Economic Survey 2018-19

Summary Volume II
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Table of Contents
Chapter 1 – State of the Economy in 2018-19: Macro View ...........................................3
Chapter 2 – Fiscal Developments ..................................................................................7
Chapter 3 – Monetary Management and Financial Intermediation .............................. 13
Chapter 4 – Prices & Inflation ..................................................................................... 16
Chapter 5 – Sustainable Development & Climate Change ............................................ 18
Chapter 6 – External Sector ........................................................................................ 25
Chapter 7 – Agriculture and Food Management........................................................... 30
Chapter 8 – Industry and Infrastructure ..................................................................... 36
Chapter 9 – Services Sector ........................................................................................ 41
Chapter 10 – Social Infrastructure, Employment and Human Development ................ 48
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Global Economic Scenario

A) India is still the fastest growing major economy and seventh largest economy in terms of Gross
Domestic Product (GDP) in current US$ in 2018-19.

B) Growth of India’s GDP moderated to 6.8 % in 2018-19 from 7.2 per cent in 2017-18.

C) World output growth declined from 3.8 % in 2017 to 3.6 % in 2018. It is because of the following
reasons,

i) Escalation of US China trade tensions

ii) Tighter credit policies in China

iii) Financial tightening alongside the normalization of monetary policy in the advanced
economies

D) As per World Economic Outlook report, India forms part of 30% of the global economy, whose
growth is not projected to decline in 2019, whereas the world economy and Emerging Market and
Developing Economies (EMDEs) are projected to slow down by 0.3 and 0.1 percentage points
respectively.

E) Contribution of the Indian economy to the GDP of EMDEs and world economy has increased
consistently over the years.

F) WEO report of International Monetary Fund (IMF) states that the growth of world economy will be
bolstered mainly by growth in China and India and their increasing weights in world income.

G) With Purchasing Power Parity (PPP) adjustments, India’s GDP at current international dollar, ranks
third in the world.

Indian Economy

A) Indian economy grew at 6.8 per cent in 2018-19 experiencing some moderation in growth when
compared to the previous year.

B) This moderation in growth momentum is mainly on account of lower growth in,

i) ‘Agriculture & allied’ – Because of contraction in food prices, decline in rabbi crops
production,
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ii) ‘Trade, hotel, transport, storage, communication and services related to

broadcasting’

iii) ‘Public administration & defence’ sectors.

C) Moderation in real GDP growth has been experienced in all quarters of 2018- 19.

D) Election related uncertainty may have contributed to growth moderation.

E) Deceleration in the manufacturing sector has tempered the growth of industry sector. Index of
Industrial Production (IIP) of manufacturing sector grew at 0.3% in Q4 of 2018-19, as
compared to 7.5% in the same quarter of previous year.

F) Slowdown in the auto sector has also affected the manufacturing sector growth adversely. Stress
in Non-Banking Financial Companies (NBFC) sector also contributed to the slow down by
adversely impacting consumption finance.

G) Gap between nominal and real growth rate has reduced significantly. So, GDP deflator has
become small.

H) On the demand side, lower growth of GDP in 2018-19 was accounted for, by a decline in growth
of government final consumption, change in stocks and contraction in valuables.

I) Headline CPI declined to 3.4% in 2018-19 from 3.6% in 2017-18. Headline WPI inflation stood at
4.3% in 2018-19 higher as compared to 3.0% in 2017-18.

J) On the external front, Current Account Deficit (CAD) increased from 1.9% of GDP in 2017-18
to 2.6 % in April-December 2018. It was largely on account of a higher trade deficit driven by rise
in international crude oil prices.

K) Trade deficit increased from US$ 162.1 billion in 2017-18 to US$ 184 billion in 2018-19. Nominal
growth of both merchandise exports and imports declined in US dollar terms in 2018-19
compared to 2017-18.

L) Growth in service exports and imports in US dollar terms declined to 5.5% and 6.7% respectively
in 2018-19.

M) Rupee depreciated by 7.8% vis-à-vis US dollar, 7.7% against Yen, and 6.8% against Euro and
Pound Sterling in 2018-19. Rising crude oil prices coupled with tighter financial conditions in US
and world are responsible for the depreciation.

N) The foreign exchange reserves in nominal terms (including the valuation effects) decreased by
approximately US$ 11.6 billion to US$ 422.2 billion in a year. RBI’s intervention to modulate
exchange rate volatility is the reason behind it.

O) Net Foreign Direct Investment (FDI) inflows grew by 14.2% in 2018- 19. Among the top sectors
attracting FDI equity inflows, services, automobiles and chemicals were the major categories.

P) As per Provisional Actuals (PA) for 2018-19, fiscal deficit stood at 3.4% of GDP.

Q) In 2018-19, direct taxes grew by 13.4% owing to improved performance of corporate tax.
However, indirect taxes fell short of budget estimates by about 16% following a shortfall in GST
revenues.

R) So, accordingly, Gross Tax Revenue as a proportion of GDP declined to 10.9% of GDP in 2018-19
(PA), lower by 0.3% as compared to 2017-18.

S) Total expenditure of central government grew by 7.9% in 2018- 19 (PA), with the growth of
15.1% in capital expenditure leading to increase in share of capital expenditure in total
expenditure.
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T) Primary deficit of the central government has been consistently declining and now stands at 0.3
per cent of GDP in 2018-19 (PA) from 0.7 per cent in 2015-16.

U) State’s Gross Fiscal deficit reduced from 3.5% of GDP in 2016-17 to 3.0 % in 2017-18 (RE) and is
budgeted to decline to 2.6% in 2018-19.

Banking Sector

A) Indian banking sector has been dealing with twin balance sheet problem, which refers to
stressed corporate and bank balance sheets.

B) However, the performance of the banking sector (domestic operations), and PSBs in particular,
improved in 2018-19.

C) Non-Performing Assets as percentage of Gross Advances reduced to 10.1% at end December

2018 from 11.5% at end March 2018.

Drivers of the Growth

A) Consumption, especially private final consumption, has always been a strong and major driver of
growth in the economy.

B) Growth in private final consumption expenditure (PFCE) increased to 8.1% in 2018-19.

C) Although the share of private consumption in GDP remains high, the pattern of consumption has
undergone some change over time, from essentials to luxuries and from goods to services.

D) Second component of consumption is the government final consumption expenditure (GFCE).

Growth of GFCE decelerated from 15.0% in 2017- 18 to 9.2% in 2018-19.

E) Third major component of demand is investment. Investment (Gross Capital Formation)

accounts for nearly 32% of GDP, within which fixed investment (Gross fixed capital formation)
accounts for about 29% of GDP.

F) Growth in fixed investment has picked up from 8.3% in 2016-17 to 9.3% next year and further
to 10.0% in 2018-19.

G) Green shoots (refers to fresh investments) in the investment activity appear to be taking hold as
also seen in the pickup in credit growth to industry.

H) Credit to, both, large and micro, small & medium enterprises has seen pickup in growth.
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I) Investment rate in services sector is the highest followed by industry and agriculture sectors
respectively.

J) There has been a decline in savings rate. Household sector entirely contributes to the decline.

Exports

A) Exports are the external component of demand of domestic goods, and imports are a leakage of
income of the country for demand of products from other countries.

B) Growth of both overall exports and imports declined in US$ terms, it increased in rupee terms
(at current prices) in 2018-19.

C) This happened due to the depreciation of rupee vis-à-vis US dollar in 2018-19.

D) Exports of both service and merchandise (in rupee terms) picked up in 2018-19 in nominal
terms.

E) Service sector raised its share in total exports from 26.8% to 38.4%. Share of India in world
service exports has also increased from 2% in 2005 to 3.5% in 2017.

Supply side of the economy

A) Gross Value Added (GVA) reflects the supply or production side of the economy to which net
indirect taxes on products are added to get GDP at market prices.

B) GVA reflected a decline in economic activity, registering a growth of 6.6% in 2018-19, lower
than 6.9% in 2017-18.

C) Growth of net indirect taxes was 8.8% in 2018-19, lower than that of 2017-18 on account of
loss of momentum of economic activity.

D) Share of agriculture sector in total GVA has been consistently falling and stands at 16.1% in
2018-19.

E) The share of crops in GVA has reduced from 12.1% in 2013-14 to 10.0% in 2017-18, and that of
livestock increased from 4.1% to 4.9% (at current prices).

F) Manufacturing accounted for 16.4 per cent in total GVA in 2018-19, marginally higher than that
of ‘Agriculture & allied’ sector .

G) Construction sector growth is estimated using growth of production of cement and consumption
of finished steel. Production of cement and consumption of finished steel grew at 13.3% and
7.5% respectively in 2018-19.

H) ‘Financial, real estate and professional services’ sector grew at 7.4 per cent in 2018-19, higher
as compared to 6.2 per cent in 2017-18. This sector amounts for more than 20 per cent of
overall GVA of the economy.
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Introduction

1. Budget 2018-19 reiterated the objective of fiscal consolidation with introduction of a new fiscal
targeting framework.
2. Revenue augmentation and expenditure re-prioritisation and rationalisation continue to be
integral to fiscal reforms.
3. Broadening and deepening the direct tax base and stabilization of Goods and Services tax are
the other priorities.
4. Improving the quality of expenditure remains the key priority.
5. Meeting allocational requirements without diversion from the newly revised fiscal glide path
remains the foremost challenge.

Growth prospects

1. Indian economy is expected to grow at 6.8 per cent in 2018-19 while maintaining macro-
economic stability.
2. The growth with macro-stability stems mainly from ongoing structural reform, fiscal
discipline, efficient delivery of services and financial inclusion.
3. The new fiscal targeting framework was adopted, which rests on twin pillars of reducing debt
and fiscal deficit.
4. The revised fiscal glide path envisaged achieving fiscal deficit of 3 per cent of GDP by FY 2020-
21 and Central Government debt to 40 per cent of GDP by 2024-25.

Medium Term Fiscal Policy (MTFP) Statement

1. The Medium Term Fiscal Policy (MTFP) revised the fiscal deficit target for 2017-18 from 3.2 per
cent to 3.5 percent, owing to spill-over impact of the new indirect tax regime.
2. It aimed to reach the fiscal deficit target of 3.3 per cent of GDP in 2018-19 with projections for
2020-21 at 3.0 per cent.
3. The debt-GDP ratio of Central Government was projected at 48.8 per cent at end-March 2019.
4. It is targeted to decline to 44.6 per cent by 2021, restoring the long-term trend of decline in the
debt to GDP ratio.

Fiscal consolidation

1. Fiscal consolidation entails revenue augmentation and expenditure rationalisation.

2. In the post-Fiscal Responsibility and Budget Management Act (FRBMA) period from 2004-05 to
2007-08, significant fiscal consolidation was achieved largely due to buoyant tax revenues with
net tax revenue to the Centre increasing by 1.9 percentage points of GDP.
3. There also been improvement in the tax to GDP ratio, significant consolidation of revenue
expenditure and gradual tilt towards capital spending over the years.
4. These have led to progressive reduction in primary and fiscal deficits.

Trends in Receipts

1. Central government receipts can broadly be divided into non-debt and debt receipts.
2. The non-debt receipts comprise of tax revenue, non-tax revenue, recovery of loans, and
disinvestment receipts.
3. Debt receipts mostly consist of market borrowings and other liabilities, which the government is
obliged to repay in the future.
4. The Budget 2018-19 targeted significantly high growth in non-debt receipts of the Central
Government, driven by growth in net tax revenue and non-tax revenue.

Tax Revenue

1. Budget 2018-19 envisaged a growth of 16.7 per cent in gross tax revenue (GTR).
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2. Broadly, 51 per cent of GTR was estimated to accrue from direct taxes and the remaining 49
percent from indirect taxes.
3. Direct taxes have grown by 13.4 per cent owing to improved performance of corporate tax.
4. Indirect taxes have fallen short of budget estimates by about 16 per cent. This is largely owing
to the shortfall in GST revenues.
5. The GST collections are yet to stabilise and several changes have been carried out following
decisions of the GST Council during the course of the year.
6. These changes relate to rate rationalisation for goods and services, changes in the threshold
limits and exemptions granted.

Tax to GDP Ratio

1. There has been improvement in tax to GDP ratio over the last six years.
2. Better tax administration, widening of TDS carried over the years, anti-tax evasion measures
and increase in effective taxpayer’s base have contributed to direct tax buoyancy.
3. Widening of tax base due to increase in the number of indirect tax filers in the GST regime has
also led to improved tax buoyancy.
4. Sustaining improvement in tax collection will depend on the revenue buoyancy of GST.

Non-Tax Revenue

1. Non-tax revenue consists mainly of interest receipts on loans to States and Union Territories,
dividends and profits from Public Sector Enterprises including surplus of Reserve Bank of India
transferred to GOI, and external grants and receipts for services provided by the Central
Government.
2. These services include fiscal services like currency, coinage and mint, general services such as
Public Service Commission and police, social services like education and health, and economic
services like irrigation, transportation and communication.
3. Nontax revenue constitutes about 1.3 per cent of GDP in 2018-19. Receipts from non-tax
revenue have exceeded the budget estimate. Increased realisation from dividends and profits
has offset slight declines in its other components.

