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BOOK FEATURES
iv
Types of Economic Recovery.................................. 30 Functions of RBI........................................................... 50
Reports & Index........................................................... 31 RBI Initiatives................................................................ 50
Transfer of Funds By RBI to
5. Taxation................................................................. 33-42
Central Government................................................... 51
Tax to GDP Ratio.......................................................... 33 Deposit Insurance and Credit Guarantee
Tax: Incidence, Impact, Shifting, Base................. 33 Corporation (DICGC).................................................. 51
Features of A Good Taxation System................... 33 Types of Banks.............................................................. 51
Taxpayer’s Charter...................................................... 34 Regional Rural Banks (RRB)���������������������������������� 51
Methods of Taxation................................................... 34 Co-Operative Banks��������������������������������������������������� 52
Taxpayer’s Charter����������������������������������������������������� 34 Cooperative Banks Viz-A-Viz
Types of Taxes............................................................... 35 Commercial Banks����������������������������������������������������� 52
Types of Direct Tax..................................................... 35 Differentiated Banks������������������������������������������������� 52
Dividend Distribution Tax (DDT)......................... 35 Development Banks.................................................... 53
Minimum Alternate Tax (MAT).............................. 35 Lead Bank Scheme...................................................... 53
Direct Tax Code (DTC)............................................... 35 Banking Reform Commitees................................... 54
Tax on Companies....................................................... 35 Priority Sector Lending (PSL)................................ 54
Tax on Financial Transactions............................... 36 Banking Terminologies............................................. 55
Long Term Capital Gains (LTCG) Ease Banking Reforms Index.................................. 55
Tax on Equity................................................................. 36 Non-Banking Financial Institutions (NBFI)..... 55
Types of Indirect Taxes�������������������������������������������� 36 Basel Norms................................................................... 57
Goods and Services Tax (GST)................................ 36 Banking Sector Reforms........................................... 57
GST Composition Scheme........................................ 37 Consolidation of PSBC���������������������������������������������� 57
GST Organisations....................................................... 38 Mission Indradhanush��������������������������������������������� 57
Laffer Curve������������������������������������������������������������������� 40 National Financial Reporting Authority
Important Financial Institutions������������������������� 40 (NFRA)............................................................................. 58
Goods and Services Tax Council��������������������������� 38 Insolvency And Bankruptcy Code........................ 58
Steps Taken to Reduce Tax Avoidance Non-Performing Assets (NPA)............................... 59
in India............................................................................. 41 Special Mention Accounts (SMA)-2014............. 59
Taxation Related Terms and Terminologies���� 41 Other Classification of Loan Accounts��������������� 59
6. Banking Sector.................................................... 43-63 Twin Balance Sheet (TBS) Problem..................... 59
Measures for NPA Resolution�������������������������������� 59
Money............................................................................... 43
Nidhi, Chit Funds and Ponzi Schemes................. 60
Legal Tender.................................................................. 43
Automated Teller Machine (ATM)........................ 61
Demand and Supply of Money............................... 44
Digital Payments.......................................................... 61
Money Creation............................................................ 44
Npci Operated System............................................... 61
Velocity of Money Circulation................................ 44
Crypto-Currency in India......................................... 62
Terminologies............................................................... 44
Other Banking Related Terms................................ 63
Monetary Policy........................................................... 45
Quantitative Tools....................................................... 45 7. Indian Insurance Market................................. 64-70
Difference Between CRR and SLR ....................... 46 Banking Sector vs Insurance Sector������������������� 64
Qualitative Tools.......................................................... 46 Types of Insurance Policy........................................ 64
Monetary Policy Stances.......................................... 46 Life Insurance................................................................ 65
Unconventional Monetary Policy Tools............. 46 General Insurance....................................................... 65
Other Associated Terms............................................ 47 Nationalization of Insurance Business............... 65
Financial Repression������������������������������������������������� 48 Insurance Providers................................................... 65
Evolution of Banking in India�������������������������������� 48 Domestic Systematically Important
Reserve Bank of India (RBI)................................... 48 Insurer (D-SII).............................................................. 66
Income and Expenditure of RBI��������������������������� 49 International Financial Services
Assets And Liabilities of RBI���������������������������������� 49 Centres Authority (IFSCA)....................................... 66
v
Micro Insurance........................................................... 67 Important Terminology............................................ 82
Health Insurance.......................................................... 67 Institutions with Respect to
Third Party Insurance............................................... 67 Securities Market......................................................... 83
Pension............................................................................. 67 9. External Sector of India.................................... 85-95
Insurance Schemes..................................................... 68
Forex Reserves.............................................................. 85
Insurance Penetration and Density..................... 69
Net International Investment
Insurance Reforms...................................................... 69
Position (NIIP).............................................................. 85
Insurance Sector Regulators................................... 69
Remittances Into India.............................................. 85
Amendments In Insurance Sector........................ 69
Exchange Rate............................................................... 86
8. Financial and Security Market....................... 71-84 Various Exchange rates mechanism.................... 86
Money Market............................................................... 71 Nominal Effective Exchange Rate
Instruments of Money Market............................... 71 (NEER) VS Real Effective Exchange Rate
(REER).............................................................................. 86
Terms Associated With Money Market.............. 72
Capital Markets............................................................ 72 Currency Convertibility............................................ 86
Primary Vis-A-Vis Secondary Market................. 72 Capital Account Convertibility: Advantages
and Disadvantages...................................................... 87
Different Types of Capital........................................ 73
Foreign Exchange Market........................................ 87
Instruments of Capital Market............................... 73
Impact of Revaluation/Appreciation
Money Market Vis-A-Vis Capital Market............ 74
Vis-A-Vis Devaluation/Depreciation................... 88
Forward Contract Vis-À-Vis Future Contract... 74
Balance of Payment (BOP)....................................... 88
Varients of Bonds........................................................ 74
Factors Influencing Current
Other Bonds................................................................... 75 Account Deficit (CAD)............................................... 89
Terminologies............................................................... 76 Trade Balance................................................................ 89
Indian Capital Market................................................ 76 Rodtep Scheme............................................................. 89
Angel Investors Vis-A-Vis Venture Capitalist....77 External Debt................................................................ 89
State Development Loans (SDL)........................... 77 Important Terminology............................................ 89
Exchange Traded Funds (ETF).............................. 77 Economic Integration and
External Commercial Borrowings........................ 78 Trade Agreements...................................................... 90
Security Market in India........................................... 78 Trade Agreement ........................................................ 90
Schemes and Lending Facilities At IMF.............. 91
Difference Between Debt and Equity.....................78
Terms Related to WTO.............................................. 91
Issuers in the Indian Security Market........................78
Other Important Terminologies............................ 92
Stock Exchange............................................................. 78
Other Foreign Investment Methods.................... 92
Role of Stock Exchanges........................................... 79
Foreign Currency Borrowings (FCB)
Major Stock Exchanges............................................. 79 and Associated Risk.................................................... 92
International Stock Exchange................................ 79 Market-Place Model Vs Inventory Model ......... 93
Commodity Exchanges.............................................. 79 Government Initiatives to Promote Trade....... 93
Major Exchanges.......................................................... 79 New Foreign Trade Policy (NFT)
Other Exchanges.......................................................... 79 2021-2026...................................................................... 94
Strategic Disinvestment............................................ 80 10. Poverty and Unemployment.........................96-101
Investment Funds........................................................ 80
Poverty............................................................................. 96
Reit and Invit................................................................. 80 Poverty Line................................................................... 96
Depository Receipts................................................... 80 Poverty Statistics According to Census 2011.....96
Types of Depository Receipts................................. 81 Committees on Poverty............................................. 96
Types of Foreign Investments................................ 81 Multidimensional Poverty....................................... 97
Foreign Direct Investment (FDI)........................... 82 Global Multidimensional Poverty
Credit Default Swap.................................................... 82 Index (MPI) 2020........................................................ 97
vi
National Multidimensional Poverty 12. Industry and Infrastructure.......................116-130
Index (N-MPI)............................................................... 97 Based on Raw Materials........................................ 116
Terminologies Related to Poverty........................ 98 Based on Size.............................................................. 116
Socio Economic And Caste Census Based on Ownership............................................... 116
(SECC)............................................................................... 99
Union Budget 2022.................................................. 117
Unemployment............................................................. 99
Index of Industrial Production (IIP)................. 119
Types of Unemployment in India......................... 99
Difference B/W PMI and IIP................................ 119
Key Employment and Unemployment
Important Industrial Locations.......................... 119
Indicators..................................................................... 100
Strategic and Critical Minerals............................ 119
Terminologies Related to Unemployment.... 100
District Mineral Foundation (DMF).................. 120
Government Schemes & Policies to Tackle
Unemployment & Poverty.................................... 101 Strategic Crude Oil Reserves............................... 120
Economic Reforms of 1991.................................. 120
11. Agriculture.......................................................102-115 Industrial Policy Resolution................................ 121
Introduction����������������������������������������������������������������102 Disinvestment ........................................................... 122
Agriculture: Economic Types of Public Sector Enterprises (PSE)...... 123
Survey- 2022-23....................................................... 102 Financial Model......................................................... 123
Agriculture: Union Budget 2023-24 Avoid.... 103 Special Economic Zones (SEZ)............................ 124
Terminologies Related�������������������������������������������104 National Investment &
Cropping Seasons..................................................... 104 Manufacturing Zones (NIMZ).............................. 124
Major Crops and Producing States.................... 104 Difference Between Nimz and SEZ.................... 124
Farming Systems....................................................... 104 Production Linked Incentive
Agriculture Inputs.................................................... 105 (PLI) Scheme.............................................................. 125
Irrigation...................................................................... 105 Industrial Corridors................................................ 125
Fertiliser/Plant Nutrient....................................... 105 Related Schemes and Initiatives........................ 126
Neem Coated Urea (NCU)..................................... 106 National Infrastructure Pipeline (NIP)........... 127
Market Development Assistance
National Logistics Efficiency and
(MDA) Policy............................................................... 106
Advancement Predictability and Safety Act
Finance/ Credit......................................................... 107 (NLEAPS)..................................................................... 127
Seeds.............................................................................. 107 Msme (Micro, Small, and Medium
Food Distribution..................................................... 107 Enterprises)................................................................ 127
Agriculture Market.................................................. 108 Intellectual Property Rights (IPR).................... 127
Sugarcane Pricing..................................................... 109 Fourth Industrial Revolution
Agriculture and Income Support Schemes.... 109 (IR 4.0).......................................................................... 128
Committees Related to Patent Prosecution Highway (PPH)
Agriculture.................................................................. 110 Programme.................................................................. 128
Other Agriculture Related Institutions........... 110 Reports.......................................................................... 129
Contract Farming...................................................... 110
Organic Farming....................................................... 111 13. Service Sector in India.................................131-134
Government Initiatives to Promote Composition of Service Sector............................ 131
Organic Farming....................................................... 111 Spread of Service Sector........................................ 131
Zero Budget Natural Farming (ZBNF)...................111 Services: Source of Strength............................... 131
Four Components of ZBNF�����������������������������������111 Service Sector Performance................................. 132
Major Agreements And Concepts National Investment and Infrastructure
Under WTO................................................................. 111 Fund (NIIF)................................................................. 132
Agreement on Agriculture (AoA)�����������������������112
Purchasing Managers Index (PMI).................... 133
Rainbow Revolution in Agriculture.................. 113
Logistics Performance Index (LPI)................... 133
Animal Husbandry................................................... 113
Logistics Ease Across Different
Land Reforms............................................................. 114 States (Leads) Report (Index) 2021................. 133
Land Reforms............................................................. 115 Champion Services Sector (CSS)........................ 133
vii
Wto and Services...................................................... 134 Gender Social Norms Index (GSNI)................... 139
Government Schemes & Initiatives................... 134 Climate Change And Environment:
14. Human Development and Sustainable Preparing To Face The Future-
Development...................................................135-139 Economic Survey 2022-23................................... 139
viii
1 Economics: An Introduction
ECONOMICS: AN INTRODUCTION
z The term economics originated from the greek word
oironomia meaning household management.
z In 1776, Adam Smith, father of modern Economic,
published wealth of Nations, where he defined
Economics as an enquiry into nature and causes of
wealth of Nations.
z It is a social science that studies the production,
distribution, and consumption of goods and services.
Macroeconomics
z Branch of Economics concerned with large scale
economic factors as fiscal policy, monetary policy,
national productivity.
z Concentrates on the behavior of the economy as a
whole.
Microeconomics
z Study of individuals, households & firms behaviour in
decision making & allocation of resources.
Washington Consensus
z Originally for the Latin American Countries.
z Objective: To address the real problems occurring in
Latin America.
Economics: An Introduction 3
Unorganized sector adds more than 60% to the z Governments raises revenue through taxes, cess, etc.
national income while the contribution of the organized to meet expenses on the services rendered by it.
sector is almost half of that depending on the industry.
Private Sector
z The ownership of assets and delivery of services is in
Gig Economy (based on short term contracts or
the hands of private individuals or companies.
freelance work), as emerging sector can be regarded
under unorganised Economy. z Activities are guided by the motive to earn profits.
Consumers need to pay for the services.
India.
1931-32 z First scientific estimate made by Prof. 1949 z National Income Committee was set up in
V.K.R.V. 1949 (Chairman – Dr P C Mahalanobis)
Economics: An Introduction 5
z It is the sum total of Rent (income from land), wages z High GCF
(earned by workers labours), profits (earned by higher rate of savings in the economy. It requires
entrepreneurs) & Interest (earned on Capital) N.I. = for high rate of production, capital formation,
(Totla consumption Expenditure) + I (Total Investment changes in production techniques.
Expenditure) + G (Total Govt. Expenditure) + (X
z GCF
(Export) - M (Import).
Capital formation in the public sector + private
z GVA
picture of economy from the producers’ side or
supply side
z GDP
picture from the consumers/demand side
perspective.
