Economic Survey 2023 24

GIST OF ECONOMIC SURVEY 2023-24
Contents
PREFACE................................................................................................................................. IV
1. State of The Economy: Steady as She Goes...................................................... 01
2. Monetary Management and The Financial Intermediation : ..................... 17

Stability is The Watchword
3. Prices & Inflationunder Control.............................................................................32
4. External Sector: Stability Amid Plenty............................................................... 43
5. Medium Term Outlook: A Growth Vision for New India.............................. 66
6. Climate Change and Energy Transition: Dealing with Trade-Offs........... 71
7. Social Sector : Benefits that Empower.............................................................. 78
8. Employment and Skill Development: Towards Quality..............................104
9. Agriculture and Food Management: Plenty ..................................................116

of Upside Left if we get it right
10. Industry: Small & Medium Matters.....................................................................124
11. Services: Fuelling Growth Opportunities........................................................ 136
12. Infrastructure: Lifting Potential Growth..........................................................143
13. Climate Change & India: A look through our lens........................................ 152
**********
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GIST OF ECONOMIC SURVEY 2023-24
PREFACE
T
he Economic Survey is one of the most vital documents to reflect on the
state of the economy, policy framework and likelihood in times to come.
All this and more makes the Economic Survey indispensable for various
competitive examinations.
Our endeavour is to provide candidates with a highly enriched, actionable,
usable and ‘marks worthy’ coverage of economic survey with enhanced
learning. One of the many highlights of this volume is the summary of the
Economic Survey .The summary is enriched with graphics and analysis in crisp
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with jargon and important terms which are difficult to understand and even
more difficult to imbibe. We have attempted to make this easy by dedicating
a separate section to important terminologies (Key Terms), along with simple
explanations so that our readers can understand the economic survey
comprehensively. Apart from the key terms we have also added the important
government schemes after every chapter.
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if candidates can use this knowledge to build the correct narrative and reflect
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contains reflective exercises, specially curated for maximum benefit to our
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allow students to mull over their understanding about the nuances of the
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Another important feature of this volume is compilation of relevant MCQs to
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and will act as an important tool to sculpture your success.
*A full-fledged video on analysis of the Economic Survey will be uploaded on
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GIST OF ECONOMIC SURVEY 2023-24 1
CHAPTER: 1
STATE OF THE ECONOMY: STEADY

AS SHE GOES
Key-Terms
" Monetary Policy: This involves the central bank’s strategies to manage the economy’s
money supply and interest rates. Tools include setting interest rates, open market
operations, and reserve requirements. The goal is to control inflation, stabilize currency,
and foster economic growth.
" Fiscal Deficit: It occurs when a government’s total expenditures surpass its revenues,
excluding borrowings. This deficit is typically financed through government borrowing,
which can lead to an increase in public debt. Persistent deficits may signal issues in
budget management.
" Gross Fixed Capital Formation (GFCF): Refers to the total investment in physical
assets like machinery, buildings, and infrastructure within a country. It is a measure of
how much capital is added to the economy’s productive capacity. High GFCF indicates
potential for economic growth and development.
" Macroeconomic Stability: This state is characterized by stable economic growth, low
inflation, and low unemployment rates. It reflects an economy’s ability to avoid severe
fluctuations in output and prices, contributing to a predictable economic environment.
" Fiscal Consolidation: This strategy involves reducing the fiscal deficit and public debt
through measures like cutting public spending or increasing taxes. The aim is to achieve
a balanced budget and ensure long-term fiscal sustainability, which can enhance
economic stability and investor confidence.
" Capital Expenditure: This includes investments made by businesses or governments
in fixed assets such as new buildings, machinery, or technology. Unlike operational
expenses, capital expenditures are intended to generate benefits over a long period
and contribute to future growth.
" Foreign Portfolio Investment (FPI): Investments made by non-residents in a country’s
financial markets, including stocks, bonds, and other securities. FPIs are typically sought
for higher returns but can be volatile and influenced by global market conditions and
economic policies.
" Household Consumption Expenditure Survey: This survey collects data on how
households allocate their spending across various goods and services. It helps to
understand consumption patterns, inflation impacts, and income distribution, providing
insights for economic policy and business strategy.
" Retail Inflation: Represents the rate at which prices of goods and services bought
by consumers increase over time. It affects the cost of living and purchasing power,
influencing consumer behavior and economic policy decisions.
" Public Debt: The total amount of money owed by the government to external and
domestic creditors, often through the issuance of bonds. High levels of public debt can
impact economic stability and lead to higher interest payments, affecting fiscal policy
flexibility.
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2 GIST OF ECONOMIC SURVEY 2023-24
Chapter at a Glance
" Objective: The chapter aims to provide a comprehensive overview of India’s economic
response to the COVID-19 pandemic and its impact on the global economic scenario. It
focuses on macroeconomic indicators, sectoral performance, fiscal policies, external sector
management, and inclusive growth measures implemented during FY24. The objective is to
analyze the effectiveness of these strategies in achieving economic recovery, stability, and
inclusive growth amidst global challenges.
" Analysis: India’s economic strategy during FY24 revolved around three main pillars:
increased public infrastructure spending, digitalization, and the Atmanirbhar
Bharat Abhiyan. These strategies facilitated robust economic growth, with real GDP
surpassing pre-pandemic levels by 20%. Sectoral performances varied, with significant
growth in agriculture, industry, and services contributing to overall GDP expansion. Fiscal
consolidation efforts were notable, with a reduction in the fiscal deficit to 5.6% of GDP,
driven by strong revenue growth and prudent expenditure management.
y Globally, economic growth in 2023 exceeded expectations at 3.2%, despite challenges
such as high inflation and geopolitical tensions impacting global trade. Central banks
globally responded with varying monetary policies to manage inflationary pressures.
India’s external sector saw improvements, with reduced current account deficit (CAD)
and stable forex reserves. Inclusive growth measures included improving labor force
participation rates and narrowing rural-urban consumption gaps.
" Schemes/Initiatives discussed in the Chapter:
y Atmanirbhar Bharat Abhiyan: It was launched to promote self-reliance in various
economic sectors through targeted relief measures, structural reforms, and incentives
for local manufacturing and production.
y Digitalization: It accelerated adoption of digital technologies in service delivery,

governance, and financial transactions to enhance efficiency and resilience in the
economy.
INTRODUCTION
India’s response to the pandemic on the economic front involved three main strategies:
" Public Infrastructure Spending: Increased public investment in infrastructure supported job
creation and industrial output, leading to private sector investment.
" Digitalisation: There was a shift towards digital service delivery due to the pandemic, driven by public
policy and technological advancements.
" Atmanirbhar Bharat Abhiyan: This initiative provided targeted relief to various economic sectors
and populations, along with structural reforms that aided recovery and enhanced growth potential.
The Indian economy showed recovery and growth, with real GDP in FY24 being 20% higher than
in FY20. The growth has been inclusive, reducing unemployment and poverty, and increasing labor
force participation.
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Chart I.1: Growth: Context matters.

Macroeconomic and political situation of the global economy
2011 to 2019 average
5.2
8.7
6.8 3.7
3.5
3.5
3.2 3.5
0.5
2022 2023
2022 2023 2022 2023
Export volume growth of goods
Real GDP growth (%) CPI Inflation (%) and services (%)
2011 to 2019 average

1.8
1.6
Global Economic
1.5 Scenario 2.2
157.6
y Economic Growth: Global economic growth was 3.2% in 2023, higher than the projected 2.8% but
121.7
lower than the 2022 growth rate. Growth was achieved amidst high inflationary pressures and
moderated global trade due to geopolitical tensions.
95.2
y Regional Performance: Both emerging market economies (EMEs) and advanced economies (AEs)
-0.1 pre-pandemic
exceeded growth projections. India and China saw significant growth, surpassing
GDP levels by 20%.The US continued to grow, while the Euro area experienced subdued
-0.6 growth,
particularly
2022 in Germany
2023 and France.2022 2023
2022 2023
Global Supply Chain Pressure
Inflation
y FDI Outflowsand Monetary
(% of GDP) Policy: Headline inflation
Geopolitical declined from 2022 peaksIndex
Risk Index but remained above
targets in many countries. Core inflation stayed high due to services inflation and strong labor
markets. Central banks, except China’s, maintained or raised policy rates to combat inflation, with
the European Central Bank initiating a rate cut in June 2024.
y Investment and Trade: Foreign direct investment (FDI) flows moderated due to increased caution
among investors. Global trade growth was modest at 0.5%, affected by lower demand in developed
economies and trade disruptions from geopolitical conflicts. There were significant increases in
cross-border trade restrictions, with around 3,000 new restrictions introduced in 2023.
y Fiscal and Financial Conditions: Global fiscal deficit increased by 1.6 percentage points, driven
by a decline in revenues and stable expenditures. Public debt rose as fiscal conditions eased,
neutralizing some effects of monetary tightening. Financial markets showed signs of expecting
future rate cuts, reflected in the inversion of the yield curve.
2
y Geopolitical Impact: The Russia-Ukraine conflict and Red Sea crisis caused supply chain disruptions
and increased transportation costs. Despite easing supply chain pressures, geopolitical risks
remain high and persistent, potentially worsening in the future.
y Red Sea Crisis: October 2023: Heightened geopolitical tensions in the Middle East disrupted supply
chains. Increased global transportation costs due to rerouted cargo. Supply chain pressures were
transient and modest; risk perceptions softened afterward.
y Inflation Trends: Inflation peaked in 2022 but declined considerably in 2023, still above target
in many countries. Easing supply chain pressures led to a sharp decline in goods inflation. Core
inflation remained high due to services inflation and strong labor markets.
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Chart I.7: Declining inflationary Chart I.8: Policy rates

pressures across countries remain high

12 World AEs EMDEs Apr-21 Apr-22 Apr-23 May-24
7
10
6
8 5
Per cent
6 4
Per cent
4 3
2
2
1
0
0
2019
2020
2021
2022
2023
2024
China UK India Japan US Euro
-1
Area

Source: World Economic Outlook Database, April 2024, Source: Central Bank Policy Rates, BIS Data Portal
IMF; Note: Data for 2024 is forecast
y Monetary Policy: Central banks maintained or increased policy rates to manage persistent core
inflation. China focused on policy stimulus to revive its troubled real estate sector. European
Central Bank (ECB) cut its policy rate for the first time in nearly five years in June 2024. Federal
Reserve (Fed) faced reluctance to lower rates due to strong labor market data and persistent
inflation. Market expectations indicated earlier and deeper rate cuts, reflected in the inverted yield
curve.
y Fiscal and Financial Conditions: Expansionary fiscal policy and easing financial conditions in
the US partly neutralized the Fed’s monetary tightening. Ongoing uncertainty regarding future
inflation and the trajectory of the US dollar.
Chart I.12: Fiscal deficit edged up Chart I.13: Uptick in global debt
across countries in 2023
General Government Fiscal Deficit as a per cent of GDP in 2023
Change in Fiscal Deficit as a per cent of GDP in 2023 over 2022
10 99.4
8
Per cent of GDP
94.7
6 93.2
Per cent
4 91.3
2
0
84.2
-2
AEs
EMDEs
UK
World
US
China
South Africa
India
Brazil
2019 2020 2021 2022 2023

6
Source: Fiscal Policy in the Great Election Year, Fiscal Monitor, IMF, April 2024
y Fiscal Deficit and Public Debt: Global government fiscal deficit rose by 1.6 percentage points as
a percentage of GDP. This increase was due to a year-on-year revenue decline, especially from oil-
producing and commodity-exporting countries. Global public debt also increased.
y Trade Volume: Global exports of goods and services grew modestly by 0.5%. Lower demand in
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0
-10.0 World Developed Developing
2019 2020 2021 2022 2023 Economies Economies

Source: World Economic Outlook Database, April 2024, IMF Source: World GIST
Investment Report 2024,
OF ECONOMIC SURVEYUNCTAD
2023-24 5
A RESILIENT DOMESTIC
developed economies ECONOMY
and weaker trade in East Asia and Latin America contributed to the slowdown.
High energy
1.11 India’s economy prices and forward
carried inflation the
reduced the demand
momentum for
it built inmanufactured
FY23 into FY24 goods. Services
despite a gamuttrade
of global and external
developments challenges.
were The focus
more positive, onoffsetting
partially maintaining macroeconomic
the decline stability ensured
in goods trade.
that these challenges had minimal impact on India’s economy. As a result, India’s real GDP grew
y Geopolitical and Trade Restrictions: Recurring disruptions, such as the Russia-Ukraine crisis,
by 8.2 per cent in FY24, posting growth of over 7 per cent for a third consecutive year, driven by
affected trade.demand
stable consumption Increasedandconcerns
steadilyabout supply-chain
improving resilience
investment and geopolitical
demand. tensionsside,
On the supply led to
aboutadded
gross value 3,000 (GVA)
new trade restrictions.
at 2011-12 prices grew by 7.2 per cent in FY24, with growth remaining
broad-based. Net taxes at constant (2011-12) prices grew by 19.1 per cent in FY24, aided by
A RESILIENT
reasonably strong taxDOMESTIC
growth, both at ECONOMY
the centre and state levels and rationalisation of subsidy
expenditure. This led to the difference between GDP and GVA growth in FY24.
Chart I.16: Carry-forward of momentum in economic growth

Nominal GDP (₹ lakh crore) Real GDP Growth (per cent) (RHS)
350 12
10
300
Nominal GDP (₹ lakh crore)
8
250 6
4
Per cent)
200
2
150 0
100 -2
-4
50
-6
0 -8
FY20 FY21 FY22 FY23 FY24
(2nd RE) (1st RE) (PE)
Source: Statement 13: Annual and Quarterly Estimates of GDP at Constant Prices, and Annual and Quarterly
Estimates of GDP at Current Prices 2011-12 Series, National Accounts Data, MoSPI; Note: RE – Revised Estimates,
PE – Provisional Estimates
" Overall Economic Growth: Real GDP grew by 8.2% in FY24, maintaining over 7% growth for the third
consecutive year. Gross Value Added (GVA) grew by 7.2%, with significant growth in net taxes.
9
Sectoral Performance:
y Agriculture: Sectoral GVA grew by 17.7% but faced challenges from erratic weather, leading to a
slight decline in food grain output.
y Industry: Manufacturing GVA increased by 9.9%, supported by reduced input prices and
stable domestic demand. Construction also grew by 9.9% due to infrastructure and real estate
demands.
y Services: Strong growth in GST collections and e-way bills. Contact-intensive services and global
capability centres contributed significantly to the sector’s expansion.
Demand and Investment:
y Private Consumption: Increased by 4.0%, with strong urban demand and improving rural
consumption. Private investment grew by 19.8%, with rising contributions from both private
corporations and households.
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and an uneven spatial distribution of the monsoon in 2023 impacted overall output. This is
reflected in the marginal decline in total foodgrain output for FY24 of 0.3 per cent as per the
third advanced estimate of foodgrain production released by the Ministry of Agriculture and
Farmers’ Welfare (MoAFW).19
Chart I.17: Broad-based growth Chart I.18: Private consumption steady

State of the Economy
as investment drives growth
Agriculture Industry 140 PFCE GFCF Exports
Chart I.22: Increased household Chart I.23: Record housing sales
15
Per cent share in GDP (current

Services 120
savings in the form of physical assets in top 8 cities 24
Real GVA growth (per cent)
10 9.5 100
Saving in physical assets
40 20 7.6 160
80
prices)
5 Savings in physical assets as per
35 1.4 140
cent of GDP (RHS) 60
Housing sales (thousands)

30 0 15 120
40
25 100
₹ lakh crore
Per cent
-5 20
20 10 80
15-10 60 0
(1st RE)
(2nd RE)
FY24
FY20
FY21
(PE)
FY23
10 5 40
FY22
(2nd RE) (1st RE) (PE)
5 20
0 Statement 12: Annual and Quarterly Estimates
Source: 0 of GDP 0 at Current Prices, 2011-12 Series, and Statement
Q1 Q3Series,
Q1 Q3 Q1 Q3 Q1 Q3 Note:
Q1 Q3
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
13: Annual and Quarterly Estimates of GDP at Constant Prices, 2011-12 National Accounts; PFCE –
Private Final Consumption Expenditure. GFCF – Gross Fixed Capital Formation
1.13 Within
Source: the 1.9,
Statement industrial
Nationalsector, manufacturing
Accounts GVA
Statistics Source: shrugged
Various off Reports
Proptiger a disappointing
25
FY23 and
Banking
2024, MoSPI and Financial Sector:
grew by 9.9 per cent in FY24. Manufacturing activities benefitted from reduced input prices
while catering to stable domestic demand. The input price advantage was reflected in the
Chart I.24: SCBs catering to Chart I.25: Large corporates tapping
subdued growth in the Wholesale Price Index (WPI) inflation, which led to a deflator of (-)1.7
investment demand corporate bond markets
per cent for the manufacturing sector during FY24. Manufacturers also passed on the reduction
YoY growth
in input prices in bank credit
to consumers, to in the sustained decline
reflected New Issuances
in the (RHS)
core consumer price
40 different sectors as of April '24 50 7
inflation.
35
The strength of manufacturing is further corroborated by the strong Bonds
Outstanding Corporate performance of
45 6
the30
HSBC India PMI for manufacturing, which consistently remained well above the threshold
value 5
25 of 50, indicating sustained expansion and40stability in India's manufacturing sector.
₹ lakh crore
₹ lakh crore
Per cent
Construction
20 activities displayed increased momentum and registered a growth of 9.9 per 4 cent
35
in FY24
15 due to the infrastructure buildout and buoyant commercial and residential real 3estate
demand.
10 30
2
5
1.14 Various high-frequency indicators reflect in the services sector. Both Goods
1 the25growth
0
and Services Tax (GST) collections and the issuance
20 of e-way bills, reflecting wholesale
0 and
Services
Non-Food
Housing
Industry
MSME
Credit
Mar-22
Mar-23
Mar-24
Jun-21
Sep-21
Dec-21
Jun-22
Sep-22
Dec-22
Jun-23
Sep-23
Dec-23
retail trade, demonstrated double-digit growth in FY24. Financial and professional services
19 https://tinyurl.com/2eekevhu
Source: Table 170, Sectoral Deployment of Bank Credit, Source: Outstanding Corporate bonds, SEBI
Handbook of Statistics on Indian Economy, RBI
10
1.19 Global trade growth slowed in 2023, leading to a marginal decline in merchandise exports
Credit
y As
growth. Disbursal: imports
merchandise Continued strongmore
slowed growth thanforexports
MSMEs and
and services
housing loans.
trade Corporate
recorded abond
issuances
larger surplus surged by
compared to 70.5%, reflecting
the year before,athe
shiftdrag
fromexerted
bank credit to bond
by net markets.
exports on GDP reduced.
The subdued contribution of exports was more than counterbalanced by the pick-up in fixed
Economic
investment, Recovery:
thereby continuing the trend of domestic stimulus seamlessly replacing external
stimuli.
y In FY24, India’s GDP reached levels projected by pre-pandemic trends. Key macroeconomic
24 The eight major cities referred to in the Proptiger reports are Ahmedabad, Bengaluru, Chennai, Delhi NCR,
indicators,
Hyderabad, Kolkata, including GDP, GVA,
Pune, and Mumbai MMR.private consumption, and fixed investment, have quickly
25 https://www.proptiger.com/guide/news-views
recovered to pre-pandemic growth trajectories.
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13
A permanent output loss refers to a downward level shift in the observed variable due to the
loss in output capacity. This box item visualises the pre-pandemic and post-pandemic trends
in India's aggregate macroeconomic variables such as GDP,GIST GVA, private consumption
OF ECONOMIC SURVEY 2023-24and 7
the subcomponents of GVA.
Chart I.26: A recovery to pre- Chart I.27: Gap from trend reducing
pandemic trajectory in GDP steadily
50 Deseasonalised GDP GDP Gap from Trend FY22 Gap (%, RHS)
FY23 Gap (%, RHS) FY24 Gap (%, RHS)
45 pre-pandemic trend
4.5 8%
40 4.0 7%
3.5 6%
₹ lakh crore
35
₹ lakh crore
3.0 State of the Economy

5%
30 2.5
4%
2.0
Improving
25 Public Finances 1.5 3%
1.0 2%
20
Consolidation of Union Government Finances
0.5 1%
15 0.0 0%
1.22 Against the global trend of widening fiscal deficit and increasing debt burden, India has
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Dec-21
Dec-22
Dec-23
Jun-21
Sep-21
Jun-22
Sep-22
Jun-23
Sep-23
Mar-22
Mar-23
Mar-24
remained on the course of fiscal consolidation. The favourable fiscal performance in 2023,
emerged as the cornerstone of India’s macroeconomic stability. The fiscal deficit of the Union
y Chart
Factors
Government
I.28: No permanent
hasDriving Recovery:
been brought down
losses
The pandemic-induced
from
Chart I.29: No
economic
6.4 per cent of GDP
permanent
contraction
in FY23 to 5.6 perallowed
cent of for
GDPthe
in output
implementation ofcapacity
counter-cyclical fiscal policies and consumption losses
process reforms. Increased capital
in FY24, according to
expenditure, provisional
digital technologyactuals (PA) and
adoption, datafinancial
releasedinclusion
by the Office of Controller
contributed General
to recovery. Public
45 Deseasonalised PFCE
digital(CGA).
of Accounts infrastructure
Strong improvements
growthGVA
Deseasonalised and and
in direct the introduction
indirect of GST
taxes on and the Insolvency
account of andeconomic
resilient Bankruptcy
26
Code (IBC) supported economic growth.
activity
40 and increased compliance
pre-pandemic trend meant that the 24 tax revenues generatedtrend
pre-pandemic exceeded the
y Sector-Specific Performance: Still lagging behind pre-pandemic projections due to slower
conservative budgetary estimates. Additionally, higher-than-budgeted
22
non-tax revenue in the
35 recovery in trade, hotel, road, and air transport sectors.
form of dividends from the RBI has buffeted revenue receipts. In combination with restrained
₹ lakh crore
y Overall GDP: Close to pre-pandemic trend levels,20 with only about 1% below the trend on an annual
revenue expenditure,
30 average basis in these
FY24. buoyant revenues ensured lower deficits. A decomposition of the
₹ lakh crore
18
fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share
16
ofMACROECONOMIC
25
the STABILITY
fiscal deficit is being accounted AND
for by capital FISCAL
outlay. This suggests that the productivity
14
CONSOLIDATION
of borrowed
20
IN
resources has improved. INDIA
12
15 Chart I.33: Steadily declining 10
Chart I.34: Decomposition of fiscal
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
deficit ratios deficit shows increasing investment
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
orientation
9.2 Primary Deficit Miscellaneous Capital Receipts

Revenue Deficit 150 Net lending
Fiscal Deficit Capital Outlay
7.3 Revenue Deficit
Per cent of fiscal deficit
100
43.0
Per cent of GDP
33.3 17.4
14 5.6 33.8 35.9
47.6
5.7 50
70.0 71.4 79.7
65.1 61.6
46.3
2.6
0
2.0
-50
FY19 FY20 FY21 FY22 FY23 FY24
FY21 FY22 FY23 FY24 (PA) (PA)
Source: Budget At A Glance, Union Budget FY24 Source: Various Union Budget Documents, Union
(Interim), Union Government Accounts at a Glance – Government Accounts at a Glance – O/o CGA
O/o CGA
" Challenges
Buoyancy in FY23: Global
in revenues spillovers,in
continues such as increased oil prices due to the Europe conflict, widened
FY24
India’s current account deficit (CAD). Central banks globally raised policy rates, adding to economic
1.23 Significant fiscal consolidation post-pandemic could be achieved largely due to buoyant
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revenues. Revenue receipts of the union government consisting of tax revenue (net to centre)
and non-tax revenue (NTR) increased YoY by 14.5 per cent in FY24 (PA), with robust growth in
uncertainty.
" Fiscal Consolidation: India achieved significant fiscal consolidation, reducing the Union Government’s
fiscal deficit from 6.4% of GDP in FY23 to 5.6% in FY24.Strong revenue growth, both from direct and
indirect taxes, and higher non-tax revenues (e.g., dividends from RBI) contributed to this reduction.
Revenue Performance:
Gross Tax Revenue Direct Taxes Indirect Taxes
Non Tax Revenue
Chart I.35:
TaxConsistent increase in
Revenue (net to centre) Chart I.36: Increase in gross tax
11.5 ratio 11.7
revenue receipts
Revenue Receiptsdriven by revenue to GDP 11.3driven by
30 10.2
both tax and non-tax revenue 10.0 strong direct tax growth
25
Per cent of GDPPer cent of GDP

Gross Tax Revenue Direct Taxes Indirect Taxes
Non Tax Revenue
₹ Lakh crore
20
Tax Revenue (net to centre) 6.2 6.5
6.0 11.7
15 Revenue Receipts 5.2 11.5 11.3
4.8
30 10.2
10 10.0 5.4 5.5 5.1 5.2
25 4.7
5
₹ Lakh crore
20
0 6.2 6.5
6.0
15 FY20 FY21 FY22 FY23 FY24 5.2
4.8
(PA) FY20 FY21 FY22 FY23 FY24 (PA)
10 5.4 5.5 5.1 5.2
4.7
5
0
(PA) FY20 FY21 FY22 FY23 FY24 (PA)

Source: Budget at a Glance, Union Budget, FY22, FY23, FY24 Interim Budget, Union Government Accounts at a
Glance – O/o CGA
y Growth in Revenue: Revenue receipts increased by 14.5% YoY in FY24, driven by strong tax and
non-tax revenues.
y Tax Revenue: Gross tax revenue grew by 13.4%, with direct taxes up by 15.8% and indirect taxes by
10.6%. Direct taxes contributed 55% of gross tax revenue, reflecting efforts to enhance progressive
taxation.
Chart I.37: Tax revenues register steady increase

FY20 FY23 FY24 (PA)
12.0
10.0
₹ Lakh crore ₹ Lakh crore
8.0 FY20 FY23 FY24 (PA)

6.0
12.0
4.0
10.0
2.0
8.0
0.0
6.0
Corporation Tax Taxes on income other Customs and Union GST
4.0 than corporation tax Excise Duties

Source: Budget
2.0 at a Glance, Union Budget, FY22, FY23, FY24 Interim Budget, Union Government Accounts at a
Glance – O/o CGA
0.0
Corporation Tax Taxes on income other Customs and Union GST
y Indirect Taxes: GST collections rose by 12.7%, with increased compliance and E-way bill
than corporation tax Excise Duties
generation.
y GST Improvement: GST has matured over seven years, improving tax buoyancy for Union and
State governments. Calls for further GST reforms include rationalizing the rate structure and
improving taxpayer awareness and compliance.
18
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TRENDS IN CENTRAL AND STATE GOVERNMENT EXPENDITURE
Central Government Expenditure- Fiscal Consolidation and Expenditure

Trends:
y Revenue Expenditure: The government has moderated revenue expenditure growth while
protecting vulnerable populations. Free food grains were provided to 81.4 cr people, demonstrating
Economic Survey 2023-24
a commitment to social welfare. Total expenditure decreased to 15.0% of GDP in FY24 from 17.7%
in FY21.
budgets moderated the growth in revenue expenditure. While achieving the compression in
y Capital Expenditure (Capex): Capex in FY24 reached ₹9.5 lakh crore, marking a 28.2% YoY increase
revenue expenditure as a per cent of GDP, the government also ensured that free food grains
and 2.8 times the level of FY20.
are provided to 81.4 crore people in the country. At the same time, shares of total expenditure
y Private
allotted Sector:
to capital Government
spending werecapex has started crowding
progressively enhanced,in private
therebyinvestment,
improving though
the the private
quality
sector’s share in Gross Fixed Capital Formation (GFCF) has seen only a slight
of expenditure. Government expenditure in FY24 continued this trend whereby, as per the increase from 34.1%
to 34.9%
provisional between
actuals, total FY19 and FY23.
expenditure declined to 15.0 per cent of GDP from 17.7 per cent in FY21.
Chart I.39: Prudent management of Chart I.40: Increasing union government

expenditure effective capex29 to GDP ratio
Effective Capex
FY20 FY21 FY22 FY23 FY24 (PA)
18 Effective Capex as % of GDP (RHS)
15.5 14 5
15 12
4
11.8
Per cent of GDP
12 10
₹ lakh crore
8 3
Per cent
9
6 12.5
2
6 10.5
3.6 3.2 4 8.4
2.1 6.6
3 1.4 5.0 5.2 1
2 4.5
0 0 0
Revenue Major Capital
FY18
FY19
FY20
FY21
FY22
FY23
FY24
(PA)
Expenditure Subsidies Expenditure
Source: Budget at a Glance, Various Union Budgets, Union Government Accounts at a Glance – O/o CGA
Revenue
Chart I.41:Expenditure Management:
Prioritising productive Chart I.42: Improving quality of
expenditure expenditure
y Lower Expenditure: FY24 expenditure was ₹60.6 thousand crore below budgeted estimates
45 withoutRevenue
compromising
Expenditureessential areas like rural development and education. 0.27
Capital Expenditure
40 Total
y Interest ExpenditureConstituted 30.4% of revenue expenditure in FY24. Efforts are needed to
Payments:
0.21
Ratio of Capex to Revex
35 reduce this share through fiscal consolidation and asset monetization.

0.19
Growth (per cent)
30
y Subsidies: Decline: Subsidies on fertilizers and food decreased by 24.6% and 22.4% respectively
0.15
25 due to changes in global supply chains and prices. 0.14 0.14
20
State Government Finances
15
10
y Fiscal Deficit: For 23 states, the gross fiscal deficit was 8.6% lower than the budgeted ₹9.1 lakh crore.
5
y Deficit as % of GDP: Came in at 2.8% against a budgeted 3.1%.
0
FY19
FY20
FY21
FY22
FY23
FY24
FY19
FY20
FY21
FY22
FY23
FY24
(PA)
(PA)
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Source: Budget at a Glance, Various Union Budget Documents, Union Government Accounts at a Glance – O/o
Chart I.43: State Gross Fiscal Deficit Chart I.44: Improving quality of
under the 3 per cent of GDP mark states’ expenditure
3.9
2.6
Gross fiscal deficit of 23 states as
Capex of 23 states as per cent of

2.8
2.7 2.6
2.5
per cent of GDP
2.4
2.3
GDP
2.2
2.2
FY20
FY21
FY22
FY23
FY24
Source: State Accounts Report, CAG; Note – data for FY24 are preliminary actuals
General Government Debt

y Post-Pandemic Focus: Both Union and State Governments have prioritized fiscal consolidation,
leading to a declining debt30.2
trajectory up to FY23.
Outstanding liabilities of 23 states
y FY24 Increase: The general government debt-to-GDP ratio rose slightly due to increased interest
rates from monetary tightening, coupled with lower-than-expected nominal GDP growth due to
reduced inflationary pressures. 28.4
per cent of GDP
y Debt Ratio Trends: With potential monetary policy easing and rising WPI inflation, combined with
27.5
ongoing fiscal consolidation efforts, the debt-to-GDP ratio is expected
27.1 to resume its decline.
Chart
25.8 I.50: General Government liabilities to GDP ratio come
off their peak in FY21
Combined liabilities Domestic liabilities
90.0
85.0
Per cent of GDP
80.0
75.0
70.0
65.0
FY19 FY20 FY21 FY22 FY23 FY24

Source: Table 112, Combined Liabilities of Central and State Governments, Handbook of Statistics on Indian
Economy, RBI. Notes34
Credit Ratings and Economic Impact

y S&P Global Ratings: In May 2024, S&P upgraded India’s sovereign credit rating outlook from
‘stable’ to ‘positive’ for the first time in 13 years. This upgrade reflects robust economic growth,
soundPrimary
fundamentals,
Deficit (perand
centimproved
of GDP) government spending
Gap (Nominal composition.
GDP growth and cost of borrowing)
y Future Ratings: Continued fiscal consolidation and reduced deficits below 7% structurally could
lead to a higher credit rating within the next two years.
23
11
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6
cent
Moderation in Inflation Pressure

Chart I.52: Declining core inflation Chart I.53: India a high-growth
but volatile food inflation and low-inflation economy
14.0 Headline Inflation
9
Core Inflation
12.0 Food Inflation India
(Avg. Growth - FY22 - FY24,%)

8
10.0 7
6
8.0
Per cent
UK Mexico EMDEs
5
6.0 4
US Brazil
4.0 3 Russia
AEs
2
2.0 Germany
1
0.0
0
Aug-22
Aug-23
Apr-22
Oct-22
Apr-23
Jun-22
Oct-23
Apr-24
Jun-23
Jun-24
Dec-22
Feb-23
Dec-23
Feb-24
4 6 8 10
(Avg. Inflation - FY22 - FY24,%)
Source: Consumer Price Indices released by CSO, Source: IMF WEO database (April 2024), MoSPI
MoSPI
Retail Inflation:
They financial Declined
system from 6.7% resilient
remains in FY23 to 5.4% in FY24.
y Government Measures: Included open market sales, controlled retail prices, timely imports, and
reductions in LPG, petrol, and diesel prices.
y RBI Actions: Raised policy rates by 250 basis points from May 2022 to February 2023, managed
liquidity, and maintained consistent communication.
y Current CPI Data: Headline CPI inflation at 5.1% in June 2024; core inflation at 3.1%.
y India’s Performance: Unique in maintaining high growth and low inflation among peers from
FY22 to FY24 despite food inflation pressures from adverse weather conditions.
y Financial System Resilience
Asset Quality: GNPA ratio decreased to 2.8% in March 2024, a 12-year low.
Capital Adequacy: CRAR decreased slightly but remained well above regulatory
requirements.
Profitability: Steady with a return on equity of 13.8% and return on assets of 1.3%.
External Sector Management

y Merchandise Exports: Moderated due to weaker global demand and geopolitical tensions.
y Imports: Declined by 4.9%, leading to a lower trade deficit.
y Service Exports: Reached USD 341.1 billion, setting a new record.
y Net Private Transfers: Increased to USD 106.6 billion.
Current Account Deficit (CAD):

y FY24 CAD: Improved to 0.7% of GDP from 2.0% in FY23.
India’s external sector is safely navigating through uncertainties
y Foreign Portfolio Investment (FPI): Robust inflows of USD 44.1 billion, helping fund the CAD and
build forex reserves.
y Foreign Direct Investment (FDI): Moderated, with net inflows dropping from USD 42.0 billion in
FY23 to USD 26.5 billion in FY24, though gross inflows remained stable.
27
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State of the Economy
global phenomenon of declining FDI flows on account of increased scepticism. Net FDI inflows
to India declined from USD 42.0 billion during FY23 to USD 26.5 billion in FY24. However,
grossChart I.56: The
FDI inflows ₹ was by
moderated
GIST OF currencies
ECONOMIC SURVEY
one of 0.6
only
2023-24
theper
most Chart
cent in FY24.I.57: Forex reserves
The contraction in netsufficient
inflows wasto
12 stable over Apr’23 – Jun’24 cover around 11 months of imports
primarily due to a surge in repatriation/disinvestment.
660
British Pound -1.4
Chart I.54: CAD narrowed to 0.7 per Chart
640 I.55: FPI inflows aided in
Mexican Peso
cent of GDP in1.3
FY24 funding
620
CAD and building forex
Indian Rupee 1.9 reserves
USD Billion
600
GoodsEuro 2.6 Services 50
120 580
Transfers
Chinese Renmimbi Income
5.0
Current Account 40 560
80 Brazilian Real 10.1
30 540
Indonesian Rupiah 11.3
40 520
USD Billion
USD Billion
Japanese Yen 18.1 20
0 500
Nov-22
Nov-23
Jul-22
Jul-23
May-22
May-23
May-24
Sep-22
Sep-23
Jan-22
Mar-22
Jan-23
Mar-23
Jan-24
Mar-24
Depreciation (-)/Appreciation (+) (per 10
-40 cent)
0
Source: Bilateral Exchange Rates, Bank for International Source: Table 205, Handbook of Statistics on the Indian
-80
Settlements Economy, RBI
-10
-120
Reduction
Q1 Q2 in
Q3 macro
Q4 Q1 vulnerability
Q2 Q3 Q4 -20
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY23
1.46 In its pursuit FY24
of fiscal consolidation through efficient and prudent fiscal management,
the Government continues to stick to the fiscal glide path. The fiscal deficit of the Government
Source: Table 196, Handbook of Statistics on the Indian Source: Table 130, Handbook of Statistics on the Indian
is expected
Economy, RBI to drop to 4.5 per cent of GDP or lower RBI
Economy, by FY26. This commitment has helped
keep the sovereign debt sustainable, thereby keeping sovereign bond yields and spreads in
1.45 Overall, India’s external sector is being deftly managed with comfortable foreign exchange
External
check. Sector
All these Indicators:
factors have combined to keep the macroeconomic environment stable and
reserves and a stable exchange rate. Forex reserves as of the end of March 2024 were sufficient
provide
y Forexa platform
Reserves:for sustainable
Sufficient growth.
to cover This of
11 months is imports
reflected in over
and the downward
100% of totaltrajectory of the
external debt.
to cover 11 months of projected imports and more than 100 per cent of total external debt. The
macroeconomic
y Indian Rupee: vulnerability index
Least volatile among– an index constructed
emerging market peers.by combining India’s fiscal deficit,
Indian Rupee has also been one of the least volatile currencies among its emerging market peers
CAD and inflation.
y External Debt: Low at 18.7% of GDP, with reserves covering 97.4% of total debt.
in FY24. India’s external debt vulnerability indicators also continued to be benign. External
debt as a ratio to GDPChartstood at aAlow
I.58: level of 18.7
reduction per cent as of end-March
in macro-vulnerability 2024. The ratio of
despite
foreign exchange reserves to total increased
debt stoodexternal
at 97.4 peruncertainty
cent as of March 2024.
37 Table 132, Handbook CPI-Inflation (%) Macro-Vulnerability Index
24.8 of Statistics on the Indian Economy, RBI - https://tinyurl.com/yne8sbw7
21.9
28 18.4
20.0
12.3 11.3 14.9

10.05
9.1
6.16 5.36
3.59
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24*
Heightened Macro-vulnerability Macro-stability Pandemic & Global
Disturbance
Source: Calculated using data on CPI inflation published by MoSPI, current account deficit published by RBI, and
fiscal deficit published in the Union Budget documents. Notes38
38 Retail Inflation from FY09 to FY12 is based on CPI-Industrial Workers released by the Labour Bureau, FY13 to
FY24 is based on CPI-Combined released by MoSPI; Gross fiscal deficit data for FY24 for the Union Government
REDUCTION INand
is Provisional Actuals, MACRO
for the state VULNERABILITY
governments, it is a Budget Estimate.
" Fiscal Deficit Target: Expected to drop to 4.5% of GDP or lower by FY26. 29
" Sovereign Debt: Maintained sustainability, helping keep sovereign bond yields and spreads in
check.
" Macroeconomic Vulnerability Index: Downward trajectory reflecting improved fiscal management
and stability.
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INCLUSIVE GROWTH AND ECONOMIC OUTLOOK- SHIFT

IN APPROACH TO WELFARE
Chart I.59: Beneficiaries under various government

welfare schemes since their inception
Jan Dhan Yojana- 51.6 crore beneficiaries

11.7 11.6
10.3
6.9
Crore
2.6
Swacch Bharat Jal Jeevan Mission PM Ujjwala Yojana Ayushman Bharat PM-AWAS Yojana
Mission (Toilets built) (tap water (gas connections Scheme (Hospital (pucca houses built)
connections) provided) admissions)
Source: Various PIB Press Releases
y Unemployment Rate: Declining; improvement in labor force participation and worker-to-

population ratio. Female Labor Force Participation: Increased from 23.3% in 2017-18 to 37% in
2022-23, driven by rural women.
y Consumption Spending: Household Consumption Expenditure Survey (2022-23): Real-term
increase in monthly per capita consumption in both rural and urban areas, narrowing the rural-
urban gap.
Chart I.60: Declining unemployment rate and improvement in labour

force participation rate and worker population ratio
LFPR WPR UR (RHS)
70 7
60 6
50 5
Per cent
Per cent
40 4
30 3
32 20 2
10 1
0 0
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
Source: Annual Report, PLFS, July 2022 - June 2023, MoSPI
Economic Outlook
y FY24 GDP: 20% higher than pre-COVID levels, with a CAGR of 4.6% from FY20 despite a 5.8% decline
in FY21.
y Global Economic Prospects: IMF Forecast: Global growth at 3.2% in 2024, down from an average
of 3.7% in the previous decade.
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Downside Risks:
y Geopolitical Conflicts: May disrupt supply chains, raise commodity prices, and affect capital
flows.
y Trade and Protectionism: Global trade outlook positive but increased protectionism could impact
India’s external sector.
Domestic Growth Drivers:

y Private Sector: Improved balance sheets and investment demand.
y Private Capital Formation: Potential caution due to fears of cheaper imports.
y Agriculture: Normal rainfall forecast and good monsoon performance could boost rural
demand.
y Structural Reforms: GST and IBC are delivering positive results.
y GDP Growth Projection: Real GDP growth projected at 6.5–7% for FY25, with balanced risk
PRELIMS PRACTICE QUESTION
Q1: Which of the following statements about 4. GST has matured over seven years, with calls
the performance of the Indian economy in for reforms to rationalize the rate structure
FY24 are correct? and improve compliance.
1. Real GDP grew by 8.2% in FY24, and Gross Select the correct answer using the codes
Value Added (GVA) increased by 7.2%.
below:
2. The agriculture sector experienced significant
growth but saw a decline in food grain output (a) 1, 2, and 3 only
due to erratic weather.
(b) 1, 2, and 4 only
3. Manufacturing and construction sectors
both grew by 9.9% due to stable domestic (c) 2, 3, and 4 only
demand and infrastructure needs.
(d) 1, 3, and 4 only
4. Private consumption increased by 4.0%,
while Gross Fixed Capital Formation (GFCF) Q3: Which of the following statements about
grew by 19.8% with a notable shift from bank
central and state government expenditure
credit to bond markets.
trends, general government debt, and
Select the correct answer using the codes
credit ratings in India are correct?
below:
(a) 1, 2, and 3 only 1. Central government revenue expenditure
decreased to 15.0% of GDP in FY24 from 17.7%
in FY21, with increased capital expenditure
(c) 2, 3, and 4 only reaching ₹9.5 lakh crore.
(d) 1, 2, and 4 only 2. Government capex has slightly increased the
Q2: Which of the following statements private sector’s share in Gross Fixed Capital
regarding macroeconomic stability and Formation (GFCF) from 34.1% to 34.9%
fiscal consolidation in India for FY23 and between FY19 and FY23.
FY24 are correct? 3. State government gross fiscal deficit in FY24
1. India’s current account deficit widened was 8.6% lower than the budgeted ₹9.1 lakh
in FY23 due to global spillovers, including
crore, with the deficit-to-GDP ratio coming in
increased oil prices and global policy rate
hikes. at 2.8%.
2. The Union Government’s fiscal deficit was 4. S&P Global Ratings upgraded India’s
reduced from 6.4% of GDP in FY23 to 5.6% sovereign credit rating outlook to ‘positive’ in
in FY24, supported by significant revenue May 2024, reflecting robust economic growth
growth and higher non-tax revenues.
and improved government spending.
3. Revenue receipts increased by 14.5% YoY
in FY24, with gross tax revenue growing by Select the correct answer using the codes
13.4% and GST collections rising by 12.7%. below:
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(a) 1, 2, and 3 only Q5: Which of the following statements about

