3.1 per cent in 2014 despite negative growth of 0.2 per cent in 2015 as compared to 5.0 per cent growth in 2014.
  • This was due to the relatively greater fall in world services exports by 6.1 per cent in 2015.
  • India’s tourism sector witnessed a growth of 4.5 per cent in terms of foreign tourist arrivals (FTAs) with 8.2 million arrivals in 2015, and a growth of 4.1 per cent in foreign exchange earnings (FEEs) of US$ 21.1 billion.

 

Social Infrastructure, Employment and Human Development

Trends in social sector expenditure

  • As per the Reserve Bank of India data, expenditure on social services by Centre and States, as a proportion of GDP was 7.0 per cent during 2016-17 (BE), with education and health sectors accounting for 2.9 per cent and 1.4 per cent respectively.

Employment scenario

  • The results of the quarterly quick employment survey by the Labour Bureau for the period December, 2015 over December, 2014 show that the overall employment increased by 135 thousand.
  • The sectors that contributed to this increase include: IT/BPOs sector,textiles including apparels and metals.
  • Employment, however, declined in gems &jewellery sector, handloom/powerloom sector, leather, automobiles sectors and transport sector during the same period.
  • The Labour Force Participation Rate (LFPR) at the all India level based on usual principal status approach was estimated at 50.3 per cent.
  • The All India LFPR of females is much lower than that for males. There are wide interstate variations in the female LFPR as well.
  • The North Eastern and Southern States, in general, display high female LFPR as compared to low levels in Northern States.
  • The multiplicity of labour laws and the difficulty in their compliance have been an impediment to the industrial development and employment generation.

Education sector

  • An important concern that is often raised in the context of school education is low learning outcomes.
  • Some of the underlying causes contributing to low quality of education in the primary sector are teacher absenteeism and the shortage of professionally qualified teachers.
  • An option to address teacher absenteeism that can be explored is biometric attendance of all teachers in primary schools for each scheduled class/lecture/session/ distinct from the present system.
  • Apart from the biometric attendance being regularly monitored by local communities and parents, it should also be put in public domain.

Health for all

  • Despite the challenges faced by the government in providing affordable health services to the population, there have been some notable achievements in the health sector.
  • Life expectancy has doubled and infant mortality and crude death rates have reduced sharply.
  • India’s total fertility rate(TFR) has been steadily declining and was 2.3 (rural 2.5 & urban 1.8) during 2014. Infant Mortality Rate (IMR) has declined to 37 per 1000 live births in 2015 from 44 in 2011.
  • The challenge lies in addressing the huge gap between IMR in rural (41 per 1000 live births) and urban (25 per 1000 live births) areas.
  • The Maternal Mortality Ratio (MMR) declined from 301 maternal deaths per 100,000 live births during 2001-03 to 167 maternal deaths per 100,000 live births during 2011-13..
  • There are wide regional disparities in MMR with States like Assam, Uttar Pradesh, Rajasthan, Odisha, Madhya Pradesh and Bihar recording MMR well above the all India MMR of 167.
  • The high levels of anaemia prevalent among women in the age group 15-49 have a direct correlation with high levels of MMR.
  • Under the National Health Mission, Government of India has programmes to address the issue of anaemia through health and nutrition education to promote dietary diversification, inclusion of iron foliate rich food as well as food items that promote iron absorption.

 

Inclusive Policies of the Government

  • For social empowerment, the ‘Nairoshni’ scheme for leadership development of minority women, ‘PadhoPardesh’, a scheme of interest subsidy on educational loans for overseas studies for the students belonging to the minority communities, etc. are being implemented.
  • For skill development and economic empowerment of minorities, schemes like ‘SeekhoAurKamao’ (Learn & Earn), Upgrading Skill and Training in Traditional Arts/Crafts for Development (USTTAD) and ‘NaiManzil’- a scheme to provide education and skill training to the youth from minority communities are in operation.