Economics: An Introduction 7
Intermediate z Intermediate goods and services are not z No intermediate goods and services
Goods included to avoid double counting. should be included in GNP.
Application z To see the strength of country’s local economy z To see how the nationals of a country
are doing economically
NI VS NDI VS PI
National Income (NI) National Disposable Income (NDI) Personal Income (PI)
National Income = The Net Gives an idea : maximum amount Individual’s/households total earnings
National Product at factor cost of goods and services the domestic (wages + investment enterprises + other
economy has at its disposal. ventures)
NI = NNP at market prices NDI = NNP + Other Current Transfers PI = NI – Undistributed profits – Net interest
(Indirect taxes – Subsidies) Or NI from rest of the world (remittances, payments made by households – Corporate
at Factor Cost = NNP at Market gift, donations etc.) tax + Transfer payments to the households
Cost – Indirect Taxes + Subsidies from the government and firms (oldage
pensions, un-employment compensation)
v v v
Economics: An Introduction 9
BRINGING INNOVATIVE DISRUPTION IN
TYPES OF PLANNING
Planning in India 11
Post-independence India adopted planned and a mixed 3 Annual Plans (Plan Holiday) (1966
economy with the state having an active and dominant to 1969)
role in the economy.
z Focus was on Self-reliance.
During this Phase, annual plans were made and
ECONOMIC PLANNING IN INDIA z
equal priority was given to agriculture & its allied
z India adopted a system of five yearly planning to sectors and the industry sector.
address its various socio-economic problems. z Green revolution ushered in this period. (1966-67).
z Idea: To make a list of important problems to be solved
keeping in view the given resources and the capacity Fourth Five Year Plan (1969 to 1974)
to arrange the resources and review after five years. z Growth with stability and progressive achievement
of self-reliance.
Architects of Indian planning: Jawaharlal Nehru, P.C
Mahalanobis, V.R Gadgil, V.K.R.V Rao. Targeted growth rate – 5.7 percent
z Objectives: Economic growth; Increase in
Achieved growth rate of 3.3% (plan failed to achieve
employment; Reduction in inequality of income;
targeted growth rate)
Reduction in poverty; Modernization of the economy;
Ensuring social justice and equality.
Major Events
z For the first 8 Plans: Emphasis was on a growing
public sector with massive investments in basic and Droughts and the Indo-Pak War of 1971–72
heavy industries. (Bangladesh Liberation War)
z Ninth Plan (1997) onwards: emphasis on the public
sector has become less pronounced and the current Fifth Five Year Plan (1974 to 1979)
thinking on planning in the country, in general, is that z Focus on poverty alleviation and self-reliance
it should increasingly be of an indicative nature.
Targeted growth rate – 4.4 percent
First Five-Year Plan (1951-56) Achieved growth rate of 4.8% (plan was successful)
z Based on the Harrod-Domar model.
z This plan was terminated in 1978, with the change in
z Its main focus was on the agricultural development of regime -Janta Party.
the country including irrigation and power projects.
Major Events
Targeted growth rate – 2.1 percent
The plan period was badly disturbed by the draconian
Achieved growth rate of 3.6% (more than its target)
emergency and a change of the government at the
Second Five-Year Plan (1956 to 1961) Centre.
Rapid industrialization with a focus on heavy
z
industries and capital goods
Rolling Plan (1978 to 1980)
z It was based on the P.C. Mahalanobis Model z Annual Plans replacing 5 year plans.
Targeted growth rate – 7.5 percent Sixth Five Year Plan (1980 to 1985)
Achieved growth rate of 4.1% z Objective: Poverty eradication and Employment
generation.
Third Five Year Plan (1961 to 1966) z Famous Slogan: Garibi Hatao
z Also called ‘Gadgil Yojana’/Plan Targeted growth rate – 5.2 percent
z The main target of this plan was to make the economy
Achieved growth rate of 5.7% (plan was successful)
independent and to reach the self-active position
of take-off. Seventh Five Year Plan (1985 to 1990)
z For the first time, it considered the aim of balanced,
z Objectives: Emphasized on rapid food grain
regional development.
production, increased employment creation and
Major Events productivity in general.
z Two wars: one with China in 1961–62 and the other Targeted growth rate – 5%
with Pakistan in 1965–66 along the Gujarat border. Achieved growth rate of 6% (plan was successful)
z Severe drought-led famine in 1965–66 had to be faced.
Planning in India 13
z It can converge with the other approved Central Third Strata: District-Level Planning
(MGNREGA) and State Government schemes. z By late 1960s all the districts of the states were having
z Funds from local bodies can be pooled with their own plans with their respective District Planning
MPLADS works. Boards with the respective District Magistrate being
z Public and community contribution is made the de-facto chairman.
permissible in the scheme.
z One MP–One Idea, an annual competition for best
Fourth Strata: Block-Level Planning
innovation in solving local problems. z As a part of the district-level planning the block level
planning came up which had the District Planning
Recent Developments Boards as their nodal body.
z Recently, the Union Cabinet has approved the Fifth Strata: Local Level Planning
restoration of MPLADS funds for the remaining part
z By early 1980s, plans were being implemented at the
of Financial Year 2021-22 till 2025-26. However,
local level via the blocks with District Planning Boards
the MPs will get ₹. 2 crore instead of the annual
approved Rs. 5 crore. (DPBs) as the nodal agency.
z It will be co-terminus with the period of the 15th z Due to socio-economic differentiations among the
Finance Commission. population, local-level planning in India developed
with its three variants: Village-Level Planning; Hill
Recommendation of Works Area Planning; Tribal Area Planning.
z The Lok Sabha Members can recommend works in
their respective constituencies. CENTRAL SECTOR SCHEMES AND
z The elected members of the Rajya Sabha can CENTRALLY SPONSORED SCHEMES
recommend works anywhere in the state from which
they are elected. Central Sector Schemes
z Nominated members of the Lok Sabha and Rajya z 100 percent funded by the Union Government with
Sabha may select works for implementation anywhere
states functioning as implementing agencies.
in the country.
z These schemes are mainly formulated on subjects
MULTI-LEVEL PLANNING from the Union List.
z In addition, the Central ministries also implement
z In late 1950s and early 1960s, the states demanded some schemes directly in the states/UTs, which
the right to plan at the state level. are called Central Sector Schemes, but resources
z By mid-1960s, the states were given the power to plan under these schemes are not generally transferred
by the Centre, advising them that they should promote to states.
planning at the lower levels of the administrative
strata. Centrally Sponsored Schemes
District level planning: Through the municipalities
z A certain percentage of the funding is borne by
and corporations in the urban areas
the Centre and the states in fixed ratios and the
Block level planning: Through panchayats and
implementation is done by the state governments.
the tribal boards.
z CSSs are formulated in subjects from the State List to
z By early 1980s, India was a country of multilevel
encourage states to prioritize in areas that require
planning (MLP).
more attention.
First Strata: Centre-Level Planning
z At this level three types of Central Plans had evolved Central Plan Assistance
over the years z Financial assistance provided by the GoI to support
the Five Year Plans, the Twenty-Point Programme State’s Five-Year Plans is called Central Plan.
and the MPLADS. z Assistance (CPA) or Central Assistance (CA).
Second Strata: State-Level Planning Components
z By 1960s, the states were planning at the state level
with their respective planning bodies, the state z Normal Central Assistance (NCA): The distribution
Planning Boards with the respective CMs being their of the NCA is formula based (Gadgil-Mukherjee
de-facto Chairman. Formula) and is untied.
Planning in India 15
z District Hospital Index Demographic Dividend
z Health Index 2019 - (Healthy states, progressive z Harness our greatest asset, the people of India: by
India) focusing on their development, through education and
skilling, and their empowerment, through productive
GUIDING PRINCIPLES OF NITI AAYOG livelihood opportunities.
People’s Participation
Antodaya z Transform the developmental process into a people-
z Prioritize service and uplift of the poor, marginalized driven one, making an awakened and participative
and downtrodden, as enunciated in Pandit Dindayal citizenry (including the NRI community) the driver of
Upadhyay’s idea of Antodaya. good governance.
z Development is incomplete and meaningless, if it does
not reach the farthest individual. Governance
z Nurture an open, transparent, accountable, pro-active
Inclusion and purposeful style of governance, transitioning
z Empower vulnerable and marginalized sections, focus from Outcome.
redressing identity-based inequalities of all kinds
gender, region, religion, caste or class. Sustainability
z Maintain sustainability at the core of our planning
Village and development process, building on our ancient
z Integrate our villages into the development process. tradition of respect for the environment.
v v v
FAST PACED GENERAL STUDIES FOUNDATION COURSE FOR UPSC CSE 2023
HINDI & HINGLISH BATCHES
PRAHAR 2023
START DATE: 07th NOV 2022 - SUBSCRIPTION END DATE: 31st DEC 2023
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Problems)
Regular Doubt
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Comprehensive Free
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Study Material
Manthan: Monthly
CA Magazine
Previous Year
Questions Analysis
Public Finance 19
Vijay Kelkar Committee presented a roadmap for fiscal
consolidation.
Public Finance 21
target-for up to 0.5 % GDP, from the stipulated fiscal National security, war, National Calamity, Collapse
deficit target during special circumstances. of Agriculture, Structural Reforms.
z GOI used an escape clause this year as COVID 19 was Decline in real output growth of a quarter by at
declared as national calamity. least three percentage points below the average of
z Under Section 4(2) of the Act, the Centre can exceed the previous four quarters.
the annual fiscal deficit target citing certain grounds:
TERMINOLOGIES
Fiscal Drag Off Budget Financing
Situation where inflation pushes income into a higher Expenditure that’s not funded through the budget.
tax bracket. The result is increase in income taxes but no Sovereign Debt Crisis
increase in real purchasing power
It describes the difficulties that a nation faces to service the
Fiscal Neutrality loans it takes from the foreign sources in foreign currency.
When the net effect of taxation and public spending is Economic Stimulus
neutral
Government measures to encourage private sector
Pump-Priming economic activity by engaging in targeted, expansionary
Generally, during a recessionary period, through monetary or fiscal policy based on Keynesian economics.
government spending and interest rate and tax reductions Fiscal Stimulus
in an attempt to revive economy during recession
When the government takes certain measures for
Twin Deficit lowering taxes or increases its spending in a bid to revive
Worsening of both Current Account deficit and Fiscal the economy.
deficit simultaneously in the economy. Monetary Stimulus
Fiscal Cliff It involves cutting interest rates to stimulate the economy.
The fiscal cliff refers to a combination of expiring tax cuts Lower interest rate will reduce the cost of borrowing,
and across-the-board government spending cuts hence more borrowing will take place.
v v v
Udaan 500+ ( 1.5 Years Prelims and Mains Test Daily Class Notes, DPPs, Weekly
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z It is the rise in prices of goods and services within a z The opposite and rare fall in the price index of this
particular economy wherein, the purchasing power basket of items is called deflation.
of consumers decreases, and the value of the cash
holdings erode. In India, the Ministry of Statistics and Programme
Implementation (MoSPI) is the nodal agency for
z Inflation measures the average price change in a
measuring unflation.
basket of commodities and services over time.
Core Inflation : Headline Inflation (Primary + fuel + food KEY TERMS AND TERMINOLOGIES
manufacturing industries).
Skewflation
Profit Induced Inflation z It is the skewed rise in the price of some items while
z If the producers, due to their monopoly position, tend remaining item prices remain the same. E.g. Seasonal
to mark-up their profit margin, it will lead to profit- rise in the price of onions.
induced inflation.
Stagflation
Structural Inflation z The situation of rising prices along with falling
z Due to the weak structure of the institutions and growth and employment. Inflation accompanied by an
markets in the economies, mostly the developing and economic recession.
low-income ones. z A combination of Inflation and unemployment (usually
E.g. Artificial shortage of foods/ goods due to hoarding in the time of Recession).
and Poor agriculture produce due to poor monsoons,
inadequate irrigation facilities etc.
Disinflation
z Reduction in the rate of inflation.
BASED ON SPEED E.g. Fall in the inflation rate from 8% to 6%.
Inflation 25
INFLATION INDICES: WPI VS CPI VS IIP
Wholesale Price Index (WPI) Consumer Price Index (CPI) Index of Industrial Production (IIP)
z Base Year: 2011-12 z Base Year: 2011-12 z Base Year: 2011-12
z Measures the average change z Measures the change in the retail z Measures the growth rates in
for bulk sale before the retail price in the prices of commodities of different industry groups of the
level. goods and services with reference to economy. It is a key economic
z Most widely used inflation a base year. indicator of the manufacturing
indicator. z RBI has adopted CPI Combined sector of the economy.
(Rural +Urban) as its key measure of z Index of 8 core industries are:
inflation. Refinery Products > Electricity >
z Covers only goods z Both goods and services Steel > Coal > Crude Oil > Natural
Gas > Cement> Fertilizers.
z These 8 industries command
40.27% weight in the overall IIP.
weight in the overall IIP.
z Manufactured products (64%) z Food and Beverage 45.86 z Different Sectors
> Primary Articles (23%) > z Miscellaneous 28.32 z Manufacturing (77.63%) > Mining
Fuel and Power (13%) z Housing 10.07 (14.37%) > Electricity (7.9%)
z Fuel and light 6.84
z Clothing and Footwear 6.53
z Pan, tobacco and intoxicants 2.38
z Published by Office of Economic z CPI for Industrial Workers (IW) by the z The IIP index is computed
Adviser (OEA), Ministry of Ministry of Labor and Employment and published by the Central
Commerce and Industry (MoLE). The base year for CPI (IW) is Statistical Organization (CSO)
changed from 2001 to 2016 on a monthly basis.
z CPI for Agricultural Laborer (AL) by
the MoLE.
z CPI for Agricultural Workers (CPI-AL)
and Rural workers (CPI-RL) base
year is 1986-87.
z CPI for Rural Laborer (RL): by the
Ministry of Labor and Employment.
z CPI (Rural/Urban/Combined):
by National Statistics Office (NSO),
MoSPI.