(b) 1, 3, and 4 only India’s external sector management, fiscal
health, and inclusive growth trends are
(c) 2, 3, and 4 only correct?
(d) 1, 2, and 4 only 1. Merchandise exports moderated due to
weaker global demand and geopolitical
Q4: Which of the following statements tensions, while service exports reached a
regarding inflation management and new record of USD 341.1 billion in FY24.
financial system resilience in India are 2. The current account deficit (CAD) improved
correct? to 0.7% of GDP in FY24, with Foreign Portfolio
1. Retail inflation declined from 6.7% in FY23 Investment (FPI) inflows of USD 44.1 billion
to 5.4% in FY24, with the RBI raising policy and Foreign Direct Investment (FDI) net
rates by 250 basis points from May 2022 to inflows decreasing to USD 26.5 billion.
February 2023. 3. The Indian rupee exhibited high volatility
among emerging market peers, and external
2. Government measures to control inflation
debt stood at 18.7% of GDP.
included open market sales, price controls,
and reductions in LPG, petrol, and diesel 4. The unemployment rate has been declining,
prices. with a significant increase in female labor
force participation from 23.3% in 2017-18 to
3. India maintained high growth and low 37% in 2022-23.
inflation from FY22 to FY24 despite adverse
weather conditions impacting food inflation. Select the correct answer using the codes
below:
4. The Gross Non-Performing Assets (GNPA)
ratio decreased to 2.8% in March 2024, (a) 1, 2, and 4 only
marking a 12-year low. (b) 1, 2, and 3 only
Select the correct answer using the codes (c) 1, 3, and 4 only
below:
(d) 2, 3, and 4 only
(a) 1, 2, and 3 only
(b) 1, 2, and 4 only ANSWERS
(c) 2, 3, and 4 only
(d) 1, 3, and 4 only 1. (b) 2. (c) 3. (b) 4. (d) 5. (a)
MAINS QUESTION
Q1: Examine the effects of geopolitical conflicts, such as the Russia-Ukraine conflict and the Red
Sea crisis, on global trade and supply chains. How did these geopolitical risks influence global
transportation costs and investment flows?
Q2: Discuss the measures and outcomes of fiscal consolidation achieved by India from FY23 to
FY24. What factors contributed to the reduction in the fiscal deficit from 6.4% to 5.6% of GDP,
and how did revenue growth play a role?
Q3: Assess the recent trends in the general government debt-to-GDP ratio. How have fiscal
consolidation efforts and monetary policy impacts influenced the trajectory of government
debt, and what are the expectations for future debt management?
Q4: Analyze the recent trends in India’s external sector, focusing on merchandise exports, service
exports, and net private transfers. How have these trends affected the current account deficit
(CAD) and the overall external sector balance?
Q5: Assess the implications of recent changes in unemployment rates, labor force participation,
and consumption spending for inclusive growth in India. How do these factors contribute to
economic stability and the overall economic outlook?
**********
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CHAPTER: 2
MONETARY MANAGEMENT
AND THE FINANCIAL
INTERMEDIATION : STABILITY IS
THE WATCHWORD
Key-Terms
" Policy Repo Rate: The interest rate at which the central bank lends money to commercial
banks. It influences overall interest rates in the economy, affecting inflation, borrowing, and
economic activity.
" Money Multiplier: A measure of how much the money supply increases with each unit of
base money created by the central bank. It reflects the capacity of the banking system to
generate additional money through lending.
" Trade Receivables Discounting System (TReDS): An electronic platform allowing small and
medium enterprises to receive early payment for their trade receivables by selling invoices
to financiers at a discount.
" Asset Reconstruction Companies (ARCs): Financial entities that purchase and manage
non-performing assets (NPAs) from banks to recover outstanding loans. They help banks
clean up their balance sheets and improve financial stability.
" Digital Financial Inclusion: The use of digital technologies to provide financial services to
underserved and unbanked populations, aiming to enhance access to banking, payments,
and credit.
" Microfinance Institutions (MFIs): Organizations that provide financial services to low-
income individuals or groups who lack access to traditional banking. They often offer small
loans, savings, and insurance.
" Capital Markets: Financial markets where long-term debt or equity-backed securities are
bought and sold, such as stock exchanges and bond markets. They facilitate capital raising
and investment opportunities.
" Mutual Funds: Investment vehicles that pool funds from multiple investors to invest in a
diversified portfolio of stocks, bonds, or other securities. They are managed by professional
fund managers.
" Social Stock Exchanges: Platforms that list and trade securities issued by social enterprises
and non-profits. They aim to attract investment for social and environmental impact
alongside financial returns.
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" Financial Sector Development Council: A body that focuses on improving and developing
the financial sector’s infrastructure, policies, and regulations to enhance financial stability
and inclusion.
" Balance-Sheet: A financial statement that summarizes a company’s assets, liabilities,
and shareholders’ equity at a specific point in time, providing a snapshot of its financial
condition.
" Fintech: Short for financial technology, it encompasses innovations and technological
solutions aimed at improving and automating financial services, such as online banking,
payment systems, and investment platforms.
" Data-Based Lending: A method of lending that uses data analytics to assess creditworthiness
and make lending decisions, often leveraging non-traditional data sources to evaluate
borrowers.
Chapter at a Glance
" Objective: The chapter aims to explore various government schemes aimed at rural
development in India. It seeks to analyze their effectiveness in addressing socio-economic
challenges and improving the quality of life in rural areas.
" Analysis: The chapter begins by outlining the historical context of rural development
policies in India and then delves into a detailed discussion of current government schemes.
It analyzes schemes like MGNREGA (Mahatma Gandhi National Rural Employment
Guarantee Act), PMGSY (Pradhan Mantri Gram Sadak Yojana), and NRLM (National
Rural Livelihoods Mission), highlighting their objectives, implementation challenges, and
impact assessment.
y Furthermore, the chapter examines case studies and empirical evidence to evaluate
the success of these schemes in achieving their intended outcomes. It discusses the role
of technology, community participation, and governance structures in enhancing the
effectiveness of rural development initiatives.
" Schemes/Initiatives
y MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): It is
aimed at providing livelihood security by guaranteeing 100 days of wage employment in
a financial year to rural households.
y PMGSY (Pradhan Mantri Gram Sadak Yojana): It aims to provide all-weather road
connectivity to unconnected rural habitations.
y NRLM (National Rural Livelihoods Mission): It aims to reduce poverty by enabling
the rural poor to access gainful self-employment and skilled wage employment
opportunities.
INTRODUCTION
In FY24, India’s banking and financial sectors demonstrated remarkable performance, with broad-based
growth in bank credit and significant improvements in asset quality. The Indian stock market excelled,
with the Nifty 50 index rising by 26.8%, and the market capitalization to GDP ratio ranking fifth globally.
The insurance and pension sectors also saw substantial growth.
However, the rise in retail investors raises concerns about potential speculation and overconfidence. As
India becomes the world’s fifth-largest economy, it’s crucial for financial institutions to balance growth
with careful consumer protection and regulatory adherence.
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Economic Performance:
y Central Bank Policy: Maintained steady policy rates; inflation under control.
y Interest Rates: Increased lending and deposit rates due to monetary tightening post-Russia-
Ukraine conflict.
y Capital Markets: India ranks fifth globally in stock market capitalization to GDP ratio.
y Digital Public Infrastructure (DPI): Enhanced financial inclusion through robust digital systems
and microfinance.
Monetary Developments - Role of Monetary Policy:

y Objective: Maintain price stability and support growth.
y Tools: Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), open market operations, credit
ceilings.
y Policy Repo Rate: Held steady at 6.5% in FY24; aimed at managing inflation and supporting
growth.
y Rate Hikes: Cumulative increase of 250 basis points from May 2022 to February 2023; policy rate
unchanged since February 2023.
y Withdrawal of ₹2,000 Banknotes: Reduced reserve money and currency in circulation.
y HDFC-HDFC Bank Merger: Impact on monetary conditions.
y Incremental CRR (I-CRR): Temporary measure impacting liquidity.
Monetary and Credit Trends:

y Reserve Money (M0): YoY Growth: 6.7% as of March 2024, down from 9.7% the previous year.
Adjusted Growth: 6.7% (compared to 7.4% a year ago), driven mainly by net foreign assets.
y Broad Money (M3): YoY Growth: 11.2% as of March 2024, up from 9% the previous year.
Components: Significant contributions from aggregate deposits and bank credit to the commercial
sector.
y Money Multiplier (MM): Current MM: 5.4, up from 5.2 a year ago. Adjusted MM: 5.3 as of March
2024.
Monetary Policy Transmission and Financial Intermediation

y During FY24, the lending and deposit rates of scheduled commercial banks increased due to
previous policy rate hikes from May 2022 to February 2023, an external benchmark-based lending
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rate system, and reduced surplus liquidity. From May 2022 to May 2024, the external benchmark-
based lending rate and the one-year median marginal-cost-of-funds-based lending rate rose by
250 and 175 basis points, respectively.
y Bank Credit Growth:
FY24: Increased by 20.2% to ₹164.3 lakh crore, up from 15% the previous year.
FY25: Continued strong growth, with 19% and 19.8% YoY growth in April and May 2024.
Sectoral Credit Growth

y Agricultural Credit: Growth: 1.5 times increase from ₹13.3 lakh crore in FY21 to ₹20.7 lakh crore
in FY24.
y Kisan Credit Card (KCC) Scheme: Facilitates timely credit, with over 7.4 crore accounts as of
2023.
y Industrial Credit: Picked up in H2 FY24, with 8.5% growth in March 2024.
Enhancements in MSME
y Trade Receivables Discounting System (TReDS): A digital platform for discounting MSME trade
receivables, enhancing liquidity and working capital.
y New MSME Definition: Based on turnover and investment criteria, expanding access to formal
banking and subsidized credit.
y Udyam and Udyam Assist Portals: Facilitating MSME registration for better access to credit; 4.5
crore enterprises registered by June 2024
y Revamped Credit Guarantee Scheme (CGS): Increased funding and credit limits, with significant
credit guarantees extended, including provisions for informal micro enterprises (IMEs).
Improvement in Asset Quality of Banks

y Improved Asset Quality: Enhanced borrower selection and debt recovery GNPA ratio fell to 2.8%
in March 2024 from 11.2% in FY18. Broad-based improvement across sectors, except for agriculture
and certain industrial sub-sectors
y Capital Adequacy: CRAR increased to 16.8% in March 2024.All banks met CET-1 ratio
requirements
y Profitability: Net Interest Margin (NIM) at 3.6% in March 2024 .Profit after tax rose by 32.5% (YoY)
in March 2024. Return on equity and return on assets ratios reached decadal highs
y Financial Stability: High capital adequacy ratio and improved asset quality.56.9% of deposits with
Public Sector Banks (PSBs). Loans constitute over 50% of total assets for top 10 banks
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y Net Interest Margin (NIM): Robust at 3.6% in March 2024, though below the financial stability
threshold of 5%.
y Profit After Tax: Increased by 32.5% YoY, driven by higher net interest income and reduced need
for additional provisions.
y Cost of Funds vs. Yield on Assets: Cost of funds increased by 100 bps, while yield on assets rose
by 75 bps.
y Deposit Distribution: 56.9% of deposits with Public Sector Banks (PSBs), with 61.1% from sticky
retail customers.
y Top Banks: Loans constitute more than 50% of assets, providing immunity to interest rate cycles.
y Capital Adequacy and Interest Rate Cycles: CRAR for top banks well above Basel III norms;
banks well-equipped to handle interest rate fluctuations.
Dealing with Distressed Assets

y Crisis and Resolution: Over the past decade, Indian commercial banks faced a severe NPA crisis,
with a peak GNPA ratio of 14.5% in March 2016. Government measures, including strengthened
banking regulations, recovery law amendments, and insolvency legislation, helped reduce the
GNPA ratio to 2.8% by March 2024.
y Economic Resilience: The ability to handle market stress, especially during slowdowns, is vital for
economic resilience. Banks play a crucial role in managing distressed assets and facilitating the
recovery and revival of businesses, which indicates an active and dynamic economy.
y Regulatory Measures: The RBI has strengthened its prudential framework to monitor and
address stressed assets. This includes timely identification, restructuring, and rescheduling of
loans. Banking regulations are continuously updated to align with market needs and economic
conditions, forming the first line of defense against financial stress.
Conventional channels of recovery and reconstruction

y Recovery Channels: Debt Recovery Tribunals (DRTs) and the SARFAESI Act, 2002 are key tools for
addressing financial stress. In FY23, these channels contributed to about 45% of the reduction in
SCBs’ GNPAs through recoveries and upgradations.
y Asset Reconstruction Companies (ARCs): ARCs, regulated under the SARFAESI Act, offer an
alternative way for investors to acquire distressed assets from banks. In FY23, ARCs purchased
9.7% of SCBs’ GNPAs, up from 3.2% in FY22. ARCs also issue security receipts (SRs) and have been
involved in the Insolvency and Bankruptcy Code (IBC) process, enhancing asset recovery.
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y Market Liquidity and Regulations: For an efficient distressed asset market, it must be deep,
competitive, and liquid. The Government and SEBI have implemented measures to improve
market liquidity and competition, such as allowing FPIs to invest in debt instruments and SRs, and
introducing the Special Situation Fund. These actions have increased FPI investment in ARCs and
are expected to boost asset recovery rates.
INCREASING COMPETITION IN THE DISTRESSED ASSET

MARKET
National Asset Reconstruction Company Ltd. (NARCL)- Acquires distressed assets from banks, with
Government backing SRs. IDRCL works with NARCL to resolve acquired assets. NARCL has acquired
assets worth ₹92,000 crore.
India Debt Resolution Company Ltd. (IDRCL) - Resolves assets acquired by NARCL, focusing on
identifying resolution strategies.
Addressing Distressed Assets through Insolvency Resolution

y Effective Resolution Tool: The Insolvency and Bankruptcy Code (IBC) has proven effective in
addressing the twin balance sheet problem by managing corporate debt and reducing NPAs. It
mandates insolvency professionals to oversee distressed corporates while a committee of creditors
makes major decisions, balancing stakeholder interests.
y Impact and Recovery: Since its introduction, the IBC has processed 31,394 corporate debtors
involving ₹13.9 lakh crore. Of these, ₹10.2 lakh crore of defaults were addressed pre-admission.
The Code has facilitated 4,131 corporate insolvency resolution processes (CIRPs), rescuing 3,171
debtors and recovering 32% of creditor claims.
y Market Influence: The IBC has become a dominant recovery route for banks, accounting for 43% of
recoveries in FY23. It has enabled over ₹3 lakh crore in recoveries since FY18, outperforming other
recovery channels. Over 3,000 businesses emerged from CIRP, showing significant performance
improvements post-resolution.
y Liquidation and Rescue: Of 2,476 CIRPs ending in liquidation, 77% were defunct, valued at just
7% of outstanding debt. Liquidation has rescued around 50 businesses through compromise or
arrangement. The IBC framework has also resolved major accounts in sectors like steel and power,
with creditors recovering 54% of claims.
Role of IBC in reviving stalled real estate projects and strengthening

homebuyers’ rights
y Pre-2016 Remedies and the Introduction of IBC: Before 2016, homebuyers faced stalled real
estate projects with limited recourse through Consumer Forums under the Consumer Protection
Act of 1986, resolving very few cases. The Real Estate (Regulation and Development) Act (RERA)
2016 introduced dedicated grievance redressal for homebuyers. The Insolvency and Bankruptcy
Code (IBC) enacted the same year added another effective channel for resolving real estate sector
distress.
y Impact of IBC on Real Estate: By March 2024, over 1,500 real estate companies were admitted
into the IBC, accounting for 21% of total admissions. Of 891 resolved corporate debtors, 133 were
from real estate, making up 15% of resolved cases. The IBC has handled the unique challenges of
real estate insolvency, such as multiple projects and thousands of homebuyer claims, by allowing
homebuyers to participate in decision-making and ensuring resolution plans comply with RERA.
y Innovations and Achievements:. Successful resolutions include Value Infracon, which recovered
98% of claims and 189% of asset liquidation value, and Jaypee Infratech, with an 88% recovery rate.
The Special Window for Affordable and Mid-Income Housing (SWAMIH), set up with ₹12,500 crore,
has financed the completion of over 32,000 homes and aims to deliver 20,000 homes annually.
These measures have improved bank balance sheets and lending capacity.
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FINANCIAL INCLUSION STRATEGY

Financial Inclusion as a Development Goal: Financial inclusion is crucial for sustainable economic
growth, reducing inequality, and eliminating poverty. It is a key enabler of the UN’s 2030 Sustainable
Development Goals (SDGs) and supports overall economic growth.
India’s Progress in Financial Inclusion: From 2011 to 2021, the percentage of Indian adults with formal
financial accounts rose from 35% to 77%. There has been significant progress in savings, borrowing, and
closing the access gap between rich and poor, as well as narrowing the gender divide.
Shift in Financial Inclusion Strategy: India’s financial inclusion focus has shifted from ‘every household’
to ‘every adult’, emphasizing account usage through direct benefit transfers (DBT) and digital payments.
Innovations like UPI123Pay and UPI Lite aim to boost digital adoption.
Cross-Border Payment Initiatives: The RBI is collaborating internationally to enhance cross-border

payments. The Project Nexus initiative aims to link India’s UPI with FPSs in ASEAN countries for faster,
more cost-effective retail payments, expected to go live by 2026.
RBI’s Financial Inclusion Strategy: The RBI’s approach includes target-based strategies, market
development, infrastructure strengthening, technological innovation, last-mile delivery, consumer
protection, and financial literacy to advance financial inclusion.
Progress on financial inclusion in India
78% account
ownership in 2021
~52.6 crore bank

24.6 ATMs per lakh
accounts under
adults in 2022
PMJDY
Progress on
Financial Inclusion
>5.5% population,
> 1.3 lakh bank i.e., 7.7 crore people
branches have credit card
14.3 Commercial
Bank per lakh
adults
Source: Pradhan Mantri Jan Dhan Yojana (PMJDY) website, PIB and RBI
Note: Data as of July 2024
DIGITAL FINANCIAL INCLUSION (DFI) IN INDIA

Digital Financial Inclusion (DFI) Definition: DFI aims to provide cost-effective digital access to financial
services for currently excluded and underserved populations, requiring both digital transactional
platforms and devices.
Impact of COVID-19 on Digitisation: The pandemic accelerated digital financial inclusion in India by 57
highlighting the needs of vulnerable citizens, prompting government support for innovative digital
infrastructure and technology.
Government Initiatives for Digital Infrastructure: Programs like Digital India and Make-in-India have
promoted the development of Digital Public Infrastructure (DPI) such as Aadhaar, UPI, and DigiLocker,
enhancing financial service delivery.
India’s Growth in Fintech: India’s robust DPI and proactive regulations have positioned it as a leading
fintech market, with significant growth in digital financial services and becoming the third-largest
growing fintech economy.
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India Stack Components: India Stack includes the Identity Layer (Aadhaar), Payment Layer (UPI), and
Data Governance Layer, which together facilitate efficient, cost-effective digital transactions and improve
financial inclusion.
Digital Credit’s Economic Impact: Increased digital financial inclusion boosts economic growth by 2.2%
on average, as digital credit supports economic opportunities and formalisation.
Microfinance Institutions (MFIs)

y Role: Provide financial services, including small-value loans to underserved populations.
y Importance: Facilitates financial inclusion by offering affordable services to low-income
households and businesses.
Evolution and Performance of MFIs in India

y Role of Microfinance: Microfinance provides small-value loans and other financial services to
underserved households and businesses, aiding financial inclusion, reducing vulnerability, and
supporting socio-economic growth.
y Regulatory Framework: The RBI’s New Regulatory Framework (2022) standardizes regulations
for microfinance institutions (MFIs), creating a level playing field and protecting borrowers.
y Global Position: India has the second-largest microfinance sector globally, with over 532 lakh
clients and ₹1.8 lakh crore in micro-credit, covering more than 50% of households.
y Client Demographics: MFIs predominantly serve rural areas (74% of clients) and focus on women
(98% of clients), including significant numbers from SC/ST communities.
y Sector Performance: MFIs achieved a 55% increase in loan disbursements in FY23, with total
assets rising to ₹1.5 lakh crore. Profitability ratios (RoA: 2.5%, RoE: 12.2%) reflect industry health.
y Portfolio Quality: MFIs have improved portfolio quality, reducing defaults and enhancing
recoveries, though some delinquency ratios are still recovering from the pandemic.
y SHG-Bank Linkage Programme: The SHG-BLP saw a 45.6% increase in credit disbursement to
₹1.5 lakh crore in FY23, with the number of credit-linked SHGs growing to 43 lakh.
y Financial Inclusion Index: The RBI’s Financial Inclusion Index improved from 60.1 in March 2023
to 64.2 in March 2024, indicating progress in financial access and quality.
Trends in Indian capital markets

y Overall Performance: Indian capital markets outperformed many emerging markets in FY24,
despite global challenges, benefiting from technology and digitisation.
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y Primary Markets: Capital formation reached ₹10.9 lakh crore in FY24, a 17.2% increase from FY23.
Debt issuances dominated, while equity and hybrid fund mobilisations also grew significantly.
y IPOs: The number of IPOs surged by 66% to 272 in FY24, raising ₹68,000 crore. SME IPOs increased
1.6 times, with funds raised more than doubling.
y Public Debt: Corporate bond issuances rose to ₹8.6 lakh crore in FY24. Private placements
accounted for most of the resources mobilised, with outstanding bonds growing to ₹45 lakh
crore.
y REITs and InvITs: These trusts raised ₹39,024 crore in FY24, over five times more than the previous
year, reflecting strong infrastructure development support.
y Secondary Markets: The Indian stock market was one of the top performers globally, with the
Nifty 50 index rising by 26.8% in FY24. India’s MSCI-EM index weight increased to 17.7%.
y Market Capitalisation: India’s market capitalisation rose to fifth globally in FY24. The market
capitalisation to GDP ratio improved to 124%, although high ratios may signal instability.
y Trading Volumes: Trading volumes increased across most segments, with commodity derivatives
turnover up 87% in FY24, driven by energy options contracts.
Retail Participation Trends in Indian Capital Markets

y Direct and Indirect Channels: Retail investor activity surged in FY24. Individual investors’ share
in equity cash segment turnover was 35.9%. The number of demat accounts increased from 1,145
lakh in FY23 to 1,514 lakh in FY24.
y Investor Registrations: NSE’s registered investor base grew nearly threefold from March 2020 to
March 2024, reaching 9.2 crore, with an estimated 20% of Indian households investing in financial
markets.
y Mutual Funds (MFs)
y Growth: MFs experienced significant growth, with assets under management (AuM) increasing
by ₹14 lakh crore (35%) to ₹53.4 lakh crore in FY24. The number of folios rose from 14.6 crore to
17.8 crore.
y Net Inflows: Growth/equity-oriented and hybrid schemes saw more than 90% of net inflows.
Exchange-traded funds (ETFs) (excluding gold ETFs) saw a 37% increase in net assets.
y Systematic Investment Plans (SIPs): SIP accounts numbered about 8.4 crore. Annual net SIP flows
doubled from ₹0.96 lakh crore in FY21 to ₹2 lakh crore in FY24. SIP AuM represents approximately
35% of MF industry AuM for equity-oriented schemes.
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FACTORS DRIVING RETAIL PARTICIPATION

Technological and Policy Developments: Factors include technological advancements, financial
inclusion measures, digital infrastructure growth, smartphone penetration, low-cost brokerages, and
economic conditions. SEBI’s Online Dispute Resolution and improved investor protection measures have
also contributed.
Tax IDs: The number of unique tax IDs on NSE rose from 2.7 crore in FY19 to 9.2 crore in FY24.
Social Stock Exchanges (SSEs) in India:

y Purpose: SSEs provide a platform for NGOs and social enterprises to raise funds through equity
and debt, targeting socio-development goals and ensuring transparency and regulation.
y Mechanism: Funds are raised using Zero Coupon, Zero Principal (ZCZP) instruments, which
function like donations and are eligible for tax exemptions under Section 80G.
y Regulation: NPOs must have at least 3 years of experience, disclose social audit reports, and
report on their social and environmental performance annually.
y Progress: As of April 2024, NSE and BSE have registered numerous NPOs, with ₹12.4 crore raised
for various social projects.
GIFT IFSC:
y Objectives: GIFT IFSC aims to onshore international financial services business in India and act as
a gateway for global capital flows. It represents India’s commitment to financial sector reforms
and becoming a global leader in international finance.
y Non-Resident Zone: Allows entities to operate outside capital control restrictions and use multiple
foreign currencies.
y Unified Regulator: Regulated by the International Financial Services Centres Authority (IFSCA),
simplifying approvals and licensing.
y Tax Regime: Offers a competitive tax regime comparable to leading global financial centers.
y Key Activities:
y Banking: Total assets of IFSC Banking Units (IBUs) exceed USD 60 billion, with cumulative
transactions surpassing USD 795 billion.
y Funds Industry: Significant growth in Fund Management Entities (FMEs) and Alternative
Investment Funds (AIFs), making GIFT IFSC a preferred jurisdiction for pooling global capital.
y Aircraft & Ship Leasing: Over 28 aircraft lessors registered, with more than 120 assets leased.
Ship leasing is also growing, with 11 companies registered by March 2024.
y Foreign Universities: GIFT IFSC is becoming an international higher education hub, with foreign
universities like Deakin University and the University of Wollongong establishing campuses to
foster skilled human resources for financial services and technology.
Developments in the insurance sector:

Global Insurance Market Trends:
y Economic Challenges: Global insurance markets faced contraction in 2022 due to economic
slowdown, rising inflation, and higher cost of capital. Total global insurance premiums fell by 1.1%
in real terms in 2022, contrasting with a 3.4% growth in 2021.
y Segment Performance: Non-life insurance premiums grew by 0.5% in 2022 (down from 2.6% in
2021) due to rate hardening in developed markets. Life insurance premiums contracted by 3.1% in
2022, compared to a 4.5% growth in 2021.
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INDIAN INSURANCE SECTOR GROWTH

y Market Dynamics: India’s insurance sector is expected to be one of the fastest-growing globally,
supported by economic growth, an expanding middle class, and regulatory support. Insurance
penetration in India slightly decreased to 4% in FY23 from 4.2% in FY22.
y Segment-Specific Trends: Life insurance premium growth is expected to slow to 4.1% in FY23 due
to pandemic-related effects and tax changes. Non-life insurance premium growth is estimated at
7.7% in FY23, down from 9% in FY22, influenced by economic factors and pandemic stabilization.
Key Areas of Focus:

y Health Insurance: Accounts for 35% of non-life premiums with a significant 11% growth in FY23,
driven by increased health awareness and government schemes like Ayushman Bharat.
y Agriculture Insurance: Represents about 12% of non-life premiums. Growth was flat in FY23 but
is expected to rise from 2024 due to technological advancements and government initiatives.
Regulatory and Industry Reforms:

y Policy Initiatives: The Government and IRDAI are promoting “Insurance for all by 2047” and
launching initiatives like Bima Sugam and Bima Vistaar to boost penetration.
y Regulatory Changes: Reinsurance regulations have been amended to attract global players. A
shift from rule-based to principle-based regulations aims to streamline operations and improve
product approvals.
y Customer Protection: Regulatory changes include a Customer Information Sheet (CIS) to enhance
transparency and reduce grievances related to unfair practices and claims delays.
DEVELOPMENTS IN THE PENSION SECTOR
Demographic Shifts:
y Declining Birth Rates: Falling birth rates affect pay-as-you-go (PAYG) pension systems, which
depend on current workers to fund retirees.
y Inflation Impact: Persistent inflation undermines confidence in the long-term sustainability
of pension benefits. Although inflation has eased in some areas, it continues to pose risks for
retirees.
Shift from Defined Benefit (DB) to Defined Contribution (DC):

y Risk Transfer: There is a global transition from DB pensions, which promise defined benefits, to
DC pensions, where individuals assume investment, inflation, and longevity risks.
y Challenges in DC Systems: Transitioning from DC accumulation to a secure post-retirement
income system remains problematic. Few systems have effectively addressed this challenge.
Gig Economy and Informal Labor:

y Changing Employment Models: The rise of gig work and informal employment disrupts traditional
pension systems, which are often designed for stable, structured employment relationships.
y Need for Individual-Based Solutions: Pension systems must adapt to focus more on individual
retirement savings rather than relying on structured employer-employee relationships.
Improvement in Pension Index:

y Global Pension Index Value: India’s index improved from 44.5 in 2022 to 45.9 in 2023, due to
better adequacy and sustainability sub-indices.
y Pension System Structure: Includes an earnings-related employee pension scheme, a DC
Employee Provident Fund (EPF), and supplementary employer-managed pension schemes.
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Growth in Subscribers:
y National Pension Scheme (NPS) & Atal Pension Yojana (APY): As of March 2024, the total
number of NPS and APY subscribers increased by 18% YoY, reaching 735.6 lakh.
y APY Popularity: APY subscribers grew from 501.2 lakh in March 2023 to 588.4 lakh in March 2024.
APY represents around 80% of the total pension subscriber base.
Demographic and Coverage Data:

y Gender and Age Mix: The share of female subscribers in APY rose from 37.2% in FY17 to 48.5%
in FY23. The proportion of younger subscribers (18-25) increased from 35% in FY17 to 46.7% in
FY23.
y Pension Amounts: Most APY accounts are for ₹1,000 per month, reflecting the target population’s
low-income status.
Pension Coverage and Assets:

y Coverage Expansion: Pension coverage under NPS and APY as a percentage of the total population
rose from 1.2% in FY17 to 5.3% in FY24.
y Assets Under Management (AuM): Increased from 1.1% of GDP in FY17 to 4% in FY24.
y Future Expansion:
y NPS Growth Potential: Expected to grow with more corporate employees and self-employed
professionals participating. NPS also has potential in rural areas due to its flexible contribution
requirements.
Demographic and Economic Factors:

y Economic Transition: As India’s income level rises and urbanization increases, there is a greater
need for retirement savings.
y Longevity and Family Structures: Rising life expectancy and changes in family support structures
increase the necessity for reliable retirement income.
Financial Literacy and Inclusion:

y Pension Literacy: Important for both men and women, particularly given the higher longevity of
women. Educating young adults and students about pension savings can instill long-term financial
discipline.
y Inclusion Efforts: Ensuring every family member has a pension account is crucial. Stakeholders,
including employers, government, and regulators, must encourage participation in pension
schemes, especially among young individuals to leverage the benefits of compounding.
Mechanisms for regulatory coordination and financial stability:

y Financial System Stability: Essential for sustainable economic growth. It Should be resilient to
macroeconomic disturbances and unforeseen shocks. It Must manage imbalances to prevent
crises and economic disruptions.
y Role of Government: Governments implement policies, regulations, and measures to ensure
financial stability. Coordination among regulators and interaction with real economy is crucial.
y Financial Sector Development Council (FSDC) in India: Facilitates interaction among financial
sector regulators. Handles financial stability, sector development, and regulatory coordination.
Oversees financial literacy, inclusion, macro-prudential supervision, and international financial
interactions.
y FSDC Sub-Committee (FSDC-SC): it is Chaired by the RBI Governor. Discusses and acts on agenda
items related to financial stability.
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y Financial Sector Assessment Program (FSAP): Conducted every five years by IMF and World
Bank. Assesses financial stability and sector development. India’s third FSAP is underway, with
reports due by February 2025.
y FSB Annual Report: Reviews G20 financial regulatory reforms and implementation status. Key
areas include Basel-III reforms, compensation, OTC derivatives, resolution, and NBFI.
y Implementation of Basel III Reforms: Enhances resilience in domestic and global banking
sectors. India is compliant with most Basel III requirements.
y Non-Banking Financial Intermediation (NBFI): India is fully compliant with FSB standards for
securitization and Securities Financing Transactions (SFT).
y Financial System Stress Indicator (FSSI): Developed by RBI to monitor stress levels in the
financial system.Latest FSSI shows easing of stress, though some sectors like NBFCs and money
markets face challenges.
Future Outlook- assessment and outlook for India’s financial sector:

y Progress and Current Status: Domestic Credit: Increased from 50.6% of GDP in 2010 to 54.7% in
2021.
y Asset Quality: Gross and Net NPAs of SCBs have declined; improvements in Capital to Risk
(Weighted) Assets Ratio (CRAR), Return on Assets (RoA), and Return on Equity (RoE).
y Stock Markets: Stable despite geopolitical uncertainties.
Challenges and Advancements:

y Balance-Sheet Issues: Banks, non-banks, and corporates faced balance-sheet excesses and a
credit boom-bust cycle.
y Financial Inclusion: Continuous progress in financial inclusion and deepening.
y Global Competitiveness: Efforts are needed to reduce financial intermediation costs and enhance
global leadership.
Outlook:
y Vision for 2047: Emphasis on becoming a developed country with a robust financial sector.
y Key Elements: Competitive banking sector, universal financial service access, low intermediation
costs, efficient credit and equity access, and well-regulated markets.
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y Insurance and Pension: Current assets in insurance and pensions are lower compared to
developed countries, indicating room for growth.
Future Developments:
y Technological Advancements: Focus on AI/ML, Decentralized Finance, IoT, and their impact on
digital payments.
y Fintech Evolution: Aim to become a ‘fintech nation’ with high fintech adoption and the largest
number of fintech firms.
y Data-Based Lending: Shift towards data-based lending for small businesses, with continuous
review of regulatory practices.
y Challenges: The transition to a more capital market-reliant system presents new vulnerabilities
and requires robust regulatory and policy responses.
PRELIM PRACTICE QUESTION
Q1: Which of the following statements Which of the above statements are correct?
regarding recent monetary developments (a) 1, 2, and 4 only
and trends in India are correct?
(b) 1 and 2 only
1. The policy repo rate was held steady at 6.5%
in FY24 to manage inflation and support (c) 1, 2, and 3 only
economic growth.
(d) 2 and 4 only
2. The cumulative rate hikes from May 2022 to
February 2023 totaled 250 basis points, with Q3: Which of the following statements are
the policy rate unchanged since February correct regarding the measures and
2023. developments related to distressed assets
3. Reserve Money (M0) growth decreased to in India?
6.7% as of March 2024, down from 9.7% the 1. The Gross Non-Performing Assets (GNPA)
previous year. ratio of Indian banks improved from a peak
4. The Money Multiplier (MM) decreased to 5.2 of 14.5% in March 2016 to 2.8% by March
in March 2024 from 5.4 a year ago. 2024.
2. The National Asset Reconstruction Company
Select the correct answer using the codes below:
Ltd. (NARCL) acquired distressed assets worth
(a) 1, 2, and 3 only ₹92,000 crore and is backed by government-
supported Security Receipts (SRs).
3. The Insolvency and Bankruptcy Code (IBC)
(c) 2, 3, and 4 only has handled over 1,500 real estate companies
(d) 1, 3, and 4 only and has been instrumental in recovering 32%
of creditor claims.
Q2: Consider the following statements 4. The Special Window for Affordable and Mid-
regarding recent developments in bank Income Housing (SWAMIH) has financed the
credit growth and financial stability in completion of over 32,000 homes and aims
India: to deliver 50,000 homes annually.
1. Bank credit growth in FY24 increased by (a) 1, 2, and 3 only
20.2% to ₹164.3 lakh crore, up from 15% in
the previous year. (b) 1, 2, and 4 only
2. The Kisan Credit Card (KCC) Scheme had over (c) 2 and 3 only
7.4 crore accounts as of 2023, facilitating
(d) 1 and 4 only
timely credit for agricultural needs.
3. The Net Interest Margin (NIM) of banks was Q4: Consider the following statements
robust at 5% in March 2024, exceeding the regarding Microfinance Institutions (MFIs)
financial stability threshold. in India:
4. The Gross Non-Performing Assets (GNPA) 1. India has the largest microfinance sector
ratio fell to 2.8% in March 2024, showing globally, with over 532 lakh clients and ₹1.8
improved asset quality compared to FY18. lakh crore in micro-credit.
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2. The RBI’s New Regulatory Framework (2022) 2. Mutual Funds’ assets under management
for MFIs aims to standardize regulations and (AuM) increased by ₹14 lakh crore to ₹53.4
protect borrowers. lakh crore in FY24.
3. The Self-Help Group (SHG)-Bank Linkage 3. Systematic Investment Plans (SIPs)
Programme saw a 45.6% increase in credit represented approximately 50% of Mutual
disbursement in FY23. Fund industry AuM for equity-oriented
schemes.
4. The Financial Inclusion Index, as reported by
the RBI, improved from 60.1 in March 2023 to 4. Social Stock Exchanges (SSEs) in India
64.2 in March 2024. use Zero Coupon, Zero Principal (ZCZP)
instruments for fundraising and offer tax
Which of the above statements is/are correct? exemptions under Section 80G.
(a) 1 and 2 only Which of the above statements is/are correct?
(b) 2, 3, and 4 only (a) 1, 2, and 4 only
(c) 1, 3, and 4 only (b) 1, 2, and 3 only
(d) 2 and 4 only (c) 1, 3, and 4 only
(d) 2 and 4 only
Q5: Consider the following statements
regarding recent trends in the Indian
financial market:
ANSWERS
1. The number of demat accounts increased
from 1,145 lakh in FY23 to 1,514 lakh in FY24. 1. (A) 2. (a) 3. (A) 4. (B) 5. (A)
MAINS PRACTICE QUESTION

Q6: Discuss the key policy and regulatory reforms introduced by the Indian government and
IRDAI to enhance insurance penetration. Evaluate the potential impact of these reforms on
customer protection and market efficiency.
Q7: Assess the recent improvements in India’s Pension Index and the growth trends of the
National Pension Scheme (NPS) and Atal Pension Yojana (APY). How do these developments
reflect the broader trends in pension coverage and financial inclusion in India?
Q8: Analyze the role of the Financial Sector Development Council (FSDC) in India in promoting
financial stability and regulatory coordination. How does the FSDC facilitate interaction
among financial sector regulators, and what are its key functions?
Q9: Discuss the role and significance of Social Stock Exchanges (SSEs) in India. How do SSEs
facilitate fundraising for NGOs and social enterprises, and what regulatory measures are in
place to ensure transparency and effective utilization of raised funds?
Q10: Evaluate the role of Digital Financial Inclusion (DFI) in enhancing access to financial
services for underserved populations in India. How do digital transactional platforms and
devices contribute to the broader goal of financial inclusion?
**********
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CHAPTER: 3
PRICES & INFLATION

