Volume II - State of Economy

2020-11-04 13:05:22

Volume II - State of Economy

US CN, US IR tensions, slowest GDP growth since 2009 crisis, low consumer demand, fall in automobile industry, drop in mfg exports from major economy
2.9 tril in 2019, decline in supply not seen in Agri, Pub Ad, Defence etc, decline in real fixed investment due to dec in real consumption
2019-2020 estimate
- Net exports, total consumption expected to inc
- Fixed invest as % GDP to dec
- GVA dec across all sectors except Pub Adm, defence and other services
Virtuous cycle of growth - inc fixed invest - inc GDP - inc Consumptioninc investment outlook
Cycle of growth has slowed
decline in fixed investment from households, marginal dec in FI form public sector, Stagnation in private corporate investment
Supply led investment - contraction in long run, bust following 2000s lending phase causing recent deceleration
Delayed decline in private consumption
Downside risk
- Trade tensions risk export economy, US IR tension inc crude oil prices, inc in short term rates in advanced countries - flight of capital, speed up IBC code
- National Infra Pipeline NIP - fiscal deficit, crowd out private investment
Upside Risk
- WEO projected rebound in global output in 2020, Thrust on affordable housing - higher investment,
- NIP may inc FDI inflows, greenfield, brownfield projects
- EoDB ranks improving, reduction in base corporate tax - inc in RoI
- 2020-21 GDP growth projected at 6-6.5%

Fiscal Developments

2020-11-04 13:06:56

2019-20 it was 3.3% from 3.4 in 2018-19, estimated 3% in 2020-21
Central Gov liabilities down to 48%
Major measures taken for Direct taxes
- Mandatory furnishing of ITR for high value transaction, interchangeability of PAN, Aadhar,
- Sabka Vishwas Legacy Dispute Settlement, QR code
- Quote Document ID number for all communication for all communication sent from office to tax payers
Tax Revenue -
- Direct tax comprise mainly of corporate and personal income tax
- Receipts from corporate, personal income have improved over last few years, Better tax adm, widening of TDS carried over years, anti-tax evasion measures, Widening of tax base
- Initiative by GSTN e-way bill, return filing status of GSTIN, SMS for reminders, free accounting & billing software
Non Tax Rev
- Aim to inc 1.5%
Non debt capital receipts
- Has inc, receipts from recovery of loans and advances declined, disinvestment major contributor
Trends in Expenditure - salaries, pensions, interest payment, major subsidies
Corporate tax had negative growth
Total liabilities of Central Gov constantly declining, characterised by low currency and interest rate risk
Decline in expenditure of states, financing via market borrowings inc, debt to GDP has risen

External Sector

2020-11-04 15:28:25

BoP improved CAD narrowed, export was subdued, external demand was low, external liabilities increased
Current Account Deficit been improved helping BoP
Merchandise Trade deficit - has improved on account of more than 50% decline in crude oil prices, surplus w/ USA, UAE.
- Merchandise export to GDP been declining
- Petro products largest exported; drugs formulations, biologicals saw high growth
- Fastest inc in electronics,
net service surplus is declining, service exports inc, service import has also inc - Business service constitute 1/3rd of it,
IN and WTO - IN spelled out priorities on undertaking reforms, transparency and notification requirement to not penalise developing countries, need for permanent sol in public stockholding for food security program, fisheries subsidies negotiation, safeguard interest of poor
WTO agreement on Trade Facilitation - imp in trading across border parameter,
- Initiative to facilitate trade : RFID tag for trusted exporters, E Sanchit to lodge complaints, ATITHI, ICEDASH, Time Release Study
WB Logistics performance Index 44th - $215 bil in worth, 350 new start-ups
- Steps taken - Bharatmala, Sagarmala freight corridors, NIP, Fast tags, improve skilling, apprenticeship programs
Anti-Dumping investigation undertaken, ARTIS to submit online application against dumping measures
External debt was 20% of GDP, share of short term debt falling,
ESI suggest reduction in Basic custom duty on intermediate goods