Inflation 27
z Aim: maintaining price stability, while keeping in
mind the objective of growth.
z Objective: to bring transparency and accountability in
deciding monetary policy.
z Determines the policy interest rate required to achieve
the inflation target.
z Committee comprises: Six members where RBI
Governor acts as an ex-officio chairman + 3 members
are from RBI + 3 selected by government.
z Inflation target is to be set once every five year by
the Government of India, in consultation with the RBI.
z The MPC is required to meet at least four times in
a year.
z The quorum for the meeting of the MPC is four
members.
z Each member of the MPC has one vote, and in the
event of an equality of votes, the Governor has a
casting vote.
z Once every six months, the Reserve Bank is required
to publish a document called the Monetary Policy
Report to explain the sources of inflation and the
forecasts of inflation for 6-18 months a head.
z Current inflation target is pegged at 4% with (+/-)
2% tolerance.
INFLATION TARGETING
z It is a monetary policy where the central bank sets
a specific inflation rate as its goal and adjusts its
monetary policy to achieve that rate.
z The RBI and Government of India signed a Monetary
Policy Framework Agreement in 2015. Monetary Policy Measures
z Inflation targeting indicates the primacy of price z Increase of the Bank rate.
stability as the key objective of monetary policy. z Make borrowing costly by increasing interest rates.
z RBI would aim to contain consumer price inflation z Increasing tendency to save.
within 6 % and within 4% with a band of (+/-) 2%. z Controlling the credit-creation.
z Conducting open market operations
MONETARY POLICY COMMITTEE (MPC) z Increasing the Repo Rate, Bank Rate, CRR, SLR and
z Created in 2016, MPC is a statutory and other policy rates.
institutionalized framework under the RBI Act, Fiscal Policy Measures
1934.
z Reducing the private spending by increasing taxes
z Urijit Patel Committeefirst proposed the idea
for the formation of a five-member Monetary Policy z Reducing the government spending
Committee. z Bringing more people under tax coverage
FISCAL STIMULUS
z In economics, stimulus refers to attempts to use
monetary or fiscal policy (or stabilization policy in
general) to stimulate the economy.
z Stimulus can also refer to monetary policies like
lowering interest rates and quantitative easing.
z A stimulus is sometimes colloquially referred to as
priming the pump or pump priming.
Inflation 29
Recovery Recessionary Phase
z A severe and prolonged downturn in economic activity. z When the overall output of goods and services typically
An extreme recession that lasts 3+ years or leads to a measured by the GDP decreases from one quarter (or
decline in real GDP of at least 10%. month) to another.
Example : The Great Depression of 1930. Recovery Measures: Tax breaks, Interest cuts, Increase
z Upturn in aggregate demand in turn leads to increase in wages etc.
in production level and new investments. Inflation
increases Business Cycle
Unemployment decreases (Phillips Curve) z Expansionary phase + Recessionary phase
Boom
z Accelerated and prolonged increase in the demand
Technical Recession
exceeds sustainable production, faces structural z When real GDP has declined for at least two
problems, demand and supply disequilibrium. consecutive quarters in order to get around
the empirical technicalities associated with the
Economic Recession recession.
z Period of general economic decline
drop in the stock market + increase in India entered a Technical Recession in the first half of
unemployment + decline in the housing market, 2020-21 for the first time in its history (RBI Nowcasts
etc. bulletin, Nov 2020)
Double-Dip-Economic Slowdown NOWCASTS BY RBI
z A recession followed by a short-lived Recovery and
followed by another recession. z Nowcast in economics means the prediction of the
present or the very near future of the state of the
z A situation in which GDP growth slows but does not
economy.
decline.
z Began with the first issue of the Bulletin in
TERMINOLOGIES WITH RESPECT TO January 1947, but interrupted during the period
RECESSION 1995 to date.
z RBI, in its latest monthly bulletin, has dedicated a
Expansionary Phase chapter on the State of the economy.
z When the overall output of goods and services typically z The idea is to provide a monthly snapshot of some
measured by the GDP increases from one quarter (or of the key indicators of India’s economic health.
month) to another.
Inflation 31
z There is an increasing inequality among nations, with World 0Investment Report (UNCTAD)
divergence in economic prospects across countries. z Focuses on trends in Foreign Direct Investment
z Aggregate output (FDI).
Advanced economy - expected to regain its pre- z Global FDI flows are forecast to decrease by up
pandemic trend path in 2022 and exceed it by 0.9% to 40% in 2020, from their 2019 value of $1.54
in 2024. trillion.
Emerging market and developing economy Trade and Development Report (UNCTAD)
(excluding China) - expected to remain 5.5% below
the pre-pandemic forecast in 2024. z In 2022, UNCTAD expects global growth to slow to
3.6%, leaving world income still 3.7% below where
its pre-pandemic trend would have put it.
v v v
PW DOUBT ENGINE
PW SAARTHI PROGRAM
LAUNCHING SOON
Proportional Taxation
z The same percentage tax is levied on everyone
regardless of income.
Retrospective Taxation
Progressive Taxation z It allows a country to pass a rule on taxing certain
z Based on the taxpayer’s ability to pay. High income products, items or services and deals and charge
earners will pay more tax than low-income earners.
companies from time behind the date on which the
E.g. Income tax. law is passed. Countries use this route to correct any
anomalies in their taxation policies that have, in the
Regressive Taxation past, allowed companies to take advantage of such
z A regressive tax is a tax applied uniformly, loopholes.
taking a larger Percentage of income from
Taxation 35
Angel Tax z Capital gains taxes are only triggered when an asset is
z It is the income tax payable by start-ups on capital realized, not while it is held by an investor.
raised via the issue of shares. z Normally if an asset is held for less than 36 months,
z To make sure that the money coming in was genuine any gain arising from selling it is treated as a Short-
and to minimise fraud. Term Capital Gain (STCG) and taxed in your hands.
z Dividend Distribution Tax (DDT) z It becomes a Long-Term Capital Gain (LTCG) if the
z It is a tax levied on dividends that a company pays to asset is held for 36 months or more.
its shareholders out of its profits. z In case of shares and mutual funds, a holding period of
12 months or more qualifies as long-term.
TAX ON FINANCIAL TRANSACTIONS
TYPES OF INDIRECT TAXES
Securities Transaction Tax Ad Valorem It is based on the value of the transaction
z Tax levied at the time of purchase and sale of securities Tax or the property. E.g. VAT.
listed on stock exchanges.
VAT VAT is an indirect tax having a multi-point
Capital Gains Tax (CGT) tax collection- imposed and collected at
different points of value addition chain.
z Any profit or gain that arises from the sale of a capital
It has no cascading effect.
asset is a Capital Gain and tax has to be paid on that,
called the Capital Gains Tax. It can be short-term or Excise Tax On goods produced or manufactured in
long-term. the country.
Customs On goods imported and exported out of
Commodities Transaction Tax Duty the country.
z Applicable for those dealing in trading of commodities.
Professional Profession tax is the tax levied and
Tobin Tax/Robinhood Tax tax collected by the state governments in
India. It is an indirect tax.
z Taxing short term currency market transactions to
combat market volatility.
GOODS AND SERVICES TAX (GST)
LONG TERM CAPITAL GAINS (LTCG) Definition
TAX ON EQUITY z It is a comprehensive tax levied on the manufacture,
sale, and consumption of goods and services.
z A capital gains tax is a tax levied on capital gains,
profits an investor realizes when he sells a capital Introduced by the 101st Constitutional Amendment Act,
asset for a price that is higher than the purchase price. on the lines of One Nation One Tax.
Powers
z Parliament and the state legislatures have concurrent powers to implement GST.
Mechanism
z Self-invoicing is to be done when you have purchased
from an unregistered supplier and such purchase of
goods or services falls under reverse charge.
GST Compensation Cess Lottery, Gambling and Betting are also taxable under
z It was introduced as relief for States for the loss of the Goods and Services Tax (GST) Act, 2017
revenues arising from the implementation of GST.
z As per the GST Act, states are guaranteed
GST COMPOSITION SCHEME
compensation for any revenue shortfall below 14% z It is an option available to a registered taxpayer.
growth (base year 2015-16) for the first five years z Small taxpayers can get rid of tedious GST formalities
ending 2022. and pay GST at a fixed rate of turnover.
z GST compensation is paid using funds specifically z Limit: Any taxpayer whose turnover is less than ₹. 1.5
collected as compensation cess- is levied on crore. In case of North-Eastern states and Himachal
products considered to be sin or luxury goods. Pradesh, the limit is now ₹ 75 lakh.
Input Tax Credit (ITC) LAWS ENABLED TO IMPLEMENT GST
z It is a mechanism to avoid cascading of taxes. z Central GST Act, 2017
z It means at the time of paying tax on output, one can z Integrated GST Act, 2017
reduce the tax one has already paid on inputs and just
z GST (Compensation to States) Act, 2017
pay the balance amount.
z Union Territory GST Act, 2017
z Cross utilisation of input tax credit is available
z GST 101st Constitutional Amendment Act, 2016
Taxation 37
GOODS AND SERVICES TAX COUNCIL
Introduced By z 101st Constitutional Union z Chairperson- Union Finance
Amendment Act, 2016 Representations Minister.
Article z 279A z Minister of State for Revenue
(Central Government) will be
Body z Constitutional Body
a member
Appointment z Constituted by Presidential z 1/3rd voting share
order.
State z The Minister of Finance
Functions z Makes recommendations Representations from each State or Minister
to the Union and State nominated by the States will
Government on issues related be its member including Delhi
to GST and Puducherry.
z Key decision-making body z 2/3rd voting share
that will take all important
z Members of the Council from
decisions (tax rate, tax
the states have to choose 1
exemption, the due date
amongst themselves to be
of forms, tax laws, and tax
the Vice chairperson of the
deadlines)
council. They can also decide
Decision z Majority of 3/4th members. his term
Quorum z 1/2 of the total number of
members of the council
ADVANTAGES OF GST
Union Government State Overall economy
z Increase tax compliance z Expansion of the tax base z Reduce corruption
z Create a unified common market z Increase Compliance z Bring about certainty
z Discourage Tax evasion z Enhance investment z Poverty Reduction
z Streamlining of Taxation z Improve the investment Scenario z Boost Secondary Sector
FINANCE COMMISSION
Constitutional Provision z Article 280, Part - XII
Appointment z By Presidential order.
Composition z Chairman + 4 other members.
Qualification z Determined by Parliament
Tenure z Constituted by the president of India every fifth year or at such earlier time as he
considers necessary.
Other Facts z Recommendations are advisory in nature.
z Balancing wheel of fiscal federalism.
Taxation 39
15TH FINANCE COMMISSION Demographic Performance
Chairman: N K Singh z Population data of 2011, to reward efforts made by
states in controlling their population.
Key Recommendations :
z States with a lower fertility ratio will be scored higher
z Vertical Devolution on this criterion.
The share of states in the centre’s taxes is
recommended to be decreased to 41%. LAFFER CURVE
1% less than 14th commission (42%), that
1% is to provide for the newly formed Union z The Laffer Curve is
Territories of J&K and Ladakh from the resources a theory formalized
of the central government. by supply-side
economist Arthur
z Horizontal Devolution: The criteria and the
Laffer to show
weights assigned for horizontal devolution are:
the relationship
Population – 15%
between tax rates
Area – 15%
and the amount
Forest & Ecology – 10% of tax revenue
Income Distance – 45% collected by governments.
Tax and Fiscal Efforts – 2.5% z The curve is used to illustrate the relationship between
Demographic Performance – 12.5% Government tax revenue and tax rates.
Taxation 41
Tax Mitigation/ Tax Planning Helps in
z It refers to financial planning for tax efficiency. It is Implementation of Goods and Services Tax.
not illegal or unethical. It is representative of Financial Extension of the Indian Customs Single Window
Prudence. Interface for Facilitating Trade (SWIFT).
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Fiat Money
z Money which does not have any intrinsic value of its
own (Currency and Coins). RBI
z Generally declared as Legal tender for all transactions z Only authority to print Currency Notes under RBI
within a country. Act, 1934.
z Security Printing and Minting Corporation of India z Can print notes of different denominations from ₹ 2 to
Ltd. (SPMCIL) – Nasik and Dewas up to ₹ 10,000.
z Bharatiya Reserve Bank Note Mudran Private Ltd. z All banknotes issued by RBI are backed by assets such
(BRBNMPL)– Mysuru and Salboni as gold, Government Securities and Foreign Currency
Assets, as defined in Section 33 of RBI Act, 1934.
LEGAL TENDER Government
z Legal Tender is a coin or a banknote that is legally z Issue One-Rupee Notes and Coins. Coins can be
tenderable for discharge of debt or obligation. issued up to the denomination of ₹ 1000 under The
z The coins issued by Government of India under Section Coinage Act, 2011.
6 of The Coinage Act, 2011, shall be legal tender in
When Reserve money increases, Broad money will
DEMAND AND SUPPLY OF MONEY z
also increase.
Demand Example
z People desire to hold money for 3 objectives/motives
If the money multiplier is 6, it means that It signifies
(Liquidity Preference Theory of Keynes)
that for every unit of money kept as cash reserves,
Transaction Motive: to carry out transactions. banks are able to create 6 units of money.
Speculative Motive: when holding money is
perceived to be less risky than lending the money VELOCITY OF MONEY CIRCULATION
or investing.
z It is a measurement of the average rate at which money
Precautionary Motive: to meet the unforeseen
is exchanged in an economy during a given time period.
circumstances in future. E.g. a car accident, home
repairs etc. Velocity of Money = GDP / Money Supply.
z It usually rises with a rise in GDP and inflation.