Non-Debt Capital Receipts

1. Non-debt capital receipts mainly consist of recovery of loans and advances, and disinvestment
receipts.
2. The share of recovery of loans has declined over the years following disintermediation of loan
portion of Central assistance to States consequent to the recommendation of the Twelfth Finance
Commission, and States allowed to borrow directly from the market.
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New Initiatives undertaken by DIPAM

1. Focus on Asset Monetisation – Policy & Process

2. Debt- ETF: DIPAM is in the process of creating a Debt-ETF to enable CPSEs to access the debt/
bond market to partially meet the capital expenditure needs by leveraging their aggregate
strength.

Defence Initiatives

1. Budget

a) Capital Expenditure in absolute terms has gone up in the past few years.
b) The allocated Capital Budget has been fully utilized since 2016-17, reversing the previous trends
of surrender of funds.
c) Delegation of enhanced financial powers to Vice-Chiefs of the three Services has been done
primarily to expedite the decision-making process involved in revenue procurements of the
Armed Forces.
d) Vice-Chiefs now have powers up to `500 crore for revenue procurement.
e) On the capital side also, the ceiling has been enhanced to `300 crore from `150 crore.
f) Several measures as part of “Business Process Re-engineering” have been undertaken to
make the acquisition process industry friendly, provide a level playing field for various
stakeholders and reduce the complexities and timelines in provisioning of defence platforms,
equipment and systems for modernization of the Indian Armed Forces.

2. Self-Reliance

a) To achieve self-reliance in the defence sector and make India a global hub in defence
manufacturing, the Ordinance Factories (OFs), Defence Public Sector Undertakings (DPSUs) and
the private industry ecosystem have enhanced their capabilities and widened the product range.
b) A large number of major products have been developed through Research and Development
initiatives. In addition, a number of products and equipment are being produced through
transfer of technology.
c) As a policy, DPSUs and OFs have been outsourcing many of their requirements and have over
the years, developed a wide vendor base that includes a large number of medium and small
scale enterprises and large scale industries.
d) In addition, the DPSUs and OFs are also striving to increase the indigenous content in the
equipments and products manufactured by them.

3. Policy Initiatives

I. Make-II’ procedure

a) In order to encourage participation of Indian industry in design and development of defence

items, a ‘Make-II’ procedure was notified.
b) Under this a number of industry friendly provisions have been introduced, such as relaxation of
eligibility criteria, minimal documentation, and provision for consideration of suo-moto proposals
suggested by industry/ individual.
c) The framework for implementation of Make-II at OFs and DPSUs level has been issued to
undertake indigenization of the items.

II. “Innovation for Defence Excellence” (iDEX)

a) An innovation ecosystem for Defence, titled “Innovation for Defence Excellence” (iDEX) was
launched.
b) iDEX is aimed at creating an ecosystem to foster innovation and technology development in
Defence and Aerospace.
c) iDEX intends to engage industries including MSMEs, Start-ups, Individual Innovators, R&D
institutes and Academia and provide them grants/funding and other support to carry out R&D,
which has potential for future adoption for Indian defence and aerospace needs.
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III. Defence Investor Cell

a) A Defense Investor Cell has been made functional in the Department of Defence Production
(DDP).
b) It has played an important role as one-stop solution for all types of defence production related
queries.

4. Private Sector Participation in Defence

a) The Defence Industry sector was opened up to 100 per cent for Indian private sector
participation, with Foreign Direct Investment (FDI) up to 26 per cent, both subject to licensing.
b) FDI policy was further liberalized and has been allowed under automatic route up to 49 per cent,
and above 49 per cent wherever it is likely to result in access to modern technology or for other
reasons to be recorded.

Trends in Expenditure

a) India’s tax to GDP ratio is low.

b) Government faces the challenge of providing sufficient funds for investment and infrastructure
expansion while maintaining fiscal discipline.
c) Improving the composition and quality of expenditure towards capital spending becomes
significant.
d) Expenditure on defence, salaries, pensions, interest payments and subsidies account for more
than 60% per cent of total expenditure.
e) Several initiatives have been undertaken by the Ministry of Defence to improve efficiency and
utilisation of defence expenditure, promote self-reliance, and encourage private sector
participation in the defence sector.
f) Expenditures on salaries, pensions and interest payments are committed in nature and have
limited headroom for creation of additional fiscal space.
g) Subsidies have seen significant moderation through improved targeting.
h) There has been considerable restructuring and reclassification of Central sector and
Centrally Sponsored Schemes in the recent past.
i) Even capital expenditure was rationalised in 2017-18.
j) Support provided to Railways and the mechanism for transferring Externally Aided Project loans
to States were rationalised.
k) Government has been able to contain fiscal deficit at 3.4 per cent of GDP through compression
of Government expenditure.
l) The entire reduction is in revenue expenditure.
m) The growth in revenue expenditure in 2018-19 PA though moderate, has been led by salaries,
pensions and interest payments.
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n) Major subsidies comprising food, fertiliser and petroleum have declined by 0.1 percentage point
of GDP in 2018-19 over 2017-18.

Transfers to States

a) Transfer of funds to States comprises essentially of three components: share of States in Central
taxes devolved to the States, Finance Commission Grants, and Centrally Sponsored Schemes
(CSS), and other transfers.
b) Till 2013-14, funds for CSS were routed through two channels, the Consolidated Funds of the
States and directly to the State implementing agencies.
c) In 2014-15, direct transfers to State implementing agencies were discontinued and all transfers
to States including for the CSS were routed through the Consolidated Funds of the States.
d) Another significant development has been award of the Fourteenth Finance Commission to
devolve 42 per cent of the divisible pool of taxes to the States, up from 32 per cent earlier.
e) Total transfers to States have risen by 1.2 percentage points of GDP.

Central Government Debt

a) Total liabilities of the Central Government include debt contracted against the Consolidated Fund
of India, technically defined as Public Debt, as well as liabilities in the Public Account.
b) These liabilities include external debt at current exchange rate but exclude part of NSSF
liabilities to the extent of States’ borrowings from the NSSF and investments in public agencies
out of the NSSF, which do not finance Central Government deficit.
c) 90 per cent of total liabilities of the Central Government was public debt.
d) The total liabilities of the Central Government as a ratio of GDP, has been consistently declining,
particularly after the enactment of the FRBM Act, 2003.
e) This is an outcome of both fiscal consolidation efforts as well as relatively high GDP growth.
f) Central government debt is characterised by low currency and interest rate risks.
g) This is owing to low share of external debt in the debt portfolio and almost entire external
borrowings being from official sources.
h) Further, most of the public debt has been contracted at fixed interest rate making India’s debt
stock virtually insulated from interest rate volatility.
i) This lends certainty and stability to budget in terms of interest payments.
j) The other salient feature is the gradual elongation of the maturity profile of the Central
Government’s debt leading to reduced rollover risks.
k) The proportion of dated securities maturing in less than five years has seen consistent decline in
recent years.
l) The weighted average maturity of outstanding stock of dated securities of the GOI has increased
from 9.7 years at end-March 2010 to 10.4 years at end-March 2019.

State Finances

a) The State budgets expanded considerably on account of increase in revenue expenditure.

b) Capital expenditure consists of capital outlay and loans and advances by the State Governments.
c) The loans and advances by the State Governments declined sharply owing to reduction in loans
and advances by States for power projects and food storage and warehousing.
d) On the revenue front, States own tax and non-tax revenue display robust growth.
e) The RBI study on State Finances points to the deterioration in fiscal deficit to GDP ratio in 2017-
18 when compared to the budget estimate.
f) This deterioration occurred due to the overshooting of revenue expenditure mainly due to farm
loan waiver and pay revisions.
g) States have budgeted for fiscal deficit of 2.6 per cent of GDP in 2018-19.
h) Consolidation is mainly due to posting of surplus of about 0.2 percentage points of GDP on the
revenue account.
i) Outstanding liabilities of states, as per cent of GDP, has increased after 2014-15.
j) The issuance of UDAY bonds in 2015-16 and 2016-17, farm loan waivers, and the
implementation of pay commission awards have led to higher debt to GDP ratio.
k) Economic Survey 2016-17 had estimated impact of UDAY bonds on fiscal deficit to be 0.7
percentage points of GDP.
l) However, despite rising States’ debt to GDP ratio, interest payment as proportion of revenue
receipts has not deteriorated.
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General Government Finances

a) The General Government (Centre plus States) has been on the path of fiscal consolidation and
fiscal discipline.
b) The combined liabilities of Centre and States have declined to 67 per cent of GDP.
c) The fiscal deficit of General Government is further expected to decline to 5.8 per cent of GDP in
2018-19.

Outlook

a)Firstly, there are apprehensions of slowing of growth, which will have implications for revenue
collections.
b) Secondly, the financial year 2018-19 has ended with shortfall in GST collections.
c) Therefore, revenue buoyancy of GST will be key to improved resource position of both Central
and State Governments.
d) Thirdly, resources for now expanded Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and
Ayushmaan Bharat, as well as new initiatives of the new Government, will have to be found
without compromising the fiscal deficit target as per the revised glide path.
e) Fourthly, US sanctions on oil import from Iran is likely to have impact on oil prices and thereby
on the petroleum subsidy, apart from implications for current account balances.
f) Finally, Fifteenth Finance Commission will submit its report for next five years beginning April
2020.
g) Its recommendation especially on tax devolution will have implications for Central Government
finances.
APTER AT A GL

T A GLANCE
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Monetary developments in 2018-2019

1. Monetary policy witnessed a U-turn over the last year with policy stance changing from ‘calibrated
tightening’ in 2018 to ‘accommodative’ by June 2019.

2. The policy rate was first hiked by 50 bps in 2018 and later reduced by 75 bps in 2019, due to
weaker inflation, growth slowdown and softer international monetary conditions.

3. The growth rate of monetary aggregates reverted to long-term trend after faltering due to
demonetization and remonetisation.

Money Trends Factors Contribution

Aggregates
Reserve Money Growth of 14.5 a. Mainly driven by currency in circulation;
(M0) b. RBI credit to government by Open market
operations.
c. RBI claim on Banks increased indicating tight
liquidity conditions.
d. Net foreign assets
Broad Money (M3) Declining since 2009; a. Growth in currency, but mostly in deposits.
improved marginally in b. Credit from scheduled commercial banks
2018-19 (SCBs) to commercial sector increased.
c. Banks credit to Government, mainly by RBI
increased.

Money multiplier Declining since a. Due to tightening of bank capital and

(M3/M0) demonetization regulatory norms

Liquidity Conditions

a) Since September 2018, the liquidity situation is tight and continued to be so.

b) Banking system faced huge shortage of liquidity which forced RBI to carry out Open market
operations (OMOs) to ease the situation.

c) Also, the Statutory Liquidity ratio (SLR) is planned to be reduced to 18% to improve the liquidity
situation.

Developments in G-Sec

a) The 10-year benchmark g-sec yields were volatile with alternate increase and decrease in last
fiscal.

b) The yields reduced due to

i. Rising crude oil prices,

ii. Reduction in US treasury yields,

iii. Concerns regarding the pace of rate hikes by the US Fed,

iv. Rising domestic inflation

c) The yields increased due to

i. Improved liquidity after OMO by RBI

ii. Expectations of lesser borrowing by the government.

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Financial sector

December 2018 – March Scheduled Commercial Banks NBFCs

2019 (SCBs)
Gross Non-performing Declined from11.5 to 10.1 per cent Increased to 6.5 per cent from
Assets (GNPA) 6.1 per cent
Capital to Risk weighted Increased from 13.8 per cent to 14.0 Decreased from 22.8 per cent
asset Ratio (CRAR) per cent to 22.2 per cent
Performance The performance of the banking sector Faced difficulties due to IL&FS
especially Public Sector Banks (PSBs) default and subsequent liquidity
improved. crisis
Capital Markets

Foreign portfolio Investment (FPI) Net Cumulative investment decreased

outflow
Mutual Funds Net Inflow Cumulative assets increased
Resource Mobilisation through equity Net Debt issue increased. But equity issues reduced
and debt Decline drastically.

Insurance Sector

a) Insurance has evolved as a tool of safeguarding the interest of people from loss and uncertainty.

b) Apart from providing protection, it also encourages savings and provides long-term funds to
individuals

c) The measure of insurance penetration and density reflects the level of development of insurance
sector in a country.

i. Insurance penetration increased steadily from 2001 to 2017 and stands at 3.69% of GDP,
but still lower than other emerging economies like china, Malaysia.

ii. Insurance Density also increased from 2001 (US$11.5 to 2017 (US$73) but is much below
than the global average.