Monetary Management and Financial Intermediation

2020-11-05 12:16:21

MPC cut repo rate due to low inflation, to strengthen domestic growth, spur private investment
Reserve money expanded, Broad Money M3 declined, time deposit and demand deposit picked up, money multiplier declined
Liquidity has increased
Banking Sector - Gross NPA was 9.3% of SCBs for PSBs it was 12.3% stressed advances have inc
Credit growth in all sectors
Steps in Banking regulation
- One time restructuring of MSME loans, banks can lend to INVITs,
- link new floating rate loans to external benchmark
- new framework for resolution of stressed assets
  - Early recognition and reporting, discretion to lenders on resolution plan,
  - Harmonised framework for resolution of stressed asset,
  - withdrawal of asset classification on restructuring,
  - definition of financial difficulty per Basel committee,
  - inter creditor agreement signing mandatory for all lenders
NBFCs - balanced sheet grew, but liquidity stress was there
- Major Policy changes - RBI given more powers to regulate, new liquidity risk framework for NBFCs, regulation of HFCs to GOI
Insurance density inc, insurance penetration declined for life insurance
Bilateral netting and multilateral netting to offset contract claims

Price and Inflation

2020-11-05 13:30:50

Global dec in inflation due to resilient Monetary, Fiscal policy frameworks, structural reforms
CPI declining, fall in food inflation,
CPI Urban more than CPI rural, food I higher in Urban areas,
Inc in Food, beverages prices main contributor
Food inflation due to untimely rains, constricted movt of onion and tomato, cobweb phenomena in pulses
- Cobweb - price fluctuation - fluctuation in supply - rise in prices
- To curb this market intervention under PSS, PMFBY, PM AASHA, providing warehouses, improve transportation, price discovery through e-NAM
Fixation of ceiling prices of drugs - saving to public, rise in sale of cardiac stents, inc in share of domestic producers
Volatility highest for vegetables, lowest for rice, prices of wheat remained stable
Measure taken by gov to contain price rise of essential commodities
- Import duties, Minimum export price, export restriction, stock limits, MSP, various agricultural schemes ex NFSM, PSS, Min Export price, , stock limits on traders, import onions from Egypt and Turkey

Sustainable Dev and Climate Change

2020-11-05 15:06:08

SDG IN index
Commendable dev in SDG 6,7,9,15,16
Lagging in SDG 2 and 5
Nexus approach - integrate mgt and governance across sectors, SDG used as medium to link objective of various sectors together ex inc electricity consumption linked w/ fall in IMR
Under SBM waste processing rose from 18 to 60%
Renewable target of 175GW has achieved 83GW
Emission Intensity - reduced 21%
UJALA LED scheme reached 360mil light bulbs
National Biofuels Policy 20 and 5% blending of ethanol
National Adaptation Fund on Climate Change NAFCC
- Aims to meet cost of adaptation to climate change for state and Union territories of India that are vulnerable to adverse effects of climate change.
- #todo
NAPCC ^d50544
International Solar Alliance - role of enabler, facilitator, incubator, accelerator ^e62bca
CDRI
IN and UNCCD - raise area to restore from 21 to 26 mil hectares, hosted 14 CoP adopted New Delhi Declaration
Agriculture Residue Burning initiatives
- National Policy for Mgt of Crop Residue - burning CR is a crime
- Promotion of Agri-Mechanisation for In Situ Mgt of CR
- Ways to address -
  - Practice conservation agri w/ low lignocellulosic crop residue
  - Create market for crop residue based briquettes,
  - create special credit line for financing farm equipment
  - promote crop residue based biochar
Suggestions
- High standards of governance, monitoring, implementation, cooperative federalism
- Scarce fin resources are biggest constraints
- Developed countries should Honour their fin obligations,