UNDER CONTROL
Key-Terms
" Retail Inflation: The rise in the price of goods and services purchased by consumers,
measured by the Consumer Price Index (CPI).
" Core Inflation: Inflation measure excluding food and energy prices, indicating underlying
long-term inflation trends.
" Monetary Policy: Central bank actions, like interest rate changes, aimed at controlling
inflation and stabilizing the economy.
" Supply Chain Disruptions: Interruptions in the production and distribution process
affecting the availability of goods and services.
" Global Commodity Prices: The worldwide market prices of raw materials like oil, metals,
and agricultural products.
" Consumer Durables: Long-lasting goods like appliances and vehicles, significant for
measuring economic stability and inflation.
" Consumer Non-Durables: Short-lived goods like food and fuel, whose prices are indicators
of immediate inflationary pressures.
" Fiscal Measures: Government policies related to taxation and spending aimed at influencing
the economy.
" Housing Rental Inflation: Increase in the cost of renting properties, contributing to overall
inflation.
" Edible Oils: Oils used in cooking, significant in inflation discussions due to India’s high
import dependence.
" Food Inflation: The rise in prices of food items, heavily influenced by weather conditions
and agricultural output.
" Inter-State Inflation Variations: Differences in inflation rates between various states
within a country.
" Rural-Urban Inflation Gap: The disparity in inflation rates between rural and urban areas,
often influenced by different consumption patterns.
" Producer Price Index (PPI): An index measuring the average change over time in the selling
prices received by domestic producers for their output.
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Chapter at a Glance
" Objective of the Chapter: The objective is to evaluate India’s management of inflation
amidst global economic challenges and domestic factors. It discusses the impact of the
pandemic, geopolitical tensions, and adverse weather conditions on inflation in various
sectors, emphasizing how prudent monetary policies and administrative actions have
helped maintain stable inflation rates. The chapter aims to provide insights into India’s
inflation trends, policy responses, and future outlook, crucial for understanding economic
stability and policy effectiveness.
" Brief Analysis of the Chapter: The chapter begins by highlighting the disruptive effects of
global economic challenges, including the pandemic and geopolitical tensions, on India’s
economy, particularly inflation in core consumer goods and food items. Despite these
challenges, India managed to keep inflation under control through strategic monetary
policies, calibrated trade measures, and administrative actions like stock management and
subsidizing essential food items. It discusses the role of the Reserve Bank of India (RBI) in
setting and achieving inflation targets, comparative performance with global economies,
and trends in retail, core, and food inflation. The chapter underscores the importance of
enhancing price monitoring mechanisms, boosting domestic production of essential food
items, and managing global commodity trends for sustained economic stability.
y Pradhan Mantri Garib Kalyan Anna Yojana
y National Mission on Edible Oils - Oil Palm
y Production-linked incentives (PLIs)
y RBI’s Monetary Policy
INTRODUCTION
In FY22 and FY23, global economic challenges due to the pandemic and geopolitical tensions
disrupted supply chains and raised commodity prices, affecting India’s economy. This led to
inflationary pressures in core consumer goods and services, exacerbated by adverse weather
conditions affecting food prices. However, prudent monetary policies, calibrated trade measures,
and strong economic growth helped reduce core inflation to a four-year low by FY24. Administrative
actions such as stock management and subsidizing essential food items also mitigated food inflation.
Expectations of a normal monsoon and stabilizing global prices support benign inflation forecasts
for India in the near term. Future inflation trends will depend on enhanced price monitoring, market
intelligence, and efforts to boost domestic production of essential food items, reducing dependency
on imports like pulses and edible oils
LOW & STABLE INFLATION IN INDIA

" India’s Success: The Reserve Bank of India (RBI) and the Central Government managed to keep retail
inflation at 5.4% in FY24, the lowest since the pandemic.
" Global Supply Chain Disruptions: Post-pandemic, supply chain disruptions were exacerbated by the
Russia-Ukraine war in FY23. Global inflation declined in the latter half of FY23 and FY24 due to reduced
price shocks and lower energy prices.
" Role of Monetary Policy: The International Monetary Fund noted that coordinated monetary
tightening by Central Banks in major economies during 2022-23 helped reduce energy prices by
lowering global energy demand.
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INDIA’S RETAIL INFLATION IS LOWER THAN THE

EMDES & WORLD AVERAGE
" India’s Inflation Performance: India’s retail inflation in 2022 and 2023 was lower than the global
average and that of EMDEs, despite widespread monetary policy tightening.
" Global Economic Resilience: In 2023, both advanced economies and EMDEs showed unexpected
resilience, returning to their inflation targets.
INDIA’S INFLATION MANAGEMENT WAS RELATIVELY

BETTER TO KEEP IT WITHIN THE TARGET
" Establishing Inflation Targets: Countries set inflation targets based on their economic development,
structure, financial system, and economic objectives (Jahan, Sarwat).
" India’s Inflation Success: In 2023, India’s inflation rate was within its 2-6% target range, outperforming
many developed and emerging economies. India had one of the lowest deviations from its inflation
target among advanced economies, despite global demand-supply imbalances.
" Comparative Performance: India’s 2023 inflation rate was 1.4 percentage points below the global
average, showing resilience amid geopolitical tensions. The survey explores trends in retail, core, and food
inflation, state-wise variations, rural-urban differentials, and fiscal measures to contain inflation.
DOMESTIC RETAIL INFLATION

Retail inflation moderated gradually in FY24
y Inflation Influences and Challenges: Since 2020, controlling inflation has been challenging. In
FY23, India’s CPI-based retail inflation was driven by higher food prices, influenced by the Russia-
Ukraine war and domestic weather conditions.
y Monetary Policy Actions: From May 2022 to February 2023, the policy repo rate increased from
4% to 6.5% to absorb excess liquidity and align inflation with targets. Core inflation declined to
3.1% by June 2024.
y Fuel Price Reductions: In FY24, declining global energy prices and government price cuts for LPG,
petrol, and diesel reduced fuel inflation. Domestic LPG prices were cut in August 2023 and March
2024, leading to deflation in LPG inflation. Petrol and diesel prices were reduced in March 2024,
also resulting in deflation.
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y Impact on Headline Inflation: Global commodity price declines in 2023 reduced price pressure
across various sectors. Low fuel and core inflation contributed to a downward trend in headline
inflation, despite food price volatility.
Results and Trends: Effective administrative measures and monetary policies moderated inflation. In June
2024, retail inflation was 5.1%. The following section examines core and food inflation trends in detail.
CORE INFLATION DYNAMICS IN THE POST-PANDEMIC

WORLD
Core inflation hits a four-year low in FY24

Core inflation: Definition and Components
y Core inflation excludes food and energy items from CPI headline inflation, eliminating the impact
of transitory supply shocks. It is divided into goods (consumer durables and non-durables) and
services components.
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Trends and Influences

y FY22: Inflationary pressures eased, helped by softening food inflation. However, core inflation
rose to 6% due to international commodity prices (Chart III.12).
y FY23: Inflationary pressures increased again, driven by the Russia-Ukraine war. Core services
inflation rose as house rents increased with urban migration (Chart III.15).
y FY24: CPI inflation moderated due to a decline in core inflation for both goods and services. Core
services inflation reached a nine-year low, and core goods inflation declined to a four-year low.
y Monetary Policy Response: To address emerging price pressures, the RBI increased the repo
rate by 250 basis points since May 2022. Chart III.13 shows the impact of this monetary policy, with
core inflation declining by about 4 percentage points from April 2022 to June 2024.
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A steep decline in service prices hastens moderation in core inflation

y Advanced Economies: Stubborn core services prices pose a risk to the inflation outlook of
advanced economies.
y India’s Improvement: In contrast, India’s core services inflation reached a nine-year low in FY24.
This improvement was aided by moderation in housing rental inflation, driven by a significant
increase in the stock of new houses in 2023.
Consumer durable inflation remains elevated but softens in FY24

y Increase in Inflation: Between FY20 and FY23, consumer durables inflation increased by over 5
percentage points. In FY21, gold prices surged significantly, impacting the personal care category
of CPI.
y Major Drivers: In FY22 and FY23, clothing, which holds 48% weightage in the consumer durable
index, was a major inflation driver due to rising costs of key input materials like cotton.
y Recent Improvements: In FY24, inflation for consumer durables declined with improved supply
of key raw materials. However, record-high gold prices, driven by anticipated Fed rate cuts and
escalating geopolitical uncertainty, have maintained upward pressure on overall durables inflation.
CORE CONSUMER NON-DURABLE INFLATION DECLINES

STEEPLY
y Consumer non-durables (CND): Consumer non-durables (CND) in the CPI basket include food and
beverages, fuel, and other consumption items. This section focuses on the other core consumer
non-durable components, excluding food and beverages, and fuel and light.
Inflation Trends
y FY20: Core CND inflation declined.
y FY21: Inflation began to rise.
y FY22: Reached an all-time high.
y FY23 and FY24: Sharp decline in inflation.
Key Driver: Changes in the cost of transport components have been the main driver of these inflation
trends.
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FOOD INFLATION
Food price pressures due to adverse weather conditions

y Global Phenomenon: Food inflation has been significant globally in the past two years due to
climate change effects.
y Climate Change Effects: Extreme weather events, uneven monsoon distribution, and lower
reservoir levels impacted agriculture, damaging crops and reducing farm output.
Inflation Trends
y FY22: Food inflation at 3.8%.
y FY23: Increased to 6.6%.
y FY24: Further rose to 7.5%.
Reasons for price pressures in major food items

Vegetables and Pulses
y Vegetables: Tomato prices surged in July 2023 due to seasonal changes, crop diseases, early
monsoon, and logistics disruptions. Onion prices spiked due to weather impacts on rabi onions,
delayed kharif sowing, dry spells, and international trade measures.
y Pulses: Prices of tur and urad increased due to low production from adverse weather. Gram
production also declined compared to the previous rabi season.
Milk Prices
y Increase: Milk prices rose in 2023 due to reduced artificial inseminations during the pandemic
and higher animal feed costs.
Government Actions
• Food Security: The Pradhan Mantri Garib Kalyan Anna Yojana, providing free food grains to over 81
crore beneficiaries, was extended for five years from January 2024.
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Global food prices and domestic inflation

Edible Oils
y Import Dependence: Over 50% of India’s edible oil needs are imported, making it sensitive to
global prices.
y Price Trends: The FAO edible oils price index influences domestic prices. Recent declines in this
index have lowered domestic prices.
y Government Actions: Monitoring global trends and balancing imports with domestic production
to ensure affordability. The National Mission on Edible Oils - Oil Palm aims to boost domestic
production and reduce imports.
Sugar
y Export Restrictions: Implemented in June 2022 to ensure local supply and manage inflation.
y Price Stability: Despite global price volatility since February 2023, domestic sugar prices have
remained stable due to these restrictions.
INTERSTATE VARIATIONS IN RETAIL INFLATION

Consistent with the decline in the all-India average retail inflation rate in FY24 compared
to FY23, inflation in most States and Union Territories (UTs) decreased. The inflation rate was
less than 6 per cent in 29 out of the 36 States and Union Territories.
Interstate variations in inflation are more pronounced in rural areas

Higher Food Weightage
y Rural Basket: Food items constitute 47.3% of the rural consumption basket.
y Urban Basket: Food items constitute 29.6% of the urban consumption basket.
Inflation Trends
y Rural Inflation: States with elevated food prices experienced higher rural inflation.
y Inter-State Variation: Higher in rural areas compared to urban areas.
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Rural-Urban Inflation Gap

y Correlation: Positive correlation between overall state inflation and rural-to-urban inflation gap.
y Examples: Haryana exhibited a wider rural-urban inflation gap compared to Goa, which had lower
overall inflation.
OUTLOOK & WAY FORWARD

Projections
y RBI: Projects headline inflation at 4.5% in FY25 and 4.1% in FY26.
y IMF: Projects inflation at 4.6% in 2024 and 4.2% in 2025.
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Global Commodity Trends

y World Bank: Expects a 3% decline in the commodity price index in 2024 and a 4% decrease in
2025 due to lower energy, food, and fertilizer prices. Energy price declines are driven by coal and
natural gas reductions. Fertilizer prices will weaken but stay above 2015-2019 levels. Base metal
prices are expected to rise.
Short-Term Outlook
y The short-term inflation outlook for India is positive, with expectations of benign inflation.
Long-Term Price Stability Measures

Edible Oils
y Issue: Rising import dependence due to faster consumption growth than production.
y Solution: Increase production of major oilseeds (sunflower, rapeseed, mustard) and explore non-
conventional oils (rice bran oil, corn oil). Expand the National Mission on Edible Oils beyond palm
oil.
Pulses
y Issue: Persistent deficit and price pressures due to concentration in a few states and vulnerability
to stresses.
y Solution: Expand pulse cultivation, particularly lentils, tur, and urad, in more districts and rice-
fallow areas. Promote summer cultivation of urad and moong in irrigated areas.
Vegetables
y Issue: Seasonal surges in prices of vegetables like tomatoes and onions.
y Solution: Improve storage and processing facilities. Assess and develop modern storage facilities
tailored to specific crops.
Administrative Actions
y Current Efforts: Swift action based on daily monitoring of prices at over 500 centers.
y Future Improvements: Enhance price monitoring and clarity by linking high-frequency data and
constructing a producer price index. Expedite revisions to the consumer price index with updated
weights and item baskets based on the latest household consumer expenditure survey.
Q1: With reference to India’s inflation trends Q2: Consider the following statements about
in FY24, which of the following statements the global and domestic factors affecting
is/are correct? India’s inflation:
1. India’s retail inflation in FY24 was the lowest 1. India’s retail inflation in 2023 was lower than
since the pandemic. the global average.
2. The Russia-Ukraine war had no impact on 2. The World Bank projects a decline in the
India’s retail inflation. commodity price index in 2024 and 2025.
3. The RBI increased the policy repo rate to 3. Advanced economies generally have higher
absorb excess liquidity. inflation rates than EMDEs.
Select the answer using the code given below: Which of the above statements is/are correct?
(a) 1 and 2 only (a) 1 and 2 only

(b) 1 and 3 only (b) 2 and 3 only
(c) 2 and 3 only (c) 1 and 3 only
(d) All of the above (d) All of the above
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Q3: Consider the following statements: (b) Both Statement-I and Statement-II are
1. Statement-I: Core inflation excludes correct, but Statement-II does not explain
food and energy items from CPI headline Statement-I
inflation. (c) Only Statement-II is correct
2. Statement-II: Government price cuts for
LPG, petrol, and diesel reduced fuel inflation
(d) Only Statement-I is correct
in FY24.
Q5: With reference to the RBI’s projections and
Which one of the following is correct in respect the World Bank’s expectations, which of
of the above statements? the following statements is/are correct?
(a) Both Statement-II is correct and explains 1. The RBI projects headline inflation at 4.5% in
Statement-I FY25.
(b) Statement-I is correct and explains 2. The World Bank expects a 3% increase in the
Statement-II
commodity price index in 2024.
(c) Only Statement-II is correct
3. The IMF projects India’s inflation rate at 4.2%
(d) Only Statement-I is correct in 2025.
Q4: Consider the following statements: Select the answer using the code given below:
1. Statement-I: Food inflation increased from (a) 1 and 2 only
3.8% in FY22 to 7.5% in FY24.
(b) 2 and 3 only
2. Statement-II: The prices of pulses increased
due to low production caused by adverse (c) 1 and 3 only
weather conditions.
(d) All of the above
Which one of the following is correct in respect
of the above statements? ANSWERS
(a) Both Statement-I and Statement-II
are correct and Statement-II explains
Statement-I 1. (b) 2. (a) 3. (d) 4. (a) 5. (c)

Q1: Discuss the factors contributing to the decline in core inflation in India. What role did housing
rental inflation play in this trend?
Q2: Explain the impact of the Russia-Ukraine war on India’s retail inflation. How did the global
and domestic factors contribute to inflationary pressures?
Q3: Evaluate the effectiveness of India’s administrative actions in mitigating food inflation. What
specific measures were taken to control prices?
Q4: Analyze the role of the Reserve Bank of India (RBI) and the Central Government in maintaining
price stability and managing inflation within the target range.
Q5: How can expanding the National Mission on Edible Oils and promoting pulse cultivation
contribute to stabilizing domestic prices?
**********
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CHAPTER: 4
EXTERNAL SECTOR: STABILITY

AMID PLENTY
Key-Terms
" Global Economic Shocks: Disruptions in the global economy due to events like the COVID-
19 pandemic and geopolitical conflicts, leading to supply chain issues and inflation.
" Foreign Direct Investment (FDI): Investments made by a company or individual in one
country into business interests located in another country.
" Merchandise Trade: Trade of tangible goods (exports and imports) between countries.
" External Debt: Total debt a country owes to foreign creditors, expressed as a percentage
of its GDP.
" Current Account Balance: A country’s balance of trade, net income from abroad, and net
current transfers.
" International Trade Sector: The exchange of goods and services between countries,
critical for economic growth.
" Balance of Payments (BoP): A statement summarizing a country’s transactions with the
rest of the world, including trade, investment, and transfers.
" Foreign Exchange Reserves (FER): Assets held by a central bank in foreign currencies,
used to back liabilities and influence monetary policy.
" Trade Openness Indicator: A measure of the extent to which a country allows trade with
other nations.
" Capital Goods: Physical assets used in production processes, like machinery and
equipment.
" Commodity Price Volatility: Fluctuations in the prices of essential goods like oil, metals,
and agricultural products.
" Nominal Effective Exchange Rate (NEER): An index of a country’s currency value relative
to a basket of other major currencies, not adjusted for inflation.
" Real Effective Exchange Rate (REER): NEER adjusted for inflation differences relative to
trading partners, reflecting external competitiveness.
" Global Capability Centres (GCCs): Offices set up by multinational companies in offshore
locations to provide various support services.
" Producer Price Index (PPI): An index measuring the average change in selling prices
received by domestic producers for their output.
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" International North-South Transport Corridor (INSTC): A transportation network to

facilitate trade between India, Russia, and Europe.
" India-Middle East Europe Corridor (IMEC): A proposed trade route connecting Asia with
Europe via ports and railroads.
" Import Release Time: The time taken for goods to be cleared for entry into a country after
they arrive at the border.
" Hershman-Herfindahl Index (HHI): A measure of market concentration used to determine
the level of competition within an industry.
y Disinvestment: The process of selling off government-owned assets or stakes in public
sector enterprises.
y Consumer Price Index (CPI): An index measuring the average change in prices over
time that consumers pay for a basket of goods and services.
y Inflation Targeting: A monetary policy strategy used by central banks to keep inflation
within a specified target range.
y Export Credit Insurance: Insurance provided to exporters to protect against the risk of
non-payment by foreign buyers.
y Sovereign Bonds: Debt securities issued by a national government to support
government spending.
y Trade Deficit: A situation where a country’s imports exceed its exports, resulting in a
negative balance of trade.
Chapter at a Glance
" Objective of the Chapter: The objective is to provide an overview of the developmental
issues and challenges faced by India’s urban and rural areas. It aims to explore the existing
policies, schemes, and initiatives that address these challenges and promote sustainable
development.
" Brief Analysis of the Chapter: It offers a comprehensive analysis of urban and rural
development in India, focusing on the disparities and developmental challenges between
these two sectors. It critically examines the policies and strategies implemented by the
government to bridge the urban-rural divide and promote inclusive growth. The chapter
also discusses the impact of various schemes and initiatives on enhancing infrastructure,
livelihood opportunities, and quality of life in both urban and rural areas.
Schemes/Initiatives
" Pradhan Mantri Awas Yojana (PMAY): It is a scheme launched to provide affordable housing
to all urban and rural poor by 2022.
" Swachh Bharat Mission (SBM): It is a nationwide cleanliness campaign aimed at achieving a
clean and open-defecation free India.
" Smart Cities Mission: It is an initiative to develop 100 smart cities across the country with
efficient urban infrastructure and sustainable development.
" Deen Dayal Antyodaya Yojana (DAY): It is a scheme focusing on poverty alleviation and
livelihood enhancement among the urban and rural poor.
" MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): It is a social
security measure that guarantees the right to work and ensures livelihood security in
rural areas.
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INTRODUCTION
Since the COVID-19 pandemic, the global economy has faced numerous shocks, including the Russia-
Ukraine conflict and Middle East developments, leading to supply disruptions and rising inflation. In
2024, the policy uncertainty is heightened by elections in 64 countries, impacting international trade
and foreign investments. Higher interest rates and active industrial policies, such as the U.S. Inflation
Reduction Act, have slowed foreign investments.
Global Trade and Investment Trends

y FDI Decline: Global foreign direct investment (FDI) decreased by 2% to USD 1.3 trillion in 2023.
y Trade Slowdown: World merchandise trade value declined by 5% in 2023.
y External Debt: EMDEs’ external debt as a percentage of GDP increased from 26.2% in 2012 to
29.8% in 2023.
y Current Account Balances: Advanced Economies saw a surplus in 2023, while EMDEs had a
surplus that moderated from 1.5% of GDP in 2022 to 0.6% in 2023.
India’s External Sector Performance

y Global Trade Dynamics: Discusses the impact of geopolitical headwinds on global trade.
y International Trade Sector: Examines India’s trade performance, case studies of export industries,
and outcomes of recent Free Trade Agreements (FTAs).
y Capital Flows: Analyzes trends in capital inflows into India.
y Balance of Payments: Compares India’s BoP situation with peer countries, including foreign
exchange reserves and international investment position.
y External Debt Management: Reviews trends and management of India’s external debt.
y Outlook and Challenges: Concludes with the outlook for India’s external sector and key
challenges.
CHANGING GLOBAL TRADE DYNAMICS
Shifts in Trade Patterns

y Mexico and Vietnam: Mexico surpassed China and Canada as the largest goods trade partner of
the US in 2023. Vietnam’s trade with China and the US has significantly increased.
y Energy Imports: European economies are shifting energy imports from Russia to Norway and
the US.
Trade Trends and Policies

y Decoupling and De-Globalization: New practices like decoupling and nearshoring are emerging,
but true decoupling, especially between the US and China, is unlikely.
y Global Trade Volume: Contracted by 1.2% in 2023, but commercial services trade increased by
9%.
Future Projections
y Trade Growth: Expected to grow at 2.6% in 2024 and 3.3% in 2025.
y Challenges: Geopolitical tensions, policy uncertainty, and restrictive trade practices could limit
the rebound.
Shipping Disruptions
y Panama and Suez Canals: Disruptions due to freshwater shortages and route diversions have
increased shipping costs.
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India’s Position
y Trade Resilience: India is expected to benefit from strong trade relations with Asia, Europe, and
the US. The following section will discuss India’s trade performance in detail.
INDIA’S TRADE: RESILIENCE AMIDST GLOBAL TURMOIL
Trade Contribution
International trade has significantly contributed to India’s economic growth through reforms and
facilitative measures. The share of trade (goods and services) in GDP has increased over time.
Trade Openness Indicator

y Increase: The trade openness indicator rose from 37.5 in FY05 to 45.9 in FY24.
y Impact: This increase has facilitated efficient resource allocation through comparative
advantage.
Trade Share in GDP

y Growth: The share of trade (excluding petroleum products exports and crude oil imports) in GDP
increased from 32.3% in FY05 to 40.8% in FY23.
Global Market Share

y Goods Exports: India’s share in global goods exports was 1.8% in FY24, up from an average of
1.7% during FY16-FY20.
y Services Exports: India’s share in global services exports rose to 4.3% in FY23, from an average
of 3.3% during FY16-FY20.
Table IV.1: Key aspects of India‘s trade (Calendar year-wise)
2020 2021 2022
Export performance (in per cent)
Share in World Merchandise Exports 1.6 1.8 1.8
Share in World Commercial Services Exports 4.1 4.0 4.4
Share in World Merchandise Plus Services Exports 2.1 2.2 2.4
Import Performance (in per cent)
Share in World Merchandise Imports 2.1 2.5 2.8
Share in World Commercial Services Imports 3.3 3.5 4.0
Share in World Merchandise Plus Services Imports 2.3 2.7 3.0
India’s rank in world trade
Merchandise Exports 21.0 18.0 18.0
Merchandise Imports 14.0 10.0 9.0
Services Exports 7.0 8.0 7.0
Services Imports 10.0 10.0 8.0
Source: DGFT, Monthly Bulletin on Foreign Trade Statistics, April 2024
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INDIA’S OVERALL TRADE
Export Growth
y Secular Growth: India’s overall exports (merchandise and services) grew consistently from FY17
to FY19.
y Economic Slowdown: FY20 experienced a slowdown due to the global pandemic.
y Recovery: FY22 marked a significant recovery, continuing into FY23 with exports crossing USD 776
billion.
y FY24 Performance: Despite global challenges, overall exports in FY24 surpassed FY23, growing
by 0.23%.
Import Trends
y Growth: Overall imports increased to USD 898 billion in FY23 from USD 760.1 billion in FY22.
y Decline: In FY24, imports declined by 4.9% despite strong domestic demand.
FY25 Early Trends

y Exports: Increased to USD 133.6 billion in the first two months of FY25, compared to USD 122.4
billion in the previous year.
y Imports: Rose from USD 136.4 billion to USD 149.9 billion in the same period, widening the trade
deficit from USD 14 billion to USD 16.3 billion.
MERCHANDISE TRADE: ENDURING THE GLOBAL

HEADWINDS
Recent Trends
y Contraction and Reversal: India’s merchandise exports contracted in H2 FY23 and H1 FY24 due
to geopolitical tensions but showed positive growth in H2 FY24.
y Growth: Despite the growth in H2 FY24, merchandise exports and imports contracted overall in
FY24 compared to FY23.
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Export and Import Dynamics

y Export Decline Factors: The decline in exports was due to the slowdown in major export partners,
particularly the EU, and the impact of monetary tightening.
y Import Value Decline: The value of imports fell due to a drop in global commodity prices, despite
steady import volumes.
y Trade Deficit: The merchandise trade deficit narrowed to USD 238.3 billion in FY24 from USD 264.9
billion in FY23.
Resilient Sectors
y Non-Petroleum and Non-Gems & Jewellery Exports: These sectors showed resilience, with
exports rising to USD 320.2 billion in FY24, a 1.5% increase.
y Imports: Non-petroleum, non-gems & jewellery imports contracted by 3.5% in FY24.
Early FY25 Trends

y Increased Exports: India’s merchandise exports rose to USD 73.1 billion in April-May 2024 from
USD 69.6 billion in the same period the previous year.
Export Composition Shift

y Capital Goods: The share of capital goods in exports increased from 16.3% in FY23 to 18.9% in
FY24.
y Consumer Goods: The share of consumer goods slightly declined from 48.9% to 47.5%.
y Intermediate Goods: The share declined from 30.2% to 28.4%.
Regional Diversification
y Diversification: India is expanding export destinations, reducing the concentration on top 10
countries from 61.9% in FY2000 to 50.5% in FY24.
y Emerging Markets: Post-FY2000, Asia, Africa, and the Middle East, including the UAE, Singapore,
Hong Kong, and China, have become significant export destinations.
y Developing Regions: The share of Asia and Africa in India’s exports increased from 42.9% in
FY2000 to 52% in FY24. Major export partners in FY24 included UAE, Singapore, China, Russia, and
Australia.
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SECTORAL TRENDS
POL Exports
y Decline in Value: POL exports value declined by 13.7% from USD 97.5 billion in FY23 to USD 84.2
billion in FY24 due to falling global petroleum prices.
y Volume Increase: POL export volumes increased from 99 million tonnes in FY23 to 108 million
tonnes in FY24.
y Long-Term Growth: Over the past six years, POL exports grew by 80.8%, from USD 46.6 billion in
FY19 to USD 84.2 billion in FY24, with a share increase in global POL exports from 4.3% in 2018 to
4.8% in 2022.
Non-POL Exports
y Engineering Goods: Dominated merchandise exports, maintaining a 25% share in FY24 with
exports reaching USD 109.3 billion.
y Agriculture and Allied Products: Maintained around an 11% share, with exports peaking at USD
52.7 billion in FY23 before slightly declining to USD 48.3 billion in FY24.
y Chemicals and Plastics: Grew from USD 31 billion in FY19 to USD 37.5 billion in FY24, but their
share declined from 9.4% to 8.6%.
y Textiles: Experienced a decline in exports from USD 37.5 billion in FY19 to USD 34.8 billion in FY24,
with the share dropping from 11.4% to 8%.
Electronics Exports
y Improvement: India’s share in world electronics exports increased from 0.63% in 2018 to 0.88%
in 2022.
y Rank and Share: India’s global rank rose from 28th in 2018 to 24th in 2022. The share of electronics
in merchandise exports grew from 2.7% in FY19 to 6.7% in FY24.
Drugs and Pharmaceuticals

y Strong Growth: The sector’s share in India’s exports grew from 5.8% in FY19 to 6.4% in FY24, with
exports rising from USD 19.1 billion in FY19 to USD 27.9 billion in FY24.
MERCHANDISE IMPORTS
Overall Trends
y Contraction: Merchandise imports contracted by 5.7% in FY24, decreasing from USD 716 billion in
FY23 to USD 675.4 billion in FY24.
y Primary Drivers: The decline was driven by reduced imports of petroleum, crude and products,
fertilizers, pearls, precious and semi-precious stones, organic and inorganic chemicals, and textile
yarn fabric.
Recent Developments
y Increase in Early FY25: Due to rising domestic demand, merchandise imports increased from
USD 106.5 billion during April-May 2023 to USD 116 billion during April-May 2024.
Shifts in Import Composition

y Capital Goods: Increased imports indicate higher demand for machinery, equipment, and durable
goods, suggesting potential industrial investments and technological upgrades.
y Consumer Goods: A marginal increase in the share of consumer goods imports reflects a stable
but limited rise in the importation of finished products for direct consumption.
y Intermediate Goods: Slight rise in the share of intermediate goods imports, indicating ongoing
demand for semi-finished products, components, or materials for further manufacturing.
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SERVICES AS A SHINING STAR IN EXPORTS
Growth and Global Position

y CAGR: Services exports expanded at a CAGR of over 14% from 1993 to 2022, surpassing merchandise
export growth (10.7%) and world services export growth (6.8%).
y Global Share: India’s share in world services exports rose from 0.5% in 1993 to 4.3% in 2022.
y Global Rank: India is the seventh-largest services exporter, up from 24th in 2001.
Sector Rankings
y Telecommunication, Computer, and Information Services: 2nd globally.
y Personal, Cultural, and Recreational Services: 6th globally.
y Other Business Services: 8th globally.
y Transport Services: 10th globally.
y Travel Services: 14th globally.
Impact on Balance of Payments

y BoP Strength: Services exports have strengthened India’s BoP position by offsetting the
merchandise trade deficit.
Evolution of Services Exports

y Value Chain Integration: India’s integration into the global software industry has shifted from
providing back-end BPO services to offering high-value-added services.
y Global Capability Centres (GCCs): The Russia-Ukraine conflict and global inflation have driven
the proliferation of GCCs in India, providing cost-effective back-office operations.
Composition of Services Exports

y IT Services: Remain the largest contributor at 48% in FY24, down from 50% in FY21.
y Other Business Services: Achieved a CAGR of 18% between FY20 and FY24, now the second-
largest contributor at 26%.
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INDIA’S RISING GLOBAL VALUE CHAINS (GVC)

PARTICIPATION
Evolution of GVCs
y Hyperglobalisation: Early 2000s saw rapid GVC expansion, boosting trade and reducing supply
chain costs.
y Slowbalisation: Post-2008 financial crisis, GVC growth slowed due to uncertainties like the China-
USA trade war, COVID-19 pandemic, and Russia-Ukraine conflict.
y Recovery: Recent trends show a recovery in GVCs, with increased foreign export inputs and
participation rates.
India’s GVC Participation

y Historical Growth: India’s GVC participation increased from the 1990s to 2000s, with foreign
value-added content of exports rising from 10% in 1995 to 22% in 2009.
y Post-GFC Decline: Participation declined after the global financial crisis.
y Recent Revival: Schemes like PLI and Districts as Exports Hub (DEH) have revitalized GVC
participation.
Sectoral Successes
y Increased Investment: Foreign investments have surged in sectors like electronics, apparel, toys,
automobiles, capital goods, and semiconductor manufacturing.
y Example: Apple assembled 14% of its global iPhones in India in FY24. Foxconn invested in Karnataka
and Tamil Nadu for new manufacturing plants.
Regional Shifts
y Asia’s Benefit: Asia, particularly India, Vietnam, Mexico, Thailand, Malaysia, and Indonesia, has
benefited from shifting supply chains.
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CHANGING LANDSCAPE OF INDIA’S GLOBAL TRADE

ARRANGEMENTS
Recent FTAs
India-Mauritius CECPA:
y Significance: First trade agreement with an African country.
y Trade Growth: Total trade increased by 168% from FY06 to FY23.
y Key Exports and Imports: India’s exports include pharmaceuticals, cereals, and cotton, while
Mauritius exports vanilla, medical devices, and refined copper.
India-UAE CEPA:
y Trade Relations: UAE has been one of India’s top trade partners for two decades.
y Trade Growth: Bilateral trade in FY24 was USD 83.7 billion.
India-Australia ECTA:
y Complementary Trade: Australia provides resources and primary products, while India exports
finished goods.
y Trade Growth: Bilateral trade increased from USD 25 billion in FY22 to USD 26 billion in FY23.
y Market Access: Immediate market access at zero duty for 98.3% of tariff lines.
India-EFTA TEPA:
y Significance: First FTA with European countries (Switzerland, Norway, Iceland, Liechtenstein).
Ongoing FTA Negotiations

y Notable FTAs: India is negotiating FTAs with the UK, EU, Australia (CECA), Peru, Eurasian Economic
Union, and Sri Lanka.
y Review of Existing FTAs: Reviews initiated for India-South Korea CEPA and ASEAN-India Trade in
Goods Agreement (AITIGA).
GOVERNMENT INITIATIVES ON TRADE FACILITATION

MEASURES AND REDUCTION IN LOGISTICS COST
Measures to Enhance Trade and Exports

y Export Targets: Setting and monitoring export targets, followed by course corrections.
y Export Credit Insurance: Provision of export credit insurance for short, medium, and long-term
exports.
y MSME Support: Encouraging banks to provide affordable export credit to MSME exporters to
explore new markets and diversify products.
y Streamlined Trade Processes: Initiatives like Turant Customs, SWIFT, pre-arrival data processing,
e-Sanchit, and Coordinated Border Management to enhance transparency and cooperation among
stakeholders.
Technological Initiatives by CBIC

y Electronic Systems: Implementation of electronic cash ledger, electronic clearances at Land
Customs Stations, online IFSC Code submission, and use of Electronic Certificates of Origin.
Logistics Cost Reduction and Efficiency

y National Master Plan: Launch of PM GatiShakti National Master Plan and National Logistics Policy
(NLP) to boost efficiency.
y Digital Reforms: Implementation of Unified Logistics Interface Platform (ULIP) and Logistics Data
Bank.
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y Port Logistics: Launch of NLP Marine for port-related logistics, with over 614 industry players
registered on ULIP and multiple applications made live.
Performance Improvements
y Global Survey Scores: Improvement in India’s score in the UNESCAP’s Global Survey on Digital
and Sustainable Trade Facilitation from 90.3% in 2021 to 93.5% in 2023.
y Women in Trade Facilitation: Improvement in the “Women in Trade Facilitation” component
from 66.7% in 2021 to 77.8% in 2023.
y Import Release Time: National Time Release Study (2023) showed a 20% improvement in overall
average import release time.
y Logistics Performance Index: India’s rank improved to 38th in 2023 from 44th in 2018, with
significant improvements in cargo tracking, infrastructure score, and logistics competence.
Port-Led Development
y Sagarmala Scheme: Promoting port-led development, increasing port capacity, and
operationalizing 23 waterways by 2030.
y Cargo Movement: Increase in cargo moved through waterways by 7.5% from April to November
2023 compared to the same period in 2022.
Impact of GST
y Travel Time Reduction: GST reduced travel time by up to 30% and increased the average distance
trucks travel from 225 km to 300-325 km.
y Logistics Cost Reduction: NCAER study showed a decline in logistics costs by 0.8 to 0.9 percentage
points of GDP between FY14 and FY22.
State-Level Improvements
y LEADS Report: Positive shift in stakeholders’ perception across logistics performance services,
infrastructure, and regulatory environment in 2023 compared to 2019.
FAVOURABLE CURRENT ACCOUNT BALANCE

Recent Trends
y Trade Deficit and Remittances: As discussed in para 4.13, a narrowing trade deficit and increasing
remittances have improved the CAD in FY24.
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y CAD Improvement: India’s CAD narrowed to USD 23.2 billion (0.7% of GDP) in FY24 from USD 67
billion (2% of GDP) in the previous year.
y Q4 FY24 Surplus: The surplus in CAD during Q4 FY24 was driven by a decline in the merchandise
trade deficit, rising net services exports, and increasing remittances.
INVISIBLES
Net Services Receipts

y Increase: Net services receipts rose from USD 143.3 billion in FY23 to USD 162.8 billion in FY24.
y Primary Drivers: Growth was driven by rising exports of software, travel, and business services.
Remittances
y Growth: Net private transfer receipts, mainly remittances, increased to USD 106.6 billion in FY24
from USD 101.8 billion in FY23.
y Significance: Remittances, the second largest source of external financing after service exports,
are crucial for narrowing the CAD and stabilizing the Balance of Payments (BoP).
Global Context
y Top Recipient: India is the largest remittance recipient, reaching USD 120 billion in 2023.
y Drivers: The increase was driven by declining inflation, strong labour markets in the US and
Europe, and demand for workers in GCC countries.
Future Projections
y Forecasted Growth: Remittances to India are expected to grow at 3.7% to USD 124 billion in 2024
and 4% to USD 129 billion in 2025.
y South Asian Share: India’s share in South Asian remittances increased to 64.5% in 2023 from 63%
in 2022.
Stability and Impact

y Stability: Remittances are a stable source of finance, unlike pro-cyclical and potentially destabilizing
FDI.
y BoP Perspective: Remittances provide permanent foreign currency inflows, help finance the
merchandise trade deficit, and contribute to narrowing the CAD. For net importers like India,
higher remittances partially offset the goods trade deficit, stabilizing the CAD.
CAPITAL ACCOUNT BALANCE
Capital Inflows in FY24

y Net Capital Flows: Increased to USD 86.3 billion in FY24 from USD 58.9 billion in FY23.
y Drivers: Primarily driven by Foreign Portfolio Investment (FPI) flows and net inflows of banking
capital, including NRI deposits.
Foreign Portfolio Investment (FPI)

y Turnaround: Net FPI inflows stood at USD 44.1 billion in FY24, the highest since FY15.
y Sectors Attracting Investment: Financial services, automobile and auto components, healthcare,
and capital goods.
y JP Morgan Government Bond Index: Inclusion expected to spur higher debt inflows.
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Global FDI Trends

y Global Decline: Global FDI declined by 2% to USD 1.3 trillion in 2023.
y Factors: Weakened growth prospects, geopolitical tensions, and cautious approaches by MNEs.
y Mergers and Acquisitions: Fell by 46%, impacting FDI in developed countries.
y Greenfield Investments: Increased by 2%, concentrated in manufacturing.
FDI Inflows to India

y Net FDI Inflows: Declined from USD 42.0 billion in FY23 to USD 26.5 billion in FY24.
y Gross FDI Inflows: Moderated slightly from USD 71.4 billion in FY23 to just under USD 71 billion
in FY24.
y Repatriation/Disinvestment: Surge in profitable exits, with repatriation increasing from USD

29.3 billion in FY23 to USD 44.5 billion in FY24.
y Investor Interest: No significant change in gross inflows indicates continued investor interest.
AN EXAMINATION OF CHANGE IN TREND AND

COMPOSITION OF FDI FLOWS
Recent Trends
y Weakened FDI Inflows: Both the industry and services sectors have seen weakened FDI inflows
in recent years.
y FDI-to-GDP Ratio: The share of FDI in GDP for industry sectors declined from 0.62% in FY20 to
0.39% in FY24, and for the services sector, it fell from 0.87% to 0.69%.
Physical vs. Digital FDI

Definitions
y Physical FDI: Includes sectors like automobiles, pharmaceuticals, and construction.
y Digital FDI: Includes sectors like computer services, telecommunications, consultancy services,
and information and broadcasting.
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Trends
y Shift in FDI: Digital FDI has increased, driven by investment in software, hardware, and
telecommunications, while physical FDI has stagnated.
y Impact of Geopolitics: Rising protectionism and geopolitical tensions have contributed to the
stagnation of physical FDI.
y Pandemic Impact: The work-from-home culture and digital infrastructure availability boosted
digital FDI, increasing its share from 46.6% in FY17 to 69.2% in FY21.
y Recent Decline: Both digital and physical FDI have fallen recently, partly due to reduced global
investment in tech start-ups.
Actual FDI vs. Intentions