Insolvency and bankruptcy code 2016

a) The Insolvency and Bankruptcy Code, 2016 (IBC) is one of the most important economic
reforms of recent times designed to effectively deal with non-performing assets.

b) It seeks to achieve resolution of corporate debtors (CDs) in distress and failing that, its
liquidation in a time-bound manner through Insolvency Professionals (IP).

c) In addition to that RBI implemented Sashakt - the resolution scheme to resolve the problem of
NPAs through a market-led approach under a Inter creditor Agreement (ICA).

d) The cases filed so far

i. 42 per cent from the manufacturing sector covering industries like steel, (FMCG), chemical
products, electrical machinery, basic metals, etc.

ii. 20 per cent in real estate;

iii. 10 per cent in engineering, procurement, and construction (EPC) sector

iv. 10 per cent in trading companies

v. Other sectors under stress are textiles, power & utilities, FMCG, and hospitality.

e) The growing number of cases indicate that the IBC as a preferred mode to resolve distressed
assets, enforce payment discipline and maximize returns.

f) It has also created new cadre of professionals and institutions like Information utilities that acts
as repositories of credit information to enhance insolvency capability.
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g) The IBBI has launched the Graduate Insolvency Programme (GIP) to promote insolvency as a
career option.

Impact of IBC

1. Behavioural change: IBC has promoted cultural shift in corporate behaviour by encouraging higher
standards of corporate governance, including cash and financial discipline.

2.Increased resolution of stressed assets: Pre-IBC resolution mechanisms like SARFAESI act, Lok
adalats focused on recovery but IBC focused on turn around of the debtors. This has increased the
recoveries under IBC compared to earlier.

3. India improved its ‘Resolving Insolvency’ ranking from 134 in 2014 to 108 in 2019 and won the
Global Restructuring Review (GRR) award for the most improved jurisdiction in 2018.

Way forward

1. Cross Border Insolvency: Adoption of the UNCITRAL Model Law on Cross-Border Insolvency to
effectively deal with cross-border insolvency issues, which will help in increased foreign investment.

2. Group Insolvency:

a. Commercial ventures also operate through group firms with separate legal personality.

b. However, when a group firms fails it will create a complex contagion which needs to be addressed
through a coherent approach.

3. Insolvency and bankruptcy of individuals pose different challenges for which special practices like
Mediation and counselling for efficient resolution can be adopted.

4. Improving NCLT capacity is needed through necessary infrastructure support such as,

a. Centralised Research Wing to assist NCLT in following international best practices.

b. Usage of technology by NCLT and IPs to enhance case management by strict timekeeping, data
mining and analysis for review of IBC impact on the ground.
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The economy witnessed a gradual transition from a period of high and variable inflation to more stable
and low level of inflation in the last five years.

1. Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining
continuously for the last five years.

2. Food inflation based on Consumer Food Price Index (CFPI) declined to a low of 0.1 per cent during
the 2018-19.

3. Wholesale Price Index (WPI) stood at 4.3 per cent during 2018-19.

Current trends in Inflation

1. Headline CPI-C inflation has remained below 4.0 per cent for two consecutive years.

2. The decline in the inflation in the FY 2018-19 was mainly due to low food inflation.

3. Food inflation based on Wholesale Price Index too declined over the last two financial years.

4. Food Inflation based on Consumer Food Price Index (CFPI) has been declining since 2014-15.

5. Decline in Food inflation is mainly due to deflation in prices of pulses, vegetables and sugar.

6. CPI-C based core inflation has remained above 4 per cent since the start of new series of CPI-C.

Drivers of Inflation

1. At the all India level, CPI-C inflation during FY 2018-19 was driven mainly by miscellaneous group
(Services) followed by housing as well as fuel and light group.

2. Services inflation has been higher than goods inflation and the gap between the two is growing.

3. Contribution of health, education, transport and communication in driving services inflation has
gained prominence across rural and urban areas

4. Inflation in health is more prominent in rural than urban areas probably owing to supply side
constraints.

Rural-Urban Inflation

1. The current phase of low inflation is also marked by reduction in both urban and rural inflation.
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2. The decline in rural inflation is steeper than that of urban inflation, resulting in decline in headline
inflation.

3. Fall in rural inflation is due to moderation in food inflation.

4. Role of miscellaneous category i.e. services in determining rural inflation has increased.

State-wise Inflation

1. Rural areas and Urban areas in 16 & 9 states/UTs respectively have registered CPI inflation of less
than 4%.

2. Daman & Diu having the lowest inflation followed by Himachal Pradesh and Andhra Pradesh.

Global Trend

1. Both World Bank food prices as well as Food and Agriculture Organization (FAO) food prices recorded
deflation during FY 2018-19. WPI based food inflation too declined.

2. World Bank Energy price index continued increasing in FY 2018-19. “Fuel & Power” inflation based on
WPI also followed same a trend.

Efforts to contain Inflation

Following efforts were taken by Central Government

1. Advisories to State Governments to take strict action against hoarding & black marketing.

2. Effective enforcement of Essential Commodities Act, 1955 & the Prevention of Black-marketing and
Maintenance of Supplies of Essential Commodities Act, 1980.

3. Higher Minimum Support Price (MSP) for pulses and other crops to enhance production.

4. Regular review meetings on prices and availability of key commodities and recommend appropriate
policy intervention.

5. To control the rise in onion prices, onions were released at reasonable prices from the stock procured
under PSF.

6. Pulses from the buffer are utilized for strategic market intervention for price management and
meeting institutional requirements for Mid Day Meal Scheme, Integrated child Development Scheme,
etc.

7. Withdrawal of prohibition on export on all varieties of edible oils, except mustard oil.
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1. The 2030 Agenda for Sustainable Development was adopted in 2015 for future development
trajectory to all nations with focus on poverty eradication, environmental sustainability, peace and
prosperity.

2. The SDGs are global goals, built upon the erstwhile Millennium Development Goals.

3. Estimates suggest that US$5 to US$7 trillion per year is required for financing these goals worldwide
and US$3.9 trillion per year in developing countries. However, the current investment in developing
countries is around US$1.4 trillion leading to a shortfall of US$2.5 trillion per year

India’s Progress towards the SDGs

SDG India Index

1. It has been developed by NITI Aayog to track the progress of all the States and UTs across 13 out of
17 SDGs.

2. It excludes Goal 12, 13, 14 and 17 on account of unavailability of comparable data across
States/UTs.

3. This SDG index provides an aggregate assessment of India’s progress and helps in informed policy
formulations.

4. The score varies from 0 to 100. A score of 0 denotes worst performance.

Performance Score
Front-Runners >= 65
Performers 50-64
Aspirants <50
Achievers 100

5. The SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs.

6. Several states have achieved 100 in SDG 10 (Reduced Inequality) and SDG 15 (Life on Land).

7. It can be attributed to initiatives such as PMJDY, MGNREGA, the National Environment Policy,
National Agro-forestry Policy and Green Highways Policy.

8. In SDG 5 (Gender Equality) and SDG 11 (Sustainable Cities and Communities), large number of
states are in the ‘Aspirants’ category’.

9. Goa, a front runner among all the States and UTs in SDG 11, has been doing exceptionally well in
waste management.

10. Kerala and Himachal Pradesh are the front runners amongst all the states with a score of 69. Tamil
Nadu is also progressing very fast.

11. Among the UTs, Chandigarh and Puducherry are the front runners with a score of 68 and 65
respectively.

Collaboration between the national and sub-national governments as well as active participation of all
other relevant stakeholders are required for meeting the challenges of financing, technical support and
continuous monitoring of the progress.

Namami Gange Mission

1. SDG 6 (Ensure availability and sustainable management of water and sanitation for all) is to be
achieved through Namami Gange Mission.

2. It was launched with a budget outlay of `20,000 crore for the period 2015-2020.
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3. National Mission for Clean Ganga (NMCG) was empowered as an Authority under the Environment
(Protection) Act, 1986. It has been done

a) For proper synchronization with the State and Local Bodies.

b) Fast track implementation and to formulate policies for long term sustainability of the Ganga
rejuvenation efforts.

Components of Objectives/Achievements
Namami Ganga
Mission
Sewerage Project -Used Public-Private Partnership (PPP) approach of Hybrid Annuity Mode
Management (HAM)
-15 years long-term Operation & Maintenance (O&M)
-Improved governance through ‘One City One Operator’ approach
- It ensured competitive and positive market participation along with
synergy in implementation.
Urban Sanitation -Cities contributed for more than 60% pollution load were covered.
-Sewage Treatment Plants were constructed and rehabilitated.
Sewerage Infrastructure -150 sewerage projects are approved in Ganga and its tributaries
Industrial Pollution - Grossly Polluting Industries (GPIs) were identified and surveyed
- Compliance of the operational GPIs in 2017 as against 2018 improved
from 39 per cent to 76 per cent.
-Online Continuous Effluent Monitoring Systems (OCEMS) of all operating
GPIs have been connected with Central & State Pollution Control Boards.
- Zero black liquor discharge has been achieved in Paper and Pulp industry
and in distillery.
Water Quality -Real Time Water Quality Monitoring Stations
-Dissolved Oxygen levels increased, Biological Oxygen Demand, and
organic pollution load decreased.
River as Public Space -Ghats, Crematories have been taken up under the mission.
-Innovative campaigns have been organized.
Rural Sanitation -More than 4000 villages on the Ganga stem have been declared ODF.
- Gram Panchayats along Ganga are supported for solid and liquid waste
management.
Ecosystem Conservation Afforestation along banks of Ganga has been taken up and Local
Communities are involved.
Urban River Management -Urban River Management Plan is being prepared to protect and enhance
the status of river health within the city.
- Generation of high-resolution Light Detection and Ranging (LIDAR) maps
are initiated.
Water Use Efficiency -Market for reuse of treated wastewater is being developed
Clean Ganga Fund - Clean Ganga Fund has been set up.
-Corporates and individuals can contribute to this Fund.

Resource Efficiency

Resource efficient development approach essentially means a transition of the management of natural
resources with a progressive minimization of waste in both consumption and production processes
through various policies and measures.

1. SDG 12 aims to ‘Ensure Sustainable Consumption and Production Patterns’. Eight other SDG goals 2,
6, 7, 8, 9, 11, 14 and 15 also have a bearing on resource efficiency.

2. Sustainable consumption and production is reflected in various policies/programme announcements

like Make in India, Zero Effect-Zero Defect Scheme, Smart Cities, Swachh Bharat, and Ganga
Rejuvenation Mission.

3. International Resource Panel estimated that efficient resource policies in G7 countries could

a) Reduce global use of natural resource by 28 per cent,

b) Diminish greenhouse gas (GHG) emissions by an additional 15 to 20 per cent and

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c) Deliver annual economic benefits of US$2 trillion globally by 2050 relative to existing trends.

4. Several countries have introduced various policies specific to the different stages of material life
cycle.

Indian Scenario

1. Rate of recycling in India is very low as compared to other developed economies.

2. As per the NITI Aayog’s Strategy Paper on Resource Efficiency 2017

a) India is the 3rd largest consumer of biomass after China and the USA.

b) Demand for total material will more than double by 2030 under the assumption of continued
economic growth of 8 per cent till 2030.

Enhancing Resource efficiency

1. Studies have analyzed the economic impact of effective RE strategy and identified that

a) 6000 crore can be saved in the manufacturing sector with the implementation of RE strategy.

b) Gold can be extracted with mining of urban e-waste.

c) Effective waste management policies can generate 14 lakh jobs.

2. Global E-waste Monitor, 2017 estimated that India was the fifth largest producer of e-waste in 2016.

3. NITI Aayog’s Status Paper “Circular Economy (CE) and Resource Efficiency (RE)- Current Status and
Way Forward” has outlined Six Pillars for a Resource Efficiency Framework.

Six Pillars for a Resource Efficiency Framework in India

Policies

i. Formulate a national policy on RE for all types of resources (biotic, abiotic) addressing various
lifecycle stages and key stakeholders

ii. Formulate a national policy on Sustainable Public Procurement (SPP) to minimize consumption of
resources, reduce waste generation and GHG emissions, as well as contribute to innovation in materials
and technology in the space of RE.

iii. Strengthen existing sectoral policies and programmes of Ministry of Mines by incorporating RE
principles.

iv. Formulate a national policy for End-of-Life Vehicles (ELVs).

v. Formulate a Waste to Resource Management Directive based on existing waste and hazardous
substance management rules/regulations following a lifecycle approach targeting relevant stakeholders
and focusing on RE.