Supply z The velocity of Money is high in the following case -
z It refers to the amount of money in circulation at a In Developing countries, Low Income people, High
given point in the economy. Financial Inclusion, During Boom or Growth period.
z The measures of money supply in India are classified
into following categories M1, M2, M3 and M4 along TERMINOLOGIES
with M0.
Reserve Money (M0): Currency in circulation + Currency Deposit Ratio (CDR)
Bankers Deposits with the RBI + Other deposits z It is the ratio of money held by the public in currency
with the RBI. to that they hold in bank deposits. (CDR = CU/DD)
High - Powered Money: The total liability of the Reserve Deposit Ratio
monetary authority of the country, RBI, is called the z Reserve Deposit Ratio (RDR) is the proportion of the
monetary base or high-powered money. total deposits commercial banks keep as reserves.
Narrow Money: M1 is called narrow money as it z Reserve money consists of: vault cash in banks and
is highly liquid and banks cannot run their lending deposits of commercial banks with RBI. It includes the
programmes with this money. SLR and CRR.
M1 = Currency with the Public + Demand Deposits z Banks use this reserve to meet the demand for cash by
with the Banking System + ‘Other’ deposits with account holders.
the RBI.
M2 = M1 + Savings deposits of post office savings Liquidity Coverage Ratio
banks z LCR is the requirement whereby banks must hold an
Broad Money (M3) = M1 + Time deposits with amount of high-quality liquid assets, enough to fund
the banking system. It is also known as Aggregate cash outflows for 30 days.
Monetary Resources. It is the stock of total money.
Liquidity Trap
M4 = M3 + All deposits with post office savings
banks. z When an expansionary monetary policy becomes
ineffective.
Liquidity in descending order is - M1>M2>M3>M4 z Due to prevailing depressed demand and production
levels individuals prefer storing their money instead
MONEY CREATION of spending.
Banking Sector 45
DIFFERENCE BETWEEN CRR AND SLR
Cash Reserve Ratio (CRR) Statutory Liquidity Ratio (SLR)
z Banks are required to maintain with the Reserve Bank a z SLR is that percentage of the deposits which the banks
certain percent of its Total Demand and Time liabilities. have to hold with themselves.
z CRR is maintained only in cash form. z SLR can be maintained in the form of Gold, Cash and
z No interest is earned on the CRR. other securities approved by RBI.
z Helps regulate the liquidity in the economy. z Interest is earned on SLR.
z It is calculated on the banks Total Demand and Time z Helps regulate the Credit facility in the economy.
liabilities. z It is calculated on banks Net Demand and Time
z The range of permissible CRR is between 3 and 15 per Liabilities.
cent. z SLR has an upper limit of 40% and a lower limit of 23%.
Marginal Cost of Funds Based Lending Benchmark Prime Lending Rate (BPLR)
Rates (MCLR) z The rate at which commercial banks can lend to
customers who are most credit worthy.
z It replaced Base rate to determine the lending rates for
commercial banks. Inflation Targeting
z It is the minimum interest rate that a bank can lend at. z A central bank has an explicit target inflation rate
z It is a tenor - linked internal benchmark, meaning the range. Government and RBI agree on convergence
rate is determined internally by the bank depending between fiscal and monetary policies.
on the period left for the repayment of a loan.
z MCLR is closely linked to the actual deposit rates and Operation Twist
is calculated based on four components: z It is the special Open Market Operations (OMOs)
Marginal cost of funds carried out by the RBI.
Tenor premium z Under this RBI carries out simultaneous sale and
Operating costs purchase of G-Secs to influence the yield rates on the
Negative carry on account of cash reserve ratio
G-Secs.
Banking Sector 47
z The RBI sells short-term G-Secs to the Banks and financial institutions and collects money. The same money would
then be used by the RBI to buy long term G-Secs.
FINANCIAL REPRESSION
Meaning z It describes measures by which government channel funds from the private sector to themselves as
a form of debt reduction.
Impact on z It results in the government being able to borrow at extremely low interest rates, obtaining low-cost
Economy funding for government expenditures.
z This action also results in savers earning rates less than the rate of inflation and is therefore repressive.
Features z Caps on ceiling on interest rates.
z Government ownership and control of domestic banks and financial institutions.
z Creation or maintenance of a captive domestic market for government debt.
z Restrictions on entry to financial industry.
z Directing credit to certain industries.
z Banks are Financial Intermediaries between India has 12 Public sector banks, 21 private banks 45
borrowers and lenders. It accepts deposits from the Foreign Banks (as of 27 November 2020).
public and lends money to businesses and consumers. z RBI is the central authority that manages all India’s
Its primary liabilities are deposits and primary assets banking pperations.
are loans and bonds.
EVOLUTION OF BANKING IN INDIA
z Bank of Hindustan was the first bank to be z Post Independence, GOI passed Banking Companies
established in 1770 at Calcutta. Act, 1949 empowering RBI as a supervisor &
z East India Company established 3 banks in regulatory Bank.
Presidency towns: Bank of Bengal (1806), Bank of z Imperial Bank of India was nationalised in 1955
Bombay (1840) and Bank of, Madras (1843). and renamed State Bank of India followed by the
z First Commercial Bank of India was Awadh formation of it’s 7 associate banks in 1959.
Commercial Bank (1881). z In 1969, Government nationalised 14 private banks
z Punjab National Bank (established at Lahore in followed by nationalisation of 6 more banks in 1980.
1895), currently operational. z India’s first all women bank - Bhartiya Mahila Bank
z The 3 Presidency Banks were amalgamated in 1921 was established in Mumbai on 19th November, 2013.
to form Imperial Bank of India, that remained a z State Banks (Repeal & Amendment) Act, 2018 led
quasi Central Bank till the establishment of RBI in to the merger of SBI associate banks along with
1935 under RBI Act, 1934. Bhartiya Mahila Bank with SBI wef April 1, 2017.
Subsidiaries of RBI
z Deposit Insurance and Credit Guarantee Corporation
(DICGC)
z Bharatiya Reserve Bank Note Mudran Private
Limited (BRBNMPL)
z Reserve Bank Information Technology Private Ltd.
(ReBIT)
z Indian Financial Technology and Allied Services
(IFTAS)
Banking Sector 49
FUNCTIONS OF RBI Banker to Banks
z It maintains banking accounts of all scheduled banks.
Monetary Authority It also acts as a lender of last resort by providing funds
z Formulates, implements and monitors the monetary to banks.
policy.
Banker to Government
z Maintaining price stability while keeping in mind the
z It performs merchant banking functions for the central
objective of growth.
and the state governments.
Regulator and Supervisor of the Financial z It is entrusted to the central govt. ‘s money, remittances,
System exchange and manages its public debt as well.
z Prescribes broad parameters of banking operations RBI INITIATIVES
within which the country’s banking and financial
system functions. RBI RECENT Retail Direct Scheme
z Regulation and supervision of banks under Banking z The Scheme is aimed at enhancing access to the
Regulation Act 1949. government securities market for retail investors.
z Regulation and supervision of non-banking financial z It offers them a new avenue for directly investing in the
companies. securities issued by the Centre and the state governments.
z Protecting depositors’ interest z Investors will be able to easily open and maintain their
government securities account online with the RBI,
Manager of Foreign Exchanges free of cost.
z Manages the Foreign Exchange Management Act, z The scheme offers a portal avenue to invest in
1999. central government securities, treasury bills, state
z It facilitates external trade and payment development loans and Sovereign Gold Bonds (SGBs).
z Promote development and maintenance of foreign z The scheme places India in a list of select few countries
exchange market in India. offering such a facility.
z Acts as custodian of Foreign Reserves.
Integrated Ombudsman Scheme
Issuer of Currency z It is aimed at further improving the grievance redress
z RBI has the sole right to issue currency notes in India. mechanism for resolving customer complaints against
z Besides exchanges and destroys currency and coins entities regulated by the central bank.
not fit for circulation. z The central theme of the scheme is based on One Nation-
z To give the public an adequate quantity of supplies of One Ombudsman with one portal, one email and one
currency notes and coins and in good quality. address for the customers to lodge their complaints.
z RBI has decided to integrate the three ombudsman
Developmental Role schemes into one and simplified the scheme by
z Performs a wide range of promotional functions covering all complaints involving deficiency in service
to support national objectives such as making by centralizing the receipt and initial processing of
institutional arrangements for rural or agricultural complaints to enhance process efficiency.
finance. z RB-IOS will do away with the jurisdictional limitations
as well as limited grounds for complaints.
Financial Inclusion z RBI will provide a single reference point for the
z The Reserve Bank has selected a bank led model for customers to submit documents, track status of
financial inclusion in India. complaints filed and provide feedback.
z RBI has undertaken a series of policy measures. Eg. z The central bank’s alternate grievance redress
Basic Savings Bank Deposit Account (BSBDA), JAM mechanism currently comprises three ombudsman
Trinity, etc. schemes:
Banking Sector 51
z Under dual control of the Registrar of Cooperative
RESIDEX
Societies and RBI.
z NHB RESIDEX, India’s first official housing price index,
z The board of members are elected with each member
was an initiative of the National Housing Bank (NHB).
having one vote.
z The scope has been widened under NHB RESIDEX
brand, to include housing price indices (HPI), land z Cooperative banks are the primary financers of
price indices (LPI) and building materials price agricultural activities, some small- scale industries
indices (BMPI), and also housing rental index (HRI). and self-employed workers.
Banking Service Index z These banks are cooperative credit institutions that
are registered under the Cooperative Societies Act
z By RBI; Base year is 2011.
1912. These banks work according to the cooperative
z It measures the inflation in the fees charged by the
principles of mutual assistance.
banks for NEFT/ RTGS/ card transactions/ mobile
banking etc. z Co-operative banks have a three-tier structure:
1. Primary Credit Societies-PCSs (agriculture or
CO-OPERATIVE BANKS urban).
z A Co-operative bank belongs to its members, who are 2. District Central Co-Operative Banks- DCCBs.
at the same time the owners and the customers of 3. State Co-Operative Banks-SCBs (at the apex
their bank. level).
COOPERATIVE BANKS VIZ-A-VIZ COMMERCIAL BANKS
Cooperative Banks Commercial Banks
z sCo-operative Societies are governed by the z Commercial banks are joint stock companies that
Co-operative societies Act, 1904. governed by the Banking Regulation Act, 1949.
z Generally, provide short, medium- and long-term z Generally, provide short medium- and long-term
finance to agriculture and allied sectors. finance, to trade, commerce and industry.
z Lend finance to their members only, shareholders z Lend to anyone who is willing to borrow and satisfies
borrow from a co-operative bank. conditions of the bank.
z Operate on a relatively small scale. z Operations are on a large scale.
z Scope of activities of a corporate bank is limited to z Commercial banks offer a wide range of financia
providing different types of loans to their members. assistance and financial services.
z Cooperative banks operate as a federal structure in z Commercial banks have the structure of a joint stock
India. company.
z Co-operative Barks are subject to the supervision of z Commercial Banks come directly under the Supervision
the state governments, NABARD and the RBI. of the Reserve Bank of India.
DIFFERENTIATED BANKS
Payments Bank Small Finance Bank
z Payments Bank are based on Usha Thorat Committee z Small Finance Banks are established on
recommendations. recommendations of Nachiket Mor Committee.
z Can accept deposits, but only up to ₹. 1 lakh per z Allowed to take deposits of any amount.
individual customer. z Can lend but the focus will be on small lending.
z Can’t lend in any form. z Can finance small business, small and marginal
z Can open small savings accounts. farmers,
z Can provide remittance services. z MSME, unorganized sector entities.
z Allowed to issue ATM /debit cards. z Can provide remittances as well as credit cards.
z Not allowed to issue credit cards. z Allowed to issue ATM or debit cards.
z Can distribute products like mutual funds, insurance, z Has to ensure that 50% of loan portfolio constitutes
third party loans. z advances of upto ₹. 25 lakhs.
z Payments banks can apply for conversion into small z Can distribute financial products like mutual funds,
finance banks (SFBs) after five years of operation. insurance, pension etc.
Banking Sector 53
z Lead bank Inter link the Commercial and Cooperative z Enhancement of the business correspondent model
banks. was suggested in order to make banking services
z It helps in more effective Branch Expansion. available in all villages having a population of above
z Better relationship between Govt. and Banks. 2,000, and relaxation in KYC (know your customer)
norms for small value accounts.
z Integration of credit activities of banks.
z Bottlenecks in the development of a District can be PRIORITY SECTOR LENDING (PSL)
located and removed.
z Lead Bank Scheme assist in implementation of the Concept & Meaning
District Plan. z RBI mandates banks to lend a certain portion of their
funds to specified sectors: agriculture, Micro, Small
Disadvantages
and Medium Enterprises (MSMEs), export credit,
z Confusion regarding the concept of Lead Bank education, etc.
especially for opening branches
z Challenges in allotment of Districts. Objective
z Lack of coordination between district planning z To ensure adequate institutional credit to reach
authorities and banking institutions operating in a vulnerable sectors of the economy, which otherwise
district on one side and between NABARD and the may not be attractive for banks from the profitability
Lead Bank on the other. point of view.
z Lead bank did not consider the role of co-operatives,
which are an important source of institutional finance. RBI Guidelines for PSL for Scheduled
z Shift in policies, complexities in operations and issues Commercial Banks
shifting to financial inclusion. z 40% of the total net bank credit should go to a priority
z Duplication of efforts in credit plan preparation. sector advance.
z Absence of checks and balances. z 10% of the priority sector advances or 10% of the
total net bank credit, whichever is higher should go to
BANKING REFORM COMMITEES the weaker section.
z 18% of the total net bank credit should go to
Prof. D R Gadgil Committee agricultural advances. Within the 18 % target for
z Banks should provide integrated banking facilities in agriculture, a target of 8 percent of Adjusted Net
unbanked areas. Bank Credit (ANBC) or Credit Equivalent Amount
z Adoption of ‘Area Based Approach’ – in unbanked of Off-Balance Sheet Exposure, whichever is higher
areas –each bank should adopt an area. is prescribed for Small and Marginal Farmers, to be
achieved in a phased manner.
z Help Agriculture & Supplemental Security Income
(SSI). z 5% of ANBC or Credit Equivalent Amount of Off-
Balance Sheet Exposure, whichever is higher should
z ‘District’ is identified as the smallest geographical unit
go to Micro enterprises.
for the scheme.