Investment Intentions
y Divergence: There has been a divergence between FDI inflows and investment intentions since
FY16.
y New Sectors: Investment intentions are increasing in sectors like renewables, AI, data centers,
EVs, batteries, green hydrogen, and semiconductors.
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Correlation with FDI Inflows

y Predictive Power: A strong correlation (over 56%) exists between investment intentions (CMIE
and UNCTAD data) and FDI inflows.
y Sector Concentration: FDI inflows have been concentrated in a few sectors, as indicated by the
Hershman-Herfindahl Index (HHI).
Attracting FDI
Current Focus
y Greenfield Projects: India has infrastructure to attract FDI in select sectors, including renewables
and digital services.
y Ease of Doing Business: Further improvements are needed across national, state, and local levels
to make sectors more accessible for investments.
Global Competition
y Competing with Advanced Nations: India competes with both developing and advanced nations
for FDI. Advanced nations use industrial policies and subsidies to attract and retain investments.
y Key Factors: Educated labor, skilled workforce, vibrant R&D culture, political stability, policy
predictability, reasonable duties and taxes, dispute resolution mechanisms, and ease of repatriation
are crucial for attracting FDI.
Future Directions
Improving Education and Skills

y Sustained Interest: Better educational and skill outcomes are essential for sustained investor
interest and accumulation of knowledge in India.
Box Discussion: FDI Inflows from China

y Global Supply Chain: Increased FDI inflows from China can help India participate more in global
supply chains and boost exports.
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COMFORTABLE FOREIGN EXCHANGE RESERVES
CAD Moderation and Capital Inflows

y CAD Moderation: The current account deficit (CAD) narrowed amidst large capital inflows.
y Capital Inflows: Enabled the addition of foreign exchange reserves (FER) in FY24.
Importance of FER
y Economic Cushion: FER insulates domestic economic activity from global spillovers and provides
liquidity.
y External Obligations: Ensures India can meet its external obligations.
FER Increase in FY24

y Significant Growth: India’s FER increased by USD 68 billion, the highest among major foreign
exchange reserves-holding countries.
y Current Level: FER stood at USD 653.7 billion on 21 June 2024.
Coverage
y Import Coverage: FER can cover more than 10 months of imports projected for FY25.
y Debt Coverage: FER covers more than 98% of total external debt outstanding at the end of March
2024.
EXCHANGE RATES
US Economic Resilience in FY24

y Positive Indicators: Tight labor market and upbeat consumer sentiment.
y Impact: Drew global funds to US treasury markets, increasing demand for the US dollar as a safe
haven.
y Dollar Strength: The US dollar gained against major peers, contributing to global currency
volatility.
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Rupee Performance and Stability

y Depreciation Pressure: The INR faced depreciation pressure but remained one of the least
volatile major currencies.
y Volatility Measurement: The coefficient of variation (CV) was 0.58 in FY24, lower than in previous
years.
y Exchange Rate Range: The INR/USD exchange rate ranged between ₹82-83.5/USD, with a 2.9%
depreciation against the USD in FY24.
y Comparison with Other Currencies: The Rupee depreciated by 6.9% against the Pound Sterling
and 6.8% against the Euro, but appreciated by 3.5% against the Japanese Yen.
RBI’s Role and Measures

y Market-Determined Exchange Rate: The INR is market-determined, with the RBI intervening
only to curb undue volatility.
y Regulatory Measures: Revised the regulatory regime for FPI investment in debt flows to encourage
foreign investment in Indian debt instruments.
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y Forex Funding Diversification: Announced measures to diversify and expand forex funding
sources to mitigate exchange rate volatility.
NEER and REER Indicators

y NEER: The Nominal Effective Exchange Rate depreciated by 0.6% in FY24, with a slight appreciation
to 92.2 in May 2024.
y REER: The Real Effective Exchange Rate appreciated by 0.8% in FY24, recording 104.7 in May 2024,
reflecting an appreciation of 1.2%.
INTERNATIONAL INVESTMENT POSITION (IIP)

Overview
y Net IIP Definition: The Net International Investment Position measures the difference between a
country’s external assets and liabilities, indicating whether it is a net creditor or debtor nation.
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External Assets
y Increase in Assets: As of the end of March 2024, Indian residents’ overseas financial assets stood
at USD 1,028.3 billion, an increase of USD 109.7 billion (11.9%) compared to March 2023.
y Components of Assets: The rise was mainly due to increased reserve assets, currency and
deposits, overseas direct investment, trade credit and advances, and loans.
y Reserve Assets: Reserve assets were USD 646.4 billion, accounting for 62.9% of India’s international
financial assets, and increased by 11.8%.
International Liabilities
y Increase in Liabilities: International liabilities reached USD 1,390 billion by the end of March
2024, up by USD 104.3 billion (8.1%) from March 2023.
y Components of Liabilities: The increase was mainly due to higher portfolio investment, loans,
direct investment, and other accounts payable.
y Debt Liabilities: Debt liabilities made up 51.1% of total external liabilities as of March 2024.
Net Claims
y Net Claims Decline: Net claims of non-residents in India were valued at USD 361.7 billion as of the
end of March 2024, a decline of USD 5.5 billion compared to March 2023.
y Coverage Ratio: India’s international financial assets covered 74% of international financial
liabilities as of March 2024.
STABLE EXTERNAL DEBT POSITION
Current Account Balance

y Definition: The current account reflects the difference between national savings (both public and
private) and investment. A deficit may indicate low national savings relative to the desired level of
investment.
Role of External Debt

y Growth Supplement: External debt supplements domestic savings, aiding faster growth,
especially in developing economies.
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y Risks: While high economic growth is often associated with high external debt, an unsustainable
large stock of external debt can create vulnerabilities and hinder growth prospects.
India’s External Debt Management

y Prudent Management: India has managed its external debt with the objective of maintaining a
sustainable current account deficit and encouraging non-debt external finance.
Sustainable Debt Levels:

y The external debt to GDP ratio declined to 18.7% at the end of March 2024 from 19.0% at the end
of March 2023.
y The share of short-term debt (original maturity up to one year) in total external debt declined to
18.5% from 20.6% over the same period.
y The ratio of Foreign Exchange Reserves (FER) to total debt stood at 97.4% as of March 2024.
Comparative Debt Vulnerability

y Indicators: India has relatively low levels of total debt as a percentage of Gross National Income
(GNI) and short-term external debt as a percentage of total external debt compared to peer
countries.
y FER Cushion: The comfortable level of FER provides additional stability and security against
external shocks.
Outlook and Challenges
Positive Outlook
y Lower Trade Deficit: Despite geopolitical risks, lower international commodity prices reduced
India’s trade deficit in FY24 compared to FY23.
y Improved CAD: Narrowing merchandise trade deficit and rising service exports resulted in a
current account surplus of 0.6% of GDP in Q4 FY24.
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y Future Projections: With the expansion of the PLI scheme and new FTAs, India’s trade deficit is
expected to decline, and the CAD to GDP ratio is anticipated to moderate to below 1% for FY24.
Risks and Challenges
Demand from Trading Partners:

y Declining Imports: The US, India’s second-largest trading partner, saw a 1.7% decline in overall
import volume in 2023, impacting India’s exports.
y Rising Protectionism: Increasing protectionist measures could undermine trade recovery.
Increased Trade Costs:

y Shipping Disruptions: Attacks on shipping in the Red Sea and drought in the Panama Canal have
rerouted trade flows, increasing costs and journey times, impacting India’s maritime trade.
y Fertilizer Imports: The Red Sea crisis has affected Middle Eastern fertilizer exports to India,
particularly Muriate of Potash from Jordan and Israel.
Commodity Price Volatility:

y Impact on Trade Balance: Fluctuations in prices of critical imports like oil, metals, and agricultural
products can affect India’s trade balance and inflation.
y Global Growth: Disappointing global growth and additional trade restrictions could exacerbate
these issues.
Trade Policy Changes:

y Export Restrictions: An increase in export restrictions globally affects India’s export opportunities
and market access. The WTO reports significant new export restrictions since 2020, impacting
global trade.
Strategic Initiatives
y Manufacturing Push: Schemes like PLI and Make in India aim to enhance manufacturing in
complex and niche sectors.
y Services Sector: India’s strength in services will drive globalisation, with ongoing demand for
service exports.
Logistics and Trade Agreements

y Infrastructure Development: Initiatives like the International North-South Transport Corridor
(INSTC) and the India-Middle East Europe Corridor (IMEC) are expected to enhance trade
efficiency.
y Trade Agreements: Efforts are being made to strike trade agreements with diverse countries,
promoting regional trade ties and expanding markets for Indian goods.
Competitiveness and Opportunities

y Agricultural Exports: India has potential as a large global exporter of agricultural commodities.
y Quality and Policy Stability: Improving product safety and quality in the private sector, along
with maintaining policy stability in the public sector, are crucial for turning challenges into
opportunities.
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Table IV.3: India’s key external debt indicators: A snapshot of stability
(Per cent, unless indicated otherwise)
End- External External Debt Foreign Concessional Short- Short-

March Debt Debt to Service Exchange Debt to Total Term Term
(USD GDP Ratio Reserves Debt Debt to Debt
billion) to Total Foreign (original
Debt Exchange maturity)
Reserves to Total
Debt
2018 529.3 20.1 7-5 80.2 9.1 24.1 19.3
2019 543.1 19.9 6.4 76.0 8.7 26.3 20.0
2020 558.4 20.9 6.5 85.6 8.8 22.4 19.1
2021 573-4 21.1 8.2 100.6 9.0 17.5 17.6
2022 R 618.8 19.9 5.2 98.1 8.3 20.0 19.7
2023PR 624.1 19.0 5-3 92.7 8.2 22.2 20.6
2024 P 663.8 18.7 6.7 97.4 7-5 19.0 18.5
Source: Ministry of Finance
R: Revised, PR: Partially Revised; P: Provisional
PRACTICE PRACTICE QUESTION
Q1: Consider the following statements: Which of the above statements is/are
correct?
1. India’s trade openness indicator increased
from 37.5 in FY05 to 45.9 in FY24. (a) 1 and 2 only
2. The share of trade (excluding petroleum (b) 2 and 3 only
products exports and crude oil imports) in
(c) 1 and 3 only
India’s GDP declined from 32.3% in FY05 to
30.8% in FY23. (d) 1, 2 and 3
Which of the above statements is/are correct? Q3: Consider the following statements
(a) 1 only regarding India’s Free Trade Agreements
(FTAs):
(b) 2 only
1. The India-Mauritius CECPA is the first trade
(c) Both 1 and 2 agreement India signed with an African
country.
(d) Neither 1 nor 2
2. The India-UAE CEPA includes a separate
Q2: Consider the following statements about annex for pharmaceuticals to facilitate
India’s trade performance: market access.
1. India’s share in global goods exports was Which of the above statements is/are correct?
1.8% in FY24.
(a) 1 only
2. India’s services exports rose to 4.3% of global
(b) 2 only
services exports in FY23.
(c) Both 1 and 2
3. The volume of merchandise imports in India
declined in FY24. (d) Neither 1 nor 2
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Q4: Consider the following statements about 1. India is the top remittance recipient country,
India’s foreign exchange reserves (FER): with remittances reaching USD 120 billion in
1. India’s FER increased by USD 68 billion in 2023.
FY24. 2. Remittances are considered pro-cyclical and
2. FER can cover more than 10 months of destabilizing compared to Foreign Direct
imports projected for FY25. Investment (FDI).
3. FER covers more than 98% of total external Which of the above statements is/are correct?
debt outstanding at the end of March 2024.
(a) 1 only
Which of the above statements is/are correct?
(b) 2 only
(a) 1 and 2 only
(c) Both 1 and 2
(b) 2 and 3 only
(d) Neither 1 nor 2
(c) 1 and 3 only
(d) 1, 2 and 3 ANSWERS
Q5: Consider the following statements
regarding India’s remittances: 1. (a) 2. (a) 3. (c) 4. (d) 5. (a)

Q1: Discuss the impact of global geopolitical tensions on India’s merchandise trade in recent
years. How has India managed to navigate these challenges to sustain its export growth?
Q2: Examine the role of remittances in India’s current account balance. How do remittances
compare to Foreign Direct Investment (FDI) in terms of stability and impact on the
economy?
Q3: Analyze the significance of India’s Free Trade Agreements (FTAs) signed between 2021 and
2024. How do these agreements align with India’s broader trade strategy?
Q4: Evaluate the recent trends in India’s foreign direct investment (FDI) inflows, focusing on
the shift between physical and digital FDI. What are the key challenges and opportunities in
attracting FDI in the current global economic climate?
Q5: Discuss the measures taken by the Indian government to enhance trade facilitation and
reduce logistics costs. How have these measures improved India’s performance in global
trade indices?
**********
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CHAPTER: 5
MEDIUM TERM OUTLOOK: A

GROWTH VISION FOR NEW INDIA
Key-Terms
" Horticulture: Horticulture refers to the branch of agriculture that deals with the art, science,
technology, and business of growing plants.
" Low-Middle-Income Country: This term categorizes countries based on their gross
national income (GNI) per capita. Low-middle-income countries are those with a GNI per
capita between the lower and upper thresholds defined by the World Bank. These countries
typically have emerging economies, where income levels are higher than those in low-income
countries but lower than those in upper-middle-income and high-income countries.
" Informal Micro Enterprises (IMEs): Informal Micro Enterprises (IMEs) refer to small-scale
businesses or economic activities that operate outside the formal regulatory frameworks
and lack legal protections.
Chapter at a Glance
" Objective of the Chapter: The objective is to outline India’s medium-term growth outlook
and strategies towards achieving its vision of becoming a developed nation by 2047. It
emphasizes sustaining economic growth through reforms, addressing environmental
concerns, enhancing education and skills, and leveraging domestic resources amid global
challenges. The chapter sets a framework for inclusive and resilient growth, focusing on
sectors like private sector investment, MSME support, agriculture, green transition
financing, education, and state capacity building.
" Analysis: The chapter provides a comprehensive analysis of India’s economic trajectory
from 1993 to 2024, highlighting significant growth milestones and the path forward towards
becoming a developed nation.
y It discusses the challenges posed by global economic shifts, climate change, and
technological advancements.
y Key areas such as job creation, skill development, agricultural modernization, and
green financing are analyzed in the context of fostering sustainable and inclusive
growth. The chapter underscores the importance of effective policy implementation,
resilience in the face of global uncertainties, and the role of domestic reforms in achieving
long-term economic objectives.
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y Aatmanirbhar packages: Government initiatives aimed at promoting self-reliance and
supporting domestic manufacturing.
y Production Linked Incentive (PLI) scheme: It is designed to enhance manufacturing
capabilities and attract investments in specific sectors.
y National Infrastructure Pipeline: It aims to boost infrastructure development across
sectors to support economic growth.
y Make in India Mittelstand: This program aims to support small and medium-sized
enterprises (SMEs) in manufacturing and export sectors.
y Mission Karmayogi: It focuses on building state capacity through public human resource
management reforms.
y National Education Policy (NEP): NEP is aimed at transforming the education sector to
align with contemporary global needs and enhance skill development.
INTRODUCTION
The direct benefit of a ‘Viksit Bharat’ is the dignity of our citizens and the improvement in their quality
of life.”
This statement exemplifies and conveys the direction and intent of the Growth in India. India’s growth,
driven by post-2014 reforms, can sustain 7% growth with a six-pronged strategy focusing on next-gen,
bottom-up reforms for strong, sustainable, balanced, and inclusive development.
Setting the Context:

y From 1993 to 2024, India’s economy grew from USD 300 billion to USD 3.6 trillion, improving
living standards. Despite global challenges, India aims to be a developed nation by 2047. Key
strategies include sustaining growth, addressing environmental concerns, enhancing education,
and focusing on domestic resources and reform implementation.
y By 2047, its centennial of independence, India aspires to be a developed nation. This goal is set
against a backdrop of a complex multipolar world, with potential geopolitical conflicts.
y Economic globalisation has peaked, with nations shifting focus to national champions amid
rising inequality, poverty, and indebtedness post-Covid. Climate change adds further pressure,
with developed nations demanding emission reductions, though often failing to meet their own
pledges.
y To achieve its growth and superpower aspirations, India must recognize the changed global terrain.
Sustaining economic growth over the next 25 years requires addressing environmental concerns
like water stress and air pollution. Education and skill development are crucial for keeping pace
with technological advancements, despite setbacks from the pandemic.
y Given global constraints, India must focus on generating domestic resources for investment and
growth, as geopolitical factors may limit export growth and foreign direct investment.
Limitations and Challenges

y Geo-economics Fragmentation: Increased fragmentation and resource nationalism limit growth,
emphasizing the need for resilience over efficiency.
y Global Trust Deficit: Countries are adopting self-reliant policies to protect against external shocks,
requiring a balance between inward and outward-looking strategies.
y Climate Change Integration: National development must include climate strategies to ensure
socio-economic stability and public health.
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y Technological Impact: Technology is a key differentiator, enhancing productivity but potentially

disrupting labor markets and income distribution.
y Limited Policy Space: Policymakers must accept trade-offs due to the multiple global crises.
y Reform Implementation: The focus must shift to ensuring correct implementation of past
reforms, requiring cooperation with state governments, the private sector, and civil society for
sustainable, inclusive growth.
KEY AREAS OF POLICY FOCUS

y Productive Jobs: India needs to create nearly 7.8 million non-farm jobs annually to cater to its
growing workforce, with a focus on organized manufacturing and services, while improving
productivity in agriculture.
y Skill Gap: 65% of India’s population is under 35, but many lack modern skills. Around 51.3% of
youth are employable, up from 34% a decade ago. Challenges include outdated curricula, lack of
trainers, and limited apprenticeship programs.
y Agriculture Potential: Agriculture needs improvements in technology, marketing, and efficiency to
sustain growth without causing high food price inflation. Addressing issues like land fragmentation
and crop diversification is crucial.
y MSME Challenges: MSMEs face regulatory hurdles and financing bottlenecks. Affordable and
timely credit access remains a core concern. The credit gap is estimated at Rs 20-25 lakh crore.
y Green Transition: India aims to reduce greenhouse gas emissions and increase renewable energy
use. Challenges include grid stability, storage technology, and dependence on China for critical
minerals.
y China Relations: India’s economic relations with China are complex. Dependence on China for
raw materials poses challenges for India’s renewable energy goals. India must balance importing
goods and capital from China.
y Corporate Bond Market: Investment needed for growth should come from diverse financing
options beyond banks, relying on both banks and capital markets supported by household savings.
y Inequality: The top 1% in India accounts for 6-7% of total incomes, and the top 10% accounts for
one-third. Policies focus on job creation, integrating the informal sector, and increasing female
labor force participation to address inequality.
y Health: Poor diets contribute to 56.4% of the disease burden in India. Improving health and
nutrition is essential for the young population’s well-being.
GROWTH STRATEGY FOR AMRIT KAAL: STRONG,

SUSTAINABLE, AND INCLUSIVE
Boosting Private Sector Investment:
y Encourage investment in machinery, equipment, and intellectual property to create quality jobs.
y Improve policies and regulations to upgrade manufacturing capacity, train workers, and remove
resource and regulatory barriers.
y Government initiatives like Aatmanirbhar packages, Production Linked Incentive (PLI) scheme,
and the National Infrastructure Pipeline aim to support this.
Supporting MSMEs:
y MSMEs are vital for the economy, contributing significantly to GDP and employment.
y Government support includes credit schemes, equity infusion, and new classification criteria.
y Further support includes deregulation, improved infrastructure, and training for MSME
entrepreneurs.
Export Strategy:
y Increase the manufacturing share of GDP by promoting exports.
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y Programs like ‘Make in India Mittelstand’ attract foreign investment and support small and
medium-sized enterprises (SMEs).
Agricultural Sector Growth:

y Agriculture is crucial for food security, climate adaptation, and resource sustainability.
y Focus on horticulture, livestock, fisheries, and food processing for employment potential.
y Modernize agriculture with new technologies and improve resource management.
Green Transition Financing:

y Utilize global green capital from sovereign funds, pensions, and private equity.
y Foster a sustainable finance ecosystem and diversify funding sources.
y Use blended finance to integrate public and private capital for green projects.
y Engage with international financial institutions to fill the climate finance gap.
Bridging the Education-Employment Gap:

y Equip the workforce with skills needed for the evolving job market.
y Focus on foundational literacy and numeracy in schools.
y Implement the National Education Policy (NEP) to improve education outcomes.
y Encourage industry collaboration with educational institutions for skill development.
Building State Capacity:

y Enhance the effectiveness of civil services through reforms and training.
y Encourage lateral entry from the private sector for diverse skills and perspectives.
y Improve accountability and performance management systems.
y Implement Mission Karmayogi to address structural issues and improve civil service efficiency.
Medium Term Outlook

Resilient Growth:
y India’s growth over the past decade has been resilient, thanks to effective government strategies
and strong institutions.
y Structural reforms have set India on a growth path, poised to become the third-largest economy
globally.
y The IMF has raised India’s growth forecast to 6.8% for 2024-25, driven by strong domestic demand
and a rising working-age population.
y India has transitioned from a low-income to a low-middle-income country, with rising aspirations
for further progress.
Six-Pronged Growth Strategy:

y Private Sector Investment: Encourage organic growth in the private sector to create jobs and fair
income distribution.
y Green Transition Financing: Utilize public-private partnerships and innovative financing to support
India’s green transition.
y MSME Support: Focus on deregulation, improved connectivity, and export strategies to help
MSMEs expand.
y Agriculture Development: Implement policies that make agriculture a growth engine while
ensuring environmental sustainability.
y Education and Skills: Align education and skill policies to focus on learning outcomes, drawing
lessons from global experiences.
y State Capacity: Invest in state machinery to sustain and accelerate progress.
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Continuing to build on reforms like strengthening the banking system, implementing GST, and expanding
infrastructure is essential for sustained growth.
Achieving “Viksit Bharat@2047” (Developed India by 2047) requires collective effort (“Sabka Prayas”) from
the government and every citizen, as emphasized by the Government of India.

Q1: What is the central objective of the ‘Make 2. Make in India
in India Mittelstand (MIIM)’ program? 3. National Infrastructure Pipeline (NIP)
(a) To attract investments from large 4. Skill India
multinational corporations
Select the correct answer using the codes given
(b) To promote Indian exports to Germany below:
(c) To encourage small and medium- (a) Only one
sized German companies to invest and
manufacture in India (b) Only two
(d) To develop industrial parks and special (c) Only Three

economic zones in India (d) All Four
Q2: Which of the following initiatives has been
introduced by the Government of India to ANSWERS
boost manufacturing in the country?
1. Production Linked Incentive (PLI) Scheme 1. (c) 2. (d)

Q1: Discuss the importance of private sector investment in India’s economic growth. What
measures has the Government of India undertaken to boost private investment, and what
challenges remain?
Q2: Analyze the significance of the MSME sector in India’s economy. Evaluate the strategies
proposed to strengthen the MSME sector and the potential impact of these strategies on
employment and economic growth.
Q3: Examine the role of agriculture in India’s economic development. How can intelligent farmer-
friendly policies contribute to sustainable growth and equity in the agricultural sector?
Q4: Evaluate the strategies proposed for financing India’s green transition. How can public-
private partnerships and innovative financing instruments be effectively utilized to meet
India’s environmental goals?
Q5: Critically assess the need for enhancing state capacity and capability in India. How can
reforms in civil services and state machinery contribute to the successful implementation of
India’s growth strategies?
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CHAPTER: 6
CLIMATE CHANGE AND ENERGY

TRANSITION: DEALING WITH
TRADE-OFFS
Key-Terms
" Per Capita Carbon Emissions: It refers to the average amount of carbon dioxide emitted
per person within a specific region or country over a given period. It is a crucial metric
for understanding individual contributions to global carbon emissions and assessing
environmental impact.
" Net Zero: Net zero refers to achieving a balance between the amount of greenhouse gases
emitted and removed from the atmosphere.
" Trade-offs in Climate Policy: It involves weighing the benefits and costs of various policy
choices to maximize overall societal welfare.
" Climate Adaptation: It involves adjusting to the effects of climate change that are already
occurring or expected to occur. It includes strategies like infrastructure improvements,
disaster preparedness, and agricultural practices aimed at reducing vulnerability and
enhancing resilience.
" Green Finance: This concept involves financial mechanisms and investments directed
towards environmentally sustainable projects and initiatives. It includes green bonds,
carbon markets, and policies promoting renewable energy and energy efficiency.
Chapter at a Glance
" Objective of the Chapter: The objective is to highlight the challenges and trade-offs India
faces in achieving its climate goals while balancing economic development. It emphasizes
the need for a comprehensive approach that integrates climate action with developmental
needs, focusing on financial challenges, resource issues, and the timeline for energy
transition. The chapter aims to underscore the complexity of transitioning to a low-carbon
economy and the critical role of international cooperation and support in achieving India’s
climate targets.
" Analysis: The chapter provides a detailed analysis of India’s climate change mitigation
and adaptation strategies, emphasizing its ambitious targets such as achieving Net Zero
emissions by 2070 and enhancing renewable energy capacity.
y It discusses the significant reliance on fossil fuels, challenges related to energy transition,
and the need for sustainable development practices.
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" The analysis underscores the financial constraints, resource competition, and the intricate
balance required between climate goals and economic growth. Overall, it presents India’s
proactive approach to climate action while navigating complex trade-offs.
y National Action Plan on Climate Change (NAPCC): It guides India’s climate strategy
through various missions like solar energy, energy efficiency, and sustainable
agriculture.
y PM-Surya Ghar Yojana: It aims to add 30 GW of solar capacity with significant CO2
reductions and job creation.
y Perform Achieve and Trade (PAT) scheme: The scheme has been successful in reducing
energy use and greenhouse gas emissions across sectors.
y Framework for Sovereign Green Bonds: It mobilizes funds for green projects in India.
y Coal Gasification Mission: It focuses on reducing coal dependency and emissions
through advanced technologies.
y International Solar Alliance (ISA): ISA promotes solar energy globally.
y Indian Carbon Market (ICM): The initiative is set to incentivize low-emission technologies
by pricing carbon emissions.
PREMISE
Despite being a fast-growing economy, India’s per capita carbon emissions are just one-third of the
global average. The goal of ‘Viksit Bharat’ by 2047 and achieving Net Zero by 2070 drives India’s efforts
for inclusive, sustainable growth. This involves balancing development needs with a low-carbon path
and securing stable, clean energy, including effective battery storage and critical minerals.
Climate change remains a major global issue, but current approaches to addressing it are flawed
because they overlook essential trade-offs. Many countries are grappling with the financial burden of
transitioning to renewable energy while managing fiscal constraints and energy needs.
KEY POINTS PERTAINING TO TRADE-OFF

y Financial Challenges: Governments face high costs for alternative energy sources and subsidies
while losing revenue from fossil fuel taxes.
y Resource Issues: There is a growing competition for critical minerals like copper and nickel needed
for renewable technologies. Extracting these materials requires significant energy, adding to CO2
emissions.
y Energy Transition Timeline: Energy transitions have historically taken 50 to 60 years. The shift
from fossil fuels to renewables will likely be slow and require reductions in overall energy use.
y Paris Agreement vs. Development Goals: The Paris Agreement prioritizes climate goals over
broader development goals. This has led to calls for carbon taxes on imports from developing
nations, which contradicts the principle of common but differentiated responsibilities.
y Developed vs. Developing Nations: Developed countries, which used fossil fuels for their growth,
now pressure developing nations to cut emissions without providing adequate financial and
technological support. This could worsen poverty and inequality in developing countries.
y Climate and Economic Development: Developing countries need substantial resources (between
USD 5.8 - 11.5 trillion by 2030) to integrate climate change into their development models. The
current pace and terms of international support are insufficient.
y Trade-offs and Decision-Making: Effective climate policy must recognize trade-offs between
climate goals and economic development. A holistic approach is needed, weighing the benefits of
reducing climate change against the costs of transitioning to new energy systems.
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Despite these challenges, India is balancing climate change impacts with its developmental goals,
demonstrating a growth strategy that integrates both considerations effectively.
PRESENT STATUS OF INDIA’S CLIMATE ACTION

y India is actively addressing climate change through a structured approach, primarily guided by
the National Action Plan on Climate Change (NAPCC).
y This plan focuses on balancing economic growth with ecological sustainability and includes nine
national missions on various aspects such as solar energy, water, energy efficiency, and sustainable
agriculture.
y States and Union Territories are encouraged to develop their own State Action Plans on Climate
Change (SAPCC), with 34 SAPCCs currently operational.
KEY ACHIEVEMENTS AND ONGOING EFFORTS:

y Solar Power: India added 15.03 GW to its solar power capacity in 2023-24, reaching a total of 82.64
GW by April 2024.
y Energy Efficiency: The Perform Achieve and Trade (PAT) scheme, targeting energy savings across
several sectors, has been successful in reducing energy use and greenhouse gas emissions.
y Nationally Determined Contributions (NDCs): India achieved its first NDC targets early, including
a 40% share of non-fossil fuel energy in electricity capacity by 2021 and a 33% reduction in GDP
emission intensity by 2019. Updated targets aim for a 45% reduction in GDP emission intensity and
a 50% share of non-fossil sources by 2030.
y Carbon Sink: India aims to create an additional carbon sink of 2.5 to 3.0 billion tonnes by 2030.
Currently, 1.97 billion tonnes of CO2 equivalent have been sequestered from 2005 to 2019.
y Greenhouse Gas Emissions: The energy sector is the largest emitter, followed by agriculture,
industrial processes, and waste. India’s emissions grew by 4.56% since 2016, slower than GDP
growth, indicating progress in decoupling economic growth from emissions.
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Adaptation Efforts:
y Importance of Adaptation: India, being highly climate-vulnerable, focuses on adapting to climate
change through various initiatives like micro-irrigation, climate-resilient agriculture, and flood
forecasting.
y Financial Allocation: Adaptation spending was 5.60% of GDP in 2021-2022, up from 3.7% in 2015-
16, showing a commitment to integrating climate resilience into development plans.
y Coastal Protection: Wetland and mangrove conservation are prioritized for protecting coastal
areas from climate impacts. India has designated 56 new Ramsar sites since 2014 and launched
initiatives like ‘Amrit Dharohar’ and Mission Sahbhagita to enhance conservation and community
involvement.
India’s climate action strategy is comprehensive, addressing both mitigation and adaptation, with notable
progress and ongoing challenges. Access to finance and technology remains crucial for continuing these
efforts effectively.
Low Carbon Development and Energy Composition in India

Energy Needs and Transition:
y India’s energy needs are expected to grow by 2 to 2.5 times by 2047 due to economic
development.
y Achieving Net Zero emissions by 2070 requires a shift to a mix of diverse energy sources with a
significant share of non-fossil fuels and improved energy efficiency.
y The pace of energy transition must balance resource demands for climate resilience and economic
development.
Current Energy Composition:

y As of 2022-23, India’s primary energy is 84% fossil-fuel based (coal, oil, and natural gas).
y In the electricity sector, non-fossil power capacity reached 45.4% by May 2024, up from 32% in April
2014.
Recent Initiatives:
y PM-Surya Ghar Yojana (2024): ₹75,021 Crore investment to add 30 GW of solar capacity, cut 720
million tonnes of CO2, and create 1.7 million jobs.
y Offshore Wind Energy: Policy and lease rules for offshore wind energy with initial funding for 1
GW capacity.
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y Green Hydrogen Mission: Targeting 5 million tonnes of green hydrogen by 2030 with financial
incentives for production and electrolyser manufacturing.
Challenges:
y Green Hydrogen Constraints: High production costs, need for infrastructure, and reliance on
intermittent renewable energy.
y Energy Mix Issues: High biomass use, heavy dependence on imported petroleum, and coal’s
dominance (70% of electricity generation).
y Coal Transition: Initiatives like the Coal Gasification Mission aim to reduce coal dependency and
emissions. Clean coal technologies and super-critical power plants are being promoted.
Renewable Energy Challenges:

y Intermittency: Renewable energy sources like solar and wind face intermittency issues affecting
grid stability.
y Levelised Cost of Electricity (LCOE): While LCOE for renewables has dropped, it doesn’t cover the
costs of intermittency and backup power. Round-The-Clock (RTC) renewable energy contracts are
proposed to address this.
Resource and Environmental Concerns:

y Land and Water Use: Renewable energy projects require significant land, with solar power
needing around 600-900 sq. km for 60 GW capacity. India faces land constraints and needs efficient
land use.
y Waste Management: Solar photovoltaic (PV) waste could reach 78 million tonnes by 2050. Effective
recycling policies are needed to manage environmental risks.
y Critical Minerals: Essential for renewable technologies, these minerals are concentrated in
a few countries. India is focusing on domestic exploration and has joined the Mineral Security
Partnership (MSP) to secure access to critical minerals.
The report from IIM Ahmedabad projects that India’s energy mix will require diverse sources for a
sustainable transition to Net Zero by 2070. Coal will remain crucial for two decades, with Renewable
Energy and nuclear power becoming predominant by 2070. Effective coal phase-down will depend
on importing or developing domestic critical minerals.
Finance for Sustainable Development

Green Bonds and Reporting:
y India launched the ‘Framework for Sovereign Green Bonds’ in 2022, raising ₹16,000 Crore in early
2023 and ₹20,000 Crore later that year. This framework, rated ‘Medium Green’ by CICERO, helps
mobilize funds for green projects.
y SEBI has required ESG disclosures for listed entities since 2012, expanding to the top 1000 listed
companies by 2026-27 under the Business Responsibility and Sustainability Report (BRSR).
Green Finance and Carbon Markets:

y RBI introduced the Framework for Acceptance of Green Deposits and promotes renewable energy
through concessional credit.
y The Indian Carbon Market (ICM), launched in June 2023, sets prices for carbon emissions to
incentivize low-emission technologies. It will replace the existing PAT scheme by 2028-30.
y India is a major player in the global voluntary carbon market, which faces challenges like double
counting and the effectiveness of credits.
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International Climate Finance:

y Developing countries need $5.8 to $11.5 trillion by 2030 to meet climate targets, but international
finance has been insufficient, mainly in the form of loans rather than grants.
y India’s NDCs and adaptation costs highlight the need for tens of trillions of dollars by 2050. The
focus remains on domestic resources due to inadequate international support.
Global Climate Commitments:

y COP 28 focused on increasing global climate ambition, with decisions on adaptation, finance, and
technology transfer. The New Collective Quantified Goal (NCQG) aims to set an annual climate
finance target starting from 2025.
India’s International Initiatives:

y India has led initiatives such as the International Solar Alliance (ISA), the One Sun One World One
Grid (OSOWOG) project, and the Coalition for Disaster Resilient Infrastructure (CDRI) to advance
solar energy, global grid connectivity, and infrastructure resilience.
y India’s Leadership Group for Industry Transition (LeadIT) focuses on supporting industry transitions
towards low-carbon technologies.
Energy Transition Challenges:

India faces challenges in balancing energy needs with emission reductions. Renewable energy growth
is crucial but requires backup power and grid integration. Diversifying energy sources, including
renewables, nuclear, and biofuels, is essential for stability and low emissions.
Financial and technological support from developed countries is crucial for India’s transition. A
balanced approach to climate change and development is necessary to address both immediate and
long-term goals.

Q1: Question: The Indian Carbon Market (ICM) energy projects
was introduced to replace which existing
(b) To incentivize participation in environment-
scheme?
positive activities
(a) National Clean Energy Fund (NCEF)
(c) To regulate carbon emissions from
(b) Perform, Achieve, and Trade (PAT) scheme
industrial processes
(c) Clean Development Mechanism (CDM)
(d) To promote international climate finance
(d) Green Credit Programme (GCP) agreements
Q2: What is the main aim of the Green Credit

Programme (GCP) introduced by the ANSWERS
Government of India?
(a) To provide concessional loans for renewable 1. (b) 2. (b)

Q1: Evaluate the current state and future prospects of technology innovation in the context of
achieving Net Zero emissions. What are the key areas of international cooperation needed to
support technological advancements in renewable energy and low-carbon technologies?
Q2: Discuss the implications of the significant dependency on imports for energy needs in India,
particularly for solar panels and critical minerals. How can India mitigate the risks associated
with high import dependency while advancing its energy transition goals?
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Q3: Critically analyze the impact of global climate commitments on developing countries. How
can the New Collective Quantified Goal (NCQG) and other international frameworks support
developing nations in achieving their climate objectives?
Q4: Discuss the role of international initiatives led by India, such as the International Solar Alliance
(ISA) and the Coalition for Disaster Resilient Infrastructure (CDRI), in addressing global
climate change. How do these initiatives contribute to sustainable development goals?
Q5: Analyze the significance of the Indian Carbon Market (ICM) and its potential to drive low-
emission technologies. How does the ICM aim to replace the existing PAT scheme, and what
are the expected challenges in its implementation?
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CHAPTER: 7
SOCIAL SECTOR : BENEFITS

THAT EMPOWER
Key-Terms
" Economic Growth and Social Progress: Economic growth refers to the increase in a
country’s output of goods and services, often measured by GDP. Social progress involves
improvements in the quality of life, such as better education, healthcare, and equality. When
economic growth aligns with social progress, it ensures that economic benefits are broadly
shared and lead to overall societal well-being.
" Dovetailing Growth: Dovetailing growth refers to integrating various growth strategies so
that they complement and enhance each other. This approach ensures that economic and
social initiatives are aligned, creating a cohesive framework where economic development
supports social improvements and vice versa, leading to more balanced and sustainable
progress.
" Child Immunisation: Child immunisation is the process of protecting children from
infectious diseases through vaccines. It involves administering vaccines at specific ages to
build immunity against diseases like measles, polio, and hepatitis. Effective immunisation
programs are crucial for reducing child mortality, preventing disease outbreaks, and
ensuring overall public health.
" Geotagging: Geotagging involves adding geographic identification to various media, such
as photographs or data, using latitude and longitude coordinates. In the context of programs
like MGNREGS, geotagging helps track and verify the location and progress of projects,
ensuring transparency and accurate monitoring of asset creation and work completion.
" Mental Disorder: A mental disorder is a broad term encompassing various psychological
conditions that affect a person’s mood, thinking, or behavior. Common disorders include
anxiety, depression, and bipolar disorder. According to WHO, one in eight people globally
live with a mental disorder.
" Treatment Gap: The treatment gap refers to the disparity between the number of
individuals needing mental health services and those receiving adequate care. This gap can
range between 70% to 92% for different mental disorders, indicating a significant need for
improved mental health services.
" Geotagging: Geotagging involves attaching geographic coordinates to data, such as
photos or project records, allowing for tracking and verification of locations. In mental
health programs, it helps in monitoring and documenting the progress and effectiveness
of interventions.
" NCERT: The National Council of Educational Research and Training (NCERT) conducts surveys
and research on various educational and developmental issues, including mental health
among school students. Its surveys help in understanding the mental health challenges
faced by adolescents.
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" Doom Scrolling: Doom scrolling refers to the compulsive consumption of negative news on
social media or the internet, which can exacerbate feelings of anxiety and depression. It is a
significant issue linked to poor mental health due to its impact on emotional well-being.
" Manodarpan: Launched during the COVID-19 pandemic, Manodarpan provides psychological
support to students through a dedicated webpage and national toll-free helpline. It aims to
address the mental health challenges faced by students during the pandemic.
Chapter at a Glance
Objective: Empowering India’s Social Sector
" India’s recent economic growth, characterized by high and sustained progress, is coupled
with significant social and institutional advancements. The government’s effective
implementation of transformational programs has reshaped welfare approaches,
enhancing empowerment and development across various sectors. Key areas of progress
include health, education, sanitation, and digital empowerment, with targeted initiatives
significantly improving rural quality of life. Women-led development is a focus, with
comprehensive programs and proactive government policies driving socio-economic
empowerment for women. Transparent and digitalized governance has visibly improved
rural living standards, and India aims to achieve developed country status by 2047 through
comprehensive progress in economic, social, technological, and institutional domains,
emphasizing community participation alongside government initiatives.
" A paradigm shift in welfare approaches has seen impactful government initiatives such as
the Jal Jeevan Mission and electrification efforts in remote villages. Success stories from
programs like PM Ujjwala Yojana, Swachh Bharat Mission, Jan Dhan Yojana, PM-AWAS
Yojana, and Ayushman Bharat Scheme highlight significant improvements in quality
of life and financial inclusion. India’s rapid economic growth supports welfare delivery
and opportunity creation, with a focus on improving healthcare, education, and basic
amenities to ensure sustainable and equitable growth. The new welfare approach prioritizes
effective implementation and efficiency over mere expenditure, with digital initiatives like
Direct Benefit Transfer (DBT) and JAM Trinity enhancing fiscal efficiency and minimizing
leakages.
" Targeted implementation reforms, such as the Aspirational Districts Programme (ADP),
emphasize convergence, collaboration, and competition to improve health, nutrition,
education, and infrastructure in underdeveloped areas. Transformative social enablers,
including Mission Indradhanush and Swachh Bharat Mission, have significantly reduced
disease incidence, improved school attendance, and enhanced nutrient absorption among
the underprivileged. The Multidimensional Poverty Index (MPI) offers a comprehensive
assessment of poverty, revealing deprivations beyond income and providing valuable
insights for targeted policy interventions. India has seen a sharp decline in MPI, with millions
escaping poverty due to improved nutrition, schooling, sanitation, and cooking fuel access.
" Affordable social security schemes, such as Atal Pension Yojana (APY), PM Jeevan Jyoti
Yojana (PMJJY), and PM Suraksha Bima Yojana (PMSBY), provide financial security for
unorganized sector workers. Corporate Social Responsibility (CSR) mandates significant
investments in education, healthcare, sanitation, and rural development, fostering
sustainable and inclusive growth. India’s journey towards developed nation status by 2047
is underpinned by robust economic growth and transformative welfare initiatives, ensuring
sustainable and inclusive development for all citizens. Comprehensive social sector programs
focusing on health, education, sanitation, and digital empowerment are crucial in achieving
this vision.
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INTRODUCTION
Path to Developed India by 2047

(ViksitBharat@2047)
y Development Goal: India aims to become a developed country by 2047.
y Comprehensive Progress: Focus on economic, social, technological, and institutional

development.
y Role of Public Policy: Effective public policy and implementation are crucial for translating
economic growth into human development.
Diverse and Expansive Social Infrastructure

y Population Diversity: India is home to 18% of the global population, necessitating outreach
across varied cultures, languages, and geographies.
y Young and Aspirational Society: Leveraging opportunities from steady economic growth.
Goals for Societal Improvement

y Healthcare and Education: Prioritizing improved healthcare and educational facilities.
y Basic Amenities: Ensuring clean water, sanitation, affordable housing, electricity, and internet
access for all.
Sustainable and Equitable Growth

y Achievements: Significant progress made in ensuring sustainable and equitable economic
growth.
y Ongoing Journey: Continues to address new and existing challenges with both centralized and
local solutions.
Transformation in Welfare Concept