 

Accessible India Campaign (Sugamya Bharat Abhiyan)

  • The Department of Empowerment of Persons with Disabilities (DEPwD) launched ‘Accessible India Campaign (Sugamya Bharat Abhiyan)’ as a nation-wide Campaign for achieving universal accessibility for Persons with Disabilities (PwDs) with a focus on three verticals: Built Environment, Public Transportation and Information & Communication Technologies.
  • The ‘Inclusiveness and Accessibility Index’ launched by the Government as part of the Sugamya Bharat Abhiyan helps the industries and corporates to participate in the Accessible India Campaign .
  • The Index is a first-of-its-kind initiative in the country and will be an ideal instrument for the integration, assimilation and inclusion of PwDs into the mainstream.
  • Further, the “Rights of Persons with Disabilities Bill – 2016” passed by the Parliament aims at securing and enhancing the rights and entitlements of PwDs.
  • The bill has proposed to increase the reservation in vacancies in government establishments from 3 per cent to 4 per cent for those with benchmark disability and high support needs.

 

Climate Change

Developments in international climate change negotiations:

  • The Paris Agreement sets the path for the post-2020 actions based on the Nationally Determined Contributions (NDCs) of the Parties.
  • The Paris Agreement entered into force on 4th November 2016.
  • The 22nd Session of the Conference of Parties (COP 22) to UNFCCC was held from 7-19 November 2016 in Marrakech, Morocco.
  • The main thrust of COP 22 was on developing rules and action framework for operationalizing the Paris Agreement and advance work on pre-2020 Actions.
  • At COP 22, Parties agreed to a deadline of 2018 for the rule book. Detailing exercise will include accounting of the NDCs, adaptation communication, building a transparency framework, global stocktake every five years, etc.
  • The key decision adopted at COP 22 was “Marrakech Action Proclamation for our Climate and Sustainable Development” which captured the sense of urgency to take action on climate change.

India’s green actions

  • India ratified the Paris Agreement on 2nd October 2016.
  • India’s comprehensive NDC target is to lower the emissions intensity of GDP by 33 to 35 per cent by 2030 from 2005 levels:-
    • To increase the share of non-fossil fuels based power generation capacity to 40 per cent of installed electric power capacity by 2030,
    • And to create an additional (cumulative) carbon sink of 2.5–3 GtCO2e through additional forest and tree cover by 2030.
  • Currently, India’s renewable energy sector is undergoing transformation with a target of 175 GW of renewable energy capacity to be reached by 2022.
  • In order to achieve the target, the major programmes/ schemes on implementation of Solar Park, Solar Defence Scheme, Solar scheme for Central Public Sector Undertakings, Solar photovoltaic (SPV) power plants on Canal Bank and Canal Tops, Solar Pump, Solar Rooftop, etc. have been launched in recent years.
  • With India’s initiative, International Solar Alliance (ISA) was launched, which is envisaged as a coalition of solar resource-rich countries to address their special energy needs and will provide a platform to collaborate on addressing the identified gaps through a common, agreed approach. 24 countries have signed the Framework Agreement of ISA after it was opened for signature on November 15, 2016.
  • Government of India has established the National Adaptation Fund for Climate Change to assist States and Union Territories to undertake projects and actions for adaptation to limate change.
  • India is also one of the few countries in the world to impose a tax on coal. This coal cess which has been renamed as “Clean Environment Cess” in the Union Budget 2016-17 funds the National Clean Environment Fund (NCEF).
  • The proceeds of the NCEF are being used to finance projects under Green Energy Corridor for boosting up the transmission sector, NamamiGange, Green India Mission, Jawaharlal Nehru National Solar Mission, installation of SPV lights and small capacity lights, installation of SPV water pumping systems, SPV Power Plants and Grid Connected Rooftop SPV Power Plants.

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Economic Survey 2016–17 reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. This document is presented to both houses of Parliament during the Budget Session.

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economic survey 2017


Economic Survey 2016–17 reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. This document is presented to both houses of Parliament during the Budget Session.

Economic Survey 2016-17 summary is very important for UPSC Civil Services Exam Preparation.


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