Banking Sector 55
Engages in Features
z Business of loans and advances, acquisition of shares/ z NBFC cannot accept demand deposits;
stocks/bonds/debentures/securities, insurance z Cannot issue cheque drawn on itself;
business, chit business but does not include any z Deposit insurance facility of DICGC is not available to
institution whose principal business is that of depositors of NBFCs;
agriculture activity, industrial activity etc.
z Norm of Public Sector Lending does not apply to
Excludes NBFCs;
z Any institution whose principal business is that of: z Cash Reserve Requirement also does not apply to
Agriculture Activity, Industrial Activity, Purchase or NBFCs;
Sale of any goods (other than securities), Providing z Regulated by multiple regulators.
any services and sale/purchase/construction of
Immovable Property.
CONSOLIDATION OF PSBC
Advantages Disadvantages
z Increased efficiency of banks z Bad Loans of the Associate bank can drag down the good
z Better Monitoring bank’s performance.
z Better Capital Adequacy of the Consolidated Banks. z Larger Banks are more vulnerable to economic crisis
z Merger helps reduce Cost of operation. z Difficult to manage people and different attitudes
z Merger destroys the idea of Decentralization
z Helps improve the professionalism and competency z Many Bank Branches have been closed after mergers -
of banks affects financial inclusion.
MISSION INDRADHANUSH
z 7 pronged approach to resolve issues faced by PSBs and improve their overall performance by ABCDEFG.
z PJ Nayak Committee on Banking sector reforms recommended many of the measures.
A Appointment In order to check the excessive concentration of power and smooth functioning
of the banks - Induction of talent from the Private Sector into the public banks,
separation of the posts of Chief Executive Officer and the Managing Director.
B Bank Board Bureau The appointments Board of the Public Sector Banks would be replaced by the
Bank Boards Bureau (BBB).
The BBB separates the functioning of the PSBs from the government by acting as
a middleman.
C Capitalisation Due to the high NPAs and the need to meet the provisions of the Basel III norms,
capitalization of banks by inducing Rs. 70000 crores were planned.
D De - Stressing PSBs and strengthening risk control measures and NPAs disclosure.
E Employment Providing greater flexibility and autonomy to PSBs in hiring manpower.
F Framework of Accountability Assessment of the banks through measuring the key performance indicators
(KPI)
G Governance Reforms Gyan Sangam, a conclave of PSBs and financial institutions. Bank Board Bureau
for transparent and meritorious appointments in PSBs.
Banking Sector 57
z For reorganization and insolvency resolution
NATIONAL FINANCIAL REPORTING of corporate persons, partnership firms and
AUTHORITY (NFRA) individuals.
z Minimum default of Rs 1 crore is needed to trigger
Introduction IBC. (In March this year, the government raised the
z NFRA is an independent regulator to oversee the threshold for invoking insolvency under the IBC to Rs
auditing profession and accounting standards in India 1 crore from Rs 1 lakh).
under Companies Act 2013. z Time bound process - 180 days, some cases 270 days
z It came into existence in October 2018. maximum.
No Deadlock - if resolution is not done, assets are to
Background z
be sold to pay debtors.
z After the Satyam scam in 2009, the Standing Committee
z It is not applicable for Willful Defaulters.
on Finance proposed the concept of the National
Financial Reporting Authority (NFRA) for the first z IBC proposes a new institutional set - up comprising
time in its 21st report. following four critical pillars:
z Section 132 of the Companies Act, 2013 then gave 1. The National Company Law Tribunal (NCLT) as
the regulatory framework for its composition and the adjudicating authority.
constitution. 2. Insolvency professionals (IPs) to manage the
insolvency and bankruptcy cases.
Composition
z The Companies Act requires the NFRA to have a 3. Information utilities (IUs) to reduce information
chairperson who will be appointed by the Central asymmetries.
Government and a maximum of 15 members. 4.
Insolvency and Bankruptcy Board of India
(IBBI), a regulator.
Functions
z Recommend accounting and auditing policies and Insolvency
standards to be adopted by companies for approval by z Insolvency is a state where the liabilities of an
the Central Government; individual or an organization exceeds its asset and
z Monitor and enforce compliance with accounting that entity is unable to raise enough cash to meet
standards and auditing standards; its obligations or debts as they become due for
z Oversee the quality of service of the professions payment.
associated with ensuring compliance with such
standards and suggest measures for improvement in Bankruptcy
the quality of service; z When an individual is unable to pay off his liabilities
z Perform such other functions and duties as may be and debts then he generally files for bankruptcy. Here
necessary or incidental to the aforesaid functions and he/she asks for help from the government to pay off
duties. his debts to his creditors.
Powers
z It can probe listed companies and those unlisted public
companies having paid-up capital of no less than Rs 500
crore or annual turnover of no less than Rs 1,000 crore.
z It can investigate professional misconduct committed
by members of the Institute of Chartered 1.
Reorganization Bankruptcy: Usually people
Accountants of India (ICAI) for prescribed classes of tend to restructure the repayment plans
body corporate or persons. to pay them easily under reorganization
bankruptcy.
INSOLVENCY AND BANKRUPTCY CODE 2. Liquidation Bankruptcy: the debtor tends to sell
off certain of their assets to pay off their debts for
z To tackle the Chakravyuh Challenge (Economic
their creditors.
Survey 2015 - 16) - the exit problem in India.
z The Economic Survey of 2015-16 recognised a key Debt accumulation on companies is very high and thus
issue called ‘the twin balance sheet’ problem. they are unable to pay interest payments on loans.
z The balance sheets of both public sector banks Bad-loan-encumbered-banks
(PSBs) and some corporate houses private entities Non-Performing Assets (NPA) of the banks is 9% for
are in bad condition i.e. overleveraged and distressed the total banking system of India. It is as high as 12.1%
private companies and the rising NPAs in Public Sector for Public Sector Banks. As companies fail to pay back
Bank balance sheets. principal or interest, banks are also in trouble.
z India has been fighting with its twin balance sheet
(TBS) problem since the global financial crisis. MEASURES FOR NPA RESOLUTION
z It is important because it is discouraging private
investment in the country and hence growth in all sectors. 3R Framework for Revitalizing Stressed Assets
Banking Sector 59
1. Rectification: Conducting Asset Quality Review (AQR) z It is not applicable to unsecured creditors.
z Not applicable on Farm Loans.
2. Restructuring: Strategic Debt Restructuring,
Scheme for Sustainable Structuring of Stressed Debt Recovery Tribunal (DRT)
Assets (S4A), Joint Lenders Forum.
z Lenders can recover their dues by approaching a DRT
3. Recovery: SARFAESI Act, 2002 and Insolvency and and get a recovery certificate.
Bankruptcy Code, 2016 z It allows lenders to take possession of properties of
borrowers anywhere in the country and sell them to
Reserve Bank of India (RBI) has set up a committee
recover dues.
headed by K.V. Kamath on restructuring of loans
impacted by the Covid-19 pandemic. z Appeals against orders passed by DRTs lie before
Debts Recovery Appellate Tribunal (DRAT).
Sustainable Structuring of Stressed Assets z It can go beyond the Civil procedure Code.
(S4A)
e-Bkray Portal
z It is an optional framework for the resolution of largely
z It was launched to enable online auction by banks
stressed accounts and a tool for financial restructuring.
of attached assets transparently and cleanly for the
z Process: bank hires an independent agency to improved realization of value.
evaluate how much of the stressed asset is sustainable
z It has property search features and contains
and how much is unsustainable - it will convert
navigational links to all PSBs e - auction sites.
the unsustainable debt into equity - no change of
ownership of the company, unlike in strategic debt z e-Bkray contains photographs and videos of the
restructuring - helps in financial restructuring. properties uploaded on the platform.
Banking Sector 61
z It supports the issuance of debit, credit and prepaid z Market volatility: Their speculative nature also
cards by banks in India makes them highly volatile. For instance, the value of
Bitcoin fell from USD 20,000 in December 2017 to
CRYPTO-CURRENCY IN INDIA USD 3,800 in November 2018.
z Risk in security: A user loses access to their
Meaning/Definition cryptocurrency if they lose their private key (unlike
z A cryptocurrency is a digital asset designed to work traditional digital banking accounts, this password
as a medium of exchange wherein individual coin cannot be reset).
ownership records are stored in a ledger existing in a z Malware threats: In some cases, these private keys are
form of a computerized database. stored by technical service providers (cryptocurrency
exchanges or wallets), which are prone to malware or
Eg. Bitcoin, Etherium, Ripple, Litecoin, etc.
hacking.
Function z Money laundering: Cryptocurrencies are more
vulnerable to criminal activities and money laundering.
z They run on a distributed public ledger called
They provide greater anonymity than other payment
Blockchain
methods since the public keys engaging in a transaction
z It uses strong cryptography to secure transaction cannot be directly linked to an individual.
records, to control the creation of additional coins, and z Regulatory bypass: A central bank cannot regulate
to verify the transfer of coin ownership. the supply of cryptocurrencies in the economy. This
z It typically does not exist in physical form (like could pose a risk to the financial stability of the country
paper money) and is typically not issued by a central if their use becomes widespread.
authority.
z Cryptocurrencies typically use decentralized control Dinesh Sharma Committee
as opposed to centralized digital currency and central Recommended total ban on cryptocurrencies
banking systems.
India and Cryptocurrency
z 2009: First cryptocurrency, Bitcoin launched in
2009 by Satoshi Nakamoto.
z 2018: RBI banned banks and other regulated
entities from supporting crypto transactions.
z 2019: Inter-ministerial committee recommended
banning all private cryptocurrencies.
z 2020: SC struck down the ban on the trading of
cryptocurrency as unconstitutional.
Significance of Cryptocurrencies
z 2021: Cryptocurrency and Regulation of Official
z Checks Corruption: As blocks run on a peer-to-peer Digital Currency Bill, 2021 introduced.
network, it helps keep corruption in check by tracking
Under this, a plan to ban private digital currencies
the flow of funds and transactions. favors RBI backed currency.
z Time Effective: Cryptocurrencies can help save money A 3 to 6 month exit period prior to banning the
and substantial time for the remitter and the receiver, trading, mining and issuing of cryptos.
as it is conducted entirely on the Internet, runs on a
mechanism that involves very less transaction fees RBI and Digital Currency
and is almost instantaneous. z RBI exploring DLT (Distributed Ledger Technology)
z Cost Effective: Intermediaries such as banks, credit based Central Bank Digital Currency.
card and payment gateways draw almost 3% from the z Under DLT, details are recorded in multiple places at
total global economic output of over $100 trillion, the same time.
as fees for their services. Integrating blockchain into
E.g. Blockchain is just one type of distributed ledger.
these sectors could result in hundreds of billions of
z Central Bank Digital Currency (CBDC): It will be a
dollars in savings.
legal tender.
Concerns Over Cryptocurrencies z Can be converted/exchanged at par with similarly
denominated cash.
z Sovereign guarantee: Cryptocurrencies pose risks to
consumers. They do not have any sovereign guarantee z Union Budget 2022: Introduction of Digital Rupee
and hence are not a legal tender. (CBDC) by the Reserve Bank of India starting 2022-23.
v v v
Banking Sector 63
OPTIONAL SUBJECTS OFFERED
History इ�तहास
Sociology
समाजशा�
Geography
भूगोल
PSIR
z Insurance is listed in the Union list in the Seventh 4. Causa Proxima - Direct loss link
Schedule of the Constitution of India.
5. Insurable interest
z It is a form of hedging and risk management system
against uncertain losses. BRIEF HISTORY OF INSURANCE IN INDIA
z Insurance refers to a legal contract by which an 1818 Life Insurance Business came to India with
individual/firm/entity receives protection from the establishment of Oriental Life Insurance
financial loss/any other kind of damage. company in India
z Principles of Insurance are: 1912 Indian Life Assurance Company Act was the
first statutory measure to regulate life business.
1. Uberrima fides - Good faith, hide nothing
1956 Nationalization of Life Insurance sector and
2. Indemnity - Only real and actual loss, not LIC came into existenceJ
imaginary 1993 Malhotra committee for insurance sector reforms.
3. Subrogation - Insurer can recover from negligent 2000 The Indian Government liberalized the insurance
third parties sector and opened it up for the private sector.
Unit Linked Insurance Recent Developments: GoI has started the process to
z It is a product that combines insurance coverage and launch the Initial Public Offer (IPO) of LIC, indicating
investment exposure. step towards privatisation.
Rural Insurance Protection against natural and 1. National Insurance Company Ltd. Kolkata (HQ)
policies climatic disasters for agriculture 2. New India Assurance Company Ltd. Mumbai (HQ)
and rural businesses 3.
Oriental Fire and Insurance Company Ltd. Delhi (HQ)
Industrial Coverage for projects, 4. United India Insurance Company Ltd. Chennai (HQ)
Insurance policies construction, contracts, fire,
equipment loss, theft, etc.
Major Reforms
Commercial Protection against loss and damage
1. November 2000: the GIC was notified as the Indian
Insurance policies of property during transportation,
Reinsurer.
transactions, marine insurance
etc. 2. March 2002: GIC was withdrawn from holding
company status of the four publicsector general
NATIONALIZATION OF INSURANCE insurance companies. Now they are directly owned
by the GoI.
BUSINESS
z In 1972, Government of India passed of the General A reinsurer is a company that provides financial
Insurance Business (Nationalisation) Act. protection to insurance companies.
z With this Act, the Government took control of all the
private insurance companies of India and created 4
companies.