Agriculture and Food Mgt

2020-11-05 15:14:13

GVA in agri sector has declined, growth has fluctuating trend, GCF also fluctuates
MSP for Kharif, Rabi and other commercial crops have inc, DBT in various schemes intro
Mechanisation in Agri -
- Farm power availability has inc, Growing farm mechanisation in market
- Sub mission on Agri Mechanisation assistance given to state gov to impart training
- In Situ crop residue mgt, Low overall Mech, Regional Disparities
Micro Irrigation -
- PMKSY - per crop more drop, Micro Irrigation Fund
Agricultural credit flow is skewed low in NE states
Crop Insurance - under PMFBY coverage has inc, National Crop Insurance Portal NCIP
Agri trade policy measures - inc import duty on some products, restriction on export of pulses edible oils lifted, creation of export policy at doubling agri exports, integrating IN farmers and agri products w/ global value chains, agri cells in IN embassies
Fisheries account for 7% of GDP from agricultural sector
Food Processing Sector - avg annual growth rate of 5%, 19 lakh are people engaged, PMKSY - modern infrastructure
DBT in fertiliser sector, New Urea Policy 2015,
Food Mgt - objective to give farmers remunerative prices and affordability to consumers maintain food buffer
- To maintain food availability gov has decentralised procurement of wheat and rice, created strategic buffers, undertook open Market sales scheme, PDS reforms ex ONORC
Food Subsidy is difference b/w per quintal economic cost and per quintal central issue Price CIP
- Reasons for inc in subsidy - inc coverage of NFSA, BPL/APL categorisation has been removed, food grain stock are much higher than their norms, decline in avg CIP for APL households
Steps taken to augment Food Storage Capacity -
- Private Entrepreneurs Guarantee Scheme PEG
- Steel silos have been constructed, Central Sector Scheme in NE states
- Online Depot Mgt System

Industry and Infra

2020-11-06 15:41:52

Dec growth rate mostly led by manufacturing sector,
IIP consists of Mfg, Mining and Electricity showed slowdown due to low credit flow, reduced lending by NBFCs, tapering of domestic demands ![[Pasted image 20220408120549.png |500]] ![[Pasted image 20220408120622.png |500]]
Index of 8 core industries - Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity ![[Pasted image 20220408120456.png |500]]
Performance of CPSEs inc w/ 15% inc in net profit
Steps taken to encourage start ups
- Exemptions from Income tax, implementation of 32 regulatory reforms
- Self-certification regime for labour laws and environmental laws
- Start-up IN hub
IN is 2nd largest crude steel producer 3rd largest consumer
MSME reforms
- In principle approval of loans up-to 1crore, interest subvention of 2% up-to 1cr
- Out of 25% mandated procurement 3% be reserved for Women
- Procurement only through GeM
- Gov to bear 70% cost for estd Pharma clusters
- Single consent under air/ water pollution laws
- Minor violations under Companies act entrepreneurs no longer have to approach court but can correct them through simple procedure
Civil Aviation sector reform -
- Leasing and financing norms in conformance w/ Cape Town convention
- Encourage domestic and international passenger and goods transfer
- Efficient use of air traffic rights, rationalising tax regime
95% of IN trade by Volume and 68% by Value in transported by sea
- Problems asso - low shipping tonnage, aging fleet, Major ports
Telecom Sector
- Wireless communication constitutes 98.27% of all subs
- Tele Density - total is 90.45%
- Inc internet subscriber total 66.5 crore
- More data consumption
- Tariff War
Telecom Infra and Connectivity
- Bharat Net, Public Wifi Access, Towers and BTS
Petroleum and Natural Gas
- To encourage private sector reforms undertaken are
  - Simplified fiscal and contractual terms, bidding w/o any production or revenue sharing to Gov
  - Early monetisation of discoveries by extending fiscal incentives
  - Incentivising gas production
Mining Sector -
- 25% inc in production of major minerals

PMAY-U

Launched to provide pucca houses with basic amenities to all eligible urban poor.
Performance 32 lkh houses have been completed, High Participation,
funding through NUHF, funding mechanism under NHB and refinancing from HFCs It is being implemented through 4 verticals

Through In situ slum development where GOI gives a grant of 1 lakh per hosue.
Promote credit linked subsidy CLSS for EWS and Lower Income Group.
Affordable Housing Partnership AHP ie PPP model for creation of the houses.
beneficiary led individual house construction / enhancement BLC promotes houses for EWS individuals under Central assistance of 1.5 lakh