Programmes and Mainstreaming

i. Mainstream RE initiatives by leveraging existing flagship programmes and schemes like Swachh
Bharat Abhiyan, Smart Cities, Make in India, Start-up India, Digital India and others.

ii. Industry may leverage Corporate Social Responsibility (CSR), Corporate Environmental Responsibility
(CER) and Extended Producer Responsibility (EPR) for RE initiatives.

iii. Build on the National Chemical Management Plan being drafted by MoEF&CC to develop a strategy,
framework and guidelines for the safe and circular management of chemicals.

iv. Leverage the national clean energy and environment fund to finance infrastructure, clean
technologies and related RE initiatives.
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Regulations

i. Establish a national coordinating body- Bureau of Resource Efficiency (BRE) between various
ministries to identify, implement and achieve national RE goals.

ii. Establish State Level coordinating bodies to identify, implement and achieve State level RE goals.

iii. Large and resource intensive industries and bulk waste generators may be mandated to file the
Resource Use and Efficiency Statement

iv. Establish and mandate a ‘Consent to Close’ requirement for medium and large industries in the ‘RED’
category to ensure that waste streams are responsibly managed and recycled before closure.

v. Rationalise tax regime on critical virgin raw materials to make secondary raw materials price
competitive.

Setting up a Dynamic Recycling Industry

i. Promote the establishment of Material Recovery Facilities (MRFs) with the allocation of land in urban
areas and industrial estates.

ii. Facilitate Urban Local Bodies (ULBs) to undertake urban mining and create secure landfills.

iii. Facilitate the establishment of Producer Responsibility Organizations (PRO) for waste recycling and
for engagement with the informal sector.

iv. Facilitate innovation to enhance resource recovery and improve working conditions by integrating
the informal sector into the waste value chain.

v. Establish a remanufacturing council or association to catalyse the growth of the remanufacturing

industry.

vi. Establish and manage platforms for waste exchange by expanding the SBM portal.

R & D and Technology Development

i. Support R&D to develop scalable technologies for RE.

ii. Create and manage knowledge platforms that facilitate open innovation, provide access to experts,
and engage

academia to support the transition towards RE.

iii. Leverage technologies like Artificial Intelligence (AI), robotics, block-chain etc. for the recycling
industry.

Capacity Development, Outreach & Monitoring

i. Facilitate creation of accredited laboratories that could conduct testing (especially for recycled
products) as well as provide advisory services.

ii. Provide capacity development support on RE for ministries/departments at the National and State
levels.

iii. Develop and promote programmes and certifications for informal sector skill development in RE.

iv. Develop and launch citizen awareness programmes on RE.

v. Foster inter-governmental collaboration and knowledge exchange with the G20, RE dialogue and
other bodies like International Resource Panel and other national and international forums.

vi. Develop monitoring and outcome indicators for tracking progress on RE.

vii. Establish and mandate the certification for operators managing waste-to-resource recycling centres
to ensure safe, efficient, and net positive operations.
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Air Pollution

It is one of the biggest environmental challenges in India and around the world. Government of India
has taken the following initiatives to tackle air pollution.

1. National Ambient Air Quality Standards (NAAQS) - Standards for ambient air quality with
reference to various identified pollutant notified by the CPCB under the Air (Prevention and Control of
Pollution) Act, 1981.

2. Air Quality Index (AQI)-

a) Tool for effective communication of air quality status to people.

b) There are six AQI categories, namely - Good, Satisfactory, Moderately Polluted, Poor, Very Poor and
Severe.

3. Graded Response Action Plan for Delhi and NCR-

a) Comprises of the graded measures for each source framed according to the AQI categories.

b) It also takes note of the broad health advisory for each level of AQI.

4. National Air Quality Monitoring Programme (NAMP)-

a) Four major air pollutants viz. Sulphur Dioxide, Oxides of Nitrogen, PM 10 and PM 2.5 are regularly
monitored.

b) It covers major cities/towns in 29 states and 6 Union Territories.

5. National Clean Air Programme (NCAP)-

a) It is a comprehensive management plan for prevention, control and abatement of air pollution.

b) Augmenting the air quality monitoring network across the country.

c) National level target of 20-30 per cent reduction of PM2.5 and PM10 concentration by 2024 is
proposed with 2017 as the base year.

Climate Change

As per the Intergovernmental Panel on Climate Change (IPCC) Special Report on “Global warming of
1.50 C”,

a) Human-induced warming reached approximately 1°C above pre-industrial levels in 2017, increasing
at 0.2°C per decade.

b) It demands for unprecedented efforts to reduce GHG emissions.

c) In 2018, annual mean surface air temperature of India was +0.41°C, significantly above normal. It
was the sixth warmest year on record since the nation-wide records commenced in 1901.

India’s Climate Action

1. National Action Plan on Climate Change (NAPCC)-

a) It was launched in 2008.

b) India made voluntary commitment to reduce emission intensity of its GDP by 20 to 25 per cent by
2020 over 2005 levels.

c) State Action Plans on Climate Change (SAPCC) was also drafted in line with the NAPCC.

2. Climate Change Action Programme (CCAP)-

a) It has been launched in 2014 with a total cost of `290 crore.

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b) It aims to build and support capacity at central and state levels, strengthening scientific and
analytical capacity for climate change assessment, establishing appropriate institutional framework and
implementing climate related actions.

Outcomes

Outcomes of these initiatives are reflected in India’s Second Biennial Update Report (BUR). Refer the
table.

Katowice Climate Package

1. Paris Agreement Work Programme (PAWP) was adopted in UNFCCC Katowice conference.

2. Achievements in CoP 24 in Katowice, Poland in 2018:

a) Recognition of different starting points for developed and developing countries.

b) Flexibilities for developing countries.

c) Consideration of principles including equity and Common but Differentiated Responsibilities and
Respective Capabilities.

Climate Financing

1. UNFCCC and Paris agreement recognize the importance of climate finance in strengthening the global
response to climate change.

2. The Scope, Scale and Speed of climate finance required to take climate actions effectively.

Scope- Climate finance should support both the adaptation and mitigation activities of the developing
countries in accordance with the country needs and priorities.

Scale- Climate finance requirements of developing countries are likely to be enormous due to existing
developmental challenges.

Speed- Global action on climate change is contingent on the delivery of timely and adequate finance.

International Solar Alliance

1. ISA has launched five programmes so far:

a) Scaling Solar Applications for Agriculture Use,

b) Affordable Finance at Scale,

c) Scaling Solar Mini Grids,

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d) Scaling Solar Rooftop, and

e) Scaling Solar in E-mobility and Storage.

2. Other important initiatives include

a) Action to Transaction meets- Innovative platform bringing project developers and bankers
together.

b) Common Risk Mitigation Mechanism- To reduce risks and financial cost of solar projects.

c) Global Solar Risk Mitigation Initiative- Developed by World Bank and Agence Française de
Dévelopment (AFD) as an integrated approach to tackle policy, technical and financial issues.
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Global Economic Environment

• Increasing Trade Protectionism and Slowing down of Global Output has closed with growth
in world output on a downward trajectory.

• The World Economic Outlook (WEO) in its April 2019 issue has projected growth in world
output at 3.3 per cent in 2019, down from 3.6 per cent obtained in 2018.

• Heightened US-China trade tensions has been stated as one of the reasons behind the global
slowdown that has spilled into other economies including India through the channel of exports.

• Beginning 2019 global slowdown has made advanced countries persist with their accommodative
monetary policy stance.

• This has escalated portfolio investment into emerging market economies making their
currencies stronger and imports cheaper.

• The trade protectionism will only divert bi-lateral trade imbalances from one country to another as
the root cause of trade deficits is the macroeconomic imbalance.

• The main priority is for countries to resolve trade disagreements cooperatively, without
raising distortionary barriers that would further destabilize a slowing global economy.

• Crude oil prices have begun to harden following production cuts by oil exporting countries with the
US also cutting out oil supplies from Iran, while prices of other commodities have also risen due to
supply distortions.

• These developments increase the vulnerability of external sector of emerging market economies
like India, which are dependent on crude imports for fueling their economic growth.

• Apart from trade tensions, trade and output were also influenced by temporary shocks, including
the federal government shutdown in the United States and production problems in the automotive
sector in Germany toward the end of the year.

• There has been a spatial shift in the nature of BoP balances as well in the last few years.

• Advanced economies had a current account deficit in 2011, which has been reducing consistently
since then and turned into current account surplus in 2017.

• Emerging and developing economies slipped from their current account surplus position.

• This reflects the shifting of the consumption hub of the world from the advanced to the
less advanced countries.

India’s Balance of Payments Developments

Overview of Balance of Payments

• The trade deficit increased to US$145.3 billion. The increase in CAD is driven by increasing
merchandise trade deficit.

• India is more dependent on Petroleum, Oil & Lubricants (POL) imports than the world is on India’s
POL exports.

• Software services, accounting for about 40 per cent of total services receipts, along with financial
services, have been the main drivers in the service exports.

• According to the World Bank (April 2019), India remained a top remittance recipient country in
2018, followed by China, Mexico, Philippines, and Egypt, with remittance inflows peaking at all-
time high at US$78.6 billion.
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Developments in Capital Account of BOP

• Robust foreign direct investment (FDI) inflows, were outweighed by withdrawals under portfolio
investment reflecting an escalation of global risk aversion.

• The reduced dependency on FPIs to fund CAD in recent times is also reflected in the fact that
growth of forex reserves in the country bears no correlation with movements in net FPI.

• Among the major economies running current account deficit, India is the largest foreign
exchange reserve holder and eighth largest among all countries of the world.

External Debt

• India’s External Debt was US$521.1 billion. The long-term debt was mostly same at 80.1 per cent
during the same period.

• India’s external debt to Gross National Income (GNI) ratio was fourth lowest, while China
continues to have the lowest ratio.

• As per the World Bank data, though India is the third largest debtor country among developing
countries after China and Brazil.

• Its average-age of debt is much higher. Higher age of debt reduces the rollover risk.

Debt Service ratio

Debt Service ratio indicates the claim that servicing of external debt makes on current receipts and is,
therefore, a measure of strain on BoP due to servicing of debt service obligations.

Net International Investment Position

• India’s net international investment deficit is the eighth highest in 2018, that however has been
increasing consistently.

• The total liabilities in the IIP statement is a more comprehensive measure of external indebtedness
than merely external debt as the former also includes net equity inflows, which is used for
financing the CAD.

• The share of net FDI inflows in total liabilities has seen a secular increase since 2013 reflecting an
increase in dependence on more stable sources of financing the CAD.

Net International Investment Position

• The International Investment Position (IIP) is a statistical statement that shows at a point in
time the value of financial assets of residents of an economy that are claims on non-residents or
are gold bullion held as reserve assets; and the liabilities of residents of an economy to non-
residents (International Monetary Fund (IMF)).
• The difference between the assets and liabilities is the net position in the IIP and represents
either a net claim on or a net liability to the rest of the world.
• A positive NIIP value indicates a nation is a creditor nation, while a negative value indicates it is
a debtor nation.

Nominal and Real Exchange Rate and Terms of Trade

Exchange rate

• The Indian rupee was one of the least volatile Emerging Market (EM) currencies during 2017-18
and traded in the range of 63 to 65 per US$. It performed better than some of other major EME
currencies.

• In particular, crude oil prices and net portfolio flows have been major drivers of exchange rate
movements in recent years. Movements in exchange rate are closely associated with movements
in crude oil price and net FPI flows.

• The rupee remained volatile in 2018-19 on account of both global and domestic factors including
rising crude oil prices, erratic trade balance, strengthening of dollar and continuous FPI outflows.
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• Additional factors impacting the rupee include trade war between US and China and US sanctions
on Iran and interest rate hikes by the US Federal Reserve.

Terms of Trade

• Depreciation of REER indicates that India’s exports must have become more competitive.

• Appreciation of REER indicates less competitive exports.

• Price competitiveness of exports can be better assessed by looking at how Terms of Trade (ToT)
have fared across a time period.

Commodity or net terms of trade (NTT)

• Commodity or net terms of trade (NTT) of a country is the ratio of the unit value (price) of
export to the corresponding unit value (price) of import measured relative to a base year.
• If this ratio increases, it implies that the country, for every unit of exports it exchanges for
imports, is receiving relatively more; if the ratio decreases then the country is receiving
relatively less.

Two other commonly used terms of trade indices are gross terms of trade (GTT) and income terms of
trade (ITT).
Gross terms of trade
• The GTT is a ratio of total quantity of imports to that of exports of a given country.
Income terms of trade (ITT)
• The ITT is the value of exports divided by the unit value (price) of imports to reflect how better
or worse a country’s purchasing power to imports has become.

Composition of Trade

Major Products Exchanged in 2018-19

• In 2018-19, petroleum products continued to be the largest exported commodity in value terms.

• Other major exports included pearls, precious, semi-precious stones as also gold and other
precious metal jewelry besides drug formulations, biological.

• In the import basket of 2018-19, petroleum crude, had the largest share followed by gold and
other precious metal Jewelry and pearls precious/semi-precious stones.

Major trading partners in 2018-19

• India’s largest export destination country continues to be the United States of America (USA).

• USA accounted for 16 per cent of India’s exports, followed by United Arab Emirates (UAE), China
and Hong Kong.

• China continues to be the largest source of imports of India. The other important sources from
which India imports are the USA, UAE and Saudi Arabia.