" Long-Term, Efficient, and Empowering: Over the last decade, India’s approach to welfare has
shifted towards being more long-term-oriented, efficient, and empowering.
" Strengthened Welfare Ecosystem: This transformation has bolstered the welfare ecosystem and
laid a solid foundation for human development.
Increased Government Expenditure

y Rising Trend in Social Sector Spending: Government spending on social services has increased
since FY16, reflecting its growing importance.
y Welfare Expenditure Growth: From FY18 to FY24, welfare expenditure grew at a CAGR of 12.8%,
outpacing nominal GDP growth of 9.5%.
y Education Expenditure: Grew at a CAGR of 9.4%, slightly below nominal GDP growth.
y Health Expenditure: Experienced significant growth with a CAGR of 15.8%.
Focus on Social Well-Being

y Key Areas: Increased focus on various aspects of social well-being, including education and health,
indicating a comprehensive approach to improving citizens’ quality of life.
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DOVETAILING GROWTH WITH EMPOWERING WELFARE:

A PARADIGM SHIFT
Impactful Government Initiatives

Jal Jeevan Mission
y Demchok Village, Leh:
Elevation: Located at 13,800 feet.
Harsh Climate: Temperatures can drop to minus 40 degrees.
First Tap Water Connection: Achieved in July 2022.
Impact: Freed women from the drudgery of fetching water.
Electrification Efforts
y Bulumgavan Village, Maharashtra:
Remote Tribal Village.
Electric Supply: First received in 2018.
Historical Context: Achieved 70 years after independence.
Empowering Welfare Initiatives: Success Stories

Improved Quality of Life
y Economic Growth: India is now the fifth largest economy, significantly improving the lives of
average Indians over the past decade.
y Empowering Approach: Numerous initiatives have positively impacted common citizens.
Key Achievements
y PM Ujjwala Yojana:
Gas Connections: Over 10.3 crore women received free gas connections.
y Swachh Bharat Mission:
Toilets Built: 11.7 crore toilets constructed.
y Jan Dhan Yojana:
Bank Accounts: 52.6 crore accounts opened.
y PM-AWAS Yojana:
Housing for the Poor: 3.47 crore pucca houses built.
y Jal Jeevan Mission:
Tap Water Connections: 11.7 crore households connected.
y Ayushman Bharat Scheme:
Hospital Admissions: 6.9 crore admissions made.
Personal Impact
y Stories of Better Lives: Behind these impressive statistics are countless personal stories of
improved living conditions and opportunities for Indian citizens.
India’s Social and Economic Landscape

Strengths
y Fastest-Growing Economy: Rapid economic growth supports welfare delivery and opportunity
creation.
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y Digital Public Infrastructure (DPI): Expansion and creation of DPI enhance service delivery and
accessibility.
Opportunities
y Youth Demographic:
Young Population: 18% of the population is aged 15-24 (above the global average of 15.4%).
Median Age: The median age is 28.2 years.
Aspirational Youth: This young demographic is eager to advance socially and financially.
Challenges
y Educational Outcomes: Need to improve learning outcomes in schools.
y Malnutrition: Elimination of malnutrition remains a critical challenge.
y Hinterland Potential: Channeling the potential of rural areas.
y Disparities: Addressing regional, caste, and gender disparities.
y Government Accountability and Transparency: Instilling these values at all government levels.
Policy Approach
y Limited Fiscal Resources: Requires efficient allocation and utilization.
y Diverse Populace Expectations: Necessitates sensitive, pragmatic, and prudent welfare policies
to meet varied socio-economic needs.
Transforming the Welfare Approach

Long-Term and Empowering Strategy
y Universal Access: Recognizing the importance of universal access to basic amenities for inclusive
growth.
y Flagship Initiatives: Launching various initiatives to build long-lasting social infrastructure.
y Sustainable Growth: Moving away from short-term measures to long-term solutions that use
resources efficiently and build for the future.
Enhancing Standard of Living

y Opportunity Utilization: Enabling individuals to improve their standard of living and capitalize
on growth opportunities.
y Social Empowerment: Empowering citizens fosters autonomy and self-confidence, changing
social relationships and institutions.
y Inclusive Development: Ensuring disadvantaged sections of society also benefit from growth.
Development vs. Welfare

y Development Treadmill: Shifting focus from mere welfare to active development participation.
y Fiscal Sustainability: Ensuring fiscal resources are used efficiently and sustainably.
y Self-Esteem and Dignity: Enhancing personal dignity and self-esteem through participation in
development.
Growing Agency Among Disadvantaged

y Emerging Segment: Noting a distinct and growing segment among the disadvantaged who
leverage networks, information, government support, and personal circumstances.
y Striving for Better Opportunities: Many disadvantaged individuals find the agency and energy
to strive for better life opportunities, as observed by Rama Bijapurkar.
PILLARS OF THE NEW APPROACH TO WELFARE

New Welfare Approach: Focus on Effectiveness
Spending and Outcomes
y Beyond Spending: Mere expenditure is not sufficient to guarantee positive outcomes.
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y Focus on Implementation: Emphasizing the need to enhance the implementation and

effectiveness of government programs.
Increasing Impact Per Rupee

y Cost-Effectiveness: Academic literature highlights the importance of improving efficiency in
converting spending into tangible outcomes.
y Muralidharan (2024): Research indicates that without significant improvements in efficiency,
increased budget allocations alone will not effectively address issues such as child stunting, school
learning, and infant mortality.
Government Strategies
y Process Reforms: Implementing reforms to improve processes and increase efficiency.
y Accountability: Strengthening accountability measures to ensure better outcomes.
y Technology Utilization: Leveraging technology to enhance program effectiveness and
monitoring.
Digitization and Efficiency in Welfare Programs

Impact of Digitization
y Force Multiplier: Digitization has significantly enhanced the effectiveness of welfare spending
across healthcare, education, and governance.
Key Initiatives
y Direct Benefit Transfer (DBT):
Fiscal Efficiency: Improves fiscal efficiency and minimizes leakages in welfare programs.
Transfers: Over ₹38 lakh crore has been transferred via DBT since its inception in 2013.
y JAM Trinity:
Components: The integration of Jan Dhan Yojana, Aadhaar, and Mobile (JAM) further supports
fiscal efficiency and accountability.
Goal-Oriented Approach in Budgetary Allocation

Outcome Budget
y Implementation: Since FY 18, the Outcome Budget has been introduced alongside the conventional
annual Budget.
y Focus: Emphasizes expected outputs and outcomes of welfare schemes to guide budgetary
allocation.
Output-Outcome Monitoring Framework

y Developed by NITI Aayog: Introduced for major central sector and centrally sponsored schemes
starting FY 20.
y Purpose: Enhances monitoring of scheme performance based on defined outputs and
outcomes.
Capital Expenditure in Social Services

y Increased Productivity: Growth in capital expenditure within social services indicates higher
productivity and creation of societal assets.
Transparency and Accountability

y Dashboards and MIS: User-friendly dashboards and management information systems (MIS)
across major schemes improve transparency and accountability.
y Real-Time Monitoring: Facilitates real-time oversight of scheme performance.
Data in Governance
y Rising Importance: Emphasis on the increasing role of data in governance, as explored in Box
VII.1.
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Targeted Implementation Reforms

Last-Mile Service Delivery
y Objective: Ensure that no one is left behind by improving the delivery of services to the most
remote and underserved areas.
Aspirational Districts Programme (ADP)

y 3C Approach:
Convergence: Coordination across different levels of government.
Collaboration: Engagement between civil society and government.
Competition: Encouraging states and districts to compete on progress via a dashboard.
y Improvements:
Indicators: Significant progress in health, nutrition, education, and basic infrastructure (e.g.,
electricity, all-weather roads, sanitation facilities).
y UNDP Appraisal: The UNDP report highlights sectoral growth and better governance as key
outcomes of the ADP.
y Success Stories: Box VII.2 includes specific examples of successful outcomes from the ADP.
Other Targeted Programmes

y Aspirational Blocks Programme: Launched in 2023 to focus on blocks with critical needs.
y Vibrant Villages Programme: Targets border areas to enhance development.
y Viksit Bharat Sankalp Yatra:
Participation: Engaged 15 crore people over two months starting November 15, 2023.
Goal: Aimed at achieving saturation in various government schemes.
These initiatives reflect the government’s commitment to improving last-mile delivery and achieving
comprehensive development across the country.
Transforming Welfare Through Social Enablers

Focus on Health and Sanitation
y Child Immunisation:
Mission Indradhanush: Increased vaccination coverage, contributing to reduced disease
incidence.
y Sanitation Programs:
ODF and ODF Plus: Efforts to eliminate open defecation and enhance sanitation practices.
Swachh Bharat Mission: Aims to improve cleanliness and hygiene.
Impact on Public Health

y Disease Incidence: Reduced due to cleaner practices and improved sanitation.
y School Attendance: Lower absenteeism due to illness, resulting from better health and
sanitation.
y Nutrient Absorption: Enhanced over the long term among the least privileged.
Vaccination Statistics
y NFHS-5 Findings:
Vaccination Coverage: Percentage of children aged 12-23 months fully vaccinated increased
from 77.9% in 2015-16 to 83.8% during 2019-21.
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Affordable Social Security Schemes for the Unorganised Sector

Key Policies and Initiatives
y Atal Pension Yojana (APY):
Purpose: Provides a pension scheme aimed at workers in the unorganised sector.
Improvement: Enhanced from its predecessor, Swavalamban Yojana, with better features and
coverage.
y PM Jeevan Jyoti Yojana (PMJJY):
Purpose: Offers affordable life insurance coverage.
Noteworthy: First of its kind in the country, aimed at providing financial protection.
y PM Suraksha Bima Yojana (PMSBY):
Purpose: Provides accidental death and disability insurance.
Innovation: Another pioneering scheme designed to offer security against unforeseen
accidents.
Achievements
y Universal Bank Account Penetration: These schemes benefit from widespread bank account
access, ensuring more extensive reach and impact.
y Success Stories: All three schemes, launched in 2015, exemplify the Government’s commitment
to expanding the social safety net for unorganised sector workers.
Wholesome Approach to Welfare and Private Sector Participation

Corporate Social Responsibility (CSR)
y Mandatory Spending:
Legislation: Section 135 of the Companies Act 2013 mandates CSR spending.
Implementation: From 2014, companies are required to allocate funds for social purpose
programs.
Trends and Impact

y Post-2014 CSR Spending:
Growth: CSR expenditure has increased significantly, reflecting a commitment to social
welfare.
Box VII.3: Provides detailed trends in CSR spending since the mandate.
Future Outlook
y Economic Growth: As corporate profits grow with India’s robust economy, the CSR pool is
expected to expand.
y Role of Nonprofits:
Last-Mile Presence: Nonprofits are well-positioned to utilize CSR funds effectively, driving
sustainable and inclusive development through their on-ground presence.
Overall Progress and Outcomes Improvements in multidimensional poverty

y Improvements in multidimensional poverty
Measuring Poverty: Beyond Income

Limitations of Income-Based Poverty Measurement
y Narrow Scope: Focusing solely on income does not fully capture the complexity of poverty.
y Concealed Deprivations: Income metrics may mask the various daily deprivations experienced
by individuals.
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Multidimensional Poverty Measurement

y Comprehensive Assessment: Evaluates poverty by considering multiple factors beyond just
income.
y Revealing Deprivations: Highlights who is poor and the range of disadvantages they face.
y Incidence and Intensity: Provides a deeper understanding of poverty by measuring both how
widespread and how severe it is.
This approach allows for a more nuanced understanding of poverty, acknowledging that deprivation
can span areas such as education, health, living standards, and access to basic services.
National Multidimensional Poverty Index (MPI) for India

y Overview The National Multidimensional Poverty Index (MPI) for India, estimated by NITI Aayog,
aligns with the global MPI published by the UNDP, with specific adjustments to suit the Indian
context.
y Dimensions The Indian MPI incorporates three equally weighted dimensions:
Health
Education
Standard of Living
y Indicators These dimensions are assessed through 12 weighted indicators, reflecting various
forms of deprivation.
y Purpose and Use The MPI captures fundamental deprivations that are indicative of real poverty. It
provides valuable insights to policymakers about the essential needs lacking in the country, aiding
in targeted policy interventions.
Measurement of Multidimensional Poverty

Headcount Ratio (HCR)
y Purpose: Measures the spread of multidimensional poverty.
y Definition: The proportion of the population that is identified as poor based on the MPI criteria.
Deprivation Score
y Purpose: Assesses the intensity of poverty.
y Definition: Indicates the number of deprivations experienced by a poor person.
y Threshold: A weighted deprivation score of 0.33 is required for a household to be considered
MPI-poor.
MPI Index Calculation

y Formula: The MPI index is calculated as the product of the Headcount Ratio (HCR) and the Intensity
of Poverty (deprivation score).
y Result: Provides a comprehensive measure of multidimensional poverty by combining both the
spread and intensity of deprivations.
INDIA’S PROGRESS IN MPI: 2019-21 VS. 2015-16

Sharp Decline in Poverty
India has experienced a significant reduction in the Head Count Ratio (HCR) and the intensity of
poverty. The Multidimensional Poverty Index (MPI) nearly halved, dropping from 0.117 in 2015-16
to 0.066 in 2019-21. This positions India well on its path to achieving Sustainable Development Goal
(SDG) Target 1.2, which aims to reduce multidimensional poverty by at least half by 2030.
Escape from Multidimensional Poverty

y Between 2015-16 and 2019-21, an estimated 13.5 crore (135 million) Indians escaped
multidimensional poverty.
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Contributing Factors
y This decline is attributed to reduced deprivations in key areas such as nutrition, years of schooling,
sanitation, and cooking fuel. These improvements are a result of extensive policy initiatives.
Chart VII.2: Decline in multidimensional poverty
(a) Headcount ratio of (b) Intensity of multidimensional

multidimensional poverty poverty
2015-16 2019-21 2015-16 2019-21

35 32.6 48 47.4
47.1
30 47
24.9 46
25 45.3
19.3 45 44.4 44.6
20
per cent
per cent
15.0 44
15 43.1
43
10 8.7
42
5.3
5 41
0 40
India Rural Urban India Rural Urban
Source: NITI Aayog, MPI Report2019-21

2015-16
2023 2015-16 2019-21
35 32.6 48 47.4
47.1
30 47
Regional Improvements
24.9 46
25 45.3
y Rural India has seen the 19.3
most significant improvements,
45 with notable
44.4 44.6 progress in states like Bihar,
Madhya20 Pradesh, Uttar Pradesh, Odisha, and Rajasthan.
per cent
per cent
15.0 44
15 43.1
Uttar Pradesh’s Achievement 43
10 8.7
y Uttar Pradesh registered the most5.3significant42decline in the number of poor people, with 3.43
crore (34.3
5 million) people escaping multidimensional
41 poverty.
Increase0 in States
India with Low Poverty
Rural Urban
40
India Rural Urban
y The number of states with less than 10% of people living in multidimensional poverty doubled
from 7 in 2016 to 14 in 2021.
Chart VII.3: Decline in the deprivations across the multidimensionally poor

population
219
Source: NITI Aayog MPI Report 2023
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219
Key Findings from NITI Aayog’s Discussion Paper

f Escaping Multidimensional Poverty
Total Escapees: Between 2013-14 and 2022-23, 24.82 crore people have moved out of
multidimensional poverty.
Data Methodology: Estimates for 2013-14 and 2022-23 are projected based on the compounded
annual rate of change due to data limitations.
f Decline in Poverty Levels

Proportion Reduction: The percentage of individuals in multidimensional poverty decreased
from 29.17% in 2013-14 to 11.28% in 2022-23.
Total Reduction: This represents a decline of 17.89 percentage points.
f Regional Highlights
Uttar Pradesh: Largest reduction, with 5.94 crore people escaping poverty.
Bihar: Second largest reduction, with 3.77 crore people escaping poverty.
Madhya Pradesh: 2.30 crore people moved out of poverty.
Rajasthan: 1.87 crore people escaped poverty.
f Rate of Decline
2015-16 to 2019-21: The Headcount Ratio (HCR) decreased at an annual rate of 10.66%.
2005-06 to 2015-16: The annual rate of decline was 7.69%.
Overall, the rate of poverty reduction has accelerated in recent years compared to earlier periods.
Household Consumption Expenditure Survey 2022-23

y The latest Household Consumption Expenditure Survey (HCES) for 2022-23, conducted from August
2022 to July 2023 and released on 24 February 2024, highlights key trends in living standards across
rural and urban areas in India.
Reduced Inequality and Rising Consumption

y The results reflect the positive impacts of various social sector initiatives, showing reduced
inequality and increased consumption spending. This is evident in the monthly per capita
consumption expenditure (MPCE) across rural and urban areas, confirming the improvements in
non-income aspects of living standards noted in the previous multidimensional poverty report by
NITI Aayog.
Inclusive Growth Findings

f Increase in MPCE:
MPCE increased by 40% in rural areas and 33.5% in urban areas from 2011-12 to 2022-23.
f Decline in Inequality:
The Gini coefficient decreased from 0.283 to 0.266 in rural areas and from 0.363 to 0.314 in
urban areas.
The rural-urban MPCE gap reduced from 83.9% in 2011-12 to 71.2% in 2022-23.
f Economic Inequality:
Consumption growth for the lowest 5% of the MPCE population outpaced that of the top 5%,
indicating reduced economic inequality over the last decade.
Impact of Government Welfare Schemes

Government welfare programs have further enhanced MPCE:
y The benefits from these programs constituted 5.0% of MPCE for the bottom 5% in rural areas and
4.3% in urban areas.
y For the top 5% in rural areas, the benefits were 0.8% of MPCE and 0.1% in urban areas.
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Inclusive Economic Growth

y The MPCE/PCI (per capita gross national income) ratio has increased for all consumption classes
except the top 5% in rural areas and the top 10% in urban areas, indicating broad-based inclusive
economic growth despite the challenges posed by the COVID-19 pandemic.
Chart VII.4: CAGR in MPCE: 2011-12 to 2022-23
(a) Positive yearly growth in both real (b) The bottom 5% fractile saw higher
and nominal terms growth than the top 5% fractile
Rural Urban 10
9.2
9.2% 8
8.5%
growth in MPCE (%)

6.6
growth in MPCE (%)
3.1%
2.7%
Bottom 5 Top 5 per Bottom 5 Top 5 per

at current prices at constant prices per cent cent per cent cent
Rural Urban
Source: Factsheet of HCES 2022-23, MoSPI
QualityHealthcare
Quality Healthcare for
forAll
All
f Importance of the Health Sector
A resilient economy requires a robust health sector. The health system’s quality is crucial for:
Ensuring human capital and labor productivity.

Increasing household savings.
Preventing poverty due to catastrophic health expenditures.
Building resilience against health shocks like COVID-19.
f Government Commitment
The Indian Government is dedicated to ensuring the health and well-being of people of all ages
through:
A preventive and promotive healthcare approach in developmental policies.
Universal access to high-quality healthcare services.
f Key Initiatives
The Government has been implementing various schemes and programs to improve the
healthcare system. The progress of these initiatives is detailed in Table VII.2.
Table VII.2: Key Healthcare Schemes
Programme/Purpose (year of launch) Progress/Outcome
Ayushman Bharat Pradhan Mantri Jan Aarogya 34.73 crore Ayushman Bharat cards
Yojana (AB-PMJAY) (2018) generated
Health insurance cover of ₹5 lakh/ year for 7.37 crore hospital admissions have been
underprivileged families for secondary and covered by the scheme.
tertiary hospitalisation
49 per cent of beneficiaries are females (as of
8 July, 2024)18 221
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Programme/Purpose (year of launch) Progress/Outcome
PM Jan Aushadhi Kendras 10,000th Jan Aushadhi Kendra was

inaugurated in AIIMS Deoghar.
Quality medicines at 50-90 per cent cheaper 1965 medicines & 293 surgical equipments
than market rates available
AMRIT (Affordable Medicines and Reliable More than 300 Amrit pharmacies operating
Implants for Treatment) in different States/UTs
Subsidised medicines for critical illnesses
16.96 lakh wellness, yoga, and meditation

sessions, 1.89 crore Tele consultations, free
drugs availed by 11.64 crore people and free
diagnostics services availed by 9.28 crore
people
ANC19 Checkup and Immunization availed by
82.10 lakh mothers and 90.15 lakh children
Seven types of screening (TB, Hypertension,
Ayushman Bhav Campaign (Sep 2023) diabetes, Oral Cancer, Breast Cancer, Cervical
Cancer and Cataract) are availed by 34.39
To saturate selected healthcare services in every crore people.
village/town and inform citizens about the
Government’s flagship schemes. 2.0 crore patients consulted general OPD,
while 90.69 lakh patients consulted specialist
OPD, and 65,094 major surgeries and 1,96,156
minor surgeries were conducted.
13.48 crore ABHA accounts were created, 9.50
crore Ayushman cards were generated, and
1.20 lakh Ayushman Sabhas were organised.
The cumulative footfall reached 20.66 crore in
25.25 lakh health melas (as of 31 March 2024)
Ayushman Bharat Digital Mission (ABDM) 64.86 crore Ayushman Bharat Health Accounts
(2021) (ABHA) created
3.06 lakh Health Facility Registries
to create a national digital health ecosystem 4.06 lakh Healthcare professionals
across the country 39.77 crore Health records linked with ABНА 20
MINDING THE MIND: TAKING STOCK OF THE MENTAL

HEALTH SCENARIO
The Impact of Mental Health on Development
Historical Insight
y Quote: Dr. Brock Chisholm, the first Director-General of the World Health Organization (WHO),
highlighted the significance of mental health with his statement in 1954: “Without mental health,
there can be no true physical health.”
Current Relevance
y Principle Impact: Mental health remains a crucial, though often overlooked, factor in both
individual well-being and national development.
y Development Link: Addressing mental health effectively is fundamental to achieving overall
physical health and fostering comprehensive development.
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Mental Well-being
Mental well-being is integral to all aspects of health, including physical, social, and emotional. It can
be described as a state in which a person can:
y Cope with daily life stresses.

y Remain productive.
y Contribute to the community.
Mental Health Conditions

y Mental health conditions encompass:
Mental disorders.
Psychosocial disabilities.
Mental states associated with significant distress, impaired functioning, or risk of self-harm.
These conditions range from minor stressors to severe disorders and can affect individuals throughout
their lifetime.
RISING PREVALENCE OF MENTAL HEALTH ISSUES:
Global Mental Health Statistics

Prevalence of Mental Disorders
According to the World Health Organization (WHO) in 2019:
y One in every eight people, or 970 million individuals globally, were living with a mental disorder.
y Anxiety and depression were the most common conditions.
Impact of COVID-19 Pandemic

The COVID-19 pandemic significantly exacerbated mental health issues in 2020:
y Major depressive disorder cases increased by 27.6%.

y Anxiety disorder cases increased by 25.6%.
Lifetime Risk of Mental Health Disorders

A large-scale study co-led by researchers from Harvard Medical School and the University of
Queensland found that:
y One out of every two people globally will develop a mental health disorder in their lifetime
Prevalence of Mental Disorders

The National Mental Health Survey (NMHS) 2015-2016 revealed that 10.6% of adults in India suffered
from mental disorders.
Treatment Gap
The treatment gap for mental disorders ranged between 70% to 92% for different disorders.
Urban vs. Rural Prevalence

y Urban metro regions: 13.5%
y Rural areas: 6.9%
y Urban non-metro areas: 4.3%
Current Survey
y The second and more expansive NMHS is currently in progress.
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Age Group Most Affected

y According to Dhyani et al. (2022), individuals aged 25-44 years are the most affected by mental
illnesses.
EVOLVING MENTAL HEALTH OF CHILDREN AND YOUTH
Importance of Mental Health in Youth

Foundation for Development
y Holistic Growth: Sound mental health is essential for the holistic development of children and
adolescents.
y Economic Impact: It is a critical step towards ensuring quality economic growth and societal
advancement.
Rising Concerns
y Prevalence: Increasing rates of mental health issues among youth are linked to factors such as
academic pressures, social media influence, family dynamics, and socio-economic conditions.
y Global Statistics: According to WHO (2021), one in seven individuals aged 10-19 years experiences
a mental disorder.
Recent Findings
y Gallup Research: UNICEF’s Changing Childhood report reveals that in the first half of 2021, a
median of 19% of 15 to 24-year-olds across 21 countries reported frequently feeling depressed or
lacking interest in activities.
Increasing Prevalence of Poor Mental Health

NCERT’s Mental Health and Well-being of School Students Survey highlighted an increasing prevalence
of poor mental health among adolescents in India, exacerbated by the COVID-19 pandemic.
Key Statistics
y Anxiety: 11% of students reported feeling anxious.
y Extreme Emotion: 14% of students reported experiencing extreme emotion.
y Mood Swings: 43% of students experienced mood swings.
Causes of Anxiety
y Studies: 50% of students cited studies as a reason for anxiety.
y Examinations and Results: 31% of students cited examination and results as causes of anxiety.
Link to Mental Health Issues

The increase in mental health issues among children and adolescents is often linked to the overuse
of the internet and social media.
Problems Linked to Internet Overuse

y Obsessive Social Media Use: Commonly known as “doom scrolling.”
y Severe Issues: Includes cyberbullying.
Jonathan Haidt’s Exploration

Jonathan Haidt, in his book The Anxious Generation: How the Great Rewiring of Children is Causing an
Epidemic of Mental Illness, examines:
y Impact of Increased Screen Time: On mental health issues among young people.
y Decline of Unsupervised Outdoor Play: How reduced free play affects emotional well-being.
y Social Media Influence: Its role in the rise of mental health issues since the early 2010s with the
advent of mobile phones.
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Mental Health Issues through the lens of Economics

Impact of Mental Health Problems
y Individual Level: Mental health issues diminish quality of life and hinder the realization of personal
potential.
y Economic Level: These disorders lead to significant productivity losses through absenteeism,
decreased productivity, disability, and increased healthcare costs.
Poverty and Mental Health

y Stressful Living Conditions: Poverty increases mental health risks due to financial instability and
lack of opportunities for upward mobility.
y Urbanisation and Migration: These factors disrupt social cohesion and traditional support
systems, leading to significant mental stress.
Economic Returns on Mental Health Investment

y High Returns on Investment: Investment in mental health yields high returns.
A 2016 study across 36 countries estimated a benefit-to-cost ratio of 2.3-3.0 to 1 for economic
benefits alone, and 3.3-5.7 to 1 when including health returns.
y Indian Context: Math et al. (2019) estimate positive returns on investment in implementing the
Mental Health Care Act 2017 in India.
Positive policy momentum provides tailwinds for action

India is creating positive momentum in policy development by recognising mental health as a
fundamental aspect of overall well-being. The Government is implementing national policies such as
the National Mental Health Policy (2014), the National Youth Policy (2014) and the National Education
Policy (2020), emphasising the importance of mental health across the entire care continuum,
particularly concerning children and adolescents. Moreover, 22 mental disorders are covered under
the Ayushman Bharat – PMJAY health insurance.
Mental Health Programs in India

f National Mental Health Programme
Purpose: Integrate mental health at the primary healthcare level and improve mental health
infrastructure.
Progress/Outcome:
Over 1.73 lakh SHCs, PHCs, UPHCs, and UHWCs upgraded to Ayushman Arogya Mandirs
providing mental health services.
Primary healthcare workers trained to provide mental health services.
Provision of 10 bedded inpatient facilities at the district level.
Community awareness activities to destigmatize mental health issues and promote
treatment-seeking behavior.
f National Tele Mental Health Programme

Purpose: Universal access to mental health counseling through a toll-free number (14416/1800-
89-14416).
Progress/Outcome:
Over 1600 trained counselors in over 20 languages.
53 Tele MANAS cells set up in 34 states/UTs.
More than 8.07 lakh calls handled since October 2022, as of 31 March 2024.
f Increasing Mental Health Personnel

Purpose: Increase the number of mental health professionals.
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Progress/Outcome:
25 Centers of Excellence sanctioned to increase PG students’ intake.
Support to 19 Government medical colleges/institutions to strengthen 47 PG Departments.
Mental health services provisioned for 22 AIIMS.
Three Digital Academies providing online training courses for general healthcare medical
and paramedical professionals.
Minimum Standard of Requirements for Post-Graduate Courses-2023 issued by the National
Medical Council on 15 January 2024.
Children and Youth-Centric Programs

f Rashtriya Kishor Swasthya Karyakram
Purpose: Holistic development of the adolescent population.
Progress/Outcome:
Adolescent Friendly Health Clinics (AFHC), peer education programs providing counseling
services involving parents, teachers, and the community.
f Manodarpan
Purpose: Counseling during COVID-19.
Progress/Outcome:
Webpage and national toll-free helpline for seeking psychological support for students.
Ayushman Bharat School Health & Wellness Programme

y Purpose: Sensitizing and training Health and Wellness Ambassadors (teachers).
y Progress/Outcome:
“Emotional Wellbeing and Mental Health” module developed by NCERT.
NCERT counseling services for school children involving 270 counselors across the country.
Live interactive sessions SAHYOG through PM eVidya DTH channels, yoga sessions, etc.
CBSE pre and post-examination tele-counseling through a toll-free helpline.
Modular Handbook on Early Identification and Intervention for Mental Health Problems in
School Going Children developed in collaboration with the Public Health Foundation of India.
State-Level Initiatives
y Meghalaya: State Mental Health Policy training Community Health Centre (CHC) and school staff
to support children and adolescents.
y Delhi: Happiness Curriculum for students from Nursery to Grade 8, integrating mindfulness,
meditation, and values-based education.
y Kerala (Kozhikode): ‘Our Responsibility to Children’ initiative includes teacher, peer, and social
mentoring, life skills education, and professional care for children with special needs.
Policy Recommendations on Mental Health

y Gaps in Existing Programs: Increase the number of psychiatrists to meet WHO norms, develop
comprehensive guidelines for excellence centers, gather user feedback, nurture peer support
networks, partner with NGOs, and involve individuals with personal mental health experiences in
decision-making.
y Awareness and Stigma: Implement a bottom-up, whole-of-community approach to address
mental health stigma and increase public awareness.
y Integration in Schools: Develop age-appropriate mental health curricula for teachers and
students, encourage early intervention, promote community-level interactions, and balance the
role of technology.
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Impact of National Health Programs

y Government Health Expenditure: Increase in the share of Government Health Expenditure
(GHE) in GDP and Total Health Expenditure (THE).
y Primary Healthcare Focus: Shift towards primary healthcare, improving health outcomes and
reducing the need for secondary and tertiary care.
y Social Security and Health Insurance: Significant increase in social security expenditure on
health and a decline in out-of-pocket expenditure (OOPE).
y Ayushman Bharat: Reduced healthcare cost burden on families and improved credit market
outcomes, highlighting the interplay between health insurance and financial stability.
Future Trends
y Healthy Eating and Mental Health: Public awareness of healthy eating promoted by dietary
guidelines.
y State and Local Governance: Crucial for the implementation of national health programs and
reaching the last mile.
Education
y SDG4 and National Education Policy (NEP) 2020
Sustainable Development Goal 4 (SDG4) aims to ensure inclusive, equitable quality education
and promote lifelong learning opportunities by 2030. The National Education Policy (NEP)
2020, now in its fourth year of implementation, aligns with SDG4 and aims to prepare India’s
youth for the challenges of a knowledge-driven economy.
y School Education
India’s School Education System serves around 26 crore students across public and private
schools, catering to diverse socio-economic backgrounds. The NEP 2020 focuses on providing
high-quality education for learners aged 3-18 years, aiming to establish India as a global
knowledge superpower. Key goals include revamping the education system to improve
learning outcomes, as evident from the drop in scores in the National Achievement Survey
(NAS) 2021 compared to 2017.
f Key Initiatives Under NEP 2020:

y Early Childhood Care and Education (ECCE): Programs like ‘Poshan bhi Padhai bhi’ launched
in May 2023 aim to develop a universal, high-quality preschool network anchored in Anganwadi
centres. This includes high-quality preschool instruction and support for children with special
needs.
y Government Schemes:
Samagra Shiksha Abhiyan: Integrated teacher training and infrastructure improvement in
schools.
Kasturba Gandhi Balika Vidyalaya (KGBV): Residential schools for girls from disadvantaged
groups.
Inclusive Education for Children with Special Needs (CwSN): Accessibility improvements
and support for children with disabilities.
Digital Initiatives: Platforms like DIKSHA provide e-content and resources in multiple
languages.
Strengthening of Teaching-Learning and Results for States (STARS): Quality and governance
improvement in six states.
y Community Participation:
Vidyanjali Program: Engages community volunteers, CSR, and private sectors to enhance
school infrastructure and educational quality.
y Progress in School Infrastructure: Improvements in facilities like toilets, drinking water,
handwashing, libraries, electricity, and internet access have been noted.
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y National Curriculum Framework for School Education (NCF-SE) 2023

y Launched in August 2023, the NCF-SE 2023 aligns with NEP 2020, promoting competency-based
education, vocational education from grade 3, and integrating Indigenous knowledge and
educational technology.
f Vocational Education
NEP 2020 mandates mainstreaming vocational education based on skills gap analysis and local
job opportunities. Initiatives under the Samagra Shiksha Scheme support the development
of vocational skills and employability among students.
f Higher Education
Higher Education has seen an increase in total enrolment and rising equity. As of 2021-22,
enrolment reached 4.33 crore, with significant growth among underprivileged sections like SC,
ST, and OBC, and a notable rise in female enrolment.
f Enrolment Growth (2014-15 to 2021-22):

Overall: 26.5%
Female: 31.6%
SC: 44.0%
SC Female: 51.0%
ST: 65.2%
ST Female: 80.2%
OBC: 45.1%
OBC Female: 49.3%
f Lifelong Learning
Digital Infrastructure and innovative programs are being developed to support lifelong
learning, adapting to the needs of a knowledge-driven economy.
India’s online learning architecture has significantly contributed to the creditisation in education,
with University Grants Commission (UGC) Regulations allowing students to earn up to 40% of their
credits from online courses. Several initiatives have driven this progress, as detailed below.
India’s Online Learning Architecture

f SWAYAM:
An open learning MOOC platform providing high-quality content across disciplines.
Offers over 13,140 courses, including emerging technologies like AI, Machine Learning, and
cloud computing.
Enrolled 4.3 crore students, making it a popular e-learning platform.
f SWAYAM PRABHA:
A DTH (Direct to Home) Satellite TV service with 48 channels providing UG/PG level educational
content 24x7.
Reached over 1.2 million students with more than 143,000 unique videos, totaling 86,000+
hours of watch time.
f SWAYAM Plus:
Led by IIT Madras, offering high-quality courses for credit recognition in collaboration with
industry leaders.
Focuses on employability in Tier 2 and Tier 3 cities, with courses in Manufacturing, Energy, IT,
Management, Healthcare, and more.
f SAMARTH:
An e-governance solution developed with the Ministry of Education and the Indian Institute of
Crafts and Design.
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Digitally transforms administrative processes in higher education institutions (HEIs), adopted

by over 3,500 HEIs.
f PM e-VIDYA:
Unifies digital education efforts with diverse content through platforms like DIKSHA and
Sathee.
DIKSHA features over 3.5 lakh e-contents and 6,854 Energized Textbooks in 30+ languages.
Sathee offers resources for competitive exam preparation, including video lectures, problems,
mock tests, an AI chatbot, and mentorship.
Way Forward in Education

Education is vital for India’s development, requiring mission-mode and cost-effective implementation
of programs, especially in primary education. Collaboration across central, state, and local governments
is essential, as education is a concurrent list subject.
f Vocational Education:
y The Lend A Hand India (LAHI) model is a good example, involving collaboration with governments
to introduce vocational education, establish labs, recruit and train vocational trainers, organize
internships, and offer placement support.
f Cost-Effectiveness:
y Improving pedagogy and governance by filling supervisory positions to monitor teaching quality,
recognizing teacher performance, and hiring local volunteers to ensure ‘teaching at the right
level.’
India’s Progress in R&D

Research and Development (R&D) is crucial for innovation, progress, and productivity. India has made
significant strides in R&D:
y Nearly one lakh patents granted in FY24, up from less than 25,000 in FY20.
y Highest growth in patent filings (31.6%) in 2022.
y Improved Global Innovation Index rank from 81st in 2015 to 40th in 2023.
y Increased Ph.D. enrollment from 1.17 lakh in FY15 to 2.13 lakh in FY22.
y Gross Expenditure on R&D (GERD) more than doubled from ₹60,196.8 crore in FY11 to ₹127,381
crore in FY21.
y Climbed to 9th rank in Nature’s Index 2023 for high-quality research output.
f Challenges and Initiatives

R&D Investment: India’s R&D investment as a percentage of GDP is 0.64%, compared to China
(2.41%), the US (3.47%), and Israel (5.71%).
Private Sector Contribution: Private sector’s contribution to R&D is low at 36.4% of GERD,
compared to higher percentages in China and the US.
f Efforts to strengthen the research ecosystem include:

Streamlining patent grants, reducing average examination time from 72 months in 2015 to
between 5 to 23 months in 2022.
Increasing scholarships for PhD and Post-Doctoral research.
Launching the National Research Foundation ‘Anusandhan’ to promote R&D, with a corpus of
1 lakh crore announced in the FY25 interim budget.
Social and Economic Empowerment of Women

India is transitioning from women’s development to women-led development, aiming for equal
partnership in growth and national progress. This vision is supported by legislative interventions and
enabling provisions to ensure women’s participation in various professions.
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G20 Presidency and Global Attention

y India’s G20 Presidency 2023: Prioritized ‘women-led development’.
y Nobel Prize in Economics 2023: Awarded to Prof. Claudia Goldin for her work on gender differences
in the labor market, highlighting the global recognition of gender issues.
Addressing Women’s Issues

The issues affecting women include lack of basic necessities (sanitation, water, menstrual hygiene),
safety, nutrition, economic and political equality, and a sense of identity. Transitioning to women-led
development requires a comprehensive approach to tackle these issues.
Government Initiatives
f Gender Budget:
Significant increase from ₹97,134 crore in FY14 to ₹3.10 lakh crore in FY25.
Share of the Gender Budget in the total Union Budget increased to 6.5% in FY25.
f Social Empowerment:
Beti Bachao, Beti Padhao: Improved sex ratio at birth from 918 (2014-15) to 930 (2023-24).
Maternal Mortality Rate: Declined from 130 per lakh live births in 2014-16 to 97 in 2018-20.
Institutional Deliveries: Increased from 78.9% (2015-16) to 88.6% (2019-21).
PM Matru Vandana Yojana: Provides cash payments for births, encouraging rest for new
mothers.
f Nutritional Security:
Saksham Anganwadi & Poshan 2.0: Focuses on malnutrition, micronutrient sufficiency, and
health practices.
Upgrades Anganwadi centres to Saksham Anganwadis with improved facilities.
f Access to Basic Necessities:

Swachh Bharat Mission, Ujjawala Yojana, Jal Jeevan Mission: Provide toilets, clean cooking
gas, and tap drinking water, reducing women’s care burden and improving safety.
f Safety through Sambal:

One-Stop Centres: Provide access to medical, legal aid, police facilitation, shelter, and
counselling.
24-hour Women’s Helpline (181): Offers prompt response on Government schemes and
emergency services.
f Education and Skilling:

School Enrolment: Achieved gender parity at all levels with Sarva Shiksha Abhiyan and Right
to Education Act.
Higher Education: Female Gross Enrolment Ratio (GER) higher than male GER for five
consecutive years.
Skilling Schemes: Increased participation of women in PMKVY, Jan Shikshan Sansthan Scheme,
ITIs, NSTIs, and NAPS.
f Women in Science:
WISE KIRAN: Boosts women’s involvement in STEM.
Vigyan Jyoti Programme: Addresses underrepresentation of girls in science and technology
courses.
f Breaking into Male Bastions:

Enabling provisions for women’s participation in non-conventional sectors like fighter pilots in
the Indian Air Force and Central Police Forces.
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f Political Empowerment:
Nari Shakti Vandan Abhiniyam 2023: Enhances women’s political participation, with a history
of significant female representation in Panchayats leading to better public goods investment.
f Transformation of Feminine Identity:

Steps like issuing ration cards in women’s names, promoting female ownership of houses, and
financial inclusion through Jan Dhan Yojana.
These initiatives demonstrate the Government’s commitment to women’s social and economic
empowerment, aiming for a comprehensive and inclusive approach to development.
The economic empowerment of women has seen significant strides in recent years, particularly in
labor force participation, financial inclusion, rural microfinance, and entrepreneurship. Below is a
summary of key developments:
f Rising Participation in the Labor Force

Labor Force Participation Rate (LFPR): The female LFPR rose to 37% in 2022-23 from 23.3%
in 2017-18. This increase is primarily driven by rural India, where many women are engaged in
agriculture.
Sectoral Shifts: There’s a need to shift women’s employment to higher value-addition sectors
like agro-processing to better utilize their skills and qualifications.
Case Study - Krishnagiri, Tamil Nadu: Industrial investments in this district have created
significant job opportunities for women, leading to positive socio-economic changes such
as reduced child marriage rates, higher female literacy, and increased female enrollment in
technical institutes.
f Financial Inclusion
Bank Accounts: Under the PM Jan Dhan Yojana, 55.6% of the 52.3 crore bank accounts opened
are held by women as of May 2024.
Deposits: The average deposits in these accounts have increased nearly fourfold from ₹1,065
in March 2015 to ₹4,398 in May 2024.
f Rural Microfinance
Self-Help Groups (SHGs): The Deendayal Antyodaya Yojana-NRLM covers over 89 million
women in 8.3 million SHGs, empowering them through financial services, personality
development, and better access to government schemes.
Community Resource Persons (CRPs): Over 3.5 crore CRPs, including Krishi Sakhis, Pashu
Sakhis, and Banking Correspondent Sakhis, play a crucial role in scaling up SHGs.
f Entrepreneurship
Loan Sanctions: Approximately 68% of loans under PM Mudra Yojana and 77.7% of beneficiaries
under Stand-Up India are women as of May 2024.
Digital Literacy: More than 53% of beneficiaries under the Prime Minister’s Rural Digital
Literacy Campaign (PMGDISHA) are women.
Growth Potential: Women-owned businesses in India, estimated at 13.5-15.7 million, could
potentially increase to 31.5 million by 2030 with continued support and encouragement.
f Asset Ownership
Property Rights: Despite legislative support for female property rights, only 14% of landowners
in nine sample states of India are women. Efforts like the requirement of female ownership of
houses under PM AWAS Yojana aim to improve this.
Impact on Violence: Property ownership is associated with decreased spousal violence,
highlighting its importance for women’s financial security and autonomy.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has evolved
significantly since its inception in 2005, aiming to provide rural households with at least 100 days of
guaranteed wage employment each year. The program has seen notable changes and improvements
in efficiency and reach over the years.
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Key Developments and Indicators

y Person-Days Generation: The number of person-days generated has shown significant variation,
peaking in 2020-21 due to increased demand during the COVID-19 pandemic.
2019-20: 265.4 crore person-days
2023-24: 309.2 crore person-days (as of March 31, 2024)
y Average Person-Days per Household: The average number of person-days per household has
slightly fluctuated, reflecting the varying demand and execution of the scheme.
2019-20: 48.4 days
2020-21: 51.52 days
2021-22: 50.1 days
2022-23: 47.8 days
2023-24: 52.1 days
y Women Participation: Women’s participation in MGNREGS has steadily increased, indicating
improved gender inclusivity.
2019-20: 54.8%
2020-21: 53.19%
2021-22: 54.7%
2022-23: 57.5%
2023-24: 58.9%
Efficiency Reforms
Several efficiency reforms have been introduced to reduce leakages and improve transparency,
including:
y Geotagging: Geotagging of assets before, during, and after work completion.

y Electronic Payments: 99.9% of payments through the National Electronic Fund Management
System.
y Aadhaar-Based Payments: Enabled for 98.6% of active workers.
y Social Audits: Established in 28 states/UTs to ensure accountability.
Asset Creation and Livelihood Diversification

MGNREGS has shifted from being purely a wage employment scheme to also focusing on asset
creation for sustainable livelihood:
y Individual Beneficiary Works: Increased from 9.6% of total completed works in FY14 to 73.3% in
FY24.
y Capacity Development Initiatives: Programs like Bare Foot Technicians (BFT) and the UNNATI
skilling project aim to upskill workers.
Convergence with Other Schemes

MGNREGS has been integrated with various national and state initiatives to maximize impact:
y Nutri-Garden: Promoting nutrition gardens for individual beneficiaries and communities.

y Fodder Farms: Collaboration with the Department of Animal Husbandry and Dairying.
y Horticulture: In partnership with the Ministry of Agriculture and Farmer Welfare.
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y Medicinal Plantation: With the National Medicinal Plantation Board, Ministry of Ayush.
y Infrastructure Projects: Including construction of Gram Panchayat buildings, community sanitary
complexes, and all-weather road connectivity.
Is MGNREGS Spending an Indicator of Rural Distress?