MICRO INSURANCE
z IRDAI Micro-insurance Regulations, 2005 defines
micro-insurance as:
A general or life insurance policy with a sum
Public Liability Insurance Act, 1991
assured of Rs 50,000 or less. z Public liability insurance policy covers a policy holder
It is targeted towards low-income households or to from claims from third parties for death or injury or
individuals with little savings. property damage caused by hazardous substances
Micro-insurance business is done through the handled in a factory.
intermediaries: Non-Government Organisations, z The compensation payable is irrespective of the
Micro-Finance Institution, Self-Help Groups etc. company’s neglect.
Focus Areas
THIRD PARTY INSURANCE z Provident Fund
z The Motor Vehicles Act, 1988: any motorized vehicle z Deposit Linked Insurance
operated on public roads should be insured against z Pension
third party liability.
z Motor Vehicle Amendment Act, 2019: Mandatory Universal Account Number (UAN)
for all new two wheelers to have a five-year third-
z UAN is a 12-digit long unique identification number
party insurance and cars and commercial vehicles to
assigned by the EPFO.
have a three-year third-party insurance.
z Both the employer and employee are assigned this
z Under the law, this liability is unlimited in the case of number (one each), so that they can contribute to the
death or injury, and hence, it is mandatory to purchase EPF account.
a Motor Third Party Liability Policy (TP Policy). z It remains unchanged even after switching jobs.
The private sector companies should be allowed to Pension Fund Regulatory and Development
enter the insurance sector. Authority (PFRDA)
No company should be allowed to deal both in the z It is a statutory body.
life insurance business and the general insurance z 6 members: One Chairman (5 yrs or 65 yrs) and 5
business through a single entity. members (5 yrs or 62 yrs).
Setting up an independent regulatory body for the
z They are eligible for re-appointment.
Insurance sector on the lines of SEBI.
z It has Powers of civil court.
INSURANCE SECTOR REGULATORS Functions
Insurance Regulatory Development z Implement National Pension System (NPS), select
its fund-managers.
Authority of India (IRDAI)
z Regulate all public and private pension funds
z IRDAI is a statutory autonomous body set up by the IRDA except EPFO, Seaman, Coal miners, Assam tea
Act, 1999, established after the recommendations of plantations related pension schemes as they’ve
Malhotra Committee report of 1994. their separate acts/ mechanisms.
z It has the responsibility to regulate and control the z Prescribe liquidity, auditing, investment norms for
Insurance sector in India. Pension funds.
z IRDAI is a member of the Financial Stability and
Development Council. AMENDMENTS IN INSURANCE SECTOR
z Securities Appellate Tribunal (SAT) is a statutory
body established under the SEBI Act, 1992 to hear and Insurance Laws (Amendment) Act, 2015
dispose of appeals against orders passed by the IRDAI. z Paved the way for major reform related amendments
Insurance Ombudsman in the Insurance Act, 1938, the General Insurance
Business (Nationalization) Act, 1972 and the
z Set up by GOI in 1998. Insurance Regulatory and Development Authority
z There are twelve Ombudsman across the country. (IRDA) Act, 1999.
Functions z Provides greater powers to the IRDAI.
z FDI increased to 49 per cent (from 26 per cent) with
z Receive and consider complaints in respect of
the safeguard of Indian ownership and control.
insurance from any person who has any problem
against an insurer. z The public sector general insurance companies (four)
allowed to raise capital.
v v v
OTHER BONDS
ISSUERS IN THE INDIAN SECURITY Ways to raise capital in the primary market
MARKET Public Issue
Open for all Indian citizens, the most broad-based
z Issuers are organizations that raise money by issuing
method of raising capital and the most prestigious.
securities. They issue securities based on their need,
their ability to service the securities. Rights Issue
Raising capital from the existing shareholders of a
Some of the common issuers in the
company - preferential kind of issue restricted to a
Indian Securities Markets are:
certain category of the public only.
z Mutual Funds
Private Placement
z Central and State Government
z Local Government and Municipalities When a company issues financial security such as
shares and convertible securities to a particular group
z Financial Institutions and Banks
of investors (not more than 49 in number) it is known as
z Public Sector Companies private placement.
Two Types:
STOCK EXCHANGE z
INVESTMENT FUNDS
Real Estate Investment Trust (REITS)/
Basis Mutual Funds
Infrastructure Investment Trust (INVIT)
Meaning A mutual fund is an asset management It is like a mutual fund, which enables direct investment
company that brings together money from of small amounts of money in infrastructure/real
many people and invests it in stocks, bonds or estate to earn a small portion of the income as return.
other assets.
Investment In Securities of listed entities Real estate property or infrastructure project.
Stock Securities Income generating projects.
Period Continuous buying and selling, relatively short Investments for a long period of time say 10-15 years.
period.
Exit Can be redeemed anytime, easy exit. On closure of scheme can be sold at stock exchange at
quoted value.
DEPOSITORY RECEIPTS
z Depository Receipts are negotiable financial instruments issued by a company in a foreign jurisdiction.
z It is a mechanism for raising funds by tapping foreign investors who otherwise may not be able to participate in
the domestic market.
OFFLINE BATCHES
03
SMART SHEET TRACKER FOR
MONITORING REGULAR PROGRESS
02 04
DOUBT SOLVER 'MITRA' TO
MEMORY CREATOR TO
ENSURE THAT EVERY DOUBT IS
ENSURE DAILY REVISIONS
RESOLVED
CTR
(CLASS TEST REVISION)
01 05
SUBJECT-WISE,
WEEKLY ASSESSMENT AND
DAILY SCHEDULED CLASSES
REWIRING BOOTCAMP
06
WEEKLY PERFORMANCE REWARDS
ESSENTIAL EXTRAS
FOR MORE DETAILS OF OFFLINE BATCHES
1000+ HOURS OF GS CLASSES
DAILY CLASS NOTES PDF
CSAT CLASSES
EXPERIENCED FACULTY SUPPORT
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Disadvantages
z Market determined exchange rates being higher than officially fixed exchange rates → raise import prices and cause
cost-push inflation.
z Improper management of CAC can lead to currency depreciation and affect trade and capital flows.
z Advantages are short lived as per studies, also International financial institutions are skeptical about CAC post-2008
crisis.
z Speculative activity can lead to capital flight from the country. E.g. South East Asian economies during 1997-98.
z Imposing control would become difficult in a globalized environment once CAC is introduced.
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Components z Visible trade (Export and Import of goods - z Direct Investment (FDI)
Merchandise transactions) z Portfolio Investment (FPI)
z Invisible trade (Export and Import of z Loans / External commercial borrowing (ECB)
services) z Non-resident’s investment in Bank, Insurance,
z Unilateral transactions Pension schemes.
z RBI’s foreign exchange reserve
Deficit z If the value of the goods and services z When more money is flowing out of a country
imported exceeds the value of those to acquire assets and rights abroad
exported.
z Current Account deficit = Trade gap
(export – import) + Net current transfers
(foreign aid) + Net factor income (Interest,
Dividend)
Surplus z If the value of the goods and services z Money is flowing into the country, but these
exported exceeds the value of those inflows reflect changes in the ownership of
imported. national assets by way of sale or borrowing.
SHUBHAM SHUKLA AYUSHI SHREYA SHREE SURBHI GOYAL MINI SHUKLA ATULESH JHA
AIR-43 AIR-48 AIR-71 AIR-78 AIR-96 AIR-131
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021
S CHITHARANJAN SIMRAN SHIVANGI GOEL WAKHARE AKSHAY ANIL AKSHAY MAHADIK RISHABH TRIVEDI
AIR-155 AIR-172 AIR-177 AIR-203 AIR-212 AIR-215
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021
NIDHI GOYAL GARIMA NAGPAL SAKSHI KUMARI AKASH JOSHI PRATIBHA SHWETA BHARTI
AIR-203 AIR-304 AIR-330 AIR-337 AIR-335 AIR-356
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021
Constitutional/Other Provisions to Tackle 2100 calories in Urban areas, 2400 calories in rural
Poverty areas.
z Fundamental Rights: Article 16; Article 17; Article 21 Lakdawala Committee (1993)
and Article 24.
z This committee defined the poverty line on the basis
z DPSP: Article 39; Article 39 (a); Article 41; Article 42
and Article 45. of household per capita consumption expenditure.
z SDG: Goal 1 i.e. to end poverty in all its forms, z The committee used CPI-IL (Consumer Price Index
everywhere. for Industrial Laborers) and CPI- AL (Consumer Price
Index for Agricultural Laborers) for estimation of the
POVERTY LINE poverty line.
Till as recently as 2011, the official poverty lines
Meaning were based entirely on the recommendations of
z The conventional approach to measuring poverty is to the Lakdawala Committee of 1993.
specify a minimum expenditure (or income) required
z Recommendations
to purchase a basket of goods and services necessary
Consumption expenditure should be calculated
to satisfy basic human needs and this minimum
expenditure is called the poverty line. based on calorie consumption as earlier.
State specific poverty lines should be constructed
World Bank Definition and these should be updated using the CPI-IW in
z A person is extremely poor if she is living on less urban areas and CPI-AL in rural areas.
than 1.90 international dollars a day, (updated in Discontinuation of scaling of poverty estimates
2015) which are adjusted for inflation as well as price based on National Accounts Statistics.
differences between countries.
Tendulkar Committee (2009)
POVERTY STATISTICS ACCORDING TO z Committee headed by Suresh Tendulkar.
CENSUS 2011 z Changed calorie-based estimation to expenditure
z The proportion of people living Below Poverty Line based.
(BPL) has come down from 37.2 per cent in 2004- z Introduce a new term Poverty Line Basket (PLB)
05 to 21.9 per cent in 2011-12 — a decline of 15.3 which is the basket of all goods selected to determine
percentage points poverty.
z Consumption quantity is fixed the same for both MPI and SDG
rural and urban people but price differs. Daily per z Since the adoption of the 2030 Agenda, UNDP
capita expenditure for Rural- `27, Daily per capita has closely aligned the MPI with the Sustainable
expenditure for Urban- `33. Development Goals (SDGs).
Estimated that 21.5% of the Indian population
was poor. Global Scenario
z 1.3 billion people are still living in multidimensional
Rangarajan Committee poverty.
z Adopted the calorie-based approach which was z The report highlighted 65 out of 75 countries studied
used in the past. significantly reduced their multidimensional poverty
z Monthly consumption expenditure per person or levels between 2000 and 2019.
per household as a tool, Daily per capita expenditure
for Rural- `33 and Daily per capita expenditure for Indian Scenario
Urban- `47 z India lifted as many as 270 million people out of
multidimensional poverty between 2005-06 and
Overall poverty: 29.5 Percent (in the year 2011-12)
2015-16.
Rural: 30.9 Percent (in the year 2011-12)
Urban: 26.4 Percent (in the year 2011-12) Neighborhood Scenario
z In China, 70 million people left multidimensional
MULTIDIMENSIONAL POVERTY poverty between 2010 and 2014, while in Bangladesh,
z Introduction: Poverty is often defined by one- the numbers declined by 19 million between 2014
dimensional measures usually based on income. But no and 2019.
single indicator can capture the multiple dimensions
of poverty.
Impact of Covid-19
z Multidimensional poverty includes: poor health, z Covid-19 is having a profound impact on the
lack of education, inadequate living standards, development landscape. The study finds that on
disempowerment, poor quality of work, the threat of average, poverty levels will be set back 3 to 10 years
violence, and living in areas that are environmentally due to Covid-19.
hazardous, among others.
z Factors incorporated: A multidimensional measure Sustainable Development Goals
of poverty can incorporate a range of indicators that z The index emphasizes on measuring and monitoring
capture the complexity of this phenomena. progress under the goals to reach zero poverty by
2030-Goal 1 of the SDGs.
GLOBAL MULTIDIMENSIONAL POVERTY
INDEX (MPI) 2020 NATIONAL MULTIDIMENSIONAL
POVERTY INDEX (N-MPI)
Introduction
z It is released by the United Nations Development Published By
Programme (UNDP) and the Oxford Poverty & z NITI Aayog
Human Development Initiative (OPHI).
Methodologies
Dimensions
z This baseline report of India’s first-ever national
z MPI uses three dimensions and ten indicators
MPI measure is based on the reference period
which are:
of 2015-16 of the National Family Health Survey
1. Education: Years of schooling and child enrollment (NFHS)- 4.
(1/6 weightage each, total 2/6);
z It uses the globally accepted and robust methodology
2. Health: Child mortality and nutrition (1/6 weightage developed by the Oxford Poverty and Human
each, total 2/6); Development Initiative (OPHI) and the United
3. Standard of living: Electricity, flooring, drinking Nations Development Programme (UNDP).
water, sanitation, cooking fuel and assets (1/18 z It captures multiple and simultaneous deprivations
weightage each, total 2/6) faced by households.
Palma Ratio
TERMINOLOGIES RELATED TO
z The Palma ratio is a measure of inequality.
POVERTY z It is the ratio of the richest 10% of the population’s
share of gross national income (GNI) divided by the
Absolute Poverty poorest 40% ‘s share.
z Absolute poverty is a condition where household z It measures inequality similar to the Gini coefficient.
income is below a necessary level to maintain
basic living standards (food, shelter, housing). Kuznets Curve
z This condition makes it possible to compare between z In economics, a Kuznets curve graphs the hypothesis
different countries and also over time.
that as an economy develops, market forces first
Relative Poverty increase and then decrease economic inequality.
z Relative poverty is a condition where household /ŶĚƵƐƚƌŝĂů
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ĐŽŶŽŵŝĐƐ WŽƐƚŝŶĚƵƐƚƌŝĂů
income is a certain percentage below median WƌĞͲŝŶĚƵƐƚƌŝĂů
ƚƵƌŶŝŶŐƉŽŝŶƚ ;ƐĞƌǀŝĐĞƐĞĐƚŽƌ
ďĂƐĞĚĞĐŽŶŽŵLJͿ
income. ĞĐŽŶŽŵŝĞƐ
ϭϬϬй
ƵŵƵůĂƚŝǀĞ ƐŚĂƌĞ ŽĨ ŝŶĐŽŵĞ
Ϭ Ϳ
Seeking or available for work i.e. ‘Unemployed’.