• China continues to be the largest exporter to India. India’s imports from China fell in 2018-19
registering a negative growth.

Trade Policy

• India has bilateral trade arrangements with all major regional groupings.

• India has signed 28 bilateral/ multilateral trade agreements with various country/group of
countries.

• In 2018-19, India’s exports to countries with which it has a trade agreement stood at US$121.7
billion accounting for 36.9 per cent of India’s export to all the countries.
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• India’s imports from countries with which it has a trade agreement stood at US$266.9 billion
accounting for 52.0 per cent of India’s imports from all the countries.

Trade Facilitation

• India ratified the WTO Agreement on Trade Facilitation (TFA) in April 2016

• India constituted a National Committee on Trade Facilitation (NCTF) with the Cabinet Secretary of
India as the Chair.

• Since then, the NCTF has played an important role in reducing the high cost of imports and exports
so as to integrate our cross-border trade with the global value chain.

• Some of the landmarks being –

1. establishment of a National Single Window system to route all import related formalities

2. simplification of fees and charges for various clearance related activities at the borders

3. paperless filing of import/ export documents through ‘E-sanchit’ project;

4. publishing of resource information online for ease of access.

• Consistent trade facilitation efforts have resulted in substantive improvement of India’s

performance in Trading Across Borders indicator from 146 in 2017 to 80 in the year 2018.

• These initiatives have also contributed to overall improvement in ‘Ease of Doing Business’
environment in the country, as also recognized by the World Bank.

Trade Related Logistics

• The Indian logistics sector is on a big growth tide.

• The logistics industry of India is currently estimated to be around US$215 billion.

• According to the Global Ranking of the World Bank’s 2016 Logistics Performance Index, India
jumped to 35th rank in 2016 from 54th rank in 2014 in terms of overall logistics performance.

• In 2018, India stood at 44th rank.

• Experts predict that the logistics sector can be the largest job creator by 2022.

• The sector currently provides employment to more than 72 crore people in the country.

• Government of India has announced a draft National Logistics policy for which a national
logistics action plan is being developed.

• Various logistics schemes have been introduced, which are as under:

1. The Government has launched many flagship programmes like the Bharatmala Yojana, the
Sagarmala Yojana and the Dedicated Freight Corridors. The objective of these
programmes is to develop infrastructure to meet the growing demand of logistics in the country
and to make a modal shift on more cost-effective modes of transport.

2. 111 waterways have been identified for development.

3. Infrastructure status has been given to select logistics activities like warehousing, cold
chains, Multi modal logistics parks and slurry pipelines.

4. Subsidy is provided to develop cold chains and pack houses.

• Indian logistics industry is a sunshine sector and there are multiple factors on both demand and
supply side that are driving this sector.

• On the demand side, the reduction in truck turnaround time following GST is a major stimulus
to logistics growth as also pick up in industrial production.
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• On the supply side, the outsourcing of non-core activities like warehousing is allowing main
players to focus on improving efficiency of transportation.

• Automation of large warehouses is also adding to the efficiency of the logistics sector.

• India’s logistics cost as a per centage of GDP was 15.4 in 1997 and 17 per cent in the year
2000.

• India’s logistics cost as a per centage of GDP is estimated to be 13 per cent.

• Driving logistics cost down from estimated current levels of 13-14 per cent of GDP to 10 per cent
in line with best-in class global standards is essential for India to become globally
competitive.

Anti-dumping and safeguard measures

• India conducts anti-dumping investigations on the basis of applications filed by the domestic
industry with prima facie evidence of dumping of goods in the country, injury to the domestic
industry and causal link between dumping and injury to the domestic industry.

Outlook

• The WEO, April 2019 has forecast acceleration of world output in second half of 2019.

• The key assumptions in this regard are continued accommodative monetary policy stance in
advanced countries and fiscal stimulus in China and de-escalation of trade tensions
between the US and China.

• There could be pressure on crude prices to increase as world output grows.

• This may not impact India since growth in world output will also favorably impact India’s exports,
which is not decoupled from growth of world trade.

• Government policies are expected to further lift restrictions on FDI inflows. This will increase the
stability of sources funding the current account deficit.

• From a macro-economic perspective, the deterioration of CAD may be contained if consumption

slows down in the economy. Increase in investment and exports will become the new drivers of
the Indian economy.
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Introduction

A) Agriculture and allied sectors are critical in terms of employment and livelihoods for the small and
marginal farmers.

B) As the size of landholdings in agriculture is declining, India should focus on resource efficiency in
smallholder farming to meet the SDG targets and to attain Agri-sustainability.

C) Following should be the backbone of smallholder farming in India to meet the pillars,

i) A combination of resource efficient methods

ii) Dynamic cropping patterns

iii) Farming that is responsive to climate change

iv) Intensive use of Information and Communication Technologies (ICT)

Overview of Agriculture and Allied Sectors

A) Gross Value Added in Agriculture

i) Gross Value Added (GVA) in agriculture improved from a negative 0.2% in 2014-15 to 6.3 % in 2016-
17 only to decelerate to 2.9% in 2018-19

ii) Crops, livestock and forestry sector showed fluctuating growth rates over the period from 2014-15 to
2017-18.

iii) Fisheries sector has shown a rapid growth from 4.9% in 2012-13 to 11.9% in 2017-18.

iv) Average annual growth rate in real terms in agricultural & allied sectors has remained at around
2.88% during 2014-15 to 2018-19.

B) Share of Agriculture Sector in GVA

i) Share of agriculture, forestry & fishing sector in GVA has seen a steady decrease over the years from
15.4% in 2015-16 to 14.4% in 2018-19.

ii) Decline was mainly due to decline in the share of crops in GVA.

iii) Share of the livestock in GVA has remained around 4 per cent from 2012-13 to 2017-18.

C) Gross Capital Formation in Agriculture & Allied Sector

i) Gross Capital Formation (GCF) in agriculture and allied sectors as a percentage of GVA saw a rise to
17.7% in 2013- 14 but declined thereafter to 15.2% in 2017-18.

ii) Share of private investment in GCF in Agriculture sector shows a decline.

Pattern of Agricultural Land Holdings In India

A) Phase-I results of the Agriculture Census 2015-16 show that the number of operational holdings,
has increased to 14.6 crore in 2015-16 from 13.8 crore in 2010-11. (Increase of 5.3%).

Operational Holdings- Land put to agricultural use

B) Share of marginal holdings (less than 1 ha) in total operational holdings increased from 62.9% in
2000-01 to 68.5% in 2015-16.

C) Share of small holdings (1 ha to 2 ha) decreased from 18.9% to 17.7% during this period. Large
holdings (above 4 ha) decreased from 6.5% to 4.3%.

D) Area operated by the marginal and small holdings increased from 38.9% in 2000-01 to 47.4% in
2015-16. Areas that of the large holdings decreased from 37.2% to 20 % during this period.
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Growing Number of Women Farmers

A) Women play a significant and crucial role in agriculture including crop production, livestock
production, horticulture, postharvest operations, Agri-social forestry, fisheries, etc.

B) Share of operational holdings cultivated by women has increased from 11.7% in 2005-06 to 13.9%
in 2015-16.

C) Marginal and small holdings operated by women farmers together constitute 27.9% of total
operational holdings cultivated by women.

Bringing Resource Efficiency In Smallholder Agriculture

A) Development strategy for agriculture should prioritise smallholder agriculture in order to promote
sustainable livelihoods and for reduction of poverty in India.

B) Productivity of a farm depends on the use of inputs like fertiliser, access to irrigation, technology,
crop intensity and choice of crops (crop pattern) grown at the farm.

C) Committee on doubling farmer’s income stated that one of the key aspects which can improve
productivity of small farm holdings is improving resource use efficiency.

D) Policy changes that are required to bring about resource efficiency are explained below,

1. Increasing Irrigation Water Productivity (IWP) in Agriculture

i) According to the Asian Water Development Outlook 2016, almost 89% of groundwater extracted is for
irrigation in India.

ii) By 2050, India will be in the global hot spot for ‘water insecurity’. India’s water insecurity index
shows that the resilience score of India is also very low.

iii) So, appropriate mechanism needs to be framed for economical use of water among small and
marginal farmers.

iv) Cropping pattern in India is highly skewed towards crops that are water intensive. Incentive
structures like MSP, heavily subsidized electricity, water, fertilizers have played a significant role in the
misalignment of crop patterns in the country.

v) Crops such as Paddy and sugarcane consume more than 60% of total irrigation water thereby
reducing water availability for other crops.

vi) States like Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh which have high land
productivity tend to have very low irrigation water productivity. It reflects inefficient use of water
and the need to re-calibrate the cropping pattern.

vii) Adoption of micro-irrigation systems (MI) is one of the possible ways to improve water use
efficiency.

viii) Subsidies can be provided to offset the costs of such improved irrigation systems.

ix) Focus in agriculture should shift from ‘land productivity’ to ‘irrigation water productivity’.

2. Economizing the Use of Fertilizers and Pesticides

i) For the small and marginal farmers, the costs of fertilizers are key determinants of profitability of
farming.

ii) Fertilizer response ratio is showing a declining trend. Declining fertilizer response ratio is an indicator
of declining responsiveness of soil fertility to fertiliser application.

iii) Declining Response Ratio is due to,

- Inadequacy and imbalance in fertiliser use

- Increasing multi-nutrient deficiency

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- Lack of farmers awareness

- Balanced plant nutrition and poor crop management

iv) Improvement in fertilizer use efficiency requires farmers’ knowledge regarding the right product,
dosage, time and method of application.

v) Some of the suggested measures are,

- Use of optimal dose based on soil health status

- Promotion of neem-coated urea

-Promotion of micronutrients

- Promotion of organic fertilizers

- Promotion of water-soluble fertilizers

3. Increasing Sustainability in Agriculture - Turning to Organic and Natural Farming

i) National Mission for Sustainable Agriculture (NMSA) has been launched to make agriculture more
productive, sustainable, remunerative and climate resilient.

ii) It promots location specific integrated/composite farming systems and conserves natural resources
through appropriate soil and moisture conservation measures.

iii) Paramparagat Krishi Vikas Yojana (PKVY) and Rashtriya Krishi Vikas Yojana (RKVY) schemes are
launched to promote organic farming.

iv) Models like Natural Farming, Vedic Farming, Cow Farming, Homa Farming, Zero Budget Natural
Farming (ZBNF) have been included to adopt depending on the farmer’s choice.

v) Organic farming is being promoted through the scheme Mission Organic Value Chain Development for
North Eastern Region (MOVCDNER) under National Mission for Sustainable Agriculture (NMSA).

vi) Some of the States which are progressively practicing ZBNF are Karnataka, Himachal Pradesh and
Andhra Pradesh.

4. Adopting Appropriate Technologies for Smallholder Farms

i) In smallholder farms, resource efficiency can be brought about through adoption of appropriate
technologies.

ii) Custom Hiring Centres (CHCs) can be set up to promote use of high-tech machinery for the
mechanization of small and marginal farm holdings, especially in difficult terrains.

iii) Technology can play a critical role in bridging the information gaps that prevail in agricultural
markets.

For example, Coffee Board has launched blockchain based coffee e-marketplace.

5. Improving Infrastructure and Access to Markets

i) Informal actors like local traders and input dealers are more prominent in the marketing channels of
the smallholder farmers.

ii) Information, Communication Technology (ICT) is needed to provide information about prices,
aggregation and storage facilities can help small and marginal farmers in overcoming the marketing
bottlenecks.

iii) NITI Aayog launched Agricultural Marketing and Farmer Friendly Reforms Index (AMFFRI)’ in 2016 to
rank States and UTs based on implementation of seven provisions proposed under model APMC Act.
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Role of Extension Services

1. Adoption of Accessed Advice and Its Usefulness

i) Agricultural households adopts the technical advice given by the veterinary department and
progressive farmers for most of the time and least from the source radio/TV etc.

ii) Majority of them found the advice to be beneficial which reflects the significance of extension
services in agriculture.

2. Trend of Expenditure on Agriculture Research & Education

There has been an increasing trend in the expenditure on agricultural research and education as a
percentage of total agricultural GVA with an exception of 2017-18.

Agricultural Credit

A) Access to timely credit or finance is a critical determinant of profitability of agriculture.

B) Regional distribution of agricultural credit in India shows that the distribution of credit is highly
skewed.

C) Distribution of agricultural credit is low in North Eastern, Hilly and Eastern States.

D) Financial inclusion in the eastern and north eastern India is relatively less as compared to the South
and West.

Allied Sectors: Animal Husbandry, Dairying AND Fisheries

A) According to the 19th Livestock Census, India has vast resource of livestock comprising about 300
million bovines, 65.1 million sheep, 135.2 million goats and 10.3 million pigs.

B) Livestock farming in India is part of a composite farming system characterized by crop-livestock

interactions.

