Class Notes 4 You

Investment is defined as the total value of capital goods produced in the economy (which is also called capital formation) plus net of export and import of capital goods. Gross fixed capital formation is defined as the production of machinery, equipment, new construction and intellectual property rights. Capital formation is important for any economy as it helps in boosting output and income. Following is the past trend of Gross fixed capital formation (investment) in the economy in the last few years. When the government decides that a certain project should be done through PPP model then it first selects a private party and signs a “Concession Agreement” (also called PPP Agreement) with the private party. This agreement provides details as to what would be the roles and responsibilities of the private sector and the government sector during the entire life of the project. The following are the important factors to be kept in mind while designing these agreements : • All the risks whi...

Infrastructure has been recognized as one of the most important enablers of economic growth. The significance of infrastructure creation has all the more increased in the current context of post covid19 scenario when we have experienced a negative growth of GDP in the last financial year. Infrastructure spending leads to rapid and inclusive economic growth as it possesses strong forward and backward linkages and a very high multiplier effect. Increase in infrastructure investment like railway, roads, ports, airport affects the economy in two ways: 1. In the short run, it boosts aggregate demand and crowds in (pulls in) private investment due to the complementary nature of infrastructure services. 2. In the long run, a supply side effect also kicks in as the infrastructure-built feeds into the productive capacity of the economy. Infrastructure is considered as the backbone of the country’s economy. It leads to inclusive growth in the following ways: 1. Spending in transportation infrast...

Land reform usually refers to redistribution of land from rich to poor. More broadly, it includes regulation of ownership, operation, leasing, sales and inheritance of land. Land reforms have been considered as important tools of socio-economic change in India. They constituted an important component of the strategy of agrarian reform that was designed to transform and modernise Indian agriculture. As land is state subject, the various reforms like abolition of zamindari, tenancy reforms and ceiling on size of landholdings and its distribution were implemented by the states which helped the marginal and small farmers in the following ways: • Tenancy reforms, in total, led to more than one crore tenants getting ownership right in Assam, West Bengal, Kerala, Tamil Nadu and Gujarat. • More than 10 lakh individuals became beneficiary (surplus land distributed to them) from the ceiling laws implemented in West Bengal. • The landlords had no personal interest in the lands they owned and also...

Food processing is a sunrise sector in India and is recognized as a Special Focus Sector in the National Manufacturing Policy. It has great potential for driving the rural economy, synergizing between agriculture, industry and consumer. But it is marred with various challenges which need to be addressed first. Challenges . Inadequate infrastructure facilities. Seasonality of operations, perishability and low-capacity utilisations. Institutional gaps in supply chain. Lack of focus on quality and SPS measures. Requirement of multiple clearances for setting up of food processing units. Government Initiatives for FPIs. 1. Pradhan Mantri Kisan Sampada Yojna (PMKSY): Umbrella scheme under MoFPI providing a host of financial assistance to FPIs. Sub-schemes include; Mega Food Parks. Integrated Cold Chain and Value Addition Infrastructure. Infrastructure for Agro-processing Clusters. Operation Greens, etc. 2. Agricultural Marketing Infrastructure: Sub-scheme of Integrated Scheme for Agricultur...

Food processing is a sunrise industry in India and is increasingly seen as a potential source for driving the rural economy as it brings about synergy between the consumer, industry and agriculture. It contributes 9% to manufacturing GDP and has an annual growth rate of 8%. But this industry is facing the following challenges: Inadequate infrastructure facility like cold storage and food parks Lack of processing facilities leading to less value addition  Lack of technology and applied research Lack of skilled manpower Lack of organized retail  Regulatory challenges: Food supply chain is regulated through APMC acts of States. Multiple clearances are required for setting up of food processing units. India possesses a large arable land resource of 160 million hectares with 127 Agro-climatic zones and has 46 of the 60 soil types in the world. It is the largest producer of milk and second largest producer of fruits and vegetables. Hence there exist numerous opportunities and growth...

