Indian Economy PDF

https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CONTENTS PART A DOMESTIC ECONOMY 1. Output of an Economy 3...

https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CONTENTS PART A DOMESTIC ECONOMY 1. Output of an Economy 3 1.1 Concept of Output 3 1.2 Concept of Depreciation 5 1.3 GDP—as a Measure of Growth 6 1.4 GDP/National Accounts Revised Series With 2017-18 As Base Year 8 1.5 Gross Happiness Index (GHI) 11 2. Towards Inclusive Growth 13 2.1 Growth Rate of Indian Economy 13 2.2 Development—Inclusive Growth 14 2.3 Growth With Equity. 18 3. Sustainable Development and Climate Change 20 3.1 Sustainable Development 20 3.2 Sustainable Development and Climate Change 21 3.3 Sustainable Development Goals (SDGs) 23 3.4 Green GDP 23 3.5 Climate Financing. 24 4. Poverty and Social Sector 25 4.1 What is Meant by Poverty in India? 25 4.2 Social Sector 25 4.3 Micro Finance 34 4.4 Pradhan Mantri Mudra Yojana (PMMY) 35 4.5 Spreading Jam Across Indian Economy 35 4.6 Universal Basic Income 37 5. Food Security 41 5.1 Food Security 41 5.2 Challenges Before India in Achieving Food Security. 46 6. Agriculture Sector 48 6.1 'Why' is Agriculture Sector Important for India? 48 6.2 Pink Revolution 51 6.3 New Agricultural Policy 2000 53 (xi) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 6.4 Agriculture Export Policy, 2018 53 6.5 Rainbow Revolution 54 6.6 Minimum Support Price (MSP) 55 6.7 Indian Agriculture—Ten New Thoughts 55 6.8 Second Green Revolution 57 6.9 National Mission For Sustainable Agriculture 57 6.10 Food Processing Industry—An Overview, Opportunities and Challenges 57 6.11 Agriculture Policy: Vision 2020 66 7. Land Reforms—Another Perspective 70 7.1 Land Reforms—Aspects 70 7.2 Land Acquisition Act 71 7.3 National Land Use Policy—Efficiency in the Use of Land 71 7.4 Leasing of Agricultural Land 72 7.5 Moving From Presumptive To Conclusive Title 72 7.6 Computerization of Land Records 72 7.7 Beyond Land and Land Rights 73 7.8 Hurdles In Land Reforms in India. 73 8. Salient Features—‘New India 76 8.1 New India 76 8.2 New Philosophies 77 8.3 India’s Economy-A Stellar Performance 81 8.4 Eight Interesting Facts About India 83 9. Industrial Sector And Liberalization 87 9.1 Role of Industry in an Economy 87 9.2 Public Sector in India 88 9.3 Industrial Policies 89 9.4 New Economic Policy 1991 90 9.5 Role of Public Sector in Future 95 9.6 National Manufacturing Policy, 2011 96 9.7 Emerging Role of Private Sector 100 9.8 Ease of Doing Business in India 104 9.9 Vision of a New India 106 10. Infrastructure 111 10.1 Infrastructure in Global Context 111 10.2 Issues in Indian Infrastructure 112 10.3 Recent Measures Taken by the Government 112 10.4 Infrastructure and Its Key Challenges 116 10.5 Environmental Issues and Infrastructure 117 10.6 Ports in India—An Economic Perspective 118 10.7 Indian Railways—A Carrier of the Nation 122 10.8 Regional Connectivity Through UDAN 128 10.9 Adarsh Railway Station Scheme 129 11. Investment Models 130 11.1 Traditional Models 130 11.2 Neo-Investment Models 132 11.3 Public Private Partnership Model (PPP) 135 (Xii) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 12. Integrated Energy Policy (2031-32) 138 12.1 Importance 138 12.2 The Policy 138 12.3 Government Initiatives 139 12.4 Structural Bottlenecks 141 13 Government Finances 143 13.1 Fiscal Policy in India 143 13.2 Public Expenditure of Government 143 13.3 Receipts by the Government 144 13.4 Ways and Means Advances 145 13.5 Nature of Government Budget 145 13.6 Nature of Deficits 146 13.7 Tax Reforms—Indirect Taxes 147 13.8 Tax Reforms—Direct Taxes 149 13.9 Goods and Services Tax: Progressive Tax Regime 150 13.10 Black Money 154 13.11 Views on Tax Compliance 157 13.12 Merger of Rail Budget With Union Budget 159 13.13 Some Other Forms of Budgeting 161 14. Reserve Bank of India and Monetary Policy Committee 163 14.1 Reserve Bank of India 163 14.2 Monetary Policy Committee 164 15. Banking 167 15.1 Banks in India 167 15.2 Banking Structure in India 167 15.3 Major Areas of Reform in the Banking Sector 170 15.4 Capital Adequacy (Basel Norms) 171 15.5 Liquidity Management By RBI 172 15.6 Directed Lending of RBI 174 15.7 Rural Infrastructure Development Fund (RIDF) 176 15.8 Overview and Outlook—Public Sector Banks 177 15.9 Financial Inclusion 178 15.10 Small Finance Bank 180 15.11 Payments Banks 181 15.12 Gold Investments Scheme 183 15.13 Banking Related Initiatives 184 15.14 Merger of SBI Associates with State Bank of India (SBI) 189 16. Inflation 190 16.1 Meaning and Measuring Inflation 190 17. Capital Market 196 17.1 Capital Market 196 17.2 Disintermediation 197 17.3 Stock Exchanges. 197 17.4 Various Indices of Stock Market. 197 17.5 Role of Securities Exchange Board of India (SEBI) 198 (xiii) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 17.6 Market Capitalization and Wealth 199 17.7 Mutual Funds and Unit-Linked Insurance Plans (ULIPS) 199 18. Planning In India 202 18.1 Genesis 202 18.2 Planning and Market Economy 202 18.3 India and Five-Year Plans 203 18.4 Inclusive Growth : Theme of 12th Plan 206 18.5 Challenges Before Twelfth Plan (2012-2013 To 2016—2017) 207 18.6 Niti Aayog: The Premier Policy Think Tank 208 18.7 Recent Initiatives of Niti Aayog. 211 PART B EXTERNAL SECTOR—LOOKING OUTWARDS Towards Globalization and Beyond 19. Looking Outward—Towards Globalization 215 19.1 Need to Look Outward 215 19.2 Need for Imports and Exports 215 19.3 Flip Side to Trade 216 19.4 New Globalization Report: Three Mega-Trends. 217 20. Inward and Outward-Looking Economies’ Globalization 218 20.1 Closed Economies 218 20.2 What are these Facilitators? 218 20.3 Globalization Indicators 220 20.4 While Being Driven into the Global Village, can have its Own Fallout Too 221 20.5 Globalization Would also Bring its Own Setof Challenges 221 20.6 Impact on Indian Society So Far 222 21. Going Forward—India and Globalization 226 21.1 Trade Strategies 226 21.2 Branding India Through Make In India 227 21.3 National IPR Policy, 2016 235 21.4 National IPR Policy- Achievements So Far. 236 22. Export-Led Growth Strategy—SEZs 238 22.1 Export Strategies 238 22.2 Special Economic Zone (SEZ) 238 22.3 Agri Export/Economic Zones (AEZs) 243 22.4 Technology Parks and EOUs 244 22.5 Report of SEZ Policy Review Committee. 245 23. Foreign Trade Policy 247 23.1 Foreign Trade Policy 2015-2020 247 23.2 Concessions Available to Exporters in DTA 250 23.3 India’s Major Trade Partners. 254 24. Balance of Payments of Economies (BOP) 255 24.1 Concept 255 24.2 BOP—Kinds of Accounts 255 24.3 Is Current Account Surplus (CAS) Better For Open Economies? 258 (xiv) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 25. Trade Reforms and Foreign Exchange Management Act (FEMA) 1999 259 25.1 Trade Reforms 259 25.2 Foreign Exchange Regulation Act (FERA) 259 25.3 Rupee Convertibility 260 25.4 External Commercial Borrowings 265 26. Foreign Investment in India 268 26.1 Changing Notions 268 26.2 Foreign Direct Investment (FDI) 269 26.3 Foreign Portfolio Investment (FPI) 273 26.4 FDI in Agriculture Sector 274 26.5 Differences Between FDI and FPI 274 27. Multilateral Financial Institutions 276 27.1 International Monetary Fund (IMF) 276 27.2 The World Bank Group 279 27.3 Asian Development Bank (ADB) 280 27.4 New Development Bank 281 27.5 Asian Infrastructure Investment Bank (AIIB) 282 28. External Debt of India 283 28.1 External Debt 283 28.2 India’s External Debt Highlights 284 29. Exchange Rate Determination 287 29.1 Exchange Rate 287 29.2 Exchange Rate in India 289 29.3 Depreciation of Indian Rupee-Reasons, Implications and Possible Solutions 295 30. Foreign Exchange Reserves 301 30.1 Foreign Exchange Reserves (FEX) of India 301 32. Regional Trading Blocs 305 31.1 Regional Trading 305 31.2 Preferential Trade Agreements 309 31.3 India’s Experience With RegionalTrade Agreements 310 PART C GLOBAL ECONOMY AND OUTLOOK n in i Post-Crisis and Beyond... 