The correlation between MGNREGS spending and rural distress is complex and not straightforward.
Research indicates varied usage of funds across states, not necessarily aligned with poverty or
unemployment rates:
y High Usage States: Tamil Nadu and Kerala, despite having lower poverty rates, account for
significant portions of MGNREGS funds.
y Low Usage States: Bihar and UP, with higher poverty rates, use a smaller portion of MGNREGS
funds.
Factors affecting the variance include:

y State Institutional Capacity: States with better institutional mechanisms utilize more funds
effectively.
y Minimum Wage Fixation: Ad-hoc wage rates set by states impact fund usage.
y Demand Registration: Issues with real-time demand registration and reporting impact the
apparent demand for work.
The Indian government has been actively fostering rural entrepreneurship through various initiatives
to ensure seamless access to affordable finance and generate market opportunities. These efforts
aim to empower rural households, particularly women, and enhance their livelihoods. Here are some
key initiatives:
Major Initiatives Supporting Rural Entrepreneurship

f Deendayal Antyodaya Yojana - National Rural Livelihood Mission (DAY-NRLM)
Objective: Empower poor households by providing self-employment and skilled wage
employment opportunities.
Impact: DAY-NRLM has reached 7,135 blocks across 742 districts, promoting over 90.86 lakh
Self Help Groups (SHGs) and mobilizing 10.05 crore households. Significant support has been
provided in terms of capital and bank credit, leading to the establishment of nearly 2.98 lakh
individual enterprises.
f Lakhpati Didis Initiative

Launch: 2023
Objective: Increase the annual income of three crore SHG households to at least ₹1 lakh within
three years through diversified livelihood activities and enhanced support.
f Saras Aajeevika Portal and eSARAS Mobile App

Launch: 2023
Objective: Provide a marketplace for handcrafted products made by SHGs, catalyzing rural
women into entrepreneurship.
f Start-Up Village Entrepreneurship Programme (SVEP) and Aajeevika Grameen

Express Yojana (AGEY)
SVEP: Supports rural entrepreneurs in setting up local enterprises with nearly 2.97 lakh
enterprises established across 221 blocks.
AGEY: Provides safe, affordable transport services in rural areas with 2,333 vehicles
operational.
f Rural Self Employment Training Institute (RSETI) Scheme

Objective: Provide free skill training, credit assistance, and mentorship to rural unemployed
youth, resulting in 36.23 lakh candidates settling as entrepreneurs or apprentices.
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f NABARD’s Support for Rural Entrepreneurs

Initiatives: Micro Entrepreneurship Development Programmes (MEDPs) and Livelihood &
Enterprise Development Programmes (LEDPs).
Impact: Training and funding for SHGs and micro-entrepreneurs, facilitating product sales on
online platforms.
f SARAS Mela
Objective: Enable SHG beneficiaries to sell their products directly in urban markets, bypassing
middlemen and improving profit margins.
f Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)

Objective: Skilling rural youth for sustainable employment, with 16.5 lakh candidates trained
and 10.48 lakh placed in jobs.
Additional Efforts and Future Directions

y Digital Transformation in Rural Governance: Initiatives like e-Panchayat, e-Gram SWARAJ, Bhu-
Aadhaar, and SVAMITVA Scheme aim to digitize governance and improve service delivery in rural
areas.
y Sustainable Development Goals (SDGs): India is committed to achieving the SDGs by 2030, with
significant progress noted in areas such as poverty reduction, health, clean water, and energy.
y Women-Led Development: Empowering women through policy and social change to enhance
their asset ownership and participation in economic activities.
y Effective Implementation: The success of these schemes relies heavily on efficient governance
and the unity of purpose at all levels of government.

Q1: Which of the following statements Q3: Which of the following programs is
regarding India’s recent economic growth associated with providing free gas
and social progress is/are correct? connections to women?
1. India’s economic growth is coupled 1. PM Ujjwala Yojana
with significant social and institutional 2. Swachh Bharat Mission
advancements.
3. Jan Dhan Yojana
2. Transparent and digitalized governance has
improved rural living standards. (a) 1 only (b) 1 and 2 only
3. Women-led development is not a focus in (c) 2 and 3 only (d) 1, 2, and 3
India’s current social sector initiatives.
Q4: Consider the following statements about
(a) 1 only (b) 1 and 2 only the National Multidimensional Poverty
(c) 2 and 3 only (d) 1, 2, and 3 Index (MPI) for India:
1. It incorporates three dimensions: Health,
Q2: Consider the following statements about Education, and Standard of Living.
the Jal Jeevan Mission:
2. It is aligned with the global MPI published by
1. It provided the first tap water connection to the UNDP.
Demchok Village, Leh, in July 2022. 3. The index calculation does not consider the
2. The mission aims to free women from the intensity of poverty.
drudgery of fetching water. Which of the statements given above is/are
3. It includes the installation of solar panels in correct?
remote villages. (a) 1 and 2 only (b) 2 and 3 only
Which of the statements given above is/are (c) 1 and 3 only (d) 1, 2, and 3
correct?
Q5: Which of the following initiatives aims to
(a) 1 and 2 only (b) 2 and 3 only
ensure universal access to mental health
(c) 1 and 3 only (d) 1, 2, and 3 counseling through a toll-free number?
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1. National Mental Health Programme

ANSWERS
2. National Tele Mental Health Programme
3. Manodarpan 1. (b) 2. (a) 3. (a) 4. (a) 5. (b)
(a) 1 and 2 only (b) 2 and 3 only
(c) 1 and 3 only (d) 1, 2, and 3

Q1: Discuss the significance of the Jal Jeevan Mission and its impact on the lives of rural women
in India. How has the mission contributed to improving the quality of life and gender equality
in rural areas?
Q2: Examine the role of digital public infrastructure in enhancing service delivery and accessibility
in India. Highlight the key initiatives and their outcomes, particularly focusing on Direct
Benefit Transfer (DBT) and JAM Trinity.
Q3: Analyze the transformation in India’s welfare approach over the last decade. How have
long-term, efficient, and empowering strategies strengthened the welfare ecosystem and
contributed to sustainable human development?
Q4: Evaluate the effectiveness of the Aspirational Districts Programme (ADP) in addressing
regional disparities in health, nutrition, education, and infrastructure. What are the key
success factors and challenges faced by this program?
Q5: Critically assess the progress made in women’s socio-economic empowerment in India.
Discuss the various government initiatives and legislative measures aimed at enhancing
women’s participation in economic activities and decision-making processes.
**********
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CHAPTER: 8
EMPLOYMENT AND SKILL

DEVELOPMENT: TOWARDS
QUALITY
Key-Terms
" Unemployment Rate : The percentage of the labor force that is jobless and actively seeking
employment. In India, it decreased to 3.2% in 2022-23. It is a key indicator of the health of
the labor market.
" Labour Force Participation Rate (LFPR) : The proportion of the working-age population
that is either employed or actively seeking employment. It has shown improvement,
indicating a recovery in workforce engagement post-pandemic.
" Periodic Labour Force Survey (PLFS) : A survey conducted by the National Statistical Office
(NSO) that provides detailed data on employment, unemployment, and labor market trends.
It reported the unemployment rate and other key labor statistics.
" Agro-Processing : The transformation of raw agricultural products into processed goods.
It offers significant potential for rural employment and contributes to value addition in
agriculture, with low processing levels compared to global standards.
" Flexi Jobs : Employment arrangements where workers are hired on a contract or temporary
basis rather than permanent positions. These jobs are growing but represent a small fraction
of the total workforce, providing both flexibility and challenges in job security.
" Female Labour Force Participation Rate (FLFPR) : The percentage of women actively
participating in the labor force. It has been rising, particularly in rural areas, due to
improvements in basic amenities and agricultural growth.
Chapter at a Glance
Objective: Enhancing India's Labor Market
" India’s labor market has shown key trends in employment, including a declining
unemployment rate (3.2% in 2022-23), increased workforce participation among youth
and females, growth in formal employment (net payroll additions under EPFO), and
a recovery in organised manufacturing. Looking to the future of the job market, the
emphasis is on technological adaptation, promising sectors like agro-processing and
the care economy, and addressing the skill gap, with only 4.4% of the young workforce
being formally skilled. Structural transformation highlights a shift from agriculture, which
employs over 45% of the workforce, to manufacturing, services, and construction, along
with a rise in self-employment.
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" Government initiatives include reforms for the ease of doing business and enhancing
skilling infrastructure through various policies. Regulatory reforms aim at simplifying
state-level laws related to land use, women’s employment, and apprenticeship promotion.
The improvement in Labour Force Participation Rate (LFPR) and Worker Population
Ratio (WPR) indicates a recovery from the pandemic. Youth and female employment has
seen significant improvements, with rising youth employment (unemployment rate down to
10%) and female labour force participation especially in rural areas. The manufacturing
sector shows resilience with rising employment and wage growth.
" To meet job creation requirements and strategies until 2036, an average of 7.85 million
non-farm jobs are needed annually. Schemes like Production Linked Incentives (PLI) and
MITRA Textile scheme are crucial. The flexi job market has grown significantly, with 5.4
million formal contract workers. Agro-processing and the care economy are highlighted for
their potential in job creation and supporting an aging population. The multidimensional
impact of creches includes affordable childcare enabling women to work and improving
children’s development, with the revamped Palna Scheme addressing childcare gaps.
Senior care reforms are crucial for addressing the rising needs of an aging population.
" In skilling, trends show an increase in skilled individuals, with the launch of the Skill India
Digital Platform. Flagship schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY),
Craftsmen Training Scheme, and Jan Shikshan Sansthan (JSS) have been pivotal. Industry
partnerships and innovations, such as the Skill Impact Bond, attract private sector funds
for skill development. The PM Vishwakarma Scheme supports artisans through skill
training and financial aid. Enhancing the National Apprenticeship Promotion Scheme
(NAPS) is essential for increased flexibility and reduced regulatory burden.
INTRODUCTION
The Employment and Skill Development chapter of the Economic Survey 2023-24 highlights several key
trends and areas of focus for improving India’s labor market. Here are some of the main points:
Key Trends in Employment:

y Declining Unemployment Rate: The unemployment rate in India has decreased to 3.2% in 2022-
23, according to the Periodic Labour Force Survey (PLFS).
y Increased Workforce Participation: There has been a rise in both youth and female participation
in the workforce.
y Growth in Formal Employment: Net payroll additions under the Employees’ Provident Fund
Organisation (EPFO) have more than doubled in the past five years, indicating healthy growth in
formal employment.
y Recovery of Organised Manufacturing: Factory employment data shows a rebound in the
organised manufacturing sector with rising employment and upscaling of factories.
Future of the Job Market:

y Technological Adaptation: With the rise of artificial intelligence, the job market must adapt to
these changes while ensuring that technological advancements contribute to collective welfare.
y Agro-Processing and Care Economy: These sectors are seen as promising areas for job creation,
with the care economy being crucial for supporting female workforce participation and addressing
the needs of an aging population.
y Skill Development: While there has been progress in skilling the workforce, only 4.4% of the
young workforce is formally skilled, indicating significant room for improvement.
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Structural Transformation:
y Shift from Agriculture to Other Sectors: Although agriculture still employs more than 45% of the
workforce, there is a notable shift towards manufacturing, services, and construction.
y Rise in Self-Employment: More than half of the workforce is self-employed, with a significant
portion working as unpaid workers in household enterprises. The female workforce, in particular,
is increasingly shifting to self-employment.
Government Initiatives:
y Ease of Doing Business: Structural reforms aimed at improving the ease of doing business are
crucial for productive employment generation.
y Skilling Infrastructure: Various policies and programs have been implemented to enhance
skilling and employability, although further efforts are needed to increase the percentage of
formally skilled workers.
Regulatory Reforms:
y State-Level Regulatory Clean-Ups: Simplifying multiple state-level laws related to land use,
sectors restricted for women workers, and apprenticeship promotion could serve as low-hanging
fruits for employment generation.
Data and Statistics:

y Labour Force Participation Rate (LFPR) and Worker Population Ratio (WPR): Both have shown
improvement, indicating a recovery from the pandemic in both urban and rural areas.
y Employment Status: The workforce is distributed across various categories, with self-employment
being the largest category, followed by casual labor and regular wage/salaried workers.
YOUTH AND FEMALE EMPLOYMENT
Rising youth employment

Youth Employment Trends (2017-2023):
y India’s youth unemployment rate has decreased significantly from 17.8% in 2017-18 to 10% in
2022-23.
y The increase in formal employment is evident, with a rise in new EPFO subscribers aged 18-28
years post-pandemic.
Female Labour Force Participation:

y Female Labour Force Participation Rate (FLFPR) has been rising, with a notable increase in rural
areas (16.9 percentage points from 2017-18 to 2022-23). This rise is attributed to improvements in
basic amenities and agricultural growth.
Employment in Manufacturing:
y The Indian manufacturing sector showed resilience, with employment in the organized sector
recovering to pre-pandemic levels and wage growth resuming. Rural wage growth has also been
strong compared to urban areas.
y Employment is growing faster in larger factories compared to smaller ones, indicating a shift
towards scaling up manufacturing units.
Sectoral and Regional Insights:

y The food products sector remains the largest employer in manufacturing, but sectors like
computers, electronics, and chemicals are growing rapidly.
y States with higher youth populations, like Chhattisgarh and Uttar Pradesh, have seen significant
employment growth in factories.
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EPFO Membership and Government Initiatives:

y EPFO membership has been increasing, with significant net payroll additions since FY19.
Government schemes like the Aatmanirbhar Bharat Rojgar Yojana (ABRY) and various social
security programs have contributed to job creation and worker welfare.
Labour Regulations and Employment Challenges:

y Stricter overtime wage premiums and high per-worker space requirements are identified as
barriers to employment growth.
y Some regulations limit job opportunities for women and restrict flexibility in working hours,
impacting overall job creation.
Government Actions:
y The government has introduced initiatives such as the National Career Service Portal, e-Shram,
and various pension schemes to support job creation and worker welfare.
y Labour Codes have been rationalized to simplify regulations and improve transparency.
JOB CREATION REQUIREMENTS AND STRATEGIES UNTIL 2036
Estimation of Job Creation Needs

Current Workforce and Future Projections:
y The workforce in 2022-23 is based on the Work Participation Rate (WPR) from the PLFS and
population estimates from MoHFW.
y Assumptions include a constant WPR for men (54.4% in 2023) and a rising WPR for women (27.0%
in 2023 to 40.0% by 2036).
y Structural transformation assumptions predict a gradual decline in agricultural employment from
45.8% in 2023 to 25% by 2047.
Annual Job Creation Requirement:

y To address the increasing workforce and the transition from agriculture, an average of
approximately 78.5 lakh (7.85 million) non-farm jobs are needed annually until 2030.
Existing Schemes and Implementation

y Supplementing Job Creation Schemes:
Existing schemes like Production Linked Incentives (PLI), MITRA Textile scheme, and MUDRA
are expected to contribute to job creation.
The PLI scheme aims to generate 60 lakh jobs over 5 years, and the MITRA Textile scheme aims
for 20 lakh jobs.
y Boosting the implementation and efficiency of these schemes is crucial.
3. Flexi Job Market Overview

y Current State of Flexi Employment:
India has approximately 5.4 million formal contract or flexi workers.
These workers receive timely salaries, social security, and medical insurance, with most
contracts lasting over six months.
The flexi workforce has grown at a CAGR of 13.2% over the past decade.
y Sectoral Distribution and Growth:
Flexi jobs make up about 1% of the total workforce in India, compared to 2.2% in Europe and
Asia-Pacific.
The contract staffing workforce has shown positive growth, even during the COVID
pandemic.
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y Sectoral Employment Breakdown:

Flexi workers are concentrated in sectors like logistics, infrastructure/construction, BFSI, IT,
and IT Enabled Services.
The majority (80%) are aged 21-30, with average salaries ranging from ₹20,000 to ₹22,000 per
month.
Most flexi jobs are in lower skill areas such as data operations, accounts, sales, and
administration.
Quality and Social Security Considerations

y Importance of Social Security:
Ensuring social security and quality of employment is essential, particularly for informal and
flexi workers.
Implementing policies to enhance job quality and provide social security benefits is crucial for
addressing the evolving employment landscape.
AGRO-PROCESSING AND CARE ECONOMY FOR

EMPLOYMENT AND GROWTH
Agro-Processing as a Promising Sector
Rural Employment Opportunities:
y Agro-processing offers significant potential for rural employment by acting as an intermediate
sector in the ‘farm to factory’ transition.
y MGNREGS data indicates high demand for low-skill rural jobs, predominantly by women. Shifting
these jobs to agro-processing could be more productive and fiscally sustainable.
y Agro-processing can also address challenges like groundwater scarcity in regions such as Punjab
and Haryana by promoting crop diversification.
Current Status of Value Addition:

y Despite India’s substantial agricultural resources, value addition is low. For example, processing
levels are:
4.5% for fruits
2.7% for vegetables
21.1% for milk
34.2% for meat
15.4% for fishery
y Comparatively, food processing in China is at 30%, and in Western countries, it ranges from 60-
80%.
Rising Demand for Processed Foods:

y The Indian food processing market is expected to reach USD 535 billion by 2025, growing at a
CAGR of 15.2%.
y Increased processed food consumption is anticipated in Tier-2 and Tier-3 cities, reflecting
metropolitan trends.
y Processed food exports as a share of agri-exports have risen from 13.7% in FY15 to 25.6% in FY23.
Success Stories:
y Sahyadri Farmer Producer Company (SFPC):
Located in Nashik, Maharashtra, SFPC has seen significant growth, crossing ₹1000 crore
turnover in FY23.
It has created 1,300 full-time and 4,000 seasonal jobs and is India’s largest exporter of fresh
grapes and processed fruits.
SFPC supports small-scale farmers, with over 95% owning less than one hectare of land.
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Potential for Local Supply and Export:

y Agro-processed outputs can supply local units like Aanganwadis and mid-day meals in schools.
y Specialized products can be linked to export supply chains and e-commerce platforms.
Program Convergence:
y The sector can leverage synergies between programs like Mega Food Park, Skill India, and MUDRA
for better labor, logistics, credit, and marketing.
y Collaboration with organizations like NABARD and Krishi Vigyan Kendra is crucial for effective
implementation.
The Care Economy: Necessity and Prospects

Defining Care Work:
y Care work includes activities meeting physical, psychological, and emotional needs and is divided
into:
Compensated Care Work: Paid roles such as nursing and caregiving.
Unpaid/Underpaid Care Work: Often performed by women at home, including childcare and
eldercare.
Increasing Demand for Care Services:

y India’s aging population will significantly increase care needs over the next 25 years.
y By 2050, the elderly population is projected to rise to 20.8% of the total population, necessitating
expanded care services.
Gender Equity and Economic Growth:

y Developing a care economy can enhance gender equity and increase the Female Labor Force
Participation Rate (FLFPR).
y Women disproportionately bear the burden of unpaid care work, affecting their ability to participate
in paid employment.
Economic Potential of Care Sector:

y Unpaid care work by women is estimated to contribute 15-17% of GDP.
y Investment in the care sector could create significant job opportunities. The global care sector is
one of the fastest-growing, with potential to generate 475 million jobs by 2030.
y In India, a 2% GDP investment in care services could create 11 million jobs, with nearly 70% going
to women.
MULTIDIMENSIONAL IMPACT OF CRECHES: EMPIRICAL

EVIDENCE
Impact of Affordable and Reliable Childcare

General Benefits:
y Freeing Women’s Time: Affordable childcare enables women to participate in paid employment,
enhancing their economic opportunities.
y Mental Health Improvement: Reliable childcare reduces stress associated with balancing work
and family responsibilities.
y Children’s Development: Access to quality childcare positively impacts children’s learning,
nutrition, and overall well-being.
International Evidence:
y Mexico: Public childcare services, supported by subsidies and grants, helped low-income mothers
secure employment and created around 45,000 caregiving jobs, primarily for women.
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y Brazil: The Rio de Janeiro Public Day Care programme for children aged 0-3 significantly increased
maternal employment by 27% and demonstrated high utilization rates.
Indian Evidence:
y Mobile Creches Study (2021-2022):
Sample: Employed women in Gujarat, Jharkhand, Odisha, and Karnataka.
Findings: 61% of women used NGO-run creches, 21% used government-run creches, while
others relied on family members or elder daughters. Quality creches were linked to better well-
being, increased income, improved child well-being, and stronger family relationships.
y SEWA Childcare Centres:
Impact: Beneficiary women increased their working hours and days, leading to higher incomes
and savings.
y Randomised Controlled Trial in Rajasthan:
Findings: Use of creches (Balwadis) led to reduced malnutrition, decreased stress, and
increased self-reported happiness among mothers.
Government Initiatives: Revamped Palna Scheme

Scheme Overview:
y Objective: Address childcare gaps, especially in urban areas where family support may be
limited.
y Implementation: Under Mission Shakti, the Anganwadi-Cum-Crèche initiative was revised to
establish 17,000 Anganwadi-cum-Crèches, with 5,222 approved as of December 2023.
y Potential Impact: Broader coverage could significantly benefit both rural and urban areas by
providing institutional support for childcare and facilitating women’s economic participation.
Senior Care Reforms

Future Outlook:
y Aging Population: By 2047, India will face increased old-age dependency, with the ratio rising
from less than 20% in 2022 to over 30% by 2050.
y Need for Reform: The rising care needs for an aging population necessitate early discussions and
the development of a comprehensive senior care policy to prepare for future demands.
The evidence underscores the critical role of childcare services in improving economic and social
outcomes for women and children. Investments in quality childcare and senior care are essential for
supporting a balanced and productive workforce while addressing demographic changes.
RISING NEED FOR ELDERLY CARE IN INDIA
Current Challenges and Recommendations

Challenges:
y Health Issues: Many elderly individuals suffer from chronic diseases, functional limitations,
depressive symptoms, and low life satisfaction.
y Demographic Trends: The elderly population is increasingly female and rural, contributing to
higher poverty, dependency, and loneliness among this group.
Recommendations:
y Data Collection: Include questions on elderly care in national surveys and censuses to support
evidence-based policymaking.
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y Awareness and Regulation: Increase awareness of existing schemes, regulate Old Age Homes,
and encourage the formation of elderly self-help groups.
y Multigenerational Living: Support policies that facilitate elderly people living in multigenerational
households.
y In-Home Ageing: Promote in-home ageing by creating short-term care facilities like day-care
centres.
Need for a Comprehensive Elderly Care Policy
Current Status:
y The elderly care industry in India is valued at approximately USD 7 billion (₹57,881 crore), but it
faces significant gaps in infrastructure, research, and geriatric illness management.
Economic Potential:
y Silver Dividend: The working capacity of older individuals represents a substantial economic
resource. Utilizing this potential can increase GDP by an average of 1.5% for Asian economies.
Strategic Reforms for a Care Economy:

y Parental Leave Policies: Support for policies that extend parental leave.
y Subsidies and Investments: Provide subsidies for care services and invest in care infrastructure.
y Skill Training: Establish mechanisms for skill training of care workers and create a Sector Skill
Council for Care Services.
y Quality Assurance: Implement monitoring mechanisms and standards for care services.
Policy and Institutional Innovations

y Public-Private Partnerships (PPP): Develop care infrastructure through PPPs, including mobile
creches in workplaces and public areas.
y Community Collaboration: Work with community-based and civil society organizations to address
operational issues and financial constraints.
y Subsidization and Self-Help Groups: Explore models like those in Australia and Argentina for
subsidizing care services. Use self-help groups (SHGs) for delivering childcare services, inspired by
successful models like Jeevika in Bihar.
y Awareness and Business Models: Promote awareness about creches and childcare services, and
leverage Start-up India for innovative business models supporting informal sector workers.
y Regulation and Quality Assurance: Develop a rating system for care facilities similar to the UK’s
OFSTED to ensure quality.
Notable Initiatives
y Goodfellows Start-up: Tackles loneliness among seniors by employing “grandpals” to provide
companionship, highlighting innovative approaches to elderly care.
y Vedanta’s Parenthood Policy: Provides a 12-month sabbatical for new mothers and flexible
working hours post-maternity.
y SEWA’s Sangini Model: Offers full-time childcare for children of informal workers, illustrating
effective support for working mothers.
y Haryana’s Crèche Policy: Provides childcare for children of working women, setting a precedent
for other states.
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DEVELOPMENTS AND PROGRESS IN SKILLING
Overview
To capitalize on India’s demographic dividend, it is essential to equip the workforce with skills and
knowledge aligned with the global labor market and Industry 4.0 requirements. Significant strides have
been made in enhancing skilling efforts, improving employability, and fostering entrepreneurship.
Key Developments
Skill Development Trends (2017-18 to 2022-23)
y Proportion of Skilled Individuals: There has been a notable increase in skilled individuals across
various demographics. As of 2022-23, 4.4% of youth aged 15-29 have received formal vocational/
technical training, with an additional 16.6% receiving informal training.
y Skill India Digital Platform: Launched to streamline access to skilling, education, employment,
and entrepreneurship, integrating various government and private initiatives. As of March 2024,
60 lakh learners have registered on the platform.
WorldSkills Competitions
y India’s participation and ranking in the WorldSkills Competitions have improved significantly,
demonstrating enhanced skills and training quality. In the 2024 competition, India participated in
50 skills and showed notable progress.
Flagship Government Schemes

y Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
Training and Certification: Since 2015, over 1.42 crore people have been trained, and 1.13 crore
certified. Reforms include compulsory on-the-job training and increased female participation.
Craftsmen Training Scheme

y ITIs: Vocational training is provided through 14,955 ITIs. From 2014 to 2023, 1.24 lakh people
enrolled in long-term training, with increased female participation from 9.8% to 13.3%.
Jan Shikshan Sansthan (JSS)

y Skilling Non-Literate and Semi-Literate Individuals: Trained 26.37 lakh people since FY19, with
82% being women. The capacity of JSSs is being upgraded with new equipment and training.
National Apprenticeship Promotion Scheme (NAPS)

y Apprenticeship Training: Over 32.38 lakh apprentices engaged between FY17 and FY24. Female
participation has increased from 7.74% to 20.77%.
Entrepreneurship Training
y NIESBUD and IIE: Provided training to over 4.64 lakh beneficiaries. IIE supported more than 1.78
lakh beneficiaries under various projects.
Skill India International Centres (SIIC)

y Global Skill Development: 30 SIICs are being established to support international skill development
and deployment of skilled Indians abroad.
PM Vishwakarma Scheme
y Support for Artisans: A new scheme aimed at modernizing traditional vocations and providing
end-to-end support for artisans and craftspeople.
Industry Partnerships and Innovations

Skill Impact Bond
y Financing and Outcomes: Launched in 2021, this bond uses a results-based finance model to
attract private sector funds for skill development. It aims to train 50,000 youth, with a focus on
female participation.
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Industry Collaborations
y Flexi MoU Scheme: Partners like Maruti Suzuki and Toyota Kirloskar have trained approximately
9,600 trainees.
y Dual System of Training (DST): Provides trainees with hands-on workplace experience, covering
978 ITIs and 37,865 trainees in the 2022 session.
y IT Partnerships: Collaborations with companies like IBM and Microsoft have trained over 21.5
lakh trainees in emerging technologies.
The PM Vishwakarma Scheme, launched in September 2023, is designed to support traditional artisans
and craftspersons in India. It offers a range of benefits including recognition through a certificate
and ID card, skill upgradation, toolkit incentives, credit support, digital transaction incentives, and
marketing support. The scheme covers 18 trades and provides skill training with stipends and travel
allowances. As of May 2024, it has received 2.14 crore applications, with 11.5 lakh verified and 4.37
lakh candidates trained or undergoing training.
Key Aspects of the Scheme:

y Training and Support: Includes 5-7 days of basic training and 15 days of advanced training, with
financial support for stipends and travel.
y Implementation: Training is offered at 1,533 centers across 365 districts, with an additional 2,000
centers planned.
y Credit Access: Bank officials in all districts help with credit applications.
y Demand and Progress: High demand with over 2 crore applications, significant training
underway.
Apprenticeship Framework: The Apprentices Act, 1961, requires establishments to undertake

apprenticeships. The National Apprenticeship Promotion Scheme (NAPS) incentivizes establishments
by reimbursing part of the stipend costs. Despite these measures, challenges include coordination
issues, infrastructure gaps, and perceptions of vocational training. Recommendations for improvement
include recalibrating the framework to increase flexibility, reducing regulatory burden, and improving
data collection on apprenticeship outcomes.

Q1: Consider the following statements: registration of 60 lakh learners as of March
2024.
1. The unemployment rate in India decreased
to 3.2% in 2022-23 according to the Periodic Which of the following statements given above
Labour Force Survey (PLFS). is/are correct?
2. The net payroll additions under the (a) 1 only

Employees’ Provident Fund Organisation (b) 2 only
(EPFO) have seen a decrease in the past five
(c) Both 1 and 2
years.
(d) Neither 1 nor 2
Which of the following statements given above
is/are correct? Q3: Consider the following statements:
(a) 1 only 1. The agro-processing sector in India has a
processing level of 21.1% for milk.
(b) 2 only
2. India’s food processing market is expected
(c) Both 1 and 2 to reach USD 535 billion by 2025.
(d) Neither 1 nor 2 Which of the following statements given above
is/are correct?
Q2: Consider the following statements:
(a) 1 only
1. The Pradhan Mantri Kaushal Vikas Yojana
(b) 2 only
(PMKVY) has trained over 1.42 crore people
since its inception in 2015. (c) Both 1 and 2
2. The Skill India Digital Platform has seen a (d) Neither 1 nor 2
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Q4: Consider the following statements: (c) Both 1 and 2

1. The Female Labour Force Participation Rate (d) Neither 1 nor 2
(FLFPR) in rural areas increased by 16.9
percentage points from 2017-18 to 2022-23. Q6: Consider the following statements:
2. The PM Vishwakarma Scheme, launched in
1. The care economy in India is projected
September 2023, covers 25 trades.
to create 11 million jobs with a 2% GDP
Which of the following statements given above investment.
is/are correct?
2. The ratio of elderly people in India is expected
(a) 1 only
to be over 30% by 2047.
(b) 2 only
(c) Both 1 and 2 is/are correct?
(d) Neither 1 nor 2
(a) 1 only
Q5: Consider the following statements: (b) 2 only
1. The WorldSkills Competitions have shown
India’s improved ranking in skills training. (c) Both 1 and 2
2. The National Apprenticeship Promotion (d) Neither 1 nor 2
Scheme (NAPS) has engaged over 50 lakh
apprentices between FY17 and FY24.
ANSWERS
is/are correct?
1. (a) 2. (c) 3. (c) 4. (a) 5. (a)
(a) 1 only
(b) 2 only 6. (c)

Q1: Analyze the trends in employment in India as reported in the Economic Survey 2023-24. How
has the formal employment sector evolved in recent years, and what are the implications for
future job creation?
Q2: Discuss the impact of technological advancements and the rise of artificial intelligence on
the Indian job market. What measures should be taken to ensure that technological progress
benefits the workforce collectively?
Q3: How has the Youth Employment rate changed from 2017-18 to 2022-23, and what factors have
contributed to this change?
Q4: What developments have been made in skilling and vocational training according to the
Economic Survey, and what are the flagship government schemes mentioned?
Q5: What are the projected requirements for job creation until 2036, and what strategies are
outlined to meet these requirements?
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CHAPTER: 9
AGRICULTURE AND FOOD

MANAGEMENT: PLENTY OF UPSIDE
LEFT IF WE GET IT RIGHT
Key-Terms
" e-NAM (National Agriculture Market): An online trading platform for agricultural
commodities to create a unified national market.
" Crop diversification: The practice of growing a variety of crops to reduce dependency on a
single crop and improve resilience to weather variability.
" Sustainable practices: Practices aimed at maintaining long-term agricultural productivity
and environmental health.
" Agroecology: An approach that integrates principles of ecology into agricultural production,
focusing on sustainability, biodiversity, and resource conservation.
" Climate-Smart Agriculture (CSA): Practices and technologies aimed at increasing
agricultural productivity and resilience to climate change, while reducing greenhouse gas
emissions.
" Precision Agriculture: The use of advanced technologies such as GPS, IoT, and data
analytics to optimize field-level management regarding crop farming.
" Vertical Farming: Growing crops in stacked layers or vertically inclined surfaces, often using
controlled-environment agriculture (CEA) technology to optimize plant growth.
Chapter at a Glance
" Objective: The chapter aims to highlight the current state, challenges, and opportunities
in the agriculture sector in India. It discusses the sector’s significant contribution to GDP
and employment, growth trends over recent years, challenges like low productivity and
fragmented land holdings, and various government interventions and initiatives aimed at
enhancing productivity, sustainability, and farmer incomes.
" Analysis: The chapter provides a comprehensive overview of the agriculture sector in
India, emphasizing its critical role in the economy, livelihood support, and food security.
It highlights the sector’s growth trajectory, recent performance metrics, and the impact of
external factors like weather variability on production. The analysis underscores the need
for continued reforms and investments in infrastructure, technology, and market linkages
to address existing challenges and unlock the sector’s potential.
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y Rashtriya Gokul Mission (RGM): It focuses on improving livestock quality and
productivity.
y National Digital Livestock Mission (NDLM): It aims at leveraging technology for
livestock development.
y National Programme for Dairy Development (NPDD): It supports dairy sector growth
through various initiatives.
y PM-KISAN: It provides direct income support to farmers.
y Per Drop More Crop (PDMC): It promotes efficient water use through micro-irrigation.
y Digital Agriculture Mission and e-NAM: e-NAM introduces digital solutions for
agriculture, enhancing efficiency and market access.
y Pradhan Mantri Matsya Sampada Yojana (PMMSY): It boosts fisheries infrastructure
and productivity.
y Crop Diversification Programme: It promotes cultivation of less water-intensive crops
like pulses and oilseeds.
y Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) and
PM Formalization of Micro Food Processing Enterprises (PMFME): It supports food
processing sector development.
y National Food Security Act (NFSA) and PMGKAY: It ensures food grain availability
and distribution to vulnerable populations.
INTRODUCTION
The agriculture sector in India supports 42.3% of the population and contributes 18.2% to GDP. Over the
past five years, it has grown at an average annual rate of 4.18% at constant prices. However, in 2023-24,
the growth rate dropped to 1.4% due to poor monsoons affecting foodgrain production.
Livestock and fisheries have shown better growth compared to traditional crops like cereals. Their share
in agriculture GVA at current prices has increased significantly.
Despite being a major producer in several crops and livestock, India faces challenges such as fragmented
land holdings, low farm investment, and inadequate infrastructure. Government interventions include
assured prices through MSP, income support via PM-KISAN, and initiatives like Per Drop More Crop for
sustainable agriculture.
Initiatives like Digital Agriculture Mission and e-NAM aim to enhance efficiency and facilitate better price
discovery in agriculture.
Growth and Contributions:

y The agriculture sector in India has grown at an average annual rate of 4.18% over the past five
years.
y It contributes 18.2% to the country’s GDP and provides livelihood support to 42.3% of the
population.
y The country has a comfortable stock of food grains, with around 40% distributed for free to two-
thirds of the population.
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y India exports more than 7% of its food grains.

y Challenges:
Low productivity levels.
Variability in weather affecting production.
Fragmented land holdings.
Inadequate marketing infrastructure.
Government Interventions:
y Minimum Support Price (MSP) to ensure remunerative prices.
y Schemes like Rashtriya Gokul Mission and PMMSY aim to improve quality, market access, and
infrastructure in livestock and fisheries, contributing to increased production.
y Improved access to institutional credit.
y Promotion of crop diversification, digitization, and mechanization.
y Encouragement of sustainable practices like organic and natural farming.
Recent Performance:
y The agriculture sector’s growth rate was 1.4% in 2023-24, down from 4.7% in 2022-23 due to poor
monsoons caused by El Nino.
y Livestock and fisheries have shown better performance compared to traditional crops.
Sector Statistics:
y In 2022-23, the share of livestock and fisheries in agriculture GVA increased to 30.23% and 7.25%,
respectively.
y The crops sector’s share in agriculture GVA was 55.28% in 2022-23.
Productivity Issues:
y Despite being a major producer, crop yields in India are lower than those of other major
producers.
y Factors include fragmented land holdings, low farm investment, lack of mechanization, and
dependency on rainfall.
Initiatives for Improvement:

y Implementation of recommendations from the Doubling Farmers Income Report (2016).
y Fixing MSP at 1.5 times the all-India weighted average cost of production.
y Income support through schemes like PM-KISAN.
y Promotion of efficient input use and sustainable production methods.
y Digital initiatives like the Digital Agriculture Mission and e-NAM.
Livestock and Fisheries:

y Schemes like Rashtriya Gokul Mission, National Digital Livestock Mission, and National Programme
for Dairy Development are enhancing quality and market access.
y The Fisheries Infrastructure Development Fund and Pradhan Mantri Matsya Sampada Yojana are
improving fisheries productivity and infrastructure.
Crop Diversification:
y Promotion of less water-intensive crops like pulses, oilseeds, and nutri-cereals.
y Implementation of the Crop Diversification Programme and the National Food Security Mission.
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Investment and Credit:

y Gross Capital Formation (GCF) in agriculture has grown at 19.04% in 2022-23.
y GCF as a percentage of agriculture GVA rose from 17.7% in 2021-22 to 19.9% in 2022-23.
y Despite the growth, there is a need for further investment to achieve the goal of doubling farmers’
income, requiring an annual investment growth rate of 12.5%.
Challenges and intervention in agriculture sector:

y Land Fragmentation and Investment Challenges: Fragmentation of agricultural land is a
significant issue that impact farmers’ ability to invest in their farms. Despite this, the share of
private corporate investment in agriculture remains low.
y Public vs. Private Investment: Public subsidies have increased significantly, particularly in
fertilizers and power, but public investments in agriculture still lag behind. Private corporate
participation is essential for long-term modernization, especially in post-harvest infrastructure.
y Subsidies and Investments: While subsidies have increased agricultural productivity in the short
term, higher investment levels are necessary for sustained growth. Government schemes like the
Agriculture Marketing Infrastructure (AMI) sub-scheme and the Agriculture Infrastructure Fund
(AIF) aim to improve storage infrastructure and post-harvest management.
y Credit Accessibility: Small landholders dominate Indian agriculture, and access to affordable credit
is crucial. Initiatives like the Kisan Credit Card (KCC) have streamlined credit accessibility, while
Joint Liability Groups (JLGs) have emerged as important sources of credit for tenant farmers.
y Insurance Schemes: The Pradhan Mantri Fasal Bima Yojana (PMFBY) provides a safety net
for farmers against crop losses. However, challenges such as high premiums, delays in claim
settlement, and lack of awareness affect the scheme’s effectiveness.
y Technological Interventions: Recent technological interventions in PMFBY, such as the Digi-
Claim-Payment Module and Yield Estimation Based on Technology (YES-Tech), aim to enhance
efficiency and transparency in crop insurance.
y Agricultural Marketing: The e-NAM Scheme and efforts to promote Farmer Producer
Organizations (FPOs) aim to improve agricultural marketing and price discovery. The e-NAM
platform has generally been well-received by farmers, though challenges like limited awareness
and infrastructure issues persist.
y Futures Market: The forward market in agricultural commodities helps in linking present and
future production, which aids in stabilizing prices and managing risks.
FISH PRODUCTION AND PMMSY INITIATIVES