Public Distribution System (PDS) is a poverty alleviation programme, contributing towards the welfare of poorer sections by providing them adequate quantities of essential items at affordable prices. But it has proved to be ineffective until now, as evident from the fact that Global Hunger Index, 2021 ranked India 101st.  Issues in PDS. Inaccurate Identification of beneficiaries. Hoarding and black marketing of essential commodities Leakages in the delivery system. Financial inefficiency- cost of procuring and delivering food grains is about six times its sale price. Shortfall in the storage capacity leading to wastage of food grains. Measure taken by Government . Revamped PDS (RPDS), to improve reach and strengthen PDS infrastructure. Targeted PDS (TPDS), to focus on ‘Poor in all areas’: Antyodaya Anna Yojana (AAY), a sub-scheme of the TPDS, to benefit the poorest of the poor. Enacted National Food Security Act (NFSA), 2013, making the Right to Food a justiciable right. One nation...

Govt. of India in 2013 enacted The National Food Security Act to provide subsidized food grains to 75% of the rural population and 50% of the urban population totalling around 84 crore people. Following are some of the important features of the Act: • The Antyodaya Anna Yojana (AAY) beneficiaries are provided 35 kg per month per family @ Rs. 3/kg rice, Rs. 2/kg wheat and Rs. 1 per kg coarse grains.  • Priority households are provided 5 kg per person per month @ Rs. 3/kg rice, Rs. 2/kg wheat and Rs. 1 per kg coarse grains. • Women are provided free meal during pregnancy and up to six months after child birth through Aanganwadi and Rs. 6000 in instalments. • Children aged 6 months to 6 yrs are provided free meal at local Anganwadi.  • Children aged 6 yrs to 14 yrs are provided mid-day meal scheme at school. • The eldest woman who is not less than 18 years of age, in every eligible household, are made the head of the household for the purpose of ration cards.  • Food securit...

The project aims to fulfil the watershed component of the PM Krishi Sinchai Yojana (PMSKY) and ensure access to irrigation to every farm (Har Khet Ko Pani) and efficient use of water (Per Drop More Crop). Impact of the project in increasing agricultural production Reduced rainwater surface runoff and increased groundwater recharge. E.g.: Use of water from wells by farmers in Malwa. Rainfall water stored in ponds, lakes etc. to be utilized later. E.g.: Check dams benefiting farmers of Bundelkhand. Production in the dry season as well. E.g.: Extensive canal irrigation helped TN farmers grow three crops in a year. Timely water availability. Dry patches of land transformed to productive farms and plantations. E.g.: Thummachennupalle watershed in Chittoor, transformed into a community-owned orchard. Challenges Lack of community participation  Non-release of funds Post-project sustainability Delayed appointment of experts In line with the Mihir Shah committee recommendations, better coor...

Integrated Farming System (IFS) is a farming practice that involves integration of solo agriculture system with livestock, aquaculture, forestry or other interrelated set of enterprises. Benefits of IFS. Increase in productivity per unit area Reduced production cost Generate employment Regular stable income with reduced risks  Availability of nutritious food Best suited for small farms How it promotes sustainable agriculture? Waste of one enterprise becomes input for another thus promotes recycling. E.g.: Poultry droppings are used as a feedstock for fish. Sustainable soil fertility and productivity through organic waste recycling. Resilient and adaptive to climate variability. Help in environmental protection through effective recycling of waste from animal activities like poultry, piggery and pigeon rearing. As per the agriculture census of 2015-16, the share of small and marginal farmers in India is around 86%, thus integrated farming is a sustainable solution for Indian agricu...

According to the 2011 census, per capita water availability has declined from 5177 cubic meters in 1951 to 1545 cubic meters. This calls for some urgent measures to check the depletion of water resources in the country. Some measures to improve water storage and irrigation system to make its judicious use are: 1. Watershed management: Includes checking wild run-off and intensive afforestation, thus reducing soil erosion, increasing water percolation and in turn replenishing groundwater reserves. 2. Rainwater harvesting: Collecting and storing rainwater at surface or subsurface aquifers. 3. Micro Irrigation: Reduces water consumption in agriculture. Fertigation and chemigation are added advantages.  4. River interlinking: It will result in the prevention of floods, droughts and would also enhance the irrigation potential of India as well as help in recharging groundwater. 5. Traditional water conservation and management system: They are not only inexpensive but can be implemented by...