32. India and the Global Economy 313 32.1 Global Output 313 32.2 India and Human Development Index (2018) 316 33. Global Economy—A Transition 317 33.1 Global Transition 317 33.2 Global Village 318 34. Lessons From Crises in Open Economies 320 34.1 Genesis 320 (xv) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 35. Global Financial Meltdown 322 35.1 De-Coupling Theory 322 35.2 Global Crisis and India 324 35.3 Collective Intervention 325 35.4 Future of Globalization 326 36. Overview of Recent Crises Since 2008 328 36.1 US Crisis 2008 And 2011 328 36.2 Euro Zone Crisis 329 36.3 Cyprus Crisis 330 36.4 Greece Debt Crisis 330 36.5 Brexit 331 37. Global Consensus—Going Forward 332 37.1 Post Crisis 332 37.2 Structural Issues 333 38. Global Unresolved Issues 334 38.1 Unaddressed Issues 334 39. World Trade Organization (WTO)—Issues And India 336 39.1 GATT and WTO 336 PART D INDIAN ECONOMY REVISITED, OUTLOOK AND CHALLENGES 40. India’s Efforts Towards Economic Reforms 343 40.1 Economic Reforms Encapsulated 343 40.2 First-and-Second Generation Reforms 343 40.3 Review of Economic Reforms in India 344 40.4 Unfinished Agenda of Economic Reforms 349 40.5 Big Bang Economic Reforms Centred at Economic Growth 349 41. Indian Economy—Outlook and Challenges 351 41.1 Global Perspective—India And China 351 41.2 Domestic Outlook 352 41.3 Outlook for Reserve Bank of India (RBI) 352 41.4 Indian Outlook—Challenges Ahead 353 41.5 India 2020: Top 7 Challenges. 355 The Igniters: Thought Provoking Questions 357 (xvi) Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF PART A DOMESTIC ECONOMY Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CHAPTER OUTPUT OF AN ECONOMY 1 CONCEPT OF OUTPUT What would we understand if we were told that today the largest economy in the world is the US? Surely, we would wonder about the parameter of such a—land area, population or output! In every economy, ‘goods’ are being produced, that is, raw materials are being converted into finished goods, agricultural crops, forestry, livestock, steel, cement, cars, cycles, bread etc. Similarly, services’ are also being rendered like banking, insurance, shipping etc. All of these have a monetary value in the local currency like the USD in the US and the INR in India. Thus, output per se implies aggregation of monetary value of all the goods and services produced in an economy in a given time period which may be a quarter (3 months), half- a-year (6 months) or a year (12 months). In other words, output’ includes all goods and services exchanged for money. For example, a fisherman catching fishes, may use some of it for self-consumption and the remaining may be used for selling in the market; thus, the monetary value of all the fishes would be considered under the concept of output. It sounds simple so far, but delving a little deeper output may as well comprise of intermediate goods like steel and cement, which in turn are inputs for other goods referred to as ‘final goods’. These final goods cannot be put to further use, except for use like cars, buildings etc. If we were to include both the intermediate and final goods in our definition of output, then that would effectively mean counting the same thing twice and in the process inflate the output of an economy. For example, production of wheat and its milling as flour results in the making of bread; thus for output purposes, only the monetary value of bread would be considered and not that of wheat and flour. Therefore, we can conclusively derive that the output should have only final goods in order to avoid double counting. But, what about a sale of second hand goods like say a second hand car? Should they be reflected in the output of an economy? The answer is no, as they have already been included once when manufactured and therefore does not amount to a fresh production. Thus, output of an economy is the monetary value of the final goods and services in a given time period. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 4 THE INDIAN ECONOMY The production of goods and rendering of services are referred to as economic activities; but who are the producers of goods and services in an economy? They could either be individuals, small and petty businesses, private companies like the Tatas, Birlas, Reliance Industries etc., or even government like the public sector companies ONGC, SAIL etc., or even foreign companies like Nokia, Sony, Samsung etc. If we were to take the monetary value of all the final goods and services produced within the geographic boundary of a country, irrespective of who the producer of the goods and services are, then it is called ‘domestic output’ of the economy. Thus, in the Indian context, domestic output consists of the monetary value of all final goods and services produced/rendered by individuals, private sector, public sector and foreign companies. Having looked into who are the producers in an economy, let us look now at how the goods are produced. In order to produce goods, at first we need some place/infrastructure where the goods can be produced. Thus we would need to have a some land (or building); money as seed capital, in order to buy machines and raw material, invest in marketing, arrange for transportation etc.; labour for production and then a person whom we call the entrepreneur as the producer of goods. These are known as ‘factors of production’ in an economy. Thus, in a ‘production life cycle’, each factor of production will have an associated cost—be it the seed capital for investment, rent for the place/infrastructure, or for that matter the labour wages and salaries; as an entrepreneur, the profit that an entrepreneur gains at the end of the day, is principally for the risk that he/she takes for production. It is important to note that profit is a cost for any economic activity; but then what is cost is also income for factors of production. For example, rent is an income for land, interest is the income for capital, wages and salaries are the income for workers and supervisors and profit per se is the income for the risks taken by the entrepreneur. Let us illustrate this example further with numbers. Following are the details of a manufacturing company: Land (rent) ₹ 10,000 Labour (Wages & Salaries) ₹ 1,000 Capital (Interest) ₹ 750 Entrepreneur (Profit) ₹ 500 Total ₹ 12,250 In this example , the total cost (all costs included ) to an entrepreneur is ₹12,250 ; what is the output! It is the same amount as ₹12,250; and what is the income of all the factors of production! It is again the same as ₹12,250. This basically means that output /cost is income for factors of production. Thus, output and the income are two sides of the same coin. Whether we say output or income, it implies the same thing. At times, output is also referred as the product of an economy, (quantity multiplied by factor cost) thus domestic product and domestic income of an economy are the same. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF OUTPUT OF AN ECONOMY 5 So far, we has discussed about the domestic output/product/income, but what about the income of Indians staying abroad? For a more comprehensive analysis of the output, it.$ necessary to look beyond the geographic boundaries that would include the income of all the Indian nationals irrespective of the country they currently reside. But if we include the income of Indian nationals outside the country, it will also be logical to deduct the income of foreign nationals residing in our country. This is also referred to as Net Factor Income From Abroad (NFIAD). Thus, Domestic Product + Income of Indians Abroad - Income of Foreigners in India = National Product or Domestic Product (+/-) NFIAD = National Product Net factor income from abroad can be positive or negative depending up on which is more— income of Indian nationals abroad or income of foreign nationals in India, that is, national product is less than the domestic product, if the income of Indian nationals abroad is less than the income of foreigners in India and vice versa. An increased foreign currency denominated debt of a country or selling domestic assets to foreign entities would tend to reduce the national product leaving domestic product unchanged. CONCEPT OF DEPRECIATION The output of an economy also consists of production of machines/machineries which are consumed every year, referred to as ‘depreciation and much of the output of such machines could be replacement in nature and not signifying additions to machine or capital stock in the economy. Let us assume that cars are being produced in an economy and there is also depreciation of cars , that is, the cars would eventually have to be replaced after their shell -life. For example, a car is priced at ₹ 3,00,000 and has a life of, say 10 years. Then, depreciation or consumption ) of car is ₹ 30 ,000 a year. Thus , if the output of an economy ignores consumption (or depreciation) of its machine stocks, it is referred as a ‘gross’ concept