In 2022-23, India achieved a record fish production of 17.54 million tons, ranking third globally and
accounting for 8% of global production. To enhance this sector, the Pradhan Mantri Matsya Sampada
Yojana (PMMSY) was developed with the aim of boosting seed and fish production along with other
extension services. Additionally, the Fisheries and Aquaculture Infrastructure Development Fund (FIDF),
introduced in 2018-19 with a total fund size of ₹7.52 Thousand Crore, has recommended 121 proposals
for ₹5.59 Thousand Crore at a concessional rate.
Cooperative Societies: Strengthening Communities

Role of Cooperatives
Cooperatives play a crucial role in aggregating produce, enhancing bargaining power, and ensuring
better market access for small and marginal farmers. The dairy cooperative movement is a prime
example of this, focusing on small rural producers. The Primary Agriculture Credit Societies (PACS)
are also seen as key for facilitating the convergence of various schemes for farmers’ welfare. A new
scheme approved in 2023 aims to set up PACS in Panchayats and villages yet to be covered.
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Growth in Cooperatives
As of March 2024, there are 8.03 lakh single-state and 1,614 multi-state cooperatives. New national-
level cooperatives such as National Cooperative Exports Limited (NCEL), Bhartiya Beej Sahakari
Samiti Limited (BBSSL), and National Cooperative Organics Limited (NCOL) have been established to
promote exports and facilitate access to improved seeds and organic products.
PACS AND GOVERNANCE IMPROVEMENTS

Several initiatives have been undertaken to enhance the functioning and scope of PACS:
" Linking PACS/Large Area Multipurpose Societies (LAMP) with NABARD through a National Software
Network.
" A grain storage program aiming to be the world’s largest decentralized storage program.
" Expanding PACS’ roles to include common service centers, LPG distributorships, petrol pump
operations, Janaushadhdi Kendra, and decentralized solar power plants.
" The Multistate Cooperative Societies (Amendment) Act, 2023, aims to improve transparency
and accountability within multistate cooperative societies by introducing provisions such as the
appointment of an ombudsman and concurrent audits.
AGRICULTURAL RESEARCH AND EDUCATION
Investment and Returns

y Investment in agricultural research significantly contributes to food security. For every rupee
invested in agricultural research, there is an estimated payoff of ₹13.85. In 2022-23, ₹19.65 Thousand
Crore was spent on agriculture research, equating to 0.43% of the agricultural Gross Value Added
(GVA). Strengthening research is essential due to ongoing abiotic and biotic pressures on the
agriculture sector.
ICAR Contributions
y The Indian Council on Agricultural Research (ICAR) is the leading organization for agriculture
research in India. In 2022-23, ICAR released 347 varieties/hybrids of 44 crops and 99 varieties of
horticultural crops. This includes 27 bio-fortified varieties and notable contributions such as rice
varieties that are now exported globally.
Overall, while various schemes and interventions are in place to address the challenges faced by Indian
agriculture, ongoing efforts are needed to enhance effectiveness, address limitations, and foster greater
private sector involvement.
FOOD PROCESSING SECTOR (FPI):

PROCESSING POTENTIAL
Sector Overview
y India is a leading producer of milk, fruits, vegetables, and sugar. The food processing sector benefits
from affordable agricultural inputs, a large labour force, and growing consumer demand. It plays
a crucial role in reducing food wastage, enhancing shelf life, and adding value to agricultural
produce. The sector is a major employer in organized manufacturing, with a 12.02% share in total
employment.
Growth and Challenges

y In 2022-23, the value of agri-food exports, including processed food, reached USD 46.44 Billion,
accounting for 11.7% of India’s total exports. Processed food exports grew from 14.9% in 2017-18
to 23.4% in 2022-23. The sector, which grew at an average annual growth rate (AAGR) of 5.35%
over the past eight years, is recovering from the pandemic’s impact. The Gross Value Added (GVA)
in the food processing sector increased from ₹1.30 lakh Crore in 2013-14 to ₹1.92 lakh Crore in
2022-23, constituting 7.66% of GVA in Manufacturing.
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SUPPLY CHAIN MANAGEMENT INITIATIVES

Production Linked Incentive Scheme for the Food Processing Industry (PLISFPI)
y The Government has implemented the Production Linked Incentive Scheme for the Food
Processing Industry (PLISFPI) to foster global food manufacturing champions, enhance branding,
and marketing abroad. This scheme is expected to create off-farm employment, improve farm
produce prices, and increase farmer incomes. Currently, 173 applications are covered under
the PLI Scheme, with beneficiaries having invested ₹7.69 Thousand Crore. An incentive of ₹1.07
Thousand Crore was released in FY 2021-22 and FY 2022-23.
PM Formalization of Micro Food Processing Enterprises (PMFME) Scheme

y The PM Formalization of Micro Food Processing Enterprises (PMFME) scheme, with a total outlay
of ₹10 Thousand Crore, provides credit-linked subsidies and capacity building, including marketing
and branding support. It aims to converge with other schemes like the National Rural Livelihood
Mission, National Urban Livelihood Mission, One District One Product, AIF, and PMKSY. State/UTs
have appointed nodal agencies, and 2 national and 44 state-level technical institutes have been
approved. Against a target of 200,000, 353,608 applications were received, with ₹6.94 Thousand
Crore loan sanctioned to 86,342 applicants. Training has been provided to 522 Master Trainers,
1068 District Level Trainers, and 70,936 beneficiaries.
Tomato, Onion, and Potato (TOP) Value Chain Development

y The scheme for developing the Tomato, Onion, and Potato (TOP) value chain, launched in 2018-
19, has expanded to cover 22 perishable crops, including 10 fruits, 11 vegetables, and shrimp.
The scheme aims to enhance farmers’ value realization, reduce post-harvest losses, increase food
processing capacities, and add value through Price Stabilization Measures and Integrated Value
Chain Development Projects. Short-term interventions include a 50% subsidy on transportation
and storage costs during surplus periods. Long-term grants range from 35% to 50% for food
processing projects in major production clusters.
FOOD MANAGEMENT: ENSURING FOOD SECURITY

Procurement and Distribution
y Food management objectives include procuring food grains at remunerative prices, distributing
food grains to vulnerable sections at affordable prices, and maintaining buffer stocks for food
security and price stability. The Food Corporation of India (FCI) is the nodal agency for procurement,
distribution, and storage. Decentralized procurement schemes ensure adequate wheat and rice
availability.
y As of 24 May 2024, 263.33 LMT of wheat and 489.20 LMT of rice were procured, surpassing previous
totals. The central pool stock of wheat and rice exceeds 600 LMT, ensuring a comfortable position
to meet food grain requirements.
National Food Security Act (NFSA) and PMGKAY

y The distribution of food grains is primarily managed under the National Food Security Act, 2013
(NFSA) and other welfare schemes, including PMGKAY. From 01 January 2024, the government
will continue providing free food grains to 81.35 crore beneficiaries under PMGKAY for five more
years, with an estimated financial outlay of ₹11.80 lakh Crore. The One Nation One Ration Card
(ONORC) system facilitates seamless food grain access for migrants through biometric/Aadhaar
authentication at Fair Price Shops (FPS).
Financial Implications
y The procurement and distribution of food grains involve significant financial implications. The
economic cost of rice and wheat for 2023-24 is ₹3,931.34 per quintal and ₹2,709.59 per quintal,
respectively. This increase in economic costs is due to higher MSPs and related incidentals.
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Conclusion
Sector Performance and Future Directions
y The agriculture sector’s performance is crucial for economic growth, with an average growth
rate of 4.18% over the last five years. Emphasis should be placed on allied sectors like animal
husbandry, dairying, and fisheries to enhance farmers’ incomes. Smallholder farmers should shift
to high-value agriculture—fruits, vegetables, fisheries, poultry, dairy, and buffalo meat—to boost
their incomes and drive a manufacturing revolution.
Promoting Crop Diversification and Investment

y Promoting crop diversification towards oilseeds, pulses, and horticulture requires addressing
issues such as investment in agri-infrastructure, credit accessibility, and market institutions. MSP
has incentivized crop diversification, positively affecting retail prices, especially for crops with
substantial procurement like paddy and wheat.
Encouraging Private Sector Investment

y Enhancing private sector investment in agriculture is essential for improving technology,
production methods, marketing infrastructure, and reducing post-harvest losses. Focusing
on post-harvest infrastructure and the food processing sector can reduce wastage, increase
storage, and ensure better prices for farmers. Investing in crop productivity and enabling greater
participation of cooperatives and FPOs in agri-marketing can also improve market infrastructure
and price discovery.
Modernizing Agriculture Marketing

y Creating a competitive framework by incentivizing states and modernizing agriculture marketing
can drive improvements. Implementing recommendations from the 15th Finance Commission
and providing financial incentives for necessary interventions can support the modernization of
agricultural marketing.

Q1: What is one major challenge affecting Q4: Which scheme was launched to provide
farmer investments in agriculture? free software and hardware assistance to
(a) Lack of subsidies Agricultural Price Marketing Committees
(b) Land fragmentation (APMCs)?
(c) Excessive corporate investment (a) Pradhan Mantri Kisan SAMPADA Yojana
(PMKSY)
(d) High credit availability
(b) e-NAM Scheme
Q2: Which government scheme provides
capital subsidy to improve storage (c) Agriculture Marketing Infrastructure (AMI)
infrastructure?
(d) Kisan Credit Card (KCC)
(a) Pradhan Mantri Fasal Bima Yojana
(PMFBY) Q5: What was the main objective of the e-NAM
(b) Agriculture Marketing Infrastructure (AMI) Scheme?
(c) e-NAM (a) To provide subsidies for fertilizers
(d) Kisan Credit Card (KCC) (b) To improve storage infrastructure
Q3: Which of the following is a recent (c) To enhance agricultural marketing and
technological intervention in the Pradhan price discovery
Mantri Fasal Bima Yojana (PMFBY)?
(d) To offer crop insurance
(a) Agriculture Infrastructure Fund (AIF)
(b) Digi-Claim-Payment Module ANSWERS
(c) Farmer Producer Organizations (FPOs)
(d) Joint Liability Groups (JLGs) 1. (b) 2. (b) 3. (b) 4. (b) 5. (c)
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Q6: Discuss the impact of land fragmentation on farmers’ investments in Indian agriculture and
suggest possible solutions to mitigate this challenge.
Q7: Evaluate the role of public subsidies in the agricultural sector of India. How do they compare
with private sector investments in terms of promoting long-term modernization and
infrastructure development?
Q8: Analyze the effectiveness of the Agriculture Infrastructure Fund (AIF) in improving post-
harvest management and infrastructure. What are some key achievements and ongoing
challenges associated with the fund?
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CHAPTER: 10
INDUSTRY: SMALL AND

MEDIUM MATTERS
Key-Terms
" Fiscal pressure: The mismatch of routine power and financial power causes huge financial
pressure of local government.
" Gross Tax Revenue: Tax Revenue forms part of the Receipt Budget, which in turn is a part
of the Annual Financial Statement of the Union Budget. It gives a detailed report on revenue
collected from different items like corporation tax, income tax, wealth tax, customs, union
excise, service, taxes on Union Territories like land revenue, stamp registration etc.
" Fiscal deficit: Fiscal deficit is the difference between the total revenue and total expenditure
of a government in a financial year.
" Net borrowing ceilings (NBC): The Net Borrowing Ceiling (NBC) of the States for the year
2022-23 has been determined at Rs. 8,57,849 crore at 3.5% of GSDP based on the GSDP data
published by NSO and methodology prescribed by 15th Finance Commission.
" Capital expenditure: Capital expenditures (CapEx) are funds used by a company to acquire,
upgrade, and maintain physical assets such as property, plants, buildings, technology, or
equipment.
" Gross State Domestic Product (GSDP): Gross State Domestic Product (GSDP) is a measure
in monetary terms, the sum total volume of all finished goods and services produced during
a given period of time, usually a year, within the geographical boundaries of the State,
accounted without duplication.
" Sovereign external debt: Sovereign debt is the government debt owed by a country, a
sovereign nation. The debt exists in the form of government-issued securities and direct
loans from financial institutions.
" Dated securities: Dated Government securities are long term securities or bonds of the
government that carries a fixed or floating coupon (interest rate).
" Anonymised Escalation Mechanism: CBIC has launched an Anonymised Escalation
Mechanism for handling the grievances related to delay in clearances. In the above
mechanism, registered users can submit their grievance for delayed clearances under
faceless assessment and escalate it anonymously to the concerned assessing as well as
the higher officers at relevant FAG Port (Faceless Assessment Group). The Anonymized
Escalation facility also enables users to track the status of the grievances submitted by them
till the final resolution.
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Chapter Glimpse
Objective of the Chapter: The objective of this chapter is to provide a comprehensive overview
of India’s industrial landscape, focusing particularly on small and medium enterprises (SMEs).
It highlights the contribution of various industrial sectors to India’s GDP and economic
growth in FY24. The chapter explores sectoral growth trends, challenges faced by different
industries, policy measures required for sustained growth, and initiatives aimed at enhancing
competitiveness and innovation across industrial segments.
" Brief Analysis of the Chapter:

y Sectoral Growth: The chapter reports robust growth in India’s industrial sector, driven
by manufacturing and construction, which nearly reached double-digit growth rates in
FY24. Key industries such as steel, pharmaceuticals, electronics, and automotive have
shown significant expansion, albeit with challenges like import dependencies and
environmental impacts.
y Policy Measures and Initiatives: Several policy measures and initiatives are discussed
to support industrial growth, including the Production Linked Incentive (PLI) schemes
across sectors like electronics, pharmaceuticals, and automobiles. These initiatives aim
to attract investments, boost production, enhance exports, and create employment
opportunities. Additionally, efforts to streamline regulations, improve infrastructure,
and promote R&D and innovation are highlighted as crucial for sustaining industrial
growth.
y Challenges: Regulatory complexities, infrastructure limitations, and technological
barriers that hinder industrial development.
y Recommendations: Reducing compliance burdens, improving access to finance for
MSMEs, and fostering a conducive environment for innovation and skill development to
address these challenges effectively.
" Schemes/Initiatives discussed in the Chapter
y Production Linked Incentive (PLI) Schemes
y One District One Product (ODOP) Initiative
y Support for MSMEs
INTRODUCTION
In FY24, India’s economy grew by 8.2%, driven significantly by industrial growth at 9.5%. Manufacturing
and construction sectors nearly reached double-digit growth, while mining, quarrying, electricity, and
water supply also saw strong positive growth. The manufacturing sector, contributing 14.3% to total
gross value added, plays a pivotal role with extensive backward and forward linkages in the economy.
Despite challenges posed by the pandemic, manufacturing maintained a 5.2% annual growth rate over
the last decade, with notable expansions in steel, machinery, wood products, transport equipment,
and pharmaceuticals. The sector’s development was historically hindered by infrastructure limitations
and regulatory barriers, which have seen improvements through initiatives like GST and infrastructure
development. However, sustaining growth requires continued deregulation, long-term private sector
investment in research and development, and policy support to enhance competitiveness.
The chapter further discusses progress, challenges, and policy measures across industrial segments,
underscoring the importance of production-linked incentives, MSMEs, CPSEs, and industrial innovation
for future growth.
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Sectoral Shifts:
y Growth Areas: Consumer-oriented industries such as automobiles, wood products, furniture,
and pharmaceuticals expanded their output share. Similarly, production-oriented sectors like
machinery, chemicals, non-metallic minerals, and rubber and plastics also grew.
y Decline Areas: Industries like petroleum products, textiles, and beverages saw a gradual reduction
in their output share.
Future Directions:
y Labor-Intensive Sectors: Focus on improving efficiency, skills, and dynamics in sectors like textiles,
food processing, and MSMEs is crucial. Incentives for R&D, formalization of smaller manufacturers,
and alleviation of supply chain issues will support growth.
y Compliance and Finance: Reducing compliance burdens and improving access to finance for
MSMEs will enhance their growth prospects.
Economic Context:
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y Industrial Growth: The industrial sector contributed to a broader economic growth of 8.2% in
FY24, with industrial output expanding by 9.5%. Manufacturing and construction sectors saw close
to double-digit growth, while mining and utilities also performed well.
y Manufacturing’s Role: Manufacturing’s share in total gross value added (GVA) was 14.3% in FY23, but
its output plays a significant role in inter-industry consumption and input supply across sectors.
Historical Perspective:
y Past Decade: The manufacturing sector has grown at an average annual rate of 5.2% over the
past decade, with substantial gains in chemicals, wood products, transport equipment, and
pharmaceuticals. This reflects a shift towards capital-intensive sectors.
Challenges and Policy Needs:

y Infrastructure and Regulation: Historically, industrial growth was constrained by inadequate
infrastructure and complex regulations. Recent improvements in infrastructure and deregulation,
along with the implementation of GST, have facilitated better manufacturing conditions.
y Competitiveness and Investment: To boost manufacturing competitiveness, continued
deregulation, long-term private sector investment, and increased R&D spending are essential.
The sector still has the potential to create low and semi-skilled jobs and drive development.
Policy Focus:
y Industrial Segments: The chapter will explore progress and challenges in various industrial
segments, including key intermediates and consumer-oriented industries.
y Cross-Cutting Themes: It will also address themes like production-linked incentives (PLIs), MSMEs,
central public sector enterprises (CPSEs), and industrial R&D and innovation, providing a roadmap
for future growth.
PERFORMANCE OF KEY SECTORS AND RELATED ISSUES
Cement Industry
y Contribution: Accounts for ~11% of input costs in construction. India is the second-largest cement
producer globally, after China.
y Capacity: Comprises 159 large plants, 120 grinding units, and 62 mini plants, with an annual
capacity of 622 million tonnes and production of 427 million tonnes in FY24.
y Geographic Concentration: 85% of production is concentrated in states like Rajasthan, Andhra
Pradesh, and Gujarat.
y Capacity Utilisation: Maintained around 60-65% in recent years. Global demand is expected to
remain flat, but robust margins are anticipated due to higher prices and lower fuel costs.
y Consumption: Domestic consumption is about 260 kg per capita, lower than the global average
of 540 kg, indicating growth potential.
y Environmental Impact: Cement industry accounts for 7% of global emissions. Efforts are ongoing
to reduce CO2 emissions to 0.35 t per tonne of cement by 2050.
Steel Sector
y Importance: Steel contributes ~47% of input costs in construction and is vital for machinery and
consumer goods.
y Trade Balance: India was a net exporter of finished steel for several years but became a net
importer in FY24 due to international price differentials. Import dependence on coking coal
increased from 56.1 MT in FY23 to 58.1 MT in FY24.
y Green Steel: India’s steel sector, responsible for 12% of national greenhouse gas emissions, is
moving towards greener practices with an emission intensity of 2.5 tonnes of CO2 per tonne of
crude steel, compared to the global average of 1.9 tonnes.
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Coal Sector
y Contribution: Coal accounts for over 55% of primary energy and 70% of power generation.
y Production vs. Consumption: Coal production increased to 997.2 million tonnes in FY24, while
imports were 261 MT. The ratio of domestic production to consumption improved as production
grew faster than consumption.
y Initiatives: The government aims to gasify 100 MT of coal by 2030 and has launched schemes
to support coal gasification and logistics improvements. Coal India Limited (CIL) is investing in
renewable power and acquiring critical minerals.
y Challenges: Issues include technological limitations, procedural delays, and the need for
sustainable practices. The demand for coking coal is expected to rise, necessitating increased
imports and beneficiation efforts.
Overall, while these sectors show robust growth and potential, they face challenges such as
environmental impacts, trade imbalances, and technological barriers.
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MAJOR CONSUMER-ORIENTED INDUSTRIES IN INDIA

(SECTORS)
Pharmaceuticals
y Current Status: India’s pharmaceutical market is valued at USD 50 billion, making it the third-
largest globally by volume. The country is a major player in generic drug production, with a
significant presence in global markets and high compliance with international quality standards.
y Growth and Challenges: India has strengthened its API production capabilities through the
Production Linked Incentive (PLI) schemes.
The country has become a net exporter of bulk drugs, with a notable increase in exports
compared to imports.
Despite these advances, there are challenges related to import dependency for certain APIs
and the need for continued innovation and R&D.
Initiatives:
y The Pradhan Mantri Bhartiya Janaushadhi Pariyojana aims to make quality medicines more
affordable.
y The government is investing in R&D and promoting innovation to drive future growth, with a focus
on enhancing collaboration between industry and academic institutions.
Textile Industry
y Current Status: The textile sector contributes significantly to India’s GDP and manufacturing GVA,
with a diverse range of products including apparel, home textiles, and technical textiles. India is a
major exporter of textiles and apparel, with a diverse export base.
y Challenges:
The sector is fragmented, with many small and medium-sized enterprises (SMEs) and challenges
related to transportation, technology, and skilled manpower.
Dependence on imported machinery and technological obsolescence also pose significant
constraints.
y Supportive Initiatives:
The establishment of PM MITRA Parks and the introduction of PLI schemes aim to boost
manufacturing capabilities and attract investments.
The National Technical Textiles Mission and other programs are focused on technological
advancement, innovation, and infrastructure development.
Electronics Industry
y Current Status: India’s electronics manufacturing sector has grown significantly, contributing to
the global market share and GDP. There has been substantial growth in domestic production and
exports, with significant investments from both domestic and foreign brands.
y Growth and Challenges:
The sector has seen an increase in domestic value addition and job creation, particularly in
mobile phone manufacturing.
Challenges include the need for reduced service link costs and improved participation in global
value chains.
y Initiatives:
Various schemes like the Production Linked Incentive (PLI) for electronics, Scheme for
Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and
Modified Electronics Manufacturing Clusters (EMC 2.0) are driving growth.
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These initiatives offer financial incentives and support infrastructure development to enhance
the electronics manufacturing ecosystem in India.
Overview of Automotive Industries:

Industry Composition:
y The Indian automotive industry features major global auto manufacturers and a robust auto
component sector.
y There was a slowdown in domestic production and consumption growth for automotive parts
from FY20 to FY23 compared to the previous five years.
Impact of the Pandemic:

y The pandemic significantly affected the automotive sector, with varying recovery rates across
different vehicle categories.
y Passenger vehicles rebounded quickly, while recovery for two-wheelers, three-wheelers, and
commercial vehicles took longer.
Production Statistics (FY24):

y Passenger Vehicles: 49 lakh
y Three-Wheelers: 9.9 lakh
y Two-Wheelers: 214.7 lakh
y Commercial Vehicles: 10.7 lakh
Policy Support:
Production Linked Incentive (PLI) Scheme:
y Automobiles & Auto Components: ₹25,938 Crore budget for FY23-FY27, focusing on OEM and
component champions.
y Advanced Chemistry Cell (ACC) Battery Storage: ₹18,100 Crore to enhance battery manufacturing
capabilities.
y FAME Scheme (Phase II): ₹11,500 Crore to promote e-mobility, including e-buses, e-three-
wheelers, and e-two-wheelers.
Electric Mobility:
y The Electric Mobility Promotion Scheme 2024 (EMPS 2024) with ₹500 Crore to accelerate adoption
of e-vehicles.
Performance Metrics:
y Automotive Parts Industry Growth: Showed varying growth rates in domestic production,
consumption, export, and import from FY20-FY23 and FY24.
y Annual Growth Rates (FY21-FY24):
Cars and Utility Vehicles: 19.2% (FY21-22), 23.4% (FY22-23), 12.8% (FY23-24*)
Three-Wheelers: -2.9% (FY21-22), 29.0% (FY22-23), 9.2% (FY23-24*)
Two-Wheelers: 25.4% (FY21-22), 28.5% (FY22-23), 16.0% (FY23-24*)
Commercial Vehicles: 7.1% (FY21-22), 10.3% (FY22-23), 2.9% (FY23-24*)
Cross-Cutting Themes:
PLI Scheme Impact:
y PLI schemes for 14 key sectors including automobiles led to significant investments, production,
and employment.
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y Notable growth in sectors like electronics, pharmaceuticals, and food processing.
MSME Sector:
y MSMEs contributed 35.4% of all manufacturing output and 45.7% of all exports in FY24.
y The Udyam Registration Portal has registered 4.69 Crore MSMEs, providing them with various
benefits.
Regulatory Challenges:
y Issues with building regulations like ground coverage, setbacks, parking, and floor area ratio affect
manufacturing capacity.
y Recommendations include reimagining regulations to better utilize land and increase
manufacturing efficiency.
One District One Product (ODOP):

y The ODOP initiative aims to promote and brand unique products from each district.
y “PM-Ekta Malls” are being set up to support and promote these products.
SUCCESS STORIES OF ONE DISTRICT ONE

PRODUCT (ODOP)
Kashmir:
y Impact: 20% increase in Shopian apple production.
y Initiatives: Government-funded pack sheds and irrigation systems.
Uttarkashi, Uttarakhand:
y Impact: Significant rise in red rice production.
y Initiatives: Organic farming training for 700 farmers and provision of tools for over 1000
beneficiaries.
Araku Valley, Andhra Pradesh:

y Impact: 20% boost in coffee output.
y Initiatives: Girijan Co-Operative Corporation loans benefitting 1,50,000 tribal families.
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Kandhamal, Odisha:
y Impact: Increased domestic and international turmeric markets; 70% rise in government
procurement.
y Initiatives: Support for 5,000 workers and 1,300 farmers, including speedy testing labs, financial
aid, and subsidies.
Bhatinda, Punjab:
y Impact: 30% rise in honey production.
y Initiatives: Financial aid, subsidies, and support for formalisation.
CENTRAL PUBLIC SECTOR ENTERPRISES (CPSES)

PERFORMANCE
" Operational CPSEs: 254 as of March 31, 2023.
" Sector Distribution: 66% in services; remaining in manufacturing, processing, and mining.
" Market Capitalisation: ₹16.69 Lakh Crore (7.95% increase from previous year).
" Net Profit: ₹2.12 Lakh Crore in FY23.
" Profit-making CPSEs: Increased from 178 in FY19 to 193 in FY23
Industrial Credit
y Growth Trend: Recovery from pandemic effects with significant credit growth in FY22 and FY23.
y Sector-wise Credit Growth:
Mining and Quarrying: 3.5% CAGR
Food Processing: 4.8% CAGR
Chemicals: 5.8% CAGR
Cement: 1.1% CAGR
Industrial R&D and Innovation

y R&D Spending: ₹44,720 Crore; 1.61% of manufacturing GVA.
y Private Sector R&D: 1.53% of private sector manufacturing GVA.
y Public Sector R&D: 2.67% of public sector manufacturing GVA.
y Top R&D Sectors: Concentrated in a few sectors, accounting for more than 70% of total
spending.
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Efforts to Promote Startups and Innovation

y Patents: Increase from 5,978 in 2014-15 to 103,057 in 2023-24.
y Startups: Growth from 300 in 2016 to over 1.25 Lakh by end-March 2024; 45% from Tier 2/3
cities.
y Women Directors: 47% of recognized startups have at least one woman director.
y ANRF: Established with ₹50,000 Crore funding for strategic research direction.
y Global Innovation Index: India ranks first among lower middle-income countries and has
improved its position globally.
CONCLUSION AND OUTLOOK
Emerging Trends
Realignment of Industrial Segments:
y Strengthening Sectors: Chemicals, wood products and furniture, pharmaceuticals, transport
equipment, steel, and machinery have gained prominence. These sectors play crucial roles in
industrial intermediates, consumer goods, and capital formation.
o Declining Sectors: Textiles, food products, beverages, tobacco, petroleum products,
and leather have seen a decrease in their relative positions.
Export-Import Balance:
y Net Exporters: Industries such as steel, pharmaceuticals, and automobiles have consistently been
major net exporters.
y Import Dependency: Key sectors like coal, capital goods, and chemicals continue to rely heavily
on imports.
Capital Goods and Construction Inputs:

y Positive Outlook: The demand for capital goods and key construction inputs, such as steel and
cement, is expected to be strong due to increased capital formation in the private sector.
y Challenges: Global uncertainties could impact export demand and the domestic cost of production
due to reliance on critical imported inputs.
GOVERNMENT INITIATIVES AND RECOMMENDATIONS
Ease of Doing Business:

y The government has implemented various measures to enhance business operations, reduce
compliance burdens, and address logistical and infrastructural challenges.
y PLI Schemes: These have attracted significant investments, increased production, sales, exports,
and job creation, especially in the white goods sector.
y Deregulation: Streamlining and simplifying regulations could further aid industrial growth by
reducing operational costs and administrative burdens.
Incentivizing R&D and Innovation:

y Industry’s Role: Industries must prioritize R&D and innovation as core aspects of their business
strategy, beyond just fiscal incentives.
y Collaboration: Active collaboration between industry and academia, alongside vocational
education enhancements, can address skill shortages effectively.
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MSME Sector Challenges:

y Supply Chain Management: Focus on improving supply chain management, market access, and
formalization for MSMEs.
y Policy Actions:
Support for MSME projects, bankability, and financing.
Facilitation and incentivization of employment-intensive MSME segments.
Simplified compliance requirements with single-window mechanisms and digitization.
Grassroots support for market access.
Collaboration between government, industry, and academia for workforce upskilling.
STATISTICAL UPGRADES FOR POLICYMAKING
Industrial Production Index:

y Updated Index: Reflect recent changes in India’s manufacturing landscape and include state-
level variants to understand geographical patterns.
MSME Dynamics:
y Regular Indicators: Track production and employment dynamics in MSMEs.
Financial Data:
y Bank Credit: Provide industry-wise gross disbursement of bank credit.
y Financial Flows: Include industry-wise monthly financial flows through domestic and external
equity, debt routes, and other financing sources.
These measures and improvements are aimed at fostering a more robust and dynamic industrial
sector in India, driving sustainable growth and global competitiveness.

Q1: Which sectors are identified as major net (a) Providing grassroots-level facilitation for
exporters in India? market access
(a) Coal, capital goods, chemicals (b) Easing compliance requirements with a
single-window mechanism
(b) Steel, pharmaceuticals, automobiles
(c) Increasing the number of regulatory
(c) Pharmaceuticals, textiles, leather
requirements
(d) Food products, beverages, petroleum
products (d) Facilitating targeted incentivization for
employment-intensive segments
Q2: What is a key challenge that could impact
the domestic cost of production in India? Q4: What should be updated to aid policymaking
according to the recommendations?
(a) Increased local production
(a) Index of industrial production at the
(b) Dependence on critical imported inputs national level only
like coal and petroleum
(b) Regular indicators of MSME dynamics
(c) High levels of domestic investment
and industry-wise gross disbursement
(d) Reduced global uncertainties of bank credit
Q3: Which of the following is NOT a (c) Annual financial flows from external
recommended action for improving the sources only
MSME sector? (d) Data on international trade policies
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Q5: What recent government initiative is mentioned as having attracted significant investments
and boosted production, sales, and exports?
(a) Industrial Credit Scheme
(b) Public Sector Enterprises Reform
(c) Production Linked Incentive (PLI) Schemes
(d) Innovation and Start-up Funding Program

Q1: Discuss the impact of the Production Linked Incentive (PLI) schemes on the Indian industrial
sector. How have these schemes contributed to investments, production, and job creation?
Additionally, evaluate the potential challenges that could arise from the implementation of
these schemes and suggest measures to address them.
Q2: Analyze the shifts in India’s industrial output shares over the last decade. Which sectors have
gained strength, and which have lost their relative positions? Discuss the possible reasons
behind these shifts and their implications for India’s industrial strategy and economic
growth.
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CHAPTER: 11
SERVICES: FUELLING GROWTH

OPPORTUNITIES
Key-Terms
" GDP (Gross Domestic Product): GDP is a key economic indicator that measures the total
monetary value of all finished goods and services produced within a country’s borders in a
specific time period, usually annually or quarterly. It provides a comprehensive snapshot of
a country’s economic performance and size.
" Foreign Exchange Earnings: Foreign exchange earnings refer to the revenue generated by
a country through international trade and transactions denominated in foreign currencies,
such as US dollars, euros, or yen.
" GST (Goods and Services Tax) and RERA (Real Estate Regulation and
Development Act): Policy reforms that have significantly impacted sectors
like real estate. GST simplified tax structures, while RERA aimed at increasing
transparency and accountability in the real estate sector.
" BharatNet: A government initiative to provide broadband connectivity to rural
and remote areas of India. It aims to bridge the digital divide and empower
citizens with access to digital services and information.
Chapter Glimpse
" Objective: The objective is to highlight the critical role of India’s services sector in its economy.
It discusses various sub-sectors within services such as roadways, railways, ports, aviation,
tourism, hospitality, real estate, technology (IT services and start-ups), telecommunications,
and e-commerce. The chapter aims to showcase the sector’s contribution to GDP, its
resilience post-pandemic, and the opportunities and challenges it faces. It also emphasizes
government initiatives and policies aimed at fostering growth and development across these
service segments.
" Analysis: Chapter 11 provides a comprehensive analysis of India’s services sector, highlighting
its significant contribution to GDP (55% in FY24) and its role in driving economic growth.
It discusses the resilience of various sub-sectors like aviation, tourism, hospitality, and real
estate post-pandemic, supported by initiatives such as UDAN, PRASHAD, and reforms like
GST and RERA.
y The chapter underscores the importance of digital transformation across sectors, the
growth of IT services and start-ups, and initiatives like Digital India and Skill India to
enhance workforce capabilities.
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Chapter Glimpse
Challenges such as skill gaps in high-tech fields, infrastructure bottlenecks, and access to finance
for SMEs are also addressed, with corresponding opportunities identified through policy interventions
and industry collaborations.
y UDAN (Ude Desh ka Aam Nagrik)
y Digital India
y PRASHAD (Pilgrimage Rejuvenation and Spiritual Augmentation Drive)
y Swadesh Darshan 2.0
y Start-Up India Initiative
y PMKVY (Pradhan Mantri Kaushal Vikas Yojana)
y GST (Goods and Services Tax) and RERA (Real Estate Regulation Act)
y Digital Skilling programs
y BharatNet
y Consumer Protection (E-Commerce) Rules, 2020
y National Deep Tech Start-up Policy
y India Purchasing Managers’ Index (PMI)
y Pradhan Manri Bhartiya Janaushadhi Pariyojana
y PM MITRA Parks
y Digi Yatra
y World Economic Forum’s Travel and Tourism Development Index (TTDI) 2024 (India bagged 39th position)
y Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASHAD) scheme
y National Integrated Database of Hospitality Industry (NIDHI) portal
y SAATHI (System for Assessment, Awareness and Training for Hospitality Industry)
y Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund
y PMAY(U)-Credit Linked Subsidy Scheme
y Future Skills PRIME (joint initiative by Ministry of Electronics & Information Technology (MeitY)
and NASSCOM)
INTRODUCTION
India’s services sector encompasses a wide spectrum of activities crucial to its economy, ranging from
contact-intensive services such as hospitality and transport to non-contact-intensive sectors like IT and
finance. Contributing significantly to GDP, it constituted about 55% of India’s economic size in FY24.
Government initiatives like Digital India have spurred growth in digital services, while export promotion
schemes and infrastructure development have bolstered logistics and tourism. Despite challenges like AI
adoption impacting job creation in certain sectors, the services industry showed resilience, rebounding
post-pandemic with a 7.6% growth in FY24. India ranks fifth globally in services exports, driven by
sectors like computer services and business services. Looking ahead, the sector anticipates continued
growth opportunities in digitally delivered services and remains pivotal to India’s economic trajectory
through ongoing investments in skills and infrastructure.
INDIA’S SERVICES SECTOR PERFORMANCE

Roadways:
y India’s road transport system has seen significant improvements, including toll digitisation to
reduce waiting times and the ‘4E’ strategy for enhanced road safety.
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y Challenges like continuous ribbon development and digital land records are being addressed
through access-controlled highways and streamlined clearances.
Indian Railways:
y Indian Railways has modernised with initiatives like Wi-Fi at stations and digitised freight
operations.
y Training institutes and digital platforms like iGOT Karmayogi support capacity building and
efficiency in operations.
Ports, Waterways, and Shipping:

y Decentralisation and public-private partnerships have enhanced port management.
y Sagar Setu application integrates major and non-major ports, boosting maritime efficiency and
promoting river cruise tourism.
Airways:
y India’s aviation sector is growing rapidly with initiatives like UDAN for regional connectivity and
Digi Yatra for passenger convenience.
y Focus on sustainability and skills development underscores the sector’s future growth, including
plans to become a global drone hub by 2030.
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Tourism:
y India’s tourism sector is rebounding post-pandemic, supported by increased foreign tourist
arrivals and foreign exchange earnings.
y Policies enhancing tourism infrastructure and promoting India as a global destination are driving
sectoral growth.
Hospitality
The hospitality industry in India has expanded significantly, adding 14,000 new rooms in 2023 to
reach a total of 183,000 chain-affiliated rooms. Hoteliers are enhancing guest experiences through
technology adoption and operational innovations like leasing external brands for added revenue. In
FY24, average daily rates grew by 13.6% to ₹7,616, reflecting sectoral growth.
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Government initiatives play a crucial role in boosting tourism:

y The ‘Pilgrimage Rejuvenation and Spiritual Augmentation Drive’ (PRASHAD) has identified 29
new tourism sites, inaugurating 12, while Swadesh Darshan 2.0 aims to develop 55 destinations
across states and Union Territories.
y India chaired the SCO Tourism Expert Working Group, fostering collaborative strategies among
member nations.
y Initiatives like E-Marketplace facilitate tourist interactions with certified guides, while SAATHI
ensures compliance with COVID regulations in the hospitality industry.
y The National Integrated Database of Hospitality Industry (NIDHI) portal registers

accommodation units nationwide to inform policy and strategy formulation.
y The Incredible India Tourism Facilitator Certificate Programme aims to create a skilled
workforce through digital platforms, promoting employment in tourism amidst global economic
challenges.
REAL ESTATE AND TECHNOLOGY INITIATIVES IN INDIA

The real estate sector in India has rebounded strongly post-pandemic, driven by increased demand
for larger, sustainable homes near urban centres. Residential sales saw a significant YoY growth of
33% in 2023, with 5.2 lakh new units launched. Policy reforms like GST, RERA, and the PMAY-U
scheme have bolstered transparency and affordability in housing. Initiatives like SWAMIH fund and
Urban Infrastructure Development Fund support affordable housing projects, while digitisation of
land records and single-window clearance streamline operations.
In the technology sector:

y Information Technology (IT) services and Global Capability Centres (GCCs) have grown,
contributing 5.9% to GVA in FY23. GCCs employ over 16.6 lakh personnel, focusing on IT, BPM, and
ER&D sectors.
y India’s IT services sector, pivotal for export earnings, supports a robust ecosystem of tech start-
ups. The number of tech start-ups surged to 31,000 in 2023, with significant growth in EdTech,
EnterpriseTech, BFSI, and SaaS sectors.
y Initiatives like ‘Future Skills PRIME’ and Digital Skilling programs aim to bridge talent gaps in
emerging technologies like AI, cybersecurity, and cloud computing. PMKVY 4.0 enhances skills in
Industry 4.0 fields.
START-UP ECOSYSTEM, TELECOMMUNICATIONS, AND

E-COMMERCE IN INDIA
Start-up Ecosystem:
y Start-Up India Initiative: Facilitates growth of tech start-ups with initiatives like Fund of Funds
for Start-ups (₹10,000 crores corpus) and Start-up India Seed Fund Scheme (supports proof of
concept, prototype development).
y National Deep Tech Start-up Policy: Addresses challenges for deep-tech start-ups (AI, IoT,
Robotics) with funding mechanisms, awareness programs, and IP protection.
y Drone Shakti Program: Supports drone technology development.
y Custom Duty Exemptions for EV-related Capital Goods: Encourages innovation in electric
vehicle infrastructure.
Telecommunications:
y 5G and 6G Development: India is rapidly expanding its 5G network; Bharat 6G Vision and Alliance
promote indigenous telecom solutions.
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y BharatNet Program: Connects Gram Panchayats with broadband; significant progress with
6,83,175 km of Optical Fibre Cable laid.
y Telecom Technology Development Fund: Allocates 5% of USOF collections for R&D in telecom
sector; supports start-ups, MSMEs, academia.
E-commerce:
y Market Growth: Indian e-commerce market projected to exceed USD 350 billion by 2030;
increasing share of modern retail.
y Initiatives: Digital India, UPI, ONDC, and relaxed FDI limits boost e-commerce growth.
y Regulations: Consumer Protection (E-Commerce) Rules, 2020; IT Rules, 2021; Digital Personal
Data Protection Act, 2023 ensure consumer safety and data protection.
y Awareness Programs: Jago Grahak Jago campaign educates consumers; National Consumer
Helpline resolves grievances; digital literacy workshops promote safe e-commerce practices.
CHALLENGES AND OPPORTUNITIES IN INDIA’S

SERVICES SECTOR
Skill Gap in Digital and High-Tech Skills:
y Challenge: Rapid digitization requires a skilled workforce adept in digital technologies like
cybersecurity, enterprise management, and financial risk management.
y Opportunity: Government initiatives such as Skill India and the National Education Policy focus on
upskilling the workforce. Collaborations between government and industry can further enhance
skills development, positioning India as a high-value partner in advanced service sectors.
Logistics and Transport Infrastructure:

y Challenge: Infrastructure bottlenecks and high logistics costs impact economic efficiency.
y Opportunity: Leveraging India’s extensive coastline and river network for enhanced port
operations and inland waterways can significantly reduce transportation costs and improve
efficiency. Emulating successful models like the Kochi Water Metro could benefit islanders and
enhance inland water transport nationwide.
Access to Finance for SMEs:

y Challenge: Small and medium enterprises (SMEs) in the services sector face challenges in
accessing finance.
y Opportunity: Initiatives like Mudra Yojana, Start-up India, and Stand-up India aim to ease
credit accessibility. Streamlining loan processes, expanding credit guarantee schemes, adopting
alternative credit appraisal methods, and enhancing supply chain financing can further improve
credit flow. Establishing agencies to assist with project documentation and enhance project
bankability can also support SMEs.
Conclusion: Addressing these challenges and leveraging opportunities in the services sector is crucial
for India’s economic growth and competitiveness. By focusing on skill development, enhancing logistics
infrastructure, and improving access to finance for SMEs, India can strengthen its position in the global
services market and foster sustainable development across various service segments. These efforts align
with broader economic goals and contribute to building a robust and resilient economy.