Just after independence India faced a critical shortage of food supply. This called for the "Green Revolution" in the agriculture sector in India in the 1960-70s, with a major focus on the rice-wheat system. It soon proved to be a grand success, converting India from a food-deficient to a food-surplus country. Major factors for its success 1. Advancement of farm technology and introduction of biotechnology in agriculture resulting in use of HYV seeds, fertilizers, pesticides, etc. 2. State support in the form of MSP and other subsidies like fertilizer and electricity subsidies. 3. Improvement in infrastructures like multipurpose irrigation projects, canals, etc. helped farmers of water deficient areas also to participate in production. 4. Political and public will to achieve food security for India. But with the passage of time, it has been realized that though it was a boon earlier, it has now become a bane due to following reasons: 1. Development of monoculture farming lead...

India produces thousands of agricultural products which are traded and transported within the States, across the States and exported outside India also. The following are the major constraints which the agricultural produce faces in transportation and marketing in India. Marketing Challenges. State APMC Acts do not allow wholesale trade outside APMC mandis and in other states. Lack of private mandi infrastructure for trading Agri-produce. Lack of assaying facility for Agri-produce for electronic trading. 86% of small and marginal farmers have uneconomical lot for selling in mandis. A long chain of intermediaries who often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Transportation Challenges: Non availability of timely railway wagon Costly rail and road transportation Lack of refrigerated vehicles for transportation of perishable Agri products. Lack of multi-modal logistics service provider T...

India is facing a harsh water crisis due to inefficient utilisation in the agriculture sector, industrial and human waste and lack of proper government planning. Due to the lack of laws and measures to regulate water usage, and in many cases, unrestricted access of electricity by the government to farmers, water is pumped round the clock; most farmers rely on traditional methods of flood irrigation to grow their crops. The adoption of micro-irrigation by farmers provides a clear solution that not only drastically curbs water usage, but also delivers other benefits to farmers like improved yields, cost savings, and higher profits. Micro-irrigation is a process of slow water application via discrete or continuous drips, tiny streams, or miniature sprays on, above, or below the soil by surface drip, subsurface drip, bubbler, or micro-sprinkler systems. The government of India launched a program called, ‘Pradhan Mantri Krishi Sinchai Yojana’ more specifically, the ‘Per Drop More Crop’ comp...

Crop diversification refers to the addition of new crops or cropping systems to agricultural production on a particular farm. In India crop diversification is happening mostly into horticulture, livestock and commercial crops like cotton, soyabean etc. The major problems and constraints in crop diversification are primarily due to the following reasons with varied degrees of influence:   • Over 50% of the cropped area in the country is completely dependent on rainfall. • Inadequate supply of quality seeds. • Fragmentation of land holding less favouring modernization and mechanisation of agriculture. • Poor basic infrastructure like rural roads, power, transport, communications etc. • Inadequate post-harvest technologies and inadequate infrastructure for post-harvest handling of perishable horticultural produce. • Very weak Agro-based industry. • Weak research - extension - farmer linkages. • Inadequately trained human resources together with persistent and large-scale illiteracy am...

The public expenditure management (PEM) is an instrument of state policy whose objective is to have overall fiscal discipline, allocative efficiency, operational efficiency and macro-economic stability. Challenges faced by government in public expenditure management while formulating the budget: 1. Autonomous component of expenditure: Compulsory expenses such as interest payments for public debt, expenditure on defence, pensions and wages and salaries of government employees. 2. Economic shocks: Global slowdown, taper tantrum policy of US Fed, Trade wars, Oil prices, Pandemic induced slowdown (Covid’19), etc. have an impact on the domestic economy because of globalisation. 3. Populist schemes: Farm loan waiver, MSPs for different crops, low-income tax rate slabs, results in higher fiscal deficit and government borrowings. 4. Low tax base: More reliance on regressive indirect tax acts as a constraint for the government to increase its social spending. 5. Inflation targeting: Restricts g...