Services Sector ESI 2020

2020-11-06 16:36:55

Issues faced by software sector - changes in exchange rate, changes in global IT spending, Stringent US visa norms, rising cost pressures due to inc in local hiring
Advantages of bringing Offshore fund Mgt to on-shore
- Inc in value of asset managed, could generate employment for high skilled finance professionals
- fee received for managing would inc export
Foreign tourist arrivals has decreased, most preferred destination is TN, MAHA, UP etc
IT BPM services, revenue decreased
Port and Shipping services - 1% share in total worlds fleet, port capacity of 1452 million tonnes, halving of turnaround time
Space Sector
- Low spending, high success rate
- Sat Com, Earth Observation, Sat aided Navigation are key areas of focus
- Private investment is required

2020-11-06 21:22:15

Spending on Health, Education etc social sector inc by 1.5% of GDP
HDI rank at 129
Drop-out rate was 10% at primary level but progressively higher, expenditure on course fees highest
Due to absence of competition quality of education is low
Measures taken to improve quality of education are
- Samagra Shiksha Abhiyan
- Central RTE rules amended to include learning outcomes
- Navodaya Vidyalaya Scheme in every district
- NISHTHA for teachers holistic development
- National Curriculum Framework promotes joyful learning
- PM Innovative learning Program DHRUV, DIKSHA, NEP
Skill Dev -
- Per PLFS only 13.53% of workforce is of productive age, formal training highest in TN, MAHA, WB lowest in Bihar, JH
- Initiatives taken are Skill India Mission, PM Kaushal Vikas Yojana etc
- Wide range of reforms introduced to Apprenticeship rules
Status of Employment in IN
- Per PLFS share of regular wage has inc 5%, proportion of women workers inc by 8
- Self-employed workers remained the same, casual labour dec by 5%
- Worker proportion in organised sector inc,
Steps taken for formalisation of Labour market
- EPFO launched Universal Account Number,
- PM Rozgar Protsahan Yojana - 12% employer contribution for employees 15000 as salary,
- Code on Wages Act 2019, MUDRA and STAND UP India
- Mandatory wage ceiling, National Career Service NCS project
Labour force included unemployed
- Female labour force participation declined, rate of decline sharper in rural areas as compared to urban ones
- Female Worker population ratio delined
- Factors influencing female labour force participation
  - More women in rural areas pursuing higher education
  - Household incomes have risen,
  - cultural - social constraints patriarchal nature etc restricts
  - 60% of working age females attend to domestic duties
  - Absence of job opportunities, lack of educational skill, low female wages, fall in international demand of labour intensive industries
  - Fall in agri employment, structural shift away from agri emp and inc mechanisation
- Initiative of improve female work participation
  - Sexual Harassment Prevention act 2013
  - Mahila Shakti Kendra Scheme
  - Provision of Safe and affordable accommodation
  - Women Helpline, One Stop Centre OSC
  - MUDRA, Stand Up India for Female entrepreneurship ^9814cd
  - Rashtriya Mahila Kosh - micro credit,
  - PM Employment Generation Program - W Entrep given 25% 35% subsidies for projects
Health For all -
- Adoption of Multi sectoral approach and inc synergy w/ other Mission mode objective
- Mission Indradhanush, Gov banned e-cigarettes
- Out of pocket expenditure has declined, Ayushman Bharat, Free Drugs service, Free diagnostic service, PM Jan Aushadhi program, PM National Dialysis Program
- Doctor Population ratio of 1:1456
- 141 new colleges no of MBBS seats also inc
- PM Swasthya Suraksha Yojana
- National Medical Commission Act 2019 for common entrance NEET
- Multi Skilling of doctors, Capacity building of Nurses
Housing for all
- 76% households in rural and 96% in Urban had pucca house
- PMAY R and U
SBM over 10 crore toilets have been built 699 districts ODF free

Volume II - State of Economy

Volume II - State of Economy

Fiscal Developments

External Sector

Monetary Management and Financial Intermediation

Price and Inflation

Sustainable Dev and Climate Change

Agriculture and Food Mgt

Industry and Infra

PMAY-U

Services Sector ESI 2020

Social Infrastructure Employment and Human Development