1. Animal Husbandry and Dairying

i) India ranks first in milk production, accounting for 20 % of world production.

ii) Milk production in India has been increasing steadily over the years from 55.6 million tonnes in
1991-92 to 176.3 million tonnes in 2017-18. (Average annual growth rate of 4.5%)

iii) All India per capita availability of milk is 375 grams per day. However, it varies between 71 grams
per day in Assam to 1120 grams per day in Punjab.

2. Domestic Demand and Price of Milk

i) Milk demand is increasing driven by factors such as population growth, urbanisation and income
growth.

ii) Of the total milk produced in rural areas around 52 per cent is the marketable surplus.

3. Small Ruminant Sector

i) Sheep and goat are collectively known as small ruminants. India supports 16.1% of the world’s goat
population and 6.4% of its sheep.

ii) Small ruminants have higher survival rates under drought conditions compared to large ruminants.

4. Schemes/Initiatives to Improve Productivity of Livestock and Dairy Sector

i) Rashtriya Gokul Mission (RGM)

ii) E Pashu Haat Portal

iii) National Livestock Mission

iv) Livestock Health & Disease Control Scheme

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v) Dairy Development

5. Fisheries Sector

i) It provides income and employment to more than 14.5 million people.

ii) India is the second largest fish producer in the world with a total production of 13.7 million metric
tonnes in 2018-19 of which 65 per cent was from inland sector.

iii) Almost 50% of inland fish production is from culture fisheries, which constitutes 6.5% of global fish
production.

iv) The sector has been showing a steady growth in the total gross value added and accounts for 5.23%
share of agricultural GDP.

v) Fish and fish product exports emerged as the largest group in agricultural exports.

Schemes related to fisheries sector

i) ‘Blue Revolution: Integrated Development and Management of Fisheries’

ii) Fisheries and Aquaculture Infrastructure Development Fund (FIDF)

iii) Draft National inland Fisheries and Aquaculture Policy (NIFAP), 2019

Food Security And Food Management in India

Timely availability and affordability of food are critical for a developing country like India.

1. Food Security

i) Global Food Security Index (GFSI), 2018 considered four core issues of food security across 113
countries,

- Affordability

- Availability

-Quality & safety

- Natural resources and resilience

ii) GFSI’s major goal is to assess in a timely manner which countries are most and least vulnerable to
food insecurity.

iii) Indian ranks 76th out of 113 countries

iii) The index shows that India’s food security challenges lie in the areas of low GDP per capita,
sufficiency of supply, public expenditure on R&D and protein quality.

iv) It reflects the need for India to further improve the management of food supply in various aspects.

Government schemes in this context

(i) Announcing Minimum Support Prices and Central Issue Price

(ii) Undertake procurement of food grains through FCI and decentralised procurement by State
Agencies

(iii) Maintain buffer stocks

(iv) Open market sale of wheat and rice to check inflation

2. Food Subsidy

i) Food subsidy comprises of two main components.

a) Food Corporation of India (FCI) for procurement and distribution of wheat and rice under the
National Food Security Act (NFSA), 2013 and other welfare schemes.
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b) Subsidy provided to States undertaking decentralized procurement

ii) The economic costs of wheat and rice for FCI have been increased in 2018-19. However, the CIP of
wheat and rice for NFSA beneficiaries has not been revised.

1. Economic Cost constitute of the acquisition and distribution costs of procuring food grains for the
central pool.
2. The difference between the per quintal economic cost and the per quintal Central Issue Price (CIP)
gives the quantum of per quintal consumer subsidy.

iii) For sustainability of food security operations, the issue of increasing food subsidy bill needs to be
addressed.

3. Computerization of Targeted Public Distribution System

i) Under the scheme, Digitization of ration cards/ beneficiary’s data, Online allocation of food grains,
Computerization of supply chain management has been completed in more than 25 states.

ii) To modernize and bring about transparency in the TPDS operations, the Central Government is
implementing the Scheme ‘End-to-end Computerisation of TPDS Operations’.
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Indian Industry: An overview

Overall, the industrial sector performance during 2018-19 improved as compared to 2017-18.

a. Gross Value Added (GVA):

• Real GVA of Industry increased to 6.9 per cent in 2018-19 from 5.9 per cent in 2017- 18.

• While the construction and manufacturing sectors performed well, the mining sector did poorly.

b. Index of Industrial Production (IIP)

• Growth was positive but less compared to last year due to the shortfall of investment in capital
goods.

• The Index of eight core industries comprising about 40.3 per cent of the IIP grew at similar rate as
that of the last year.

• Except, crude oil all core industries registered positive growth.

c. Central Public Sector Enterprises (CPSEs)

• Out of these 339 CPSEs, 184 CPSEs were profit making, 71 loss making and 82 are non-
operational during 2017-18.

• The overall net profit of operating CPSEs grew by 2.29 per cent.

• However, CPSEs contribution to the total Central Exchequer decreased by 2.98 per cent.

d. Gross Capital Formation in Industrial Sector:

• The rate of growth of Gross Capital Formation (GCF) in industry has registered a sharp rise
showing upward momentum of investment in industry.

• The Mining & Quarrying, Manufacturing, Electricity, Gas, Water Supply & Other Utility Services and
Construction had registered a positive growth rate.

e. Credit Flow to the Industrial sector:

• Overall the Gross bank credit flow to the industrial sector has increased but with variations.

• Positive growth: chemicals, cement, engineering industries, construction, infrastructure.

• Negative growth: textiles, petroleum, coal products and nuclear fuel, basic metal & products.

Key Initiatives taken to boost Industrial Sector in India

Improving ease of doing business

• Simplification and rationalization of the existing rules and introduction of information technology
for effective governance.

• India improved its ranking to 77th position in the World Bank Doing Business (DB) Report, 2018.

• It has improved its rank in 6 out of 10 indicators and has moved closer to international best
practices.

Start-up India

• Start-up India, Stand-up India initiative was launched in 2015 to promote innovation and
entrepreneurship among enterprising youth.
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• Start-up India Hub as ‘One Stop Shop’ for the start-up ecosystem has provided Learning Program
to build business plan.

• Steps have been taken for easing regulations such as exemption from Income tax on investments
raised by Start-ups.

• Regulatory reforms implemented to improve Ease of Doing Business for Start-ups through a Self-
certification regime for labour and environmental laws.

Foreign Direct Investment (FDI)

• The Government is promoting investment through a liberal FDI policy as it enhances productivity
by bringing capital, skills and technology to the country.

• Total FDI equity inflows were US$44.36 billion of which more than 70 per cent came from
Singapore, Mauritius, Netherlands, Japan and United Kingdom.

Sector wise Performances and challenges:

1. Steel:

Performance:

Production: Positive growth

• Globally, India is the 2nd largest crude steel producer with a global share of 6 per cent.

• It is one of the core industries that have strong forward and backward linkages with material flows
and income generation contributing about 2 per cent of the GDP.

Consumption: Positive growth

• India is also the third largest consumer of the finished steel with per capita consumption of only 69
kg lower than the global average of 214 kg.

• With huge investments in infrastructure, construction and automobile sector, steel demand and
consumption are growing.

Exports decline and Imports grow

• Imposition of protectionist measures and trade frictions led to decline in exports to US, EU and
Canada

• But the import of finished steel from East Asian and ASEAN countries grew making India net
importer.

The National Steel Policy, 2017 directives:

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• Encourages long-term growth for Indian steel on both supply and demand fronts.

• Focuses on domestic production especially of value added steel to match the growing demand

• Need to increase Investment in capacity addition and infusion of modern technology for
production.

Key challenges:

• Capacity expansion as the demand for steel is bound to rise with economic growth

• Lack of indigenous production of High grade and value-added steel used in power, defence and
automobile.

• Difficulties in acquiring mining lease

• High dependency on import of coking coal add to cost of steel production.

• High logistics costs also act as a major constraint.

2. Leather and Footwear:

• It is a highly employment intensive sector.

• The global demand for footwear is moving towards non leather footwear.

• But, Indian tax policies favour leather footwear production.

• India faces high tariffs in international markets for leather goods and non-leather footwear.

• Indian Footwear and Accessories Development Programme is being implemented (2017-20)

to address these challenges and create jobs and formalize the sector.

3. Gems and Jewellery:

• sector contributes to exports and employment generation of around 5 million

• The gem and jewellery exports were 13.69 per cent of total merchandise exports in the country.

Key Initiatives:

• Establishment of Special Notified Zone, to set up Common Facility Centres.

• Creation of separate ITC HS Code for lab grown diamond.

• Reduction of GST rates for cut and polished diamonds and precious stones.

• Exemption from IGST on import of gold by specified agencies and banks.

• Exemption from GST on supply of gold by nominated agencies to exporters

• Providing financial assistance for participation of international fairs.

• Domestic Council for Gems & Jewellery to organise the small scale domestic industry.

4. MSMEs:

• The Micro, Small and Medium Enterprises (MSME) sector provides large employment opportunities,
industrialization of rural areas, reducing regional imbalances, etc.

Key initiatives:

• Loans up to 1 crore within 59 minutes through online portal.

• Interest subvention of 2 per cent for all GST registered MSMEs on incremental credit up to 1 crore
with SIDBI as nodal agency.

• The working capital extended by SCBs and Systemically Important NBFCs and RRBs will be covered
under the Scheme.
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• Prime Minister’s Employment Generation Programme

• Credit Guarantee Trust Fund for Micro and Small Enterprises.

• Credit Linked Capital Subsidy Scheme for Technology Up-gradation.

• Scheme of Fund for Regeneration of Traditional Industries.

• Micro and Small Enterprises- Cluster Development Programme for the establishment of new
enterprises and development of existing ones.

5. Textiles:

India is the second largest manufacturer and exporter in the world, contributing 12.65 per cent to
manufacturing and 2.3 per cent to GDP, 12 per cent of exports and global share of 5 per cent.

Challenges:

• Fragmented and scattered manufacturing, except spinning segment.

• Technological gap in weaving, processing and embroidery, knitting, technical textile and
garmenting segments.

• Higher average tariffs in external markets as compared with competing nations which enjoy duty
free access affects competitiveness.

Key Initiatives:

• incentives under Amended Technology Up-gradation Fund Scheme

• Rebate of State Levies

• 4% interest rate under Merchandise Exports from India Scheme

• Assistance is also provided to exporters under Market Access Initiative Scheme.

• enhanced interest equalization rate of 5% for pre and post shipment credit for the textile sector

Infrastructure

SDG-9: “Develop quality, reliable, sustainable and resilient infrastructure, with a focus on affordable and
equitable access for all”

• There is massive investment need in infrastructure to achieve targeted economic growth in the
country.

• India needs to spend US$200 billion (7-8% of GDP) on infrastructure annually and accelerate the
flow of private capital into infrastructure.

Key initiatives:

• National Investment and Infrastructure Fund (NIIF) to provide investment opportunities to

commercially viable projects.

• Credit Enhancement Fund for infrastructure projects for increasing the credit rating of bonds
floated by infrastructure companies is to be launched.

• New credit Rating System for infrastructure projects, based on Expected Loss approach, has
been launched to provide additional risk assessment mechanism for investors.

• Infrastructure investment trusts and Real Estate Investment Trusts have been formulated
to pool investment in infrastructure.

1. Road Sector:

Road construction in kms grew at 30 kms per day in 2018-19 compared to 12 kms per day in 2014-15.

Challenges:
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• Availability of funds for financing large projects.

• Lengthy processes in acquisition of land.

• Payment of compensation to the beneficiaries,

• Environmental concerns, time and cost overruns due to delays.

• Procedural delays, lesser traffic growth than expected.

• Shortfall in funds for maintenance.

Key Initiatives:

• Central Road and Infrastructure Fund (CRIF) replaced the central road fund and now funds are to
be earmarked for various infrastructure sectors.

• Construction of Eastern Peripheral Expressway, Delhi-Meerut expressway and Dhola-Sadiya Bridge

has improved connectivity.

Sector Key Initiatives

Railways • Freight and passenger performance have improved over the year.
• Rail Safety has improved with zero train collisions in 2018-19.
• Mission Electrification for electrifying 100 per cent of its Broad-Gauge network is
undertaken.
• Green Certification of Workshop and Production Units through Green Industries
Certification

Telecom • The Government has constituted ‘5G India 2020 Forum’ to articulate the Vision for
5G.
• FDI Reforms in telecom sector to promote ease of doing business.
• Digital Communications Commission to ensure effective implementation and
monitoring of the ‘National Digital Communications Policy- 2018’.

Power • India improved its ranking in the Energy Transition Index published by World
sector Economic Forum to 76th position.
• The Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) launched in 2017 to
achieve universal household electrification.

Housing • The Real Estate (Regulation and Development) Act, 2016 to ensure regulation and
promote real estate sector in transparent manner and to protect the interest of
home buyers
• ‘Ease of Living’ Index for cities to enable data driven approach in urban planning and
management and promote healthy competition among cities.
• Municipal Performance Index (MPI), 2019, to examine the sectoral performance of
municipalities across a set of 5 verticals namely Service, Finance, Planning,
Technology and Governance.
• These Indices are linked to Sustainable Development Goals (SDGs) to track and
achieve SDGs.