Potential GDP is the real value of goods and services that can be produced when a country's factors of production are fully employed. It is the maximum sustainable level of output that an economy can produce. As per the Economic Survey 2015-16, the determinants of potential GDP are : 1. Physical capital (Capital stock of the economy should be fully utilised) 2. Human capital 3. Labour (Labour force should be productively employed) 4. Productivity (Factor productivity of various factors of production should be high) 5. Economy’s technological efficiency  Potential GDP tends to grow slowly because inputs like labour and capital and the level of technology changes quite slowly over time. As per Economic Survey 2015-16, India's medium/ long term growth potential is somewhere between 8 to 10 percent. Following are the major factors hindering India from realising its potential GDP : Demand Side Factors . • Less domestic demand due to low purchasing power of majority of the population...

As per article 112 of the Constitution, the budget must distinguish the expenditures on revenue account from other expenditures (capital account). Therefore, the budget of Govt. of India is divided into Revenue Budget and Capital Budget, which are further divided into receipts budget and expenditure budget. The following are major differences between revenue budget and capital budget.  REVENUE BUDGET Revenue Receipts : Those receipts of the government which neither creates a liability nor reduces the assets (physical or financial) of the government. Example: Various direct and indirect tax receipts and interest, fee, dividend from PSUs  Revenue Expenditure : Those expenses of the government which neither creates any asset (physical or financial) nor reduces any liabilities of the Government. Example: Salary, pension, subsidy, interest payment etc.  CAPITAL BUDGET Capital Receipts : Those receipts of the government which either creates liability or reduces the assets (phys...

Organisation for Economic Co-operation and Development (OECD) defines Inclusive growth as the economic growth that is distributed fairly across society and creates opportunities for all. It refers to ‘broad-based’, ‘shared’, and ‘pro-poor growth’. Inclusive growth meets the objectives of inclusiveness and sustainability together : 1. Demand led growth: Inclusive growth leads to a wider distribution of wealth which creates a demand in a country and hence leads to domestic demand-driven growth.  2. Environment friendly: With better wealth distribution people move away from polluting sources of energy such as wood, cow dung, etc and adopt more environment-friendly sources such as LPG which further improves environmental sustainability (SDG 7, 14). 3. Gender equality: Inclusive growth addresses the structural and fundamental problems in society and the economy. E.g.: current strategy to empower women (SDG 5). These strategies build strong foundations that are more sustainable for long ...

Inclusive growth is economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity to every section of the society. Intra-generational equity represents availability of opportunities regardless of their economic class, gender, sex, disability and religion. Sustainable development seeks to promote human well-being, in the senses of both economic growth and social well-being, while simultaneously protecting and conserving the environment. Following are the major intra-generational issues: 1. Lack of healthcare facilities 2. Lack of quality education leading to difference in capabilities 3. Lack of job opportunities in remote areas of the country like North-east and hilly state. 4. Exclusion of women from various employment categories Inter-generational equity represents providing for the preservation of natural resources and the environment for the benefit of the future generations. Following are the major inter-generatio...

According to the Economic Survey 2018-2019, Indian economy has witnessed a gradual transition from a period of high and variable inflation to a more stable and low level of inflation along with steady GDP growth in the past five years. Steady growth rate and low inflation been good for the Indian economy : 1. Low inflation has helped to promote stability, confidence, security and therefore encourages investment. 2. Steady growth also provided for better revenue prospects which assisted the government to increase the contribution in various social sector schemes for example 17 percent hike in allocation to Women and Child Development Ministry. 3. Low inflation allowed the RBI to reduce the repo rates which provided capital for industrialists at cheaper rates. 4. Low inflation increases disposable income and therefore increases demand and investment in the economy. High inflation eats up the earnings of people which decreases demand in the economy. 5. Steady growth rate made it possible...