and if it is accounted for it is known as ‘net’ concept. Accordingly, there is Gross National Product (GNP) and Gross Domestic Product (GDP). Hence, GNP - Depreciation = Net National Product (NNP) GDP — Depreciation = Net Domestic Product (NDP) Thus, there are four concepts in the output of an economy—GNP, GDP, NNP and NDP. Let us now try to understand which method is technically the best measure of growth. Clearly, it is the NNP as it first covers all the nationals of a country and is also a net Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 6 THE INDIAN ECONOMY increase after depreciation. It is also called as “National Income” of an economy. But NNP/GNP are gradually losing significance since countries have high external debts that are serviced through internal resources which tends to increase outflows and reduce GNP of a country, leaving GDP unaffected. Similarly, the sale of assets to foreign entities will also have similar impact. Further remittances have become significant in economies like India affecting GNP not seen as a correct way to judge output of an economy. GDP—AS A MEASURE OF GROWTH India, US and most other economies have switched over to GDP for measuring growth of their respective economies. Let us recall the concept of ‘monetary value of goods and services’ as output which has been discussed in the beginning of the chapter. But this monetary value can be viewed from two perspectives— factor cost (It is also the income for the factors of production) and market price for example the price of a car as illustrated earlier. To further elucidate, the market price is the price paid for a goods or services in the market. Let us discuss the differences between the factor cost and market prices? We all know that the government levies taxes (and also gives subsidies) on different goods and services before they reach the market. In India, excise duty is payable on manufacturing of goods and similarly, service tax is payable on services provided (we will discuss these later in the Chapter on government finances). Now, Factor Cost + Indirect Taxes - Subsidies = Market Price or Factor Cost + Net Taxes (as subsidies can never be equal or more than taxes in an economy) = Market Price. Now the question, that in the monetary value whether factor cost or market price should be taken? The output measured at market prices can be increased by increasing taxes in an economy. This does not necessarily imply that more goods and services have been produced in the economy. Output of an economy is worked out both at market prices as well as factor cost, but for growth purposes, output at factor cost is considered. This means that increased value in production of goods and services in an economy is captured at factor cost and not at market prices. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF OUTPUT OF AN ECONOMY 7 The difference between the output at market price and at factor cost is tax burden on an economy, which is useful for cross-country comparisons. Can output at market price and factor cost be the same? The answer is yes, in cases of exceptional circumstances where the taxes are equal to subsidies or in utopian circumstances where taxes and subsidies both are zero. This concept is more of an academic relevance rather than of practical utility. The moment we start talking about the monetary value either at market prices or factor cost, the concept of inflation becomes important. In simpler terms, inflation is increasing prices and during inflationary times it tends to inflate the value in nominal terms. Suppose inflation is at 10 per cent, it implies that the price is going up by 10 per cent, that is to say that the factor cost is also increasing, which would increase the output, even though there is no physical increase in the production of goods and services. It is because of this reason that the output measured at factor cost would have to be adjusted to actually reflect the increased production of goods and services in an economy. The adjustment is a statistical exercise which is done by using the GDP deflator that gives the output at factor cost in terms of constant prices’. The output at constant prices refers to the output obtained after being adjusted for inflation. To further explain, suppose we do not adjust for inflation and the output growth for an year is 9 per cent so is inflation. It means that the output has not increased, but their prices have increased. Without adjusting for inflation, the increase in output has little or no significance and actually could be misleading. This adjustment for inflation is also known as ‘real’ or otherwise it is ‘nominal’ and is generic in nature. Real growth is adjusted for inflation while nominal growth ignores adjustment for inflation. Growth by definition has to be ‘real’. Similarly, there is ‘nominal’ and ‘real’ interest rate, income, wages, but there is no concept of nominal and real growth as growth by definition has to be adjusted for inflation. This is implied in the meaning of the word growth itself. The use of the word ‘growth’ in the Indian context implies increase in GDP at factor cost at constant prices. In India, the entire computation is the responsibility of the Central Statistical Organisation (CSO), Government of India. The estimates of growth are provided by the organisation on quarterly basis at the end March, June, September and December every year and the annual growth estimates are provided during April-March, every year which is also referred to as the financial year (calendar year is January-December). All the government and corporate accounting in India is with reference to the financial year. What we have covered so far is a simple exposure to ‘National Income Aggregates’, also referred as ‘National Income Accounting’ for students who do not have exposure to economics. There are three methods of computation of National Income, namely output method, income method and expenditure method relevant for the students who want to pursue a career in economics. The bird eye view of three methods of national income accounting is highlighted in following diagram. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 8 THE INDIAN ECONOMY Method of Measurement of Nl: At a Glance 1.4 GDP/NATIONAL ACCOUNTS REVISED SERIES WITH 2017-18 AS BASE YEAR The structure of economic activities changes over time due to changes in structure of production and demand in the economy. On production side, the production pattern changes along with changes in technology and innovations in the system leading to change in the consumption pattern over time. The changes in relative prices stimulate changes in the consumption and production choices. Therefore, to account for these structural changes and to update the prices, the rebasing exercise is needed after a certain period. The exercise of rebasing national accounts brings up a fresh lot of information about the changes in economic structure of the economy, along with switching over to new base prices. This also helps in judging the size of the economy, correction of biases and looking afresh at the relative importance of sectors in the economy. The recent introduction of new series of National Accounts by Central Statistics Office (CSO) revised the base year for National Accounts Statistics to 2017-18 form 2011-12 The new series of national accounts is an improvement upon old base in terms of its comprehensive coverage of corporate sector and government activities and incorporation of recent data generated through National Sample Surveys. It also brings up some changes in methods of evaluation, approaches to account economic activities, introduced new concepts and incorporation of new classifications. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF OUTPUT OF AN ECONOMY 9 Earlier “GDP at factor cost” was known as simply the “GDP” in India. It is nothing but sum of the factor costs incurred during the process of turning out economy’s output for the concerned year. Thus, it is a compilation of wages, interests, salaries, profits etc. This concept - GDP at factor cost - used to be expressed both in constant prices (with 2004-05 prices as the base year prices) and current prices. For most purposes, including academic works, GDP at factor cost in constant prices was used as “GDP”. Further by adding net indirect taxes (ie. product taxes - product subsidies), GDP at market prices was also reported in the National Account Statistics. In the revised series, as is the practice internationally, industry-wise estimates are presented as Gross Value Added (GVA) at basic prices, while “GDP at market prices” will be referred to as “GDP”. GVA at basic prices can be referred to as GVA at producer price and GDP at market price as well as GDP at buyer price. Estimates of GVA at factor cost (earlier called GDP at factor cost) can be compiled by using the estimates of GVA at basic prices and production taxes less subsidies. It would result in an effect on the size of GVA compared to GDP at factor cost, which may be different for different sectors. For example, net production tax being positive in manufacturing would result in higher GVA than GDP in the sector. New growth figures for GVA at basic prices would also carry an impression of tax and subsidies which was not the case in GDP at factor cost. The production tax has been distinguished from product tax. For example: production taxes like land revenues, stamps and registration fees and tax on profession etc. and excise tax, sales tax, service tax and import and export duties etc. are included in product tax. A similar distinction is also made between production and product subsidies, for instance, former includes subsidies to railways, input subsidies to farmers, subsidies to village and small industries, administrative subsidies to corporations or cooperatives etc. and latter includes food, petroleum and fertilizer subsidies, interest subsidies given to farmers, households etc. through banks and subsidies for providing insurance to households at lower rates etc. GDP at market prices, henceforth, be referred as GDP, can be computed by adding net of product tax and product subsidies in GVA at basic prices. Gross Value Added (GVA) at basic prices = Compensation of Employees + Operating Surplus + Mixed Income + Consumption of Fixed Capital (CFC) + Production taxes - Production subsidies GVA at factor cost (earlier referred to as GDP at factor cost) = GVA at basic prices - (Production taxes - Production subsidies) Gross Domestic Product (GDP) = GVA at basic prices + Product taxes - Product subsidies In manufacturing, many argue that the output was falling but the new series showed that the manufacturing sector’s performance was not that bad. It was because although the output was stagnant or less but the value addition was better off. GDP is a measure of Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 10 THE INDIAN ECONOMY value added, it’s not about output. It’s the case of output being stagnant but value-addition going up. Earlier the sectoral manufacturing data value addition was sourced from the RBI Industrial Outlook Survey conducted on a quarterly basis; but now the Ministry or Corporate Affairs making it obligatory on the part of the companies registered under the Companies Act for online reporting, the MCA 21 database has been used for the manufacturing sector value added. The MCA database as on date covers 5 lakh companies and is fairly representative of the universe. The RBI surveys are small in size and not completely reliable for the sectoral analysis. Further, the manufacturing value added was calculated from ASI Annual data and extrapolated using IIP for the intervening period. The limitation with this data was that the ASI and IIP are establishment-based data while the MCA database goes beyond establishment based value addition and also incorporates data on brand pricing, marketing etc i.e. it includes allied activities which were earlier outside the purview of manufacturing value added. Further, the corporate segment manufacturing coverage accounts for almost 66-70 percent of the manufacturing sector. Then the new series data collected from local bodies is also used and the coverage is 60 percent. The valuables’ segment, which basically comprises of gold and jewellery, an important component of capital formation, was treated as consumption. In new series, valuables are combined into household savings and, therefore, consumption has come down and savings have gone up accordingly. The new GDP numbers will be liable to changes in future based on change in base year of IIP WPI and CPI series. These are important indices which play a pivotal role when computing GDP at constant and current prices. Based on revisions of base year of these indices, GDP growth rates may change. The reasons for the rise in growth for manufacturing sector at new base are structural as well as change in compilation methodology. These are highlighted below: 1. The shift from establishment approach to enterprise approach: The establishment approach used in Annual Survey of Industries did not capture the activities of a unit other than manufacturing. Whereas, an enterprise along with its manufacturing activities is also engaged in activities other than manufacturing such as ancillary activities. Now, in the new approach, the activities of a manufacturing company other than manufacturing are accounted in manufacturing sector. The enterprise approach is facilitated by MCA 21 data with Ministry of Corporate Affairs. These changes possibly have increased the coverage of registered sector of manufacturing. 2. Incorporation of findings of NSSO surveys: The details of new NSS Surveys viz. Unincorporated Enterprises Surveys (2010-11) and Employment & Unemployed Survey, 2011-12, are now available therefore, incorporated in the new series. The updates are an improvement in the representation of activities in the unorganized manufacturing sector. 3. The change in labour input method: The new series has switched over to “Effective Labour Input Method” for Unincorporated Manufacturing & Services Enterprises. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF OUTPUT OF AN ECONOMY 11 Earlier method was assigning equal weights to all types of workers, while the new method assigns different weights for workers as per their productivity. 4. The inclusion of production tax less subsidies: The net of production tax and production subsidies is positive in manufacturing, while it is inter-alia negative in agriculture and allied’ and ‘Electricity, gas etc’. Therefore, the positive net production tax would increase the size of GVA in the sector in absolute and relative to other sectors. Moreover, any change, including a change in policy, if alters the lump sum production tax and subsidies then this may also likely to reflect in the growth rates in the sector. So we can say, the vast difference in the figures of the new series is not just because of an updation of the database or change in methodology but more so because of the change in data source. The new GDP numbers will be liable to changes in the future based on change in base year of IIP WPI and CPI series. These are important indices which play a pivotal role when computing GDP at constant and current prices. Based on revisions of base year of these indices, GDP growth rates may change. 1.5 GROSS HAPPINESS INDEX (GHI) Economic Development has always been considered and measured on materialistic enhancements and economic parameters. The term ‘Gross National Happiness’ was first coined by the 4th King of Bhutan, King Jigme Singye Wangchuck, in 1972. The concept implies that sustainable development should take a holistic approach towards notions of progress and give equal importance to non-economic aspects of wellbeing. The GNH Index includes areas of socio-economic concern such as living standards, health, education and less traditional aspects of culture and psychological wellbeing. It is a comprehensive reflection of the general wellbeing of the population. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CHAPTER TOWARDS INCLUSIVE GROWTH (Growth and Development) 2 GROWTH RATE OF INDIAN ECONOMY Now, let us go back to the statement made in the beginning of growth rates slowing down. The phrase basically means that the output of an economy is increasing but at a decreasing rate over the previous quarter/half-year/year, whichever is the reference period. If during the same reference period, output has declined, then it is referred to as contraction’ of output. Continuous periods of contraction over two quarters are known as ‘recession’ and still longer periods of continuous recession are known as ‘depression’. Until now, the world economy has witnessed The Great Depression during 1929- 1933. (We shall discuss more about this aspect in the Chapter on Global Outlook.) As we have discussed earlier, growth plays an important role in an economy. As we know by now that ‘increased growth’ means ‘increased output’ and ‘increased income’ of an economy with increased income for factors of production which sets off a circular motion of further increase in income. Increased Income —> Increased purchasing power —> Increased demand for goods and services —> Increased production —> Increased output —> Increased income Increased income Increased savings —> Increased investment —> Increased output —> Increased income Thus, increasing growth of an economy signifies well-being of that economy. Jobs get created, income levels increase and overall wealth of an economy increases. For this very reason, every economy would like to increase its overall growth. India was believed till the reforms were initiated, caught in a ‘low-growth cycle’ with low levels of incomes, thereby resulting in low savings and thus low investments, ultimately again leading to low income and again to low savings, which is known as the low-growth cycle. It was also said during those days that India is unable to break through the ‘Hindu rate of growth’ with its inability to grow beyond 3.5 per cent (the term was coined by the noted Indian economist, late Prof. Raj Krishna), with low income and increasing population leading to increased poverty and unemployment in the country, regional/intra-regional imbalances and also widening of income inequalities. Inability of an economy to increase growth rates of economies is not only due to low savings and investment but also due to lack of resources, technology and infrastructure constraints. These factors were a handicap earlier for India but things have changed in the 21st century. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 14 THE INDIAN ECONOMY The 21st century has been good for India, as growth rates had started moving upwards and on were on the verge of achieving a double-digit growth, probably for the first time, except may be for a year briefly in the 1980s. Though growth rates have increased but it has not made any perceptible impact on the poverty, unemployment, inter-/intra-regional and income imbalances. Despite the high growth rates achieved, we have not got the desired results. There has been a distinct deceleration in growth since 2010 sliding down to the lowest in last decade of 4.4 per cent. But the larger question remains of high growth achieved had not yielded tangible benefits to the Indian economy. This would lead us to another concept of ‘development’. How are growth and development different from each other? DEVELOPMENT—INCLUSIVE GROWTH The concept of development is qualitative, whereas that of growth is quantitative. While growth is an arithmetic number signifying an increase in the output of an economy, development includes distribution of output or the ability of the increased output and income to reach the bottom-most stratum of society. Development also implies equitable distribution in the economy. Earlier it was widely believed that initially increased growth is required and then development would happen, through what is referred as the ‘trickle-down theory’. This means that the increased growth would percolate down to the bottom-most stratum of society and provide equitable distribution. This is the significance of the word ‘growth and development’. In the earlier years, the problem was our inability to push up rates of growth and the emphasis was on increasing growth for the trickle-down theory to work which would have allowed for development and equitable distribution. But the story for India is quite different since the economic reforms initiated in 1991 and since 2005. India has not only broken through the low-growth cycle but also become one of the fastest-growing economies after China. The high growth rate achieved since 2005 questions the trickle-down theory in India, as it has not benefited the Indian masses in terms of lowering absolute poverty levels significantly, creating employment opportunities, reducing inter-/intra-regional imbalances (rather it has only accentuated). There are reasons to understand why ‘trickle- down theory’ has not worked for India. Firstly, the Indian economy has a structural problem of excessive economic dependence on the agricultural sector. Over 65 per cent of the population is either directly/indirectly dependent on this sector. The contribution of the agricultural sector to the overall gross domestic product (GDP) is only 18 per cent. The largest contribution of over 55 per cent comes from the services sector and the remaining 27 per cent is contributed by the secondary sector of which only 14 per cent is by the manufacturing sector. The sector contributing the least to GDP has the maximum dependence (agriculture) and the sector contributing the most, has the least dependence (services). Secondly, In India’s growth process, there has been a missing link of the relative earlier maturity of the services sector before achieving manufacturing sector maturity. Ideally, Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF TOWARDS INCLUSIVE GROWTH 15 it should be first manufacturing sector before the services sector or at best together. This is an important feature as there is a linkage between manufacturing sector and agricultural sector either through raw materials or as a market for the industrial produce, and also for employment opportunities. This provides for greater sustainable growth of economies. Thus, the benefit of increased growth in recent years has largely been confined to die services sector and little to the manufacturing sector and has not percolated to the agricultural sector where the majority of our population resides. The peaking or maturity of the service sector in India could be due to the surge in BPOs and KPOs and also due to the need for value-added services by the bigger economies establishing bases in India given the low cost of hiring, easier to impart skills and a large young workforce. Still, a larger question of why this excessive dependence on agricultural sector, remains still to be resolved. It is said that India’s population mostly resides in villages. Lack of employment opportunities in the manufacturing sector, lack of formal education/skills, lesser growth of agro-based industries, traditional thinking and abject poverty could be some of the many reasons. But it also has to do with the governmental efforts by providing basic, effective and efficient infrastructure around villages including the road/rail links. The aim should be to have pan-India rail-road connectivity. This would provide for easy accessibility and faster mode of travel the making labour mobile. History has been testimony to the fact that roads are the gateways to development in countries like Germany, the United States and more recently China. India has only recently woken up to this reality and due emphasis is now being given to the road building, primarily through various projects, namely, Golden Quadrilateral (connecting the 4 metropolitan cities Delhi-Kolkatta-Chennai-Mumbai), the North-South corridor (Srinagar-Kanyakumari) and the East-West corridor (Silchar-Porbandar). Besides, efforts are also on for building of roads for Tier II and III cities and also for villages under the Pradhan Mantri Gramin Sadak Yojana (PMGSY) scheme. Recently, the government has cleared Bharatmala Project, which is the second largest highways construction project in the country since NHDP, under which almost 50,000 km or highway roads were targeted across the country. Bharatmala will look to improve connectivity particularly on economic corridors, border areas and far flung areas with an aim of quicker movement of cargo and boosting exports. The project is expected to create nearly 100 million man days of jobs during the road construction and subsequently 22 million jobs as a result of the increased economic activity across the country. The construction will be billed via several routes including debt funds, budgetary allocation, private investment, toll operator transfer model etc. The government, having realized that benefits of increased growth has not been reaching the people and hence now discontinued using nomenclature of ‘development’ and has replaced it by the term ‘inclusive growth’. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Recommendations for Inclusive Growth in India 1 Improving Business I Improving Improving Public Strengthening Environment Fiscal Situation Governance & Regulation Innovation Adopt revised Company Bills Strengthen fiscal framework Reduce administrative Improve conditions & incentives Implement Foreign Bribery Law Improve targeting & delivery regulations and burdens for business and innovation Adopt National Competition Policy mechanism of subsidies Reform to enhance international Implement a transparent evidence openness Improve Role of Competition Implement revised Direct Tax Code based regulation-making system Increase in investment & innovation Commission of India Push international taxation Mitigate risks of corruption in as a share in GDP Introduce Cross Government Training reforms to boost investor sentiments contract management Improve transparency of trade, Programme Increase public transparency to export & investment regimes reinforce public trust ’r I Lower Poverty & I Improving Transport Financial Sector Improving Inequality Infrastructure Reforms Health Care Quality Regulate supply chain for pharmaceuticals THE INDIAN ECONOMY Adopt a comprehensive Monitor highway Public Private Liberalise allocation of bank credit reform to lower poverty Participation contracts Modernise financial sector legal infrastructure Additional funding to states for & inequality Streamline land record management Streamline regulatory arrangements expanding coverage of health care to the poor Enhance the cost Initiate reform of railway Modernise regulation of rural & Regulate private health insurance effectiveness properties of accounting & finance cooperative banks NREGA Improve database on household creditworthiness Include guidelines for safety in Retarget subsidies projected infrastructure projects. to support poor households & increase equity Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF TOWARDS INCLUSIVE GROWTH 17 It is not a new concept but only how development is now being viewed by the government. The earlier belief was that for development to take place, growth was a necessary condition. The changed notion of inclusive growth is that any growth should benefit the people by and large which means that the benefits of growth should be more broad-based, should have an orientation towards ‘masses’ and not only classes’. Thus, inclusive growth has both growth and development as components, not to be seen as separate, but viewed as together, today and also in the future. Inclusivity would imply more equitable distribution of the gains achieved through higher growth. But, equitable distribution is not about equal distribution in an economy, arithmetically. This is possible only in theory. Equitable distribution is all about ‘fair and just share’ for the masses, especially the poor. It is not about the rich getting richer, as long as the poor are also moving up the ladder in terms of income and welfare, even though less proportionately than the privileged sections of the economy. As long as both the subsets in an economy are moving up in the same direction, have means of livelihood, are economically better off and their basic needs are met, the objective of equitable distribution is being achieved. Hence, inequitable distribution would mean the rich getting richer and the poor remaining poor, or the worse, still becoming poorer. As we have been discussing that inclusive growth is oriented towards masses, what should inclusive growth give? or when can we say that growth has become inclusive and begun to deliver? Inclusive growth should lead to: 1) Employment opportunities for the masses at the entry level, providing livelihood, means of income, increasing their purchasing power and improving their ‘well- beingness’. This should result in reducing absolute poverty levels. 2) Reduction of inter-/intra-regional imbalances. 3) Create opportunities for skill development/formation. 4) Better dispersal of industries. 5) Increased agro-based industries. (6) A gradual shift away from the excessive economic dependence on the agricultural sector through employment-driven and positive migration. (7) Increased vocational employment (carpentry, repairs to cars/scooters/TV/mobiles, gardening, etc.). Inclusive growth would also require a changed perception of both the central government and also the state governments, working in tandem, by creating an ‘enabling environment’ for the above deliverables. Such an environment would require the following: (1) Pan-India road/rail links which would link the entire country and provide accessibility and affordable faster mode of transport for people and goods. (2) Providing accessibility and affordability to public services (primary health care and education), public utilities (electricity, drinking water and sanitation) and public goods (social assets like community centres, etc.). (3 Re-energizing the Industrial Training Institutes (ITIs) for skill development. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 18 THE INDIAN ECONOMY (4) Policy framework conducive for investment by private sector (something like Tata Motors for their NANO car project in Gujarat). (5) Focus on directly creating employment opportunities. The government has already launched Mahatma Gandhi National Rural Employment Guarantee Scheme, which provides employment for 100 days to one member from every poor family/household in every district of the country. The creation of the enabling environment by the government is a key prerequisite, which would largely determine India’s ability to achieve inclusive growth in future. Growth and development or inclusive growth has always been an avowed objective of the government since independence. The difference today is not in the objective but the manner in which it is being sought to be achieved. Earlier, the government had taken up, both the responsibilities of increasing growth and equitable distribution, and spread scarce resources across both resulting in the dilution of efforts and achieving neither growth nor equitable distribution. The reforms of 1991 mark a change in the strategy of letting the private sector play a major responsibility in the investment and growth while on the other hand the government would concentrate on the welfare measures and create the enabling environment for desired inclusive growth of the economy in future. This is also based on the fact that more and better growth by the private sector would mean larger tax revenue base for the government which would enable the government in expanding the social sector interventions as a way of redistribution to the people. Inclusive growth is not a new concept and is said to be a combination of both, what was earlier known as growth, development and equitable distribution, all rolled into a new terminology known as inclusive growth, specific and unique to India. In future, the challenge would lie not in achieving a higher growth but to provide greater inclusivity, more broad-based, which benefits the masses. Inclusive growth was a challenge as identified by the eleventh five-year plan only to become a larger challenge in the twelfth five-year plan. GROWTH WITH EQUITY Both growth and equity are the two important objectives of any type of economic planning. While growth refers to the increase in the overall national income, equity refers to an equitable distribution of this income so that the benefits of higher economic growth can be passed on to all sections of population to bring about social justice. Growth is assessed by the market value of goods and services produced in the economy (GDP) and it does not guarantee an equitable distribution of the income from this production. Hence, Growth with equity is a rational objective of economic growth as it ensures the benefits of high growth are shared by all people equally. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CHAPTER 3 SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE SUSTAINABLE DEVELOPMENT Ar present, a few new terminologies are also being used for economies such as ‘sustainable development’ and ‘green GDP’. ‘Sustainable development’ is a global terminology which is being used to address the global issues of global warming, environmental aspects increased global pollution and ecological imbalances, which are critical for survival of planet earth and is thus a broader concept not relating to any one country but for the world as a whole. It is neither the problem of one country nor can it be solved by one country. It is more macro in nature, which requires to be addressed by countries collectively through a dialogue and a consensus building at a global platform. This is about the present generation’s ability to meet ‘its’ own needs but without compromising on the ability of the future generation to meet ‘its’ needs. It is about a better environment for the future generation rather thar. what the present generation has inherited, to say the least not a worse than that inherited Even though there has been a consciousness on the issue of sustainable development, the real thrust was provided with the Earth Summit during 1992 and then through various international conventions. All the conventions mentioned so far have flagged the underlying issues especially that of reduction in greenhouse gases emission, which is critical for sustainable development. It also addresses areas of cleaner energy, reduction in biodiversity losses, tree plantation, solar/wind energy and other such global issues in sustainable development. It is not about flagging of issues, which is important in as much as the need for collective consensus. But the reduction level so arrived through consensus, for different countries, should be adhered within the prescribed time lines. This is the problem area of a sharp divide between the rich countries and the countries such as India and China of achieving a broad-based, self-imposed reduction levels where each and every conventions have beer, failed. All the rich countries have failed to meet the deadlines repeatedly on all the major issues but most importantly on GHS emission reduction levels. India, on the other hand, has been more forthright in its approach of already having low levels of such emissions and the projected level of emissions even by 2031 lower than the global average of 2005. Its progress in cleaner energy, solar and wind energy and the tree plantation is commendable. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE 21 However, there are larger issues for India. The worrying fact of the increased growth, expanding size of output still has millions of poor people living below US $1 per day and India being home to the largest number of poor people in the world is very disturbing. Poverty and sustainable development cannot be divorced from each other. The increasing number of slums, widespread absence of hygienic sanitation, pitiable living conditions, continued use of plastics and polluted rivers are all an integral part of sustainable development so far as India is concerned. SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE The adoption of a new climate change agreement at the 21st Conference of Parties (COP 21) by 195 nations in Paris in December 2015 represents another milestone in the climate change front. The Paris Agreement sets a roadmap for all nations in the world to take action against climate change in the post-2020 period. The Millennium Development Goals (MDG) that were in place from 2000 to 2015 were replaced by the Sustainable Development Goals (SDG) with the aim of guiding the international community and national governments on a pathway towards sustainable development for the next fifteen years. A new set of 17 SDGs and 169 targets were adopted by the world governments in 2015. The 22nd Conference of the Parties (COP-22) to the UN Framework Convention on Climate Change has concluded its meeting in Marrakech, Morocco, with a range of decisions around implementing the Paris Agreement. Following the new global agreement last December, the threshold of signatories for it to enter into force was passed less than 12 months after being agreed and far earlier than expected. This has added pressure to quickly develop the necessary rules and procedures to support the Agreement. Morocco saw meetings under the Convention, as well as the Kyoto Protocol, and for the first time, the Paris Agreement. The headline outcomes and announcements were: Countries gave themselves two years to 2018 to agree rules and procedures for the Paris Agreement. Technical work produced guidance and questions for work-plans, focusing on: Nationally Determined Contributions (NDCs); a transparency framework; global stocktake; technology development and transfer; adaptation, and market and non­ market approaches. Countries agreed a five-year workplan on Loss and Damage. Developed countries launched a roadmap to 2020 on reaching the agreed goal of $100bn per annum in climate finance for developing countries. A statement of the need for action and countries ' will to act was agreed - the Marrakech Action Proclamation for Our Climate and Sustainable Development. The Climate Vulnerable Forum , which is an international partnership of countries highly vulnerable to a warming planet, committed to update their NDCs before 2020, prepare long- term low -emissions development strategies , and generate 100 % of their energy from renewable sources as soon as possible. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 22 THE INDIAN ECONOMY Countries are now already looking to 2020 which is the next milestone in the process There will be a facilitative dialogue that year , with inputs including an Intergovernmental Panel on Climate Change special report on the practicalities of a 1.5C temperature objective, as well as assessments of Parties collective progress pledges and views from Parties and stakeholders. That will lead to pressure for Parties to raise their level of Nationally Determined Contributions. The next two years are for Parties to agree the details of the dialogue and its inputs and the rules, such as on accounting that will allow a shared view and comparability between countries actions. On the domestic front , India continued to take ambitious targets in its action against climate change. As a part of its contribution to the global climate change mitigation efforts, India announced its Intended Nationally Determined Contribution (INDC which set ambitious targets for domestic efforts against climate change. Our country has itself set an ambitious target of reducing its emissions intensity of its Gross Domestic Product (GDP) by 33-35 per cent by 2030, compared to 2005 levels. India has also taken the initiative of setting up an International Solar Alliance (ISA), an alliance of 121 solar-resource rich countries , lying fully or partially between the Tropic of Cancer and Tropic of Capricorn. This alliance was jointly launched by the Prime Minister of India and President of France on 30 th November 2015 at Paris, on the sidelines or the 21st Conference of Parties to the UNFCCC. The Paris declaration on the ISA states that the countries share the collective ambition to undertake innovative and concerted efforts for reducing the cost of finance and technology' for immediate deployment ot competitive solar generation and to pave the way for future solar generation, storage and good technologies for countries’ individual needs. India has announced its Intended Nationally Determined Contribution (INDC) ir. respect of climate change inclusive of following aspects: To put forth and further propagate a healthy and sustainable way of living, based on traditions and values of conservation and moderation. To adopt a climate-friendly and cleaner path than the one hitherto followed by others at a corresponding level of economic development. To achieve about 40 per cent cumulative electric power installed capacity from non ­ fossil fuel based energy resources by 2030 with the help of transfer of technology and low cost international finance including from the Green Climate Fund (GCF). To create an additional carbon sink of 2.5 to 3 billion tonnes of CO, equivalent (CO. eq.) through additional forest and tree cover by 2030. To better adapt to climate change by enhancing investments in development programmes in sectors vulnerable to climate change , particularly agriculture , water resources, the Himalayan region, coastal regions, health and disaster management. To mobilize domestic , new and additional funds from developed countries for implementing these mitigation and adaptation actions in view of the resources required and the resource gap. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE 23 To build capacities , create domestic framework and an international architecture for the quick diffusion of cutting-edge climate technology in India and joint collaborative R&D for such future technologies SUSTAINABLE DEVELOPMENT GOALS (SDGs) Goal 1: No poverty: - Eradication of poverty in all its forms everywhere. Goal 2: Zero hunger: - End hunger by achieving food security and improved nutrition. Goal 3: Good health and well/being for people: - Ensure healthy lives for all. Goal 4: Quality education: - Ensure inclusive and equitable quality education for all. Goal 5: Gender equality: - Achieve gender equality and women empowerment. Goal 6: Clean water and sanitation: - Ensure sustainable water management and sanitation for all. Goal 7: Affordable and clean energy: - Ensure access to sustainable and modem energy for all. Goal 8: Decent work and economic growth: - Promote sustainable economic growth and decent work for all. Goal 9: Industry, Innovation, and Infrastructure: - Build resilient infrastructure, sustainable industrialization and foster innovation. Goal 10: Reducing inequalities: Reduce income inequality from all segments. Goal 11: Sustainable cities and communities: - Make cities and human settlements more safe and sustainable. Goal 12: Responsible consumption and production: - Ensure sustainable consumption and production patterns. Goal 13: Climate action: - Take urgent action to combat climate change and developments in renewable energy. Goal 14: Life below water: - Conserve and sustainably use the oceans, seas and marine resources. Goal 15: Life on land: - Protect terrestrial ecosystems, manage forests, combat desertification, reverse land degradation and halt biodiversity loss. Goal 16: Peace justice and strong institutions: - Promote peaceful societies, provide access to justice and build effective institutions. Goal 17: Partnerships for the goals: - Strengthen the global partnership for sustainable development. 3.4 GREEN GDP Green GDP refers to a national accounting system of the utilization of the non-renewable natural resources of any country and is now being envisioned as a part of sustainable development. The objective is to utilize the resources optimally, efficiently and effectively in furthering the growth of economies and at the same time a realization of their scarcity value. It is also believed that such an accounting will also pave the way for greater R&D Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 24 THE INDIAN ECONOMY for developing viable alternatives to the fast depleting non-renewable natural resources of the country. Clearly, the biggest issue is that of absolute poverty which has to be addressed in prior, before one can talk about broader aspects of sustainable development. This not to say that India should not address the issue of sustainable development, but addressing the needs of the poor is unquestionably the priority, of giving them the means of living and a hygienic, decent living standards. Thus, inclusive growth, sustainable development and green GDP are all different terminologies, totally distinct from each other in their meaning but cannot be said to be independent but inter-related in terms of their implications. CLIMATE FINANCING. Climate finance means local, national or international financing through public, private and alternative sources of financing. It is critical to addressing climate change as large-scale investments are required to reduce climate change induced adversities. Climate finance is equally important for adaptation strategies as there are requirements for significant financial resources to allow countries to adapt to the adverse effects and reduce the impacts of climate change. Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF CHAPTER 4 POVERTY AND SOCIAL SECTOR 4.1 WHAT IS MEANT BY POVERTY IN INDIA? Poverty is defined as the minimum basic consumption level, essential for survival. It has been defined by the Planning Commission of India in terms of calorie intake. Absolute poverty is a condition , where the calorie intake is less than 2400 kcalories per person per day in rural areas and 2100 kcalories per person per day in urban areas. The World Bank has coined its own universal definition of poverty levels as per person consumption of less than US $1 per day. Relative poverty, is across difference in income levels of the rich and the relative poor. Even by this crude definition of Planning Commission of absolute poverty, it is estimated that over 230 million people are living below poverty line (BPL). According to the definition of World Bank, the numbers would increase significantly. India is said to have the largest number of people living BPL. The number of people BPL is even more higher than the entire population of the US. Poverty is largely concentrated in states such as UP, Bihar, Orissa, MP, West Bengal and they account for over 50 per cent of the total poverty in India. Despite over six decades of independence, why poverty continues to exist? It can be attributed to the large economic dependence on the agricultural sector, subsistence, traditional and stagnating, which are not able to provide enough for the dependent population in terms of employment opportunities, high levels of adult illiteracy, large number of landless, small and marginal farmers with no income support. There is absence of employment opportunities in the manufacturing sector. It is not about how poverty is measured crude or refined? It is the biggest curse of post­ independence India of not being able to address the large-scale poverty in the country despite the well-intended schemes as can be seen in the following sections. SOCIAL SECTOR Social sector and poverty are interrelated as it largely comprises of those BPL and also that segment of the population which is outside the mainstream of development, which consists of the under-privileged, always at the receiving end, poor, backward classes and scheduled castes/tribes. It will also have landless, small and marginal farmers who are Website ➡ https://upscpdf.com https://t.me/UPSC_PDF Website ➡ https://upscpdf.com https://t.me/UPSC_PDF 26 THE INDIAN ECONOMY engaged in casual work in the informal sector, living virtually on a daily basis. They are the most vulnerable section prone to exploitation, domination and do not have any voice or can also be known as ‘silent sufferers’ or a ‘mere spectator’ to their pitiable and pathetic condition oblivious of the fact that India is today one of the fastest growing economies. One has already seen earlier, why this has happened. But what has the Government done about this? It has adopted a three-pronged strategy to address the social sectors which are as follows: 1.Broad Targeting; 2.Narrow Targeting; 3.Social Security. Broad Targeting Under broad targeting strategies the government undertakes ambitious programs with sub-programes for overall and comprehensive development of the country. Example of the broad targeting programmes are: 1. Indira Awas Yojana 2.Sarva Siksha Abhiyan 3.Mid-day Meal scheme 4.Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA). 5.Total Sanitation Campaign. 6.Jawaharlal Nehru National Urban Renewal Mission (JNNURM 7.Integrated Child Development and Services (ICDS). 8.National Rural Health Mission (NRHM 9.Rajiv Gandhi Drinking Water Scheme. Of all the above, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) is the most ambitious project of the government which is being implemented at the national level and of magnitude not seen anywhere in the world. It is the brain child of Jean Dreze, a Belgian economist. This scheme has now been enacted and guarantees unskilled wage employment of 100 days to one person in every rural household at a minimum wage. The 100 days employment under this scheme is visualized in the lean season of agricultural activities. This scheme is being implemented in all the districts of the country and is seen as a major step in creating the employment opportunities and also for poverty alleviation in the country. Women are given preference for employment under this scheme, which has no middlemen or contractor and directly being implemented by the Gram Panchayats and the wages are paid in the bank account of those who are provided with the employment. The state governments are required to give unemployment allowance of one-third of the wages if not able to provide employment within 15 days of their registration. This scheme has been globally lauded as one of the most well intended schemes for the social sector anywhere in the world. Critics of the scheme, however, feel that such a scheme could be damaging in the long run by p