Way forward

• As an emerging economy, the scope for Industry 4.0 and Next generation infrastructure are
enormous.

• India needs adequate and timely investment in quality infrastructure through private investment
across the country with the collaboration of public sector.

• Along with physical infrastructure; provision of social infrastructure is also equally important.
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Introduction

• Services sector (excluding construction) has a share of 54.3 per cent in India’s GVA and
contributed more than half of GVA growth in 2018-19.

• Services share in employment is 34 per cent in 2017 which is significantly lesser that its share of
54 per cent in GVA

• An important finding is that India’s services sector does not generate jobs in proportion to
its share in GVA. This contrasts with the international experience.

• India received 10.6 million foreign tourists in 2018-19.

• Foreign exchange earnings from tourism in India stood at US$27.7 billion in 2018-19.

• Many of the high frequency indicators such as bank credit to services sector decelerated in 2018-
19.

• The IT-BPM industry grew and is estimated to have reached US$181 billion in 2018-19.

SERVICES SECTOR PERFORMANCE IN INDIA: AN OVERVIEW

• Services sector growth moderated in 2018-19. Despite the recent growth moderation, services
sector growth continues to outperform agriculture and manufacturing sector growth.

• The share of services is particularly high in Chandigarh and Delhi with over 80 per cent share while
Sikkim was at the bottom with 30 per cent share.

• In contrast, services sector accounts for less than 40 per cent of share of services in GSVA in
states such as Gujarat, Uttarakhand, Madhya Pradesh and Chhattisgarh.

• Even states with relatively low share of services, such as Haryana, Jharkhand, Odisha, Andhra
Pradesh and Uttarakhand, have witnessed strong services sector growth in the recent years.

Trade in Services Sector

• The rising services trade surplus has helped finance nearly 50 per cent of India’s trade deficit as of
2017-18.

• The service trade surplus is largely driven by Computer & ICT services, and to some extent, travel
services.

India in World Commercial Services Exports and Imports

• India’s trade in commercial services, both in exports and imports, moderated in 2018 .

• In 2018, world trade in commercial services stagnated. India's growth rate decelerated but
remains above world growth rate.

• According to the WTO data, India is among the world’s top 10 exporters and importers of
commercial services

• India ranks eighth in exports and tenth in imports in 2017.

• India’s share in world’s commercial services exports has risen steadily over the past decade to
reach 3.5 per cent in 2017.

• India remains one of the strongest performers among the major service-exporting countries.

• Government has taken many initiatives that included measures such as Start-up India, Insolvency
and Bankruptcy Code, National Intellectual Property Rights (IPR) policy, implementing GST regime
and improving the ease of doing business
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• These initiatives have helped increase India’s ranking in the World Bank’s Ease of Doing Business
Index from 100 in 2017 to 77 in 2018

• Digital India, e-visas, infrastructure status to Logistics, schemes for the housing sector etc., could
give a further fillip to the growth of services sector.

• The Government has implemented FDI reforms in a number of sectors, including defence,
construction development, insurance/pension/other financial services, asset reconstruction
companies, broadcasting, civil aviation, pharmaceuticals and trading etc.

• An investor-friendly FDI policy has been put in place under which up to 100 per cent FDI is
permitted via automatic route in most sectors, including single-brand retail trading, construction
development and regulated financial sector activity.

• In order to boost services exports, the Service Exports from India Scheme (SEIS) covers
business services, education services, health services, tourism and travel related services,
transport services etc.

• Government has also created a dedicated fund of `5,000 crore for financing sectoral initiatives
under the Champion Services Sector Scheme.

• Under this scheme, various domestic policy reforms critical to enhance the competitiveness of
services exports, including on data privacy/security and e-commerce, would be pursued through
the Ministries concerned.

FDI into Services Sector

• FDI equity inflows into the services sector accounted for more than 60 per cent of the total FDI
equity inflows into India.

Services Sector Gross Value Added Versus Employment

• As per the UN National Accounts Statistics data, India ranked 7th in terms of GDP size and 9th in
terms of services sector size in 2017.

• Note that India's rank has since risen to 6th in terms of GDP but the 2017 numbers have been
used here for purposes of comparison

• India has the second fastest growing services sector after China, registering a growth of 7.9 per
cent.

• India also ranks second after the UK in terms of services share in exports, with the shares as high
as seen in developed countries, such as U.S.A, France and Spain.

• India ranks the second lowest after China in terms of services share in Gross Value Added (GVA)
and ranks the lowest in terms of services share in employment.

• In addition, compared to the experience of other countries, services share in India’s

employment at 34 per cent is significantly lower than services share in GVA at 54 per
cent.

• This divergence in the performance of the services sector in India has been witnessed as the sector
has not been able to generate jobs in proportion to its size.

• The share of services in employment is roughly the share of services GVA for other countries such
as USA, China, Japan, Germany, UK, Brazil, Mexico in 2017.

• Services sector expansion in the recent decades has been unable to generate proportionate
employment, especially in the formal sector.

• This also suggests that there lies immense potential for employment generation in the services
sector in the coming years in line with other countries.
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Major Services: Sectorwise Performance and Some Recent Policies

Tourism

• Tourism sector is a major engine of economic growth that contributes significantly in terms of GDP,
foreign exchange earnings and employment.

• As per the World Tourism Barometer of the United Nation’s World Tourism Organization ,
International Tourist Arrivals (ITA) reached a total of 1.3 billion in 2017.

• The Foreign Tourist Arrivals (FTAs) in 2018-19 stood at 10.6 million. Foreign exchange earnings
(FEEs) from tourism stood at US$27.7 billion in 2018-19.

• Outbound tourism increased in recent years. This was more than double the foreign tourist arrivals
in India.

• Growth in domestic tourist visits slowed down.

• Tamil Nadu , Uttar Pradesh, Karnataka , Andhra Pradesh and Maharashtra were the top 5
destination States.

• Amongst centrally protected ticketed monuments, Taj Mahal, Agra was the most visited for
domestic visitors followed by Sun Temple, Konark and Red Fort, Delhi.

• The Ministry of Tourism launched the ‘National Mission on Pilgrimage Rejuvenation and Spiritual,
Heritage Augmentation Drive’ (PRASHAD) in January 2015 with the objective of pilgrimage
infrastructure at selected important pilgrimage destinations.

• Under the Swadesh Darshan Scheme, the Ministry of Tourism has identified 15 thematic circuits for
development namely: Himalayan Circuit, North East Circuit etc.

Health and Medical Tourism in India

• Government has taken various Policy initiatives and measures to promote Health and Medical
Tourism in India along with the Public Private Initiatives in the Tourism sector.

• India has emerged as a major Medical Tourism destination.

• The Ministry of Tourism has recognized Medical and Wellness Tourism including Ayurveda as a
Niche product in order to overcome the aspect of ‘seasonality’ and to promote India as a 365
days destination and attract tourists with specific interests.

Indian Healthcare Industry

• The market size of medical tourism in India is estimated at US$ 3 billion in 2017. The value of
medical tourism is forecasted to reach US$ 9 billion by 2020.

• India currently has around 18 per cent of the global medical tourism market.

• In an estimate, it can be a US$ 9 billion-worth medical tourism destination by having 20 per cent
global market share by 2020.

• Government offers financial support as Marketing Development Assistance, for Publicity and for
organising Wellness and Medical Tourism Promotion shows.

• Medical Tourism is regularly highlighted for promotion as part of the Incredible India Campaign in
the print, electronic, online and outdoor media in India and abroad as well as at the various travel
trade exhibitions overseas.

• ‘Medical Visa’ has been introduced, which can be given for specific purpose to foreign travellers
coming to India for medical treatment.

• ‘E- Medical Visa’ has also been introduced for 166 countries.
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Some of the issues relating to tourism sector are briefly stated below:

• The co-ordination mechanism of various like-minded Ministries and Stakeholders to resolve issues
for promotion of tourism in the country needs to be strengthened.

• State/UT Government need sensitization about tourism as a major driver of employment and
poverty alleviation.

• Budgetary allocation for development of tourism infrastructure should be increased.

• Land should be made available for hotels and reserve land for hotels in all new townships under
planning.

• Fast-track clearances for hotel projects.

• Increase skill development efforts to train more persons. Make the Taxation regime on Hospitality
Industry globally competitive.

IT –BPM Services

• The Indian IT-BPM industry is estimated to have reached US$181 billion in 2018.

• E-commerce market is estimated at US$43 billion for FY 2018-19, at the growth rate of 12 per
cent.

• The IT services constitute the largest segment with a share of around 52 per cent, followed by BPM
with share of around 20 per cent.

• Software products and engineering services together accounted for around 19 per cent share
whereas hardware accounts for 10 per cent.

• The Indian Information Technology / Information Technology enabled Services (IT/ ITeS) industry
has contributed immensely in positioning the country as a preferred investment destination
amongst global investors and creating huge job opportunities in India, as well as in the USA,
Europe and other parts of the world.

• USA, UK and EU account for 90 per cent of the total IT-ITeS exports.

• However, there are new challenges surfacing in these traditional geographies.

• Demand from APAC, Latin America and Middle East Asia is growing and new opportunities are
emerging for expanding in continental Europe, Japan, China and Africa.

• Efforts are being made to further strengthen existing markets, and simultaneously diversify and
increase presence in the new and emerging markets in Europe (besides UK which is a mature
market), Africa, South America, Israel, Australia, China and Japan through market development
and industry repositioning initiative.

• India’s digital economy has received a tremendous boost through various Government initiatives.

• These initiatives coupled with new and emerging technologies are enhancing the digital economy of
the country and are creating IT and electronics led new opportunities for revenue and job creation
in both traditional as well as new sectors of the economy such as transport, health, power,
agriculture, and tourism.

• The National Policy on Electronics 2019 (NPE 2019) has been notified on February 2019 by the
Ministry of Electronics and Information Technology (MeitY)

Media & Entertainment Services

• The Media and Entertainment sector comprises mainly of television, print, radio, films, music,
digital advertising, over the top (OTT-film and television content delivered over internet), visual
effects (VFX) and gaming.

• Technology has rapidly changed the profile of this sector especially in the area of content and
carriage.
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• Audio–visual services have been identified by the Government (2018) as one among the 12
Champion Service sectors for focused development so as to reap its full potential.

Private Television Sector

• India is the second largest pay-TV market in the world after China. TV penetration reached 66 per
cent in the country.

• The growth drivers for TV sector include digitisation of cable services, higher uptake of High
Definition channels, growth of OTT platform aided by rising smart phone penetration and high-
speed data adoption.

• In the distribution sector, Cable TV still dominates the distribution of TV channels in the country
through MSOs and LCOs. DTH sector is rapidly becoming a key player in the distribution sector.

Public Service TV Broadcasting

• Prasar Bharati is the country’s public service broadcaster with All India Radio and Doordarshan as
its two constituents.

• It came into existence in 1997 with a mandate to organise and conduct public broadcasting
services to inform, educate and entertain the public and to ensure a balanced development of
broadcasting in the country.

• Doordarshan has the world’s largest terrestrial broadcast facility with over 1400 terrestrial TV
transmitters and also provides free to air DTH services.

Print Media

• Print accounted for the second largest share of the Indian M&E industry.

• Print Industry is declining all over the world primarily due to huge in roads of internet and TV
channels in media industry. India is also no exception to this phenomenon.

• The number of registered publications in the country stood at 1,18,239.

• However, growth of circulation of publications contracted in 2017-18 over the previous year.

• The total circulation of publications in the country during 2017-18 was 43 crore of which Hindi,
English and Urdu publications were the top three.

• Hindi dailies continue to be the largest in terms of circulation followed by English and Urdu.

Films

• India is the world’s biggest producer of films with 1,776 domestic film releases in 2018.

• The highest number of films were released in Kannada (243) followed by Hindi (238) and Telugu
(237). Despite producing the highest number of movies in the world, India has less than 25 per
cent of the number of screens as compared to China or USA.

• India’s screens per million of population is also the very low, primarily due to lack of cinema
penetration in tier-II, tier-III and tier-IV markets in India. This presents a large untapped potential
for the Indian film segment.

• In the Overseas Theatre Performances, the highest number of film exports were made to the Gulf
region (50) followed by Australia (48) and USA/Canada (46).

• In terms of value, however, China became the largest international market for Indian film content.

Digital Media

• The various segments of digital media include- online video viewing, audios, news through OTT
platforms and social media etc.

• The total number of mobile subscribers stood at 1.17 billion in 2018.

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• Smartphone users increased by 39 per cent to reach 340 million in 2018.

• Average data consumption doubled from 4 GB to 8 GB per month between 2017 and 2018.

• Moreover, digital media market grew to reach 169 billion in 2018.

• Internet subscribers grew to 570 million in November 2018, driven by rural internet
subscriber growth of 49 per cent.