;ϰϱ
ƚLJ
ƵĂů ŝ Neither seeking nor available for work.
ĞĂƌŶĞĚ
ĨĞ
Ƌ ǀĞ
Ƶƌ
ĞŽ nj
>ŝŶ
>Ž ƌĞŶ z The first two constitute the labor force and
unemployment rate is the percent of the labor force
ϭϬϬй
that is without work.
ƵŵƵůĂƚŝǀĞƐŚĂƌĞŽĨƉĞŽƉůĞĨƌŽŵůŽǁĞƐƚƚŽ
ŚŝŐŚĞƐƚŝŶĐŽŵĞ
Unemployment rate = (Unemployed Workers / Total
labor force) × 100
SOCIO ECONOMIC AND CASTE CENSUS
(SECC) TYPES OF UNEMPLOYMENT IN INDIA
z To estimate the BPL population, SECC followed a
three-step process: Cyclical Unemployment
1. Automatic exclusion z It is a result of the business cycle, where
2. Automatic inclusion unemployment rises during recessions and declines
3. Neither automatically included nor automatically with economic growth.
excluded
z Cyclical unemployment figures in India are negligible.
7 Criteria used in SECC z It is a phenomenon that is mostly found in capitalist
z Households with only one room , with no solid economies.
walls and roof
z Households with no adult male aged 15-59. Technological Unemployment
z Female headed households z It is the loss of jobs due to changes in technology.
z Households with differently abled members
z Households with no able bodied members Disguised Unemployment
z SC/ST households with no literate members z It is a phenomenon wherein more people are
above the age of 25years employed than actually needed.
z Landless households deriving major income
z It is primarily traced in the agricultural and the
from manual labour.
z Findings: it was found that the percentage of people unorganized sectors of India.
below the poverty line in 2011-12 was 30.95 percent
in rural areas and 26.4 percent in urban areas. Seasonal Unemployment
z It is an unemployment that occurs during certain
UNEMPLOYMENT seasons of the year.
z Agricultural laborers in India rarely have work
Meaning
throughout the year.
z Unemployment is a phenomenon that occurs when a
person who is capable of working and is actively
searching for work is unable to find work.
Structural Unemployment
z It is often used as a measure of the health of the z It is a category of unemployment arising from
economy. the mismatch between the jobs available in the
market and the skills of the available workers in
Measure
the market.
z The most frequent measure of unemployment is
the unemployment rate, which is the number of z Many people in India do not get jobs due to lack of
unemployed people divided by the number of people requisite skills and due to poor education level, it
in the labor force. becomes difficult to train them.
Agriculture 103
TERMINOLOGIES RELATED TO CROPPING
MAJOR CROPS AND PRODUCING
Cropping Intensity STATES
z Number of crops cultivated in a piece of land per
annum is the cropping intensity. Top 3 Largest Producing States
Crop
(Descending Order)
Cropping Pattern
Rice West Bengal, Uttar Pradesh, Punjab
z Different crops grown in an area at a particular point
of time are called cropping patterns. Wheat Uttar Pradesh, Punjab, Madhya Pradesh
z Factors: climate (temperature, rainfall, wind etc.), Maize Karnataka, Madhya Pradesh, Bihar
soil, support price, value, demand market, labor Nutri Cereals Rajasthan, Karnataka, Madhya Pradesh
availability, historical setting, etc.
Pulses Rajasthan, Madhya Pradesh, Uttar
Multiple Cropping Pradesh
z Growing more than two crops in a piece of land in a Groundnut Gujarat, Rajasthan, Tamil Nadu
year in orderly succession
Sugarcane Uttar Pradesh, Maharashtra, Karnataka
Inter Cropping
Cotton Maharashtra, Gujarat, Telangana
z Growing two or more crops simultaneously with distinct
Jute West Bengal, Bihar, Assam
row arrangement on the same field at same time.
Mixed Cropping Pokkali Rice Varietie
z Also known as polyculture, inter-cropping is a type of z In News: Recently, Farmers in West Bengal are
agriculture that involves planting two or more plants trying to introduce Pokkali Rice variety from Kerala.
simultaneously in the same field, interdigitating the
z Features: Pokkali is a unique saline tolerant rice
crops.
variety that is cultivated in an organic way in the
Strip Cropping waterlogged coastal regions of Alappuzha, Thrissur
z In this, crops are cultivated in alternate strips which and Ernakulam districts of Kerala.
are parallel to each other on the same piece of land. z Season: June to early November when the salinity
z It is used when a slope is too steep or when there level of the water in the fields is low.
is no alternative method of preventing soil erosion. z GI Recognition: The uniqueness of the rice has
Contour Bunding brought it the GI tag and is the subject of continuing
research.
z It is the farming practice of ploughing/planting
across a slope following its elevation contour
lines, that create a water break which reduces the FARMING SYSTEMS
formation of rills and gullies during times of heavy
water run-off; which is a major cause of soil erosion. Wetland Farming
Soils flooded or irrigated: lake, pond or canal and land
CROPPING SEASONS z
is always in submerged condition.
Kharif
z Cropping season: from July to October during the Dry Land Farming
South-West Monsoon. z Practice of crop production entirely depending upon
z Crops: Rice, maize, sorghum, pearl millet/bajra,
rainfall; moisture conserved in the soil.
finger millet/ragi (cereals), arhar (pulses), soybean,
groundnut (oilseeds), cotton etc.
Rain Fed Farming
Rabi z Crop production in areas where rainfall is, more than
z Cropping season: from October to March during the
North-East Monsoon. 750 mm (i.e. assured rainfall areas).
z Crops: wheat, barley, oats (cereals), chickpea/gram
(pulses), linseed, mustard (oilseeds) etc. Mixed Farming
Zaid z System of farming on a particular farm which includes
z Cropping season: from March to June. crop production, raising livestock, poultry, fisheries,
z Crops: Seasonal fruits and vegetables. beekeeping etc.
Income Support
Inputs Distribution Sale Issues
and Pension
z Fertiliser z PDS z APMC z PM Kisan z Crop Residue
z Finance z FCI z E-NAM z PM Kisan Maan and Stubble
z Seeds z Negotiable Ware z MSP Dhan Yojana Burning
house Receipt z Price Deficiency z PM AASHA
Payment
z Operation Greens
Agriculture 105
Urea Nutrient Based Subsidy (NBS)
z Not included in the NBS. z The Scheme was initiated in the year 2010.
z Source of nitrogenous fertilizer. z Implemented by the Department of Fertilizers.
z Urea Subsidy: Central Sector Scheme which includes
z Envisaged linking subsidy to nutrient composition
freight subsidy for movement of urea across the
country. (N, P, K & S) rather than products.
z Diversion of urea to plywood and animal feed makers, z Aim: to discourage farmers from applying too much
smuggled to neighbouring countries like Bangladesh urea containing only nitrogen and increase the
and Nepal - Neem coated urea is one of the solutions. consumption of P&K fertilisers which will result in
z Urea overuse: detrimental to the fiscal health of the balanced fertilisation.
economy, proving detrimental to the soil health of
the country. z Applicable to 22 fertilisers (other than Urea).
Introduction Mulching
z Department of Fertilizers (DoF) has made it It is a simple process of covering the bare soil with straw,
mandatory for all the domestic producers to produce wood chips, shredded bark etc. to reduce the water
100% urea as Neem Coated Urea (NCU). evaporation, soil erosion and weed growth.
Benefits
MARKET DEVELOPMENT ASSISTANCE
z Improvement in soil health.
z Reduction in usage of plant protection chemicals.
(MDA) POLICY
z Reduction in pest and disease attack.
Objective
z An increase in yield of paddy, sugarcane, maize,
z To promote the use of alternative fertilisers →
soyabean, Tur/Red Gram.
Atmanirbhar in Fertilisers
z Negligible diversion towards non-agricultural
purposes. Key Points
z Due to slow release of Nitrogen, Nitrogen Use z MDA policy was earlier limited to city compost only.
Efficiency (NUE) of Neem Coated Urea increases z There were demands to expand this policy by
resulting in reduced consumption of NCU as compared incorporating organic waste like Biogas, Green
to normal urea. Manure, organic compost of rural areas, solid/
liquid slurry etc.
Objective of New Urea Policy 2015 z This expansion will fully complement the Swachh
z To maximize indigenous urea production.
Bharat Abhiyan.
z To promote energy efficiency in the urea units.
z To rationalize the subsidy burden on the Government Use of Space Technology in Fertilizer Sector
of India. Department of Fertilisers → a three-year Pilot Study on
“Resource Mapping of Rock Phosphate using Reflectance
Fertigation Spectroscopy and Earth Observations Data” by National
Mixing water-soluble fertilizers in drip system, where Remote Sensing Centre under ISRO, in collaboration
fertilizer is delivered into the root system which reduces with Geological Survey of India (GSI) and the Atomic
wastage of fertilizers. Mineral Directorate (AMD).
Agriculture 107
the National Food Security Act, 2013 (NFSA),
through the One Nation-One Ration Card system.
AGRICULTURE MARKET
One Nation, One Ration Card Initiative Agricultural Produce Market Committees
z Making standard format for ration cards. (APMC)
z Enable beneficiaries under NFSA to purchase z Established by the States.
subsidised food grains from any fair price shop in z Aim: to eliminate the incidence of exploitation of the
these states. farmers by the intermediaries; food produce must be
brought to the market; sales are made through auction.
z Ration card holders buy food grains anywhere in the
z As per APMC Act: the sale/purchase of agricultural
country.
commodities in a specified market area; producer-
sellers or traders pay the requisite market fee, user
Negotiable Warehouse Receipts (NWR) charges, levies and commissions for the commission
z Launched: 2011, by the Ministry of Consumer Affairs, agents (arhatias); Charges were levied irrespective of
Food & Public Distribution. whether the sale took place inside APMC premises or
z Objective: Farmers can seek loans from banks against outside it; the charges varies widely across states and
commodities.
the warehouse receipts issued to them against their
storage. E-NAM
z Regulated: Warehousing Development and Regulatory z Launched in 2016.
Authority (WDRA).
z Pan-India electronic trading portal for farm
z Receipts Issued: Warehouses registered with the produce, aims to create a unified national market
WDRA → fully negotiable instrument backed by a for agricultural commodities by integrating existing
Central legislation. APMC markets.
z Benefits: Avoid distress sale of agricultural produce,
allow transfer of ownership of that commodity without Minimum Support Prices (MSP)
having to deliver the physical commodity, enhance z Minimum price set by the Government to protect
banks’ interest in lending in respect of farm goods, farmers from the price volatility of Agri commodities.
Can increase liquidity in the rural areas, Encourage z Recommended by: Commission for Agricultural
scientific warehousing of goods. Costs and Prices (CACP)
z Electronic Negotiable Warehouse Receipt (e-NWR) z Approved by: Cabinet Committee on Economic Affairs
System → launched in 2017. (Headed by PM)
z Benefits: Farmers will not have to worry about losing z Nodal Agency: Food Corporation of India (FCI)
the receipt + Stop multiple bank loans on a single z As per Swaminathan Commission for Agricultural
receipt. Cost and Prices (CACP)- there are three types of
production costs:
Food Corporation of India (FCI) A2: Actual paid out cost
z Nodal agency under Ministry of Consumer Affairs, A2+FL: Actual paid out cost plus imputed value of
Food and Public Distribution → procurement; storage family labour.
and movement of food grains; public distribution;
C2: Comprehensive cost including imputed rent
maintenance of buffer stocks.
and interest on owned land and capital
z It procures food grains
At minimum support price (MSP). z CACP considers both (A2+FL) and C2 costs while
On an open-ended basis.
recommending MSPs.
z Procurement is also done by State Government z C2 costs are used as benchmark reference costs
Agencies and private rice millers on behalf of the (opportunity costs) to see if the MSPs recommended
FCI. by them at least cover these costs in some of the
major producing States.
z The food grains are also disposed of by FCI and State
Governments through sale under Open Market Sales MSP is Declared for
Scheme.
z Cereals (7): Paddy, Wheat, Barley, Jowar, Bajra, Maise
and Ragi
z Pulses (5): Gram, Arhar/ Tur, Moong, Urad and Lentil
Agriculture 109
z Objective: To promote agri-business project
COMMITTEES RELATED TO development in their respective States; Farmer
AGRICULTURE Producer Organizations (FPOs)/Farmer Producer
Companies (FPCs); Implementation of e-NAM
platform.
National Commission on Farmers/ z Important Schemes by SFAC: Equity Grant & Credit
Swaminathan Committee (2004) Guarantee Fund (EGCGF) Scheme; Farmer Producer
z Chairman: Prof. M.S. Swaminathan. Organization (FPO) Scheme; National Agriculture
z Recommended: to fix minimum support prices (MSP) Market (NAM) Scheme, etc.
for crops at levels at least 50 per cent more than the z Kisan Rath App: Ministry of Agriculture → transport
weighted average cost of production. of farm produce during lockdown.
Agriculture 111
z AOA classifies subsidies in different boxes to regulate the agricultural subsidies through the following mechanisms.
AGREEMENT ON AGRICULTURE (AoA) z They should not relate to (are “decoupled” from)
z To remove trade barriers and to promote transparent current production levels or prices.
market access and integration of global markets. It
stands on following three pillars: Amber Box
z Aggregate Measure of Support (AMS)
Market Access z Those subsidies which are trade distorting and need
Tariffs: Tariffication and Reduction Commitments to be curbed.
Domestic Support
Blue Box
z Green Box
z This is the “amber box with conditions.”
z Blue Box
z Any support that would normally be in the amber box,
z Development Box is placed in the blue box if the support also requires
z Amber Box: (De Minimis and Commitments) farmers to limit production.
Export Competition
z Export Subsidies Agriculture Circumvention: Food
De-Minimis Support
Aid and Export Credit. z Developed countries are allowed to maintain trade
distorting subsidies or ‘Amber box’ subsidies to a level
z Export Subsidies and other methods used to make
of 5% of total value of agricultural output.
exports competitive.
z For developing countries this figure was 10%.
z Least developed countries do not have to make
commitments to reduce tariffs or subsidies.
z The base level of tariff cuts was the bound rate
Special and Differential Treatment Box
before 1st January, 1995 or for unbound tarrifs, z Special concessions to the developing economies
the actual rate charged in September, 1986 when for their agricultural development → subsidies for
the Uruguay Rounds begun. tractors, ploughing machines, pump sets, winnowing
machines etc.
Green Box
z Subsidies which are no or least market distorting. Sanitary and Phyto Sanitary Measures
z Income Support: not product specific and uniformly z Measures for food safety and animal and plant health
available to farmers and crop doesn’t matter. based on scientific terms. They should not be arbitrary
z Subsidies must not distort trade, or at most cause and discriminatory in nature.
minimal distortion
z They have to be government-funded.
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ŝŐŝƚĂůŝƐĂƚŝŽŶŽĨ>ĂŶĚZĞĐŽƌĚƐ ĂŶĚZĞŽƌŐĂŶŝƐĂƚŝŽŶŽĨŐƌŝĐƵůƚƵƌĞ
Bringing Green Revolution in Eastern India z Started by: National Dairy Development Board
(NDDB) in 1970s.
z Flagship programme under Rashtriya Krishi Vikas
z Objective: to create a nationwide milk grid.
Yojana (RKVY).
z Result: India became the largest producer of Milk
z Announced in the Union Budget, 2010-11.
and Milk Products.
z Aim: Address the constraints limiting the productivity z Dr. Verghese Kurien and Gujarat-based co-operation
of “rice-based cropping systems”. Anand Milk Union Limited (AMUL) are associated
z Focus: bringing the 2nd Green Revolution in eastern with white revolution.
region, which has rich water resources.
z Seven States: Assam, Bihar, Chhattisgarh, Jharkhand, ANIMAL HUSBANDRY
Odisha, West Bengal and eastern Uttar Pradesh
z Article 48 (DPSP): requires the State to organise
(Poorvanchal).
animal husbandry on modern and scientific lines,
Blue Revolution- Fisheries preserving and improving breeds, and prohibiting the
slaughter of cows and other cattle.
z Launched: During the seventh five-year plan from
1985 to 1990. z Budget 2020: To eliminate following disease by 2025:
z Pradhan Mantri Matsya Sampada Yojana: to bring Cattle: Foot and Mouth disease, Brucellosis,
all fishermen under the ambit of farmer welfare Sheep and goat: Peste Des Petits Ruminants(PPR)
programs and social security schemes. Use MGNREGA workers to develop fodder farms.
z Aim: to augment fish production to achieve its target
of 15 million tonnes by 2020 under the blue revolution Pashudhan Sanjivani
and raise it thereafter to about 20 million tonnes by z Animal Wellness Programme with emergency
2020 to 2023. helpline.
z Mission Fingerling: facilitate establishment of z Farmers given Nakul Swasthya Patra- An Animal
hatcheries and Fingerling rearing pond to ensure Health card with UID identification number of each
the fish production of fish fingerling, Post Larvae of animal registered in a National Database.
shrimp and crab in the country.
e-PashudhanHaat Portal
White Revolution- Milk z Online portal for connecting farmers with breeders
z Nodal Department: Department of Animal Husbandry of indigenous bovine breeds so they can connect with
and Dairying. each other for bulls, artificial insemination etc.
Agriculture 113
Rashtriya Gokul Mission National Kamdhenu Breeding Centre
z Indigenous bovine breeds - conserve them & increase z For development and conservation of indigenous
their population. breeds in a scientific manner.
E.g. Gir, Sahiwal, Rathi, Deoni, etc. Rashtriya Kamdhenu Aayog 2019
z State govts are given money for establishing Gokul z Ministry: Animal Husbandry & Dairying.
Gram breeding & disease treatment centres.
z Aim: Genetic up-gradation of cow resources + Enhance
cow productivity through research in organic manure,
biogas etc; Cow welfare, cow protection laws.
LAND REFORMS
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Advantages
Disadvantages
Agriculture 115
12 Industry and Infrastructure
z Used for GDP Calculation to account for the unorganized Critical Minerals in India
sector z India is totally import-dependent for seven out of
12 identified minerals and does not have any
IMPORTANT INDUSTRIAL LOCATIONS declared resources for them, except light rare Earth
(found along with monazite sands) and beryllium.
Factors Affecting Location of Industries: Raw material,
z China is currently a leading global supplier for 6 out
Capital, Energy, Labour, Market, Water, Communication, of the 12 mineral resources identified as critical for
Transport, Land, Power etc. India by 2030.
What Are They? They will be self-sustained townships They are “Deemed Foreign Territories”
encompassing all support systems like and are exclusively for export-oriented
schools, electricity etc. industries.
INDUSTRIAL CORRIDORS
z Composed of multi-modal transport services with the
intent to stimulate industrial development that would
pass through the states.
z Projects will be implemented through National
Industrial Corridor Development and
Implementation Trust (NICDIT)- an apex body
under the Department for Promotion of Industry
and Internal Trade (DPIIT), Ministry of Commerce
and Industry.
z Manufacturing is a key economic driver in these
projects.
PATENT PROSECUTION HIGHWAY z This would allow a patent applicant to demand fast-
tracking of his patent application by showing that his
(PPH) PROGRAMME product or process has already been granted a patent
z PPH is a set of initiatives for providing accelerated in Japan.
patent prosecution procedures by sharing information
between some patent offices. Example- between Japan
Patent Office (JPO) and Indian Patent Office.
z The basic characteristic of the service sector is the z Services account for around 55 per cent of total size
production of services rather than end-products. of the economy, about 38 per cent of total exports and
z Services are intangible goods which include two-thirds of total FDI inflows into India.
attention, advice, experience, and discussion used z Services sector has been the largest recipient of FDI
to enhance productivity, performance, potential and in India with inflow of US$ 83.14 billion between
sustainability. April 2000 and June 2020.
z Backbone of the global economy and the most dynamic z NITI Aayog in partnership with the Institute of
component of international trade. Competitiveness released the Export Preparedness
Index (EPI) report 2020- India’s merchandise
E.g. From communications to transport, finance, exports have witnessed growth from USD 275.9 billion
education, tourism in 2016-17 to USD 331.0 billion in 2019-20.
GOVERNMENT SCHEMES & INITIATIVES Start Up India Fund/ Funds of Funds for
Startups
Start Up India Scheme z Launched in the year 2016 with the corpus of
`10,000 crore
z A startup is defined as an entity that is
z SIDBI manages the fund.
Headquartered in India,
z Government launched this fund to help startups get
Opened less than 10 years ago, funding in early stages.
an annual turnover less than `100 cr z The fund does not directly invest in startups, instead,
z Principal financial institution: Small Industries it allocates money to venture capitalists (VC) funds,
which are required to invest at least twice the amount
Development Bank of India (SIDBI) of contributions received from the government.
,ƵŵĂŶĞǀĞůŽƉŵĞŶƚ/ŶĚĞdž;,/Ϳ
z For the first time, UNDP introduced a new metric called Mean Years of Schooling – 6.5 years.
the Planetary Pressures-adjusted HDI, or PHDI. Per-capita GNI $6,829.
z PHDI reflects the impact caused by each country’s per-
capita carbon emissions and its material footprint. INEQUALITY ADJUSTED HDI
z The PHDI measures the HDI for pressures on the planet z HDI doesn’t show the inequalities in the country. For
to reflect a concern for intergenerational inequality. this, we need inequality-adjusted HDI.
z India dropped two ranks, standing at 131 out of 189 z The difference between the IHDI and HDI is the human
countries in the 2020 report. India is placed in the development cost of inequality – the overall loss to
medium human development group. human development due to inequality.
Life expectancy at birth – 69 years. z This leads to better understanding of inequalities
Expected Years of Schooling – 12.2 years. across populations.
/ŶĞƋƵĂůŝƚLJͲĂĚũƵƐƚĞĚ,ƵŵĂŶĞǀĞůŽƉŵĞŶƚ/ŶĚĞdž;/,/Ϳ
GENDER DEVELOPMENT INDEX (GDI) z The GDI measures gender gaps in human
development achievements by accounting for
dŚƌĞĞŝŵĞŶƐŝŽŶƐ &ŝǀĞ/ŶĚŝĐĂƚŽƌƐ disparities between women and men—using the
same component indicators as in the HDI- health,
ZĞƉƌŽĚƵĐƚŝǀĞ DĂƚĞƌŶĂůDŽƌƚĂůŝƚLJ
knowledge and living standards.
,ĞĂůƚŚ
'ĞŶĚĞƌ /ŶĞƋƵĂůŝƚLJ /ŶĚĞdž
ĚŽůĞƐĐĞŶƚ&ĞƌƚŝůŝƚLJ z The GDI is the ratio of the HDIs for females and males.
Grandfathering Clause ϳй
ϲй
z It is the exemption granted to existing investors or ϱй
gains made by them before the new tax law comes ϰй
into force. ϯй
Ϯй
Anti-Dumping Duties ϯй ϰй ϱй ϲй ϳй ϴй
z Tariffs imposed by importer countries on exporter
countries when such dumped goods are exported
below market price. It is a way of increasing the price LAFFER CURVE
of goods which are too cheap.
z It shows the relationship between tax revenue and
Break-Even Price tax rate.
z It is the price necessary to make a normal profit. z Its message is that if the tax is fixed at an optimum
z It is a price which includes all costs, including variable (reasonably low levels), tax revenue will be
and fixed costs. At the break-even price, the firm maximum.
neither makes a loss or profit.
Wage-Price Spiral
z The wage-price spiral refers to the strong mutual BEVERIDGE CURVE, OR UV CURVE
link between wage growth and inflation.
z It is a graphical representation of the relationship
z Rising wages invariably put upward pressure on prices between unemployment and the job vacancy
and inflation.
rate, the number of unfilled jobs expressed as a
z High inflation creates upward pressure on wages proportion of the labour force.
as workers seek to gain an increase in wages to meet
the rising prices and maintain living standards z It typically has vacancies on the vertical axis and
unemployment on the horizontal.
ENVIRONMENTAL KUZNETS CURVE /ŵƉƌŽǀŝŶŐ
sĂĐĂŶĐŝĞƐ
ĂŐŐƌĞŐĂƚĞ
z It explains the relationship between economic ĚĞŵĂŶĚ >ĞƐƐ
growth and environmental degradation.
ĞĨĨŝĐŝĞŶƚ
/ŶĚƵƐƚƌŝĂů ŵĂƚĐŚŝŶŐ
>ĞǀĞů ŽĨ ĞŶǀŝƌŽŶŵĞŶƚĂů ĚĞŐƌĂĚĂƚŝŽŶ
ĐŽŶŽŵŝĐƐ WŽƐƚŝŶĚƵƐƚƌŝĂů
WƌĞͲŝŶĚƵƐƚƌŝĂů
ƚƵƌŶŝŶŐƉŽŝŶƚ ;ƐĞƌǀŝĐĞƐĞĐƚŽƌ ĞĐůŝŶŝŶŐ
ďĂƐĞĚĞĐŽŶŽŵLJͿ
ĞĐŽŶŽŵŝĞƐ ĂŐŐƌĞŐĂƚĞ
DŽƌĞ ĚĞŵĂŶĚ
ĞĨĨŝĐŝĞŶƚ
ŵĂƚĐŚŝŶŐ
hŶĞŵƉůŽLJŵĞŶƚ
'WƉĞƌĂƉŝƚĂ;ĞĐŽŶŐƌŽǁƚŚͿ dŚĞĞǀĞƌŝĚŐĞƵƌǀĞͲhŶĞŵƉůŽLJŵĞŶƚͲsĂĐĂŶĐLJZĞůĂƚŝŽŶƐŚŝƉ
(2) Reaching the Last Mile - Building on the huge success for the 740 Eklavya Model Residential Schools,
of Aspirational District program, Aspirational Blocks serving 3.5 lakh tribal students over the next three
program, covering 500 blocks for saturation of years.
government services launched. Outlay for PM Awas Yojana is being enhanced by
(3) Infrastructure and Investment - Capex outlay is being 66% to over `79,000 crore.
increased steeply by 33% to `10 lakh crore, which Capital outlay of `2.40 lakh crore has been
would be 3.3% of the GDP. provided for the Railways, which is the highest
(4) Unleashing the Potential - A National Data Governance ever outlay and about nine times the outlay made
Policy will be brought up enabling access to in 2013-14.
anonimised data to unleash innovation and research Urban Infrastructure Development Fund (UIDF)
by startups and academia. will be established through use of priority Sector
SUMIT RAMTEKE VIPIN DUBEY KISLAY SISODIA UMESH GOYAL PANKAJ GUJJAR NEELESH KUMAR SINGH
AIR-358 AIR-361 AIR-383 AIR-388 AIR-423 AIR-442
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021
ANSHUL NAGAR RITESH KUMAR SHWETA ANJALI VERMA MANE SWAPNIL TUKARAM HARSHIVANI SINGH
AIR-537 AIR-541 AIR-557 AIR-577 AIR-203 AIR-579
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021
RISHABH HANS
BHARAT JAI PRAKASH
MEENA SPARSH VERMA
?
2023
AIR-586 AIR-624 AIR-626 AIR-???
UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2021 UPSC CSE 2023