• Given that there are around 4 billion internet users in the world, one in eight is Indian.

• Entertainment was the largest category in mobile content consumption for Indian users, followed
by sports and lifestyle. Social Media penetration reached 17 per cent in 2018. The most active
social media platforms were YouTube, Facebook, WhatsApp and Instagram.

Radio Sector

• All India Radio (AIR) broadcasts cover nearly 92 per cent of the geographical area and 99.2 per
cent of the population of the country.

• The opening of private FM radio since 1999 has not only resulted in providing good quality of
reception to radio listeners, but also helped encouraging local talent and generating employment to
large number of people in various cities.

• Community Radio Stations are set up with the involvement of various educational institutions and
civil society organizations. At present, 250 Community Radio stations have been operationalized. It
is proposed to establish at least one CRS in each district with priority to coastal districts and
aspirational districts.

Emerging Media

• As compared to the traditional media, it is the non-linear media comprising of digital media
including OTT, animation & VFX, live events, online gaming, etc. that has been witnessing double
digit growth in the media & entertainment sector in recent years.

• The spread of broadband connectivity fall in data prices, demand for regional language content
have triggered the growth of digital media.

• The Animation, VFX, gaming and comics sector in India is also a thriving business with even
Hollywood movies being outsourced to India for work related to post-production which includes
video editing, visual effects, animation, 2D-3D conversion, etc.

• It is one of the sunrise sectors for India and given the rapid expansion of the sector the
requirement of skilled professionals is also immense.

Policy initiatives

• In view of increasing piracy of films by unauthorized recording of films in cinema halls, a Bill
has been introduced in the Rajya Sabha in February 2019 to amend the Indian Cinematograph Act
1952.

• Audio–visual service has been identified by the Government as one among the 12 Champion
Service sectors identified for focused development so as to reap its full potential.

• Government of India is in the process of setting up National Centre of Excellence (NCOE) for
Animation, Visual Effects, Gaming and Comics.

• Government of India has decided to establish a Film and Television Institute in Arunachal Pradesh.

Space Services

• Over the last three decades, space technology has matured from providing simple mapping
applications to development of complex models, decision support and early warning systems,
incorporating space and derived inputs.
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• Satellite launch services and satellite database mapping and Geospatial services are areas in which
India is making a mark and has huge potential for the future.

• India became the sixth nation to develop this highly coveted complex cryogenic rocket propulsion
technology and also paved the way for the development of a high thrust Cryogenic engine & stage
for the next generation launch vehicle i.e. GSLV Mk-III.

Bhuvan Services

• ISRO’s Bhuvan Geo-portal provides multi sensor, multi-platform and multi temporal Satellite
Imagery, thematic maps and satellite data-derived information related to Earth Observation &
Disaster Management Support.

Mapping and Geospatial Services

• Satellite data are used to estimate crop acreage in season forecasting of production for 8 major
crops in the country viz. wheat, rice (kharif & rabi), mustard, rabi sorghum, jute, winter potato,
sugarcane, cotton in the country.

• Mahalanobis National Crop Forecast Centre under Ministry of Agriculture & Farmers Welfare
regularly generates crop forecasts.
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Introduction

a) It has also been estimated that demographic advantage in India is available for five decades from
2005-06 to 2055-56. It is longer than any other country in the world.

b) This demographic advantage can be reaped only if education, skilling and employment opportunities
are provided to the young population.

Human Development Index

a) India’s HDI (Human Development Index) has improved significantly over the years between 1990 and
2017.

b) But India’s position is still lowest among Asian and developing economies.

c) Region-wise trend of HDI scores suggests that most Southern and Northern States have performed
much better as compared to their Eastern counterparts.

Gender Issues

a) World is aspiring to achieve SDG 5 by 2030 which is associated with ‘achieving gender equality’.

b) Role of women is critical not only across agriculture and industrial sectors but also in governance,
education and health services.

c) Government of India has initiated following programmes to mainstream women and make women
active agents of change in the society,

i) Beti Bachao, Beti Padhao (BBBP)

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ii) Ujjwala Scheme

iii) Poshan Abhiyaan

iv) Pradhan Mantri Matra Vandana Yojana etc.

Financial Inclusion and level of household autonomy of women

a) It is considered as an essential tool for empowerment of women as it enhances their self-confidence

and enables financial decision-making to a certain extent.

b) At all India level, the proportion of women having a bank or saving account that they themselves use
have increased from 15.5% in 2005-06 to 53% in 2015-16.

c) As per NFHS-4, participation of currently married women in household decision making has increased
from 76.5% in 2005-06 to 84% in 2015-16 at all India level.

d) States like Chhattisgarh, Goa, Himachal Pradesh, Kerala, West Bengal and North Eastern States are
front runners in terms of women’s participation in household decision making compared to other States.

Gender Budgeting
- It is a tool for gender mainstreaming by using the Budget as an entry point to apply a gender lens to
the entire policy process.
- Gender budgeting was referred for the first time by the then Finance Minister of India in his budget
speech in 2001.
- GB is undertaken through several institutional mechanisms such as Gender Budget Statement, Gender
Budget Cells, as well as various schemes/programmes for women and girls.

Trends in Social Sector Expenditure

a) Public investment in social infrastructure has /a critical role in providing access to social services for the
people, especially the marginal and vulnerable sections of the society.

b) Expenditure on social services by the Centre and States as a proportion of GDP has registered an
increase in different proportion across all the sectors.

c) Education sector registered GDP increase from 2.8% in 2014-15 to 3% in 2018-19.

d) Share of expenditure on social services out of total budgetary expenditure increased from 24.9% in
2013-14 to 26% in 2018-19.

- Social services include, education, sports, art and culture; medical and public health, family welfare;
water supply and sanitation; housing; urban development; welfare of SCs, STs and OBCs, labour and
labour welfare; social security and welfare, nutrition, relief on account of natural calamities etc.
- Expenditure on ‘Education’ pertains to expenditure on ‘Education, Sports, Arts and Culture’

Education for all

a) SDG 4 on education requires ensuring equitable, inclusive and quality education along with promotion
of lifelong learning opportunities for all by 2030.

b) As per Educational Statistics at a Glance (ESAG), 2018, the thrust on providing primary education has
yielded results across social categories and gender in Gross Enrolment Rate (GER).

c) Significant progress has been made in respect of female participation up-to secondary level and GER
for girls has exceeded that of boys.

d) However, girls’ enrolment rate is lower than that of boys at the higher education level.

e) Drop-out rates are very high for boys at the secondary school level. Reasons for male students
dropping out are economic activities, lack of interest in education and financial constraints.

f) Pupil Teacher Ratio (PTR) at national level for primary schools is 23, 17 for upper primary, 27 for
secondary and 37 for senior secondary schools.
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g) Gender Parity Index (GPI) based on Gross Enrolment Ratio (GER) indicates increasing trend of female
participation at all levels.

h) At the higher education level the GPI is low (0.92 in 2015-16 for higher education level and for all
other levels it was above 1)

j) Although, enrolment of girls is higher than that of boys in government schools, the pattern gets
reversed in private schools.

Learning Outcomes: Improving quality of education

a) As per Annual Status of Education Report (ASER, 2018), there is a gradual improvement in both basic
literacy and numeracy for Class III students.

b) However, still only a quarter of them are at grade level (ability to read and do basic operations like
subtraction of Class II level).

c) Report also shows that 1 out of 4 children leaving Class VIII are without basic reading skills (ability to
read at least at Class II level).

d) Rules of the RTE Act were amended in February 2017 to include the class wise, subject wise Learning
Outcomes till Class VIII for the first time.

e) District wise report cards, generated under National Achievement Survey, show the learning levels of
students in every district against the expected learning outcomes of a particular grade.

Shortfall of teachers

a) Shortage of teachers is a perennial problem with 9.08 lakh vacancies of teachers at elementary level in
government schools as on 31st March 2016.

b) Performance Grading Index, 2017-18 states that shortage of teachers and principals and administrative
staff, lack of regular supervision and inspection, inadequate training of the teachers, timely availability of
finances are some of the factors plaguing the education system in the country.

Skill Development

a) According to NSSO Report 2011-12, only 2.3 per cent of the total workforce in India had formal sector
skill training.

b) Government has announced many schemes to improve the skill development in the country.
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Bridging the disconnect in the Skilling Ecosystem

a) Government initiatives in the skilling ecosystem require more coordinated and concerted efforts
between various Ministries and State governments for improving quality, relevance, quantity, aspirations,
mobility and financing of skill development.

b) Proper pre-screening on the candidates should be done and ensure that only eligible candidates are
enrolled for the programme.

c) Stronger facilitation support to avail MUDRA loan should be provided to PMKVY certified candidates.

d) Skill Voucher can be introduced as a financing instrument given to a beneficiary that enables them to
sign up for vocational education course at any accredited training institute.

e) Industry should be incentivized to set up training institutions in PPP mode. Local Industry must be
involved for curriculum development, training modules, provision of equipment, training of trainers etc.

f) Personnel of Railways and other para-military forces could be used for skill training or lending
institutional support in imparting training in hilly, inaccessible and difficult terrains.

Employment Scenario

1a) As per Periodic Labour Force Survey (PLFS) estimates, Labour Force Participation Rate (LFPR) in India
has declined to 36.9% in 2017-18 from 39.5% in 2011-12.

b) In rural areas, it has declined by 3.6 percentage points while it has declined by 0.1 percentage points
in urban areas.

c) The Worker Population Ratio (WPR) has also declined in both areas.

d) Unemployment rate (UR) in India stood at 6.1% with 5.3% in rural areas and 7.8% in urban areas as
per usual status.

e) Proportion of urban youth who received formal vocational training has improved to 4.4% in 2017-18.

f) PLFS found on average, a male employee earned nearly 1.2-1.3 times the earnings of female regular
salaried worker in 2018.

g) Net employment generation in the formal sector was higher at 8.15 lakh in March 2019 against 4.87
lakh in February 2018. It reflects a positive trend in terms of employment in the formal sector.

Health for All

Healthy productive population is an enabler for sustainable development. So, it is critical to improve public
health delivery, reduce health inequities and ensure affordable health care for all.

Status of Health system

a) Maternal Mortality Ratio (MMR) of India has declined to 130 per lakh live births in 2014-16.

b) MMR in India has declined by 77 per cent as compared to 44 per cent decline in global average.

c) As per the latest Sample Registration System, 2016 report, the Under Five Mortality Rate in India is 39
per 1000 live births, Infant Mortality Rate is 34 per 1000 live births and Neonatal Mortality Rate is 24 per
1000 live births.

d) U5MR has declined at a faster pace in the period 2008-2016.

Expenditure on health

a) As per the National Health Accounts Estimates during 2013-14 to 2015-16, there is an encouraging
trend of decreasing Out of Pocket Expenditure (OOPE) and an increase in public health expenditure out of
Total Health Expenditure (THE).

b) Public health expenditure of Centre, States and Local Bodies, as a percentage of Total Health
Expenditure (THE) increased from 22.5% in 2004-05 to 30.6% in 2015-16.
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c) Government has taken several steps to reduce Out of Pocket Expenditure (OOPE) and burden of
diseases in the country. E.g. Ayushman Bharat, Free Drugs and Diagnostics Service etc.

Health Infrastructure in Rural Areas

a) Health infrastructure is an important indicator of the quality of health care delivery systems.

b) Indian Public Health Standards(IPHS) are a set of uniform standards envisaged to improve the quality
of health care delivery in the country.

Human Resource in health sector

a) There exists shortfall across all cadres in the posts of doctors and specialists.

b) There are large number of Primary Health Centres (PHCs) which are functioning with one doctor or
without doctor.

Rural Development

Rural Connectivity

a) Quality of life of people can be substantially improved by improving connectivity which will enhance
their access to medical services, schools, markets and many other social services.

b) Pradhan Mantri Gram Sadak Yojana aims to provide funds to States to construct rural roads to connect
villages by all-weather roads.

c) Since 2014, around 190,000 km of rural roads has been constructed. The rate of rural road
construction, i.e. kms of rural road constructed per day, has increased.

d) Some of the better performing states are Maharashtra, Assam, Uttar Pradesh & Odisha.

Rural housing (PMAY-G): Shelter for the Poorest of the Poor

a) During 2014-2019, 1.54 crore houses were completed including those carried over from Indira Awaas
Yojana.

b) The average number of days taken for completion of a house under first year of PMAY in 2016-17 was
221 and around 114 days during the second year of PMAY in 2017-18.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

a) MGNREGS has been instrumental and a guiding factor for tackling rural poverty and unemployment by
providing employment to the rural poor and unskilled people.

b) It has generated 267.96 crore person days during 2018-19.

c) Out of the total person-days, person-days for women was 54.6%, SC was 20.7% and ST was 17.4%. It
was well-above targets.

d) Around 85,000 km of road length was constructed under MGNREGA during 2018-19.