Q1: Consider the following statements of digital commerce in India by providing a
regarding the Open Network for Digital level playing field for large and small digital
Commerce (ONDC): commerce apps and platforms.
1. It is a government based regulatory body Which of the above statements is/are correct?
which is aimed at helping digitizing the
businesses. (a) 1 only (b) 2 only
2. It will enable large-scale democratization (c) Both 1 and 2 (d) Neither 1 nor 2
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Q2: Consider the following pairs: 1. NeSL is India’s first Information Utility and
is regulated by the Securities and Exchange
1. Travel and Tourism Development Index
Board of India (SEBI).
(TTDI): UNCTAD
2. Its primary objective is to serve as a repository
2. Medical Tourism Index: World Economic
of legal evidence holding the information
Forum pertaining to any debt/claim.
3. Global Real Estate Transparency Index: WTO
Select the correct answer using the code given
Which of the above pairs is/are correctly below:
matched? (a) 1 only (b) 2 only
(a) No pair (b) Only one pair (c) Both 1 and 2 (d) Neither 1 nor 2
(c) Only two pairs (d) All the three pairs
Q5: Which of the following statements
Q3: Consider the following statements regarding the Account Aggregator (AA) is/
regarding Neo-Banks: are correct?
1. These are financial institutions that operate 1. They can read consumer data but they cannot
resell consumer data.
solely online and conduct all their activities
digitally. 2. The Financial Stability and Development
Council (FSDC) issues the license for Account
2. They provide all conventional banking
Aggregator.
services through digital platforms or mobile
applications. 3. It will help banks reduce transaction costs
and thus enable them to offer more tailored
3. They need to possess a banking license and products and services to customers.
operate independently.
Select the correct answer using the code given
How many of the above statements is/are below:
correct?
(a) 1 and 2 only (b) 3 only
(a) Only one (b) Only two
(c) 1 and 3 only (d) 1, 2 and 3
(c) All three (d) None
Q4: Which of the following statements

ANSWERS
regarding the National e-Governance
Services Limited is/are incorrect? 1. (a) 2. (a) 3. (b) 4. (a) 5. (b)
MAINS QUESTION
Q1: Examine the impact of digital transformation on India’s services sector, focusing on sectors
like IT, e-commerce, and telecommunications. Discuss the government policies and initiatives
aimed at fostering digital growth in these areas. How can India leverage its demographic
dividend to strengthen its position in the global digital economy?
Q2: Analyse the growth prospects of India’s hospitality and tourism industry post-pandemic.
Highlight the initiatives and policies introduced by the government to support this sector.
What measures are needed to sustain and enhance the growth momentum in tourism, both
domestic and international?
Q3: Evaluate the role of start-ups and innovation in shaping India’s services sector. Discuss
the initiatives like Start-Up India, Digital India, and policies supporting deep-tech start-
ups. How can these initiatives contribute to job creation, economic resilience, and global
competitiveness in emerging technologies?
Q4: Assess the challenges and opportunities in enhancing skill development in the services
sector, particularly in digital and high-tech skills. What are the current skill gaps, and how
can partnerships between government, industry, and academia address these challenges?
**********
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CHAPTER: 12
INFRASTRUCTURE: LIFTING
POTENTIAL GROWTH
Key-Terms
" Infrastructure Financing: It refers to the methods and sources used to fund the
construction or improvement of physical and organizational structures needed for
the operation of a society, including roads, railways, airports, energy grids, and digital
networks.
" Public-Private Partnership (PPP): It is a collaboration between government entities
and private sector companies to finance, build, and operate infrastructure projects.
PPPs aim to leverage private sector efficiency and innovation while sharing risks and
rewards.
" Multimodal Transportation: The integration of different modes of transport (e.g.,
road, rail, waterways, air) to create a seamless and efficient transportation network
that enhances connectivity, reduces logistics costs, and improves overall economic
productivity.
" Asset Monetization: The process of unlocking the value of public assets (such as roads,
airports, ports) by leasing or selling them to private investors or companies, typically
through long-term contracts, to generate revenue for new infrastructure projects.
" Smart Cities: Urban areas that leverage technology and data-driven solutions to
improve the quality of life for residents, enhance urban services (like transportation,
energy, waste management), and promote sustainable economic development.
Chapter Glimpse
" Objective of the Chapter: The objective is to introduce students to the critical role of infrastructure
in economic development. It aims to explain how infrastructure supports economic activities,
enhances productivity, and contributes to overall growth and development in an economy.
" Brief Analysis of the Chapter: Chapter 12 provides a comprehensive overview of various aspects
related to infrastructure. It starts by defining infrastructure and discussing its significance in
facilitating production and improving the quality of life. The chapter then delves into different
types of infrastructure such as transport, communication, energy, and social infrastructure.
It emphasizes the importance of each type and how deficiencies in infrastructure can hinder
economic progress.
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y The analysis also covers the impact of infrastructure on economic growth, highlighting its
role in reducing production costs, increasing efficiency, and attracting investments. The
chapter discusses the challenges faced in infrastructure development, including funding
constraints, policy issues, and the need for efficient management and maintenance.
y Moreover, the chapter discusses the initiatives taken by the government to promote
infrastructure development, such as public-private partnerships (PPP), special economic
zones (SEZs), and various schemes aimed at improving connectivity, energy supply, and
social infrastructure like health and education.
Schemes/Initiatives discussed in the Chapter:

y Public-Private Partnerships (PPP)
y Bharatmala Project
y Ujjwal Discom Assurance Yojana (UDAY)
y PM-GatiShakti
y Real estate investment trusts (REITs)
y National Monetisation Pipeline (NMP)
y Parvatmala Pariyojana
y Pradhan Mantri Gram Sadak Yojana (PMGSY)
y Amrit Bharat Station Scheme
y Sagarmala national programme
y Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM)
y PM - Surya Ghar: Muft Bijli Yojana
y Namami Gange programme - National Mission on Clean Ganga (NMCG)
y Atal Bhujal Yojana
y Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)
y Global River Cities Alliance
INTRODUCTION
The Chapter focuses on the critical role of infrastructure development in India’s economic strategy,
particularly under the framework of becoming a developed nation by 2047. This chapter examines
various sectors such as road transport, railways, water transport, civil aviation, and energy infrastructure,
highlighting significant initiatives and challenges.
Infrastructure Financing: The Indian government has significantly increased capital expenditure,
nearly tripling it from FY20 to FY24. This investment is primarily directed towards foundational assets like
roads and railways. Reforms such as National Infrastructure Pipeline, Project Monitoring Group, and
innovative financing instruments like REITs and InvITs have facilitated private sector participation
and streamlined project execution.
DEVELOPMENTS ACROSS INFRASTRUCTURE SECTORS

" Road Transport: The Bharatmala Pariyojana has expanded national highways, increasing connectivity
and efficiency. Significant private sector investments and asset monetization have been achieved,
with revenues exceeding ₹1 lakh crore since FY19.
" Rail Transport: Indian Railways has seen a 77% increase in capital expenditure, focusing on
infrastructure augmentation and modernization. Initiatives like Vande Bharat trains and green
initiatives underscore the sector’s growth trajectory.
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" Water Transport: The Sagarmala program aims to modernize ports and enhance coastal shipping
and inland water transport. Initiatives like the Inland Vessels Act 2021 aim to streamline regulations
and promote safe navigation on national waterways.
" Civil Aviation: The airport sector has witnessed substantial growth with capital expenditures exceeding
₹72,000 crore in the last five years. Schemes like UDAN have enhanced regional connectivity, with
significant investments in new airports and terminal expansions.
" Energy Infrastructure: India is progressing towards its renewable energy targets, aiming for 50%
capacity from non-fossil fuel sources by 2030. Initiatives include significant investments in renewable
energy and efforts to enhance power transmission capabilities.
" Transportation Sector:
y Bharatmala Pariyojana: Aimed at developing national highways, including economic corridors,
expressways, and improving connectivity across the country.
y Pradhan Mantri Gram Sadak Yojana (PMGSY): Connecting rural areas with all-weather roads to
enhance access to economic opportunities, health, and education services.
y Regional Connectivity Scheme (RCS-UDAN): Enhancing regional air connectivity to make air
travel affordable and accessible.
Box XII. 4: Initiatives for Railway Enhancement
Mumbai-Ahmedabad High Dedicated freight corridors

Amrit Bharat Station Scheme
Speed Rail (MAHSR) project (DFCs)
Launched in August 2023 for Under this 508 Km. project, Two DFCs are under
development of stations on a executed with cooperation implementation namely
continuous basis. from Govt. of Japan, land the eastern DFC with route
acquisition and civil conduct length of 1,337 kilometre and
Involves preparation
award have been completed. the western DFC with route
of master plans and its
length of 1,506 kilometre.
phased implementation Overall physical progress
to improve amenities, of 41.7 per cent has been By the end of FY24, 96.1 per
building improvements, achieved and financial cent of the total DFC route
multimodal integration, and expenditure of 59,291 crore length has been completed.
sustainability. was incurred until 31st March
2024.
1,324 stations have been
identified for upgradation so
far.
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Fact Box
Key Initiatives in the Railway Sector
" GatiShakti Multi-Modal Cargo Terminal (GCT): Private players are developing GCTs on
railway and non-railway land based on industry demand. 77 GCTs are operational, with 186
locations receiving in-principle approval as of March 31, 2024.
" Virtual Aggregation Platform: Launched for online booking of parcel space, providing real-
time visibility of demand to cargo transporters.
" Pradhan Mantri Bhartiya Janaushadhi Kendras: Policy framework established to set up 50
centers in railway station premises.
" Signalling and Safety Improvements
" Electrification of Indian Railways: 96.4% of the electrified network extended to 63,456
kilometers under the Mission 100 per cent Electrification Programme. Electrification
progressed at approximately 5,594 RKM per year between 2019 and 2024.
Key Initiatives in the Ports

" Major Port Authorities Act, 2021 with a focus on decentralised decision-making, professionalism,
and PPP models has enhanced efficiency and improved governance of major ports.
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" ‘Harit Sagar’- Green Port guidelines were launched in May 2023 - under which four major ports
are already generating more renewable energy than their demand.
" ‘Sagar Aankalan’, a national benchmarking of Indian ports performance applicable to all Indian
seaports was released in February 2024.
" A world-class National Maritime Heritage Complex being built at Lothal will showcase a vast
collection of maritime artefacts and India’s rich maritime history.
" Development of an all-weather greenfield deep draft major port at Vadhavan in Maharashtra
has been approved by the Cabinet.
y The project will be constructed by Vadhavan Port Project Limited, an SPV formed by Jawaharlal
Nehru Port Authority and Maharashtra Maritime Board.
ENERGY SECTOR
y Renewable Energy: Target to increase installed capacity to 175 GW by 2022, focusing on
solar power expansion and integrating renewable sources into the grid.
y Hydrogen and Fuel Cell Economy: Developing technologies for clean energy
alternatives.
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Major Programmes, Projects, and Initiatives in the Renewable Energy

Sector
" Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM): As
of 31 March 2024, 166 MW decentralized solar capacity has been installed and 3.26 lakh
agricultural pumps have been solarized under the Scheme.
" Production Linked Incentive Scheme for National Programme on High Efficiency
Solar Photovoltaic (PV) Modules: To achieve manufacturing capacity of GW scale in High
Efficiency Solar PV modules with outlay of ₹24,000 crore.
" Solar Parks Scheme: To provide solar power developers with a plug and play model, by
facilitating necessary infrastructure along with all statutory clearances. Scheme has a
sanctioned capacity of 39.7 GW for the development of 56 Solar Parks in 13 States.
" PM - Surya Ghar: Muft Bijli Yojana: Aimed to install rooftop solar plants in one crore
households with a total financial outlay of ₹75,021 crore and to be implemented until FY27.
This is expected to enable an installation of around 30 GW of residential rooftop solar
capacity and 40-45 GW of overall rooftop solar capacity addition by FY27.
" CPSU Scheme Phase-II (Government Producer Scheme): Aimed at setting up
gridconnected solar PV power projects by PSUs and the Government organisations, using
domestically manufactured solar PV cells and modules, with VGF support for self-use or use
by the Government or Government entities.
" Wind Power: As of 31 March 2024, the wind power installed capacity has grown by about 2.1
times during the past 10 years to about 45.89 GW. As per REN21 Report, India stands fourth
in wind power installed capacity in the world.
" New Solar Power Scheme (for Particularly Vulnerable Tribal Groups (PVTG) Habitations/
Villages: Launched on 04 January 2024 under the Pradhan Mantri Janjati Adivasi Nyaya
Maha Abhiyan for electrification of one lakh un-electrified PVTG households located in 18
States and one Union Territory by provision of off-grid solar systems where electricity supply
through grid is not techno-economically feasible.
" Bio Energy Programme: The National Bioenergy Programme notified in November 2022 to
be implemented from 1April 2022 to 31 March 2026 in two phases.
" National Green Hydrogen Mission: Approved in January 2023 with outlay of ₹19,744
crore. The mission targets to achieve about 5 million metric tonne (MMT) of annual Green
Hydrogen production capacity, associated renewable energy capacity of about 125 GW, ₹8
lakh crore in total investments, and 50 MMT CO2 annual emission expected to be averted
by year 2030.
WATER & SANITATION SECTOR

" Swachh Bharat Mission (SBM): Focus on sanitation and waste management, transitioning from ODF
to ODF Plus status across villages.
" Jal Jeevan Mission (JJM): Providing tap water connections to rural households, aiming for universal
coverage by 2024.
Case Study: Steel (Barthan) Bank: The idea of Siddhipet district in Telangana
The initiative in Siddipet district addresses the challenge of managing plastic waste from disposable
utensils. Originating during the Kanti-Velugu program in 2022, it introduced the "steel bank"
concept. This involves storing a variety of steel utensils at Gram Panchayat Offices to replace
disposable plastic items used during medical camps and other events. Benefits include reduced
plastic waste accumulation, heightened community awareness about the harmful effects of plastic,
and additional income for communities and Self-Help Groups (SHGs). The initiative has significantly
cut down plastic waste disposal, aiming for a reduction of 6-8 kilograms per event and 28 quintals
monthly. Similar initiatives, like the Barthan Bank, have been implemented across various states'
local bodies.
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WATER RESOURCE MANAGEMENT SECTOR

" Namami Gange Programme: Cleaning and rejuvenating river Ganga through infrastructure projects
and pollution abatement measures.
" Dam Rehabilitation and Improvement Project (DRIP): DRIP is being implemented with financial
assistance from the World Bank to improve the safety and operational performance of selected existing
dams along with dam safety institutional strengthening with system-wide management approach.
" Atal Bhujal Yojana: World Bank aided Central Sector Scheme with an outlay of ₹6,000 crore, being
implemented from 1st April 2020 for five years. Planned in 8,213 water-stressed gram panchayats
(GPs) of 229 administrative blocks/ talukas in 80 districts of seven States
" Pradhan Mantri Krishi Sinchayee Yojana (PMKSY): Launched in 2015-16 to enhance physical access
to water on farms and expand cultivable areas under assured irrigation, improve on-farm water use
efficiency and introduce sustainable water conservation practices.
Urban Sector:
y Pradhan Mantri Awas Yojana (PMAY-U): Providing affordable housing with basic amenities in
urban areas, aiming to complete sanctioned houses by 2024.
y Swachh Bharat Mission Urban (SBM-U): Achieving ODF and garbage-free status in urban areas
through waste management and sanitation facilities.
Tourism Sector:
y PRASHAD Scheme: Developing tourism infrastructure at pilgrimage and heritage sites.
y Swadesh Darshan Scheme: Integrated development of tourist destinations across states and
Union Territories.
DIGITAL INFRASTRUCTURE
" Digital India Programme: Enhancing digital services and governance through platforms like PM
GatiShakti, Bhuvan, BharatMaps, Single Window Systems, PARIVESH portal, National Data
Analytics Platform, Unified Logistics Interface Platform, Pro-Active Governance and Timely
Implementation (PRAGATI), India Investment Grid (IIG) and many similar dashboards and data
stacks for almost all ministries.
" Space Sector: Currently, India operates 55 active space assets, comprising 18 communication
satellites, nine navigation satellites, five scientific satellites, three meteorological satellites, and 20
Earth observation satellites.
y The Indian Space Research Organisation (ISRO) has expanded its launch vehicle fleet to include
the Polar Satellite Launch Vehicle (PSLV), Geosynchronous Satellite Launch Vehicle (GSLV), Launch
Vehicle Mark-3 (LVM3), and the Small Satellite Launch Vehicle (SSLV).
y Key space exploration missions have included the Mars Orbiter Mission (2014), ASTROSAT (2015),
Chandrayaan-2 Orbiter (2019), Chandrayaan-3 lunar landing (2023), and the Aditya-L1 mission
(2023). India’s indigenous satellite navigation system, NavIC, was fully operationalized in
2016. New Space India Limited (NSIL) successfully launched 72 OneWeb satellites to Low
Earth Orbit using the LVM3, M2, and M3 missions, establishing the LVM3 as a competitive
launch vehicle in the global commercial launch services market.
Challenges and Opportunities:

y Land Related Issues: There are delays in land acquisition and clearances affecting infrastructure
projects like airports and highways. There is need for digital land records to streamline
processes.
y Skill Demands: There is shortage of technical skills in sectors like aviation for maintenance, repair,
and manufacturing. Vulnerability of airlines to external shocks necessitates skill development in
critical areas.
y Private Sector Participation: There are limited private investment due to high capital requirements
and long payback periods. There are challenges in project structuring, risk estimation, and dispute
resolution hinder private sector involvement.
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y Environmental Sustainability: There persists compliance challenges with global environmental

standards like CORSIA in aviation. Cost and infrastructure challenges in adopting sustainable
aviation fuel (SAF).
y Financial Aggregation: Complex infrastructure financing involving multiple stakeholders, but
lacks coordinated reporting formats. There are data gaps in tracking capital flows across different
sectors and financing instruments.
Facilitation and Addressing Bottlenecks:

y National Monetisation Pipeline (NMP): NMP was announced in 2021 on the principle of ‘asset
creation through monetisation’ i.e., tapping private sector investment for new infrastructure
creation.
y National Infrastructure Pipeline (NIP): NIP aims to invest ₹111 lakh crore by 2025 across sectors
like transportation, energy, and water. It is a centralised portal for project tracking and showcasing
investment opportunities.
y Project Monitoring Group (PMG): PMG resolves issues in infrastructure projects worth ₹500
crores and above, facilitating faster implementation. It facilitated resolution of thousands of issues
across mega projects.
y PM GatiShakti National Master Plan (PMGS-NMP): It provides for integrated planning for
multimodal infrastructure to bridge connectivity gaps and enhance logistics efficiency. It involves
43 Ministries and all States/UTs for streamlined project planning and execution.
CONCLUSION AND OUTLOOK

India has made significant strides in infrastructure development, focusing on road, rail, air connectivity,
sanitation, and digital infrastructure. However, public sector funding dominates, with limited private
sector involvement. To enhance infrastructure quality, there’s a need for more private financing and
innovative funding approaches at local levels. Data gaps persist in tracking demand and usage across
sectors, hindering effective resource allocation. A unified data platform under a standardized classification
system is recommended to improve data consistency and aid policy decisions.

Q1: Consider the following statements: Select the correct answer using the code given
below:
1. According to Economic Survey 2023-24,
the gross inflow of external commercial (a) 1 only (b) 2 only
borrowings to infrastructure sector has (c) Both 1 and 2 (d) Neither 1 nor 2
increased from FY 2020-23 to FY 2024.
2. Sagar Aankalan is a national benchmarking Q3: Consider the following statements:
of Indian ports performance applicable to all 1. Under the Maritime India Vision 2030,
Indian seaports Andaman & Nicobar islands and Lakshadweep
Islands are planned to be developed for
Which of the above statements is/are correct? tourism and other initiatives.
(a) 1 only (b) 2 only 2. The Indo Bangladesh Protocol (IBP) route
provides an alternate connectivity for all
(c) Both 1 and 2 (d) Neither 1 nor 2 North-eastern states from Guwahati and
Jogighopa to Kolkata and Haldia ports.
Q2: With reference to National Monetisation Which of the above statements is/are correct?
Pipeline (NMP), which of the following
(a) 1 only (b) 2 only
statements is/are correct?
1. The NMP plans to utilise capital from only
(c) Both 1 and 2 (d) Neither 1 nor 2
strategic government-owned assets.
ANSWERS
2. Under NMP Scheme, the ownership of the
assets will remain with the government..
1. (c) 2. (b) 3. (c)
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Q1: Discuss the significance of the National Monetisation Pipeline (NMP) and its impact on
infrastructure development in India. How can it facilitate private sector participation in the
infrastructure sector?
Q2: Examine the challenges and opportunities in achieving universal tap water connections
under the Jal Jeevan Mission (JJM) in rural India. What measures are needed to overcome
these challenges?
UPSC SYLLABUS
40 analyze
Q3: Critically the role of renewable www.iasscore.in
2025-26 energy initiatives like the Pradhan Mantri Kisan Urja
Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) in achieving India’s energy security goals.
Discuss the challenges faced in scaling up such programs.
Women’s Reservation Act Bail as Right
Q4: Evaluate theWords Socialist and Secular
effectiveness of thein Bharatmala Pariyojana
Sub-Categorisation of OBCs national highway
in enhancing
Constitution Finance Commission
infrastructure in India. What are the key achievements and challenges associated with this
Comparing Indian Secularism to French Indian Federalism
initiative? OBC Reservation in Local Bodies
Q5: Discuss the role of digital infrastructure under the Digital India Programme in transforming
governance and service delivery in India. What are the key challenges hindering its full
implementation? 
**********
IAS 2025-26
More Than Basics, Actual Preparation
GS Prelims
FOUN Mains
ATION cum
1 A Programme for Extensive 5
Prelims & Mains Preparation
In-depth covering All Vital
updation
coverage of components classes
Pre and Main 2 4
syllabus
Prelims & Mains
3 Personalised
Test series Mentor Support
Weekly Current
Affair Classes
Oﬄine Online
8448496262
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CHAPTER: 13
CLIMATE CHANGE & INDIA:

A LOOK THROUGH OUR LENS
Key-Terms
" NDC (Nationally Determined Contributions): NDCs are commitments made by each country
under the Paris Agreement to reduce national greenhouse gas emissions and adapt to climate
change. India’s NDCs include targets for emission intensity reduction and the share of renewable
energy in its energy mix.
" LeadIT: LeadIT stands for Leadership Group for Industry Transition, which aims to accelerate
the transition of energy-intensive industries to low-carbon pathways. It focuses on promoting
cleaner production processes and technologies.
" Infrastructure for Resilient Island States (IRIS): IRIS is an initiative to support island nations
vulnerable to climate change by enhancing their infrastructure resilience. It aims to build
sustainable and climate-resilient infrastructure in these states.
" Per Capita Energy Consumption: Per capita energy consumption refers to the average energy
consumption per person within a country. It is used to compare energy usage across different
countries and assess their energy needs and efficiency.
" Integrated Farming Systems (IFS): IFS refers to agricultural systems that integrate crop and
livestock farming, with a focus on recycling farm waste and maximizing resource use efficiency.
It promotes sustainable agricultural practices and enhances farm productivity.
" Regenerative Agriculture: Regenerative agriculture is a farming practice that aims to improve
and restore soil health, enhance biodiversity, and increase resilience to climate change. It focuses
on practices such as minimal soil disturbance, cover cropping, crop rotation, composting, and
integrating livestock.
" Monocropping: Monocropping refers to the agricultural practice of growing a single crop year
after year on the same land. This approach is often used in industrial agriculture for efficiency
and scale but can lead to issues such as soil degradation, increased pest and disease pressure,
and loss of biodiversity.
Chapter Glimpse
" Objective of the Chapter: The objective is to highlight India’s unique perspective on climate
change and critique the global strategies that often overlook its specific challenges and
contributions. The chapter aims to advocate for a sustainable approach that integrates India’s
cultural ethos and values into global climate action frameworks.
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" Brief Analysis of the Chapter: Chapter 13 critiques the current global approach to climate
change, arguing that it fails to consider India’s unique challenges and contributions
adequately. It discusses India’s achievements in reducing emission intensity and increasing non-
fossil fuel-based energy capacity ahead of schedule. Despite these efforts, India faces criticism
as a large polluter, which the chapter challenges by highlighting disparities in per capita energy
consumption and historical emissions by developed nations.
" The chapter emphasizes the Mission LiFE initiative as a significant step towards sustainable
development, drawing from Indian philosophy to promote environmentally responsible behaviors
without compromising quality of life. It also critiques Western practices and their environmental
impacts, particularly in areas like meat production and unsustainable consumption patterns.
" Overall, the analysis underscores the need for a more inclusive and sustainable approach to
climate change that respects local contexts and encourages equitable global participation in
reducing environmental impact.
Schemes/Initiatives:
" Mission LiFE Initiative: Launched at COP26, this initiative promotes 75 LiFE actions aimed at
fostering sustainable living practices among individuals. It encourages actions like reducing
plastic use, adopting energy-efficient technologies, and promoting mindful consumption of
resources.
" Ujala Program: This initiative promotes energy-efficient LED lights across India, resulting in
significant energy savings and cost reductions through bulk procurement and distribution.
" Swachh Bharat Mission: Known for its Open Defecation Free (ODF) campaign, this mission aimed
at achieving cleanliness and sanitation across India, thereby improving public health and the
environment.
" Others:
y International Solar Alliance (ISA)
y Coalition for Disaster Resilient Infrastructure (CDRI)
y Creation of LeadIT
y Infrastructure for Resilient Island States (IRIS)
y Big Cat Alliance
y ‘Give It Up’ LPG Subsidy Scheme
y Ujala program
y Open Defecation Free (ODF) campaign
INTRODUCTION
Mata Bhumi Putroham Prithivy ah
Earth is my mother and I am her son
As the world’s most populous country, currently globally the 5th largest economy, India is headed
to become the 3rd largest by 2030. Naturally, this means that our energy needs are expected to grow
- about 1.5 times faster than the global average in the next 30 years. Addressing climate change is a
global priority, yet the strategies adopted often overlook India’s unique challenges and contributions.
Despite India’s efforts, it faces criticism for being a large polluter. The essay critiques global climate
strategies and advocates for a more inclusive and sustainable approach, emphasizing India’s ethos and
the Mission LiFE initiative.
India’s achievements against targets for climate change

" Successfully reduced the emission intensity vis-à-vis its GDP by 33% between 2005 and 2019,
thus achieving the initial NDC target for 2030, 11 years ahead of scheduled time.
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" Also achieved 40% of electric installed capacity through non-fossil fuel sources, nine years
ahead of the target for 2030. Between 2017 and 2023, India has added around 100 GW
of installed electric capacity, of which around 80% is attributed to non-fossil fuelbased
resources.
" India’s contribution to climate action is significant through its international efforts –
" International Solar Alliance (ISA)
y Coalition for Disaster Resilient Infrastructure (CDRI)
y creation of LeadIT
y Infrastructure for Resilient Island States (IRIS)
y Big Cat Alliance
CLIMATE CHANGE AND THE GLOBAL APPROACH

The world has adopted a strategy that comprises a set of pathways, popularly called ‘climate
adaptation’ and ‘climate mitigation’. Most of this includes shifting to energy sources other than
fossil fuels, enhancing energy efficiency through innovative and environment-friendly design,
adopting regenerative and environmentally sensitive agricultural practices, as well as protecting
and restoring the natural ecosystems.
India is the 3rd largest emitter after the US and China and, therefore, is repeatedly asked to accept a
greater share of responsibility. What is constantly de-emphasised is that since the period of the first
settlement of societies, western nations with a forward position on the industrial revolution indulged in
fossil-fuelled development with reckless abandon that led to the position the world is in today
Issues with Current Approach:

y There is lack of holistic understanding of life’s laws and interconnectedness with nature.
y Prescriptive mandates for diverse countries without considering local contexts and lifestyles.
y Neglect of major contributors like meat production and unsustainable consumption patterns in
developed nations.
Critique of Renewable Energy Transition:

y Shift to renewables presents challenges like resource-intensive production of solar panels and
batteries.
y Environmental impacts include mining, manufacturing, and disposal, often comparable to fossil
fuels in emissions.
Per Capita Energy Consumption Disparity:

y Developed nations historically emitted significantly more CO2 per capita.
y Current climate policies disproportionately burden developing nations like India, which have low
per capita emissions.
Mission LiFE Initiative:

y Introduced by India, Mission LiFE promotes sustainable choices without compromising quality of
life.
y Draws from Indian philosophy to integrate pro-environment behaviors into daily life, aiming for
long-term sustainability.
As per an estimate by the International Energy Agency, a single Chat-GPT search consumes 10
times more energy than a similar query on Google. One large data centre in Iowa owned by Meta is
estimated to burn just in one year, the equivalent of 7 million laptops working 8 hours a day
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IMPLICATIONS OF ADOPTING THE WESTERN PRACTICES

Adopting the Western Practice has negative environmental implications for the developing world.
" Cultural and Economic Resilience: India’s success in sustaining its large population and achieving
societal aspirations is attributed to its ‘Dharmic’ nature, which supports efficiency in market economy
without fully adopting market society values.
" Environmental Impact of Western Practices: Adoption of Western meat production methods, which
heavily rely on vast amounts of arable land for animal feed (like maize and soybean), poses significant
threats to global food security and environmental sustainability.
" Food-Feed Competition: The shift towards feed crops for livestock production is reducing available
land for direct food crops, exacerbating food scarcity issues in developing countries. This trend
threatens to worsen with projected population growth.
" Unsustainable Practices: Western livestock cultivation practices, such as monocropping and
heavy use of synthetic chemicals, are degrading soil quality, depleting nutrients, and threatening
biodiversity.
" Policy Recommendations: It’s crucial for India and other developing nations to avoid replicating
unsustainable Western practices. Emphasizing sustainable farming systems that recycle farm waste
and prioritize non-edible feed can mitigate environmental and food security risks.
" Call for Action: There’s a need to rethink global food production strategies, ensuring they align with
local conditions and prioritize equitable access to food while preserving natural resources.
TRADITIONAL FARMING PRACTICES (THE INDIAN WAY)

mātā bhūmih putruahan prthivyā
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" Integrated Farming Systems (IFS): India promotes IFS where farm waste and byproducts are
recycled for various agricultural activities, enhancing productivity sustainably.
" Mission LiFE: Launched at COP26, this initiative encourages individual responsibility towards climate
change through 75 LiFE actions, promoting sustainable living practices like reducing plastic use and
adopting energy-efficient technologies.
" Ujala Program: This promotes energy-efficient LED lights, saving significant energy and costs
through bulk procurement and distribution.
" Swachh Bharat Mission: Known for its Open Defecation Free (ODF) campaign, it aimed to achieve
cleanliness and sanitation across India, improving public health and environment.
" Policy on Circularity in Textiles: Urges reuse and recycling in the fashion industry to reduce carbon
emissions and waste, emphasizing local and sustainable production.
" Ayurveda and Traditional Medicine: Advocates for natural and preventive healthcare practices
aligned with sustainable living, reducing dependency on synthetic medicines.
" Public Policy for Sustainable Living:
y The Ujala program, launched in 2015, to encourage energy-efficient LED lights has resulted in
energy savings of around 48 billion kWh per year and estimated savings of USD 2.5bn per year.
y The adoption of the kinds of actions and measures targeted by the LiFE initiative worldwide
would reduce annual global CO2 emissions by more than 2 billion tonnes (Gt) in 2030 (20% of the
emissions reductions needed by 2030) and in consumer savings of about USD 440 billion.
y Mindful consumption of resources, water conservation, and reducing carbon footprints
through policy measures like incentivizing sustainable agriculture and promoting local food
consumption.
Chart XIII.10: LiFE Themes
The essence of the text highlights “Thahraav” or settlement/contentment as crucial yet elusive in
modern life. It emphasizes the importance of internal stability amidst external changes, contrasting
it with today’s consumer-driven culture that leads to overconsumption and waste. The text argues
that unchecked consumerism perpetuates social fragmentation and environmental degradation,
Individual action
advocating for is the
addressing rootcore
causesof Climate
rather than justResponsibility
symptoms in global sustainability efforts.
Internal equanimity fosters greater acceptance of others, leading to improved human relations
and cohesive families, which in turn positively impact society and sustainability. Despite access
to material wealth and economic progress, it’s crucial not to lose touch with our natural origins
and responsibilities. The global climate change movement should respect individual choices and
economic needs while focusing on individual behavior, encapsulated as ‘LiFE’.
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Q1: Consider the following statements 2. Doubling the rate of Energy Efficiency
regarding the findings of the Economic improvements.
survey 2023-24: 3. Slashing methane emissions from fossil fuel
1. India has successfully reduced the emission operations by 75 per cent.
intensity of its GDP by 33% between 2005 4. Innovative, large-scale financing mechanisms
and 2019. to triple clean energy investments in
emerging and developing economies.
2. India has achieved 40% of electric installed
capacity through non-fossil fuel sources, 5. Measures to ensure an orderly decline in
nine years ahead of the target for 2030. the use of fossil fuels, including an end to
new approvals of unabated coal-fired power
3. India has added around 100 GW of installed
plants.
electric capacity, of which around 80%
is attributed to non-fossil fuel based How many of the above statements are key
resources. pillars of a global strategy for getting the world
on track by 2030 proposed by WEO?
How many of the above given statements is/are
correct? (a) Only two (b) Only three
(a) Only one (b) Only two (c) Only four (d) All five
(c) All three (d) None ANSWERS

Q2: Consider the following statements:
1. Tripling global Renewable Energy Capacity. 1. (c) 2. (d)

Q1: Discuss India’s achievements and contributions towards global climate action, emphasizing
its targets and initiatives. How do these efforts reflect India’s unique challenges and
sustainable development ethos?
Q2: Question: Critically analyze the global approach to climate change mitigation and adaptation
strategies. What are the key shortcomings in these strategies, particularly in their application
to developing countries like India?
Q3: Question: Evaluate the environmental implications of adopting Western agricultural practices
in developing countries. How can sustainable farming systems mitigate these implications,
with reference to India’s traditional farming practices?
Q4: Question: Discuss the concept of ‘Thahraav’ or settlement/contentment in the context

of sustainable living and climate change mitigation. How can fostering internal stability
contribute to global efforts towards environmental sustainability?
Q5: Question: Examine India’s policy interventions and initiatives aimed at promoting sustainable
living and environmental conservation. Highlight the role of initiatives like Mission LiFE and
traditional practices in achieving these objectives.
**********
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GIST OF ECONOMIC SURVEY 2023-24

1. State of The Economy: Steady as She Goes...................................................... 01

2. Monetary Management and The Financial Intermediation : ..................... 17

3. Prices & Inflationunder Control.............................................................................32

4. External Sector: Stability Amid Plenty............................................................... 43

5. Medium Term Outlook: A Growth Vision for New India.............................. 66

6. Climate Change and Energy Transition: Dealing with Trade-Offs........... 71

7. Social Sector : Benefits that Empower.............................................................. 78

8. Employment and Skill Development: Towards Quality..............................104

9. Agriculture and Food Management: Plenty ..................................................116

10. Industry: Small & Medium Matters.....................................................................124

11. Services: Fuelling Growth Opportunities........................................................ 136

12. Infrastructure: Lifting Potential Growth..........................................................143

STATE OF THE ECONOMY: STEADY

y Digitalization: It accelerated adoption of digital technologies in service delivery,

Chart I.1: Growth: Context matters.

2011 to 2019 average

Chart I.7: Declining inflationary Chart I.8: Policy rates

2019 2020 2021 2022 2023

Chart I.16: Carry-forward of momentum in economic growth

 Demand and Investment:

Chart I.17: Broad-based growth Chart I.18: Private consumption steady

Per cent share in GDP (current

Housing sales (thousands)

3.0 State of the Economy

9.2 Primary Deficit Miscellaneous Capital Receipts

Per cent of GDPPer cent of GDP

Chart I.37: Tax revenues register steady increase

8.0 FY20 FY23 FY24 (PA)

TRENDS IN CENTRAL AND STATE GOVERNMENT EXPENDITURE

 Central Government Expenditure- Fiscal Consolidation and Expenditure

Chart I.39: Prudent management of Chart I.40: Increasing union government

Expenditure Subsidies Expenditure

35 reduce this share through fiscal consolidation and asset monetization.

Capex of 23 states as per cent of

FY20 FY21 FY22 FY23 FY24

 General Government Debt

 Credit Ratings and Economic Impact

 Moderation in Inflation Pressure

(Avg. Growth - FY22 - FY24,%)

y Financial System Resilience

 External Sector Management

y Imports: Declined by 4.9%, leading to a lower trade deficit.

y Service Exports: Reached USD 341.1 billion, setting a new record.

y Net Private Transfers: Increased to USD 106.6 billion.

 Current Account Deficit (CAD):

12.3 11.3 14.9

INCLUSIVE GROWTH AND ECONOMIC OUTLOOK- SHIFT

Chart I.59: Beneficiaries under various government

Jan Dhan Yojana- 51.6 crore beneficiaries

y Unemployment Rate: Declining; improvement in labor force participation and worker-to-

Chart I.60: Declining unemployment rate and improvement in labour

Source: Annual Report, PLFS, July 2022 - June 2023, MoSPI

Domestic Growth Drivers:

PRELIMS PRACTICE QUESTION

(a) 1, 2, and 3 only Q5: Which of the following statements about

 Monetary Developments - Role of Monetary Policy:

 Monetary and Credit Trends:

 Monetary Policy Transmission and Financial Intermediation

Demand and Investment:

Central Government Expenditure- Fiscal Consolidation and Expenditure

General Government Debt

Credit Ratings and Economic Impact

Moderation in Inflation Pressure

External Sector Management

Current Account Deficit (CAD):

Monetary Developments - Role of Monetary Policy:

Monetary and Credit Trends:

Monetary Policy Transmission and Financial Intermediation

Sectoral Credit Growth

Improvement in Asset Quality of Banks

Dealing with Distressed Assets

Conventional channels of recovery and reconstruction

Addressing Distressed Assets through Insolvency Resolution

Role of IBC in reviving stalled real estate projects and strengthening

Microfinance Institutions (MFIs)

Evolution and Performance of MFIs in India

Trends in Indian capital markets

Retail Participation Trends in Indian Capital Markets

Social Stock Exchanges (SSEs) in India:

Developments in the insurance sector:

Shift from Defined Benefit (DB) to Defined Contribution (DC):

Gig Economy and Informal Labor:

Improvement in Pension Index:

Demographic and Coverage Data:

Pension Coverage and Assets:

Demographic and Economic Factors:

Financial Literacy and Inclusion:

Mechanisms for regulatory coordination and financial stability:

Future Outlook- assessment and outlook for India’s financial sector:

Challenges and Advancements:

DOMESTIC RETAIL INFLATION

Core inflation hits a four-year low in FY24

A steep decline in service prices hastens moderation in core inflation

Consumer durable inflation remains elevated but softens in FY24

Food price pressures due to adverse weather conditions

Reasons for price pressures in major food items

Global food prices and domestic inflation

Interstate variations in inflation are more pronounced in rural areas

Global Commodity Trends

Long-Term Price Stability Measures

Global Trade and Investment Trends

India’s External Sector Performance

Shifts in Trade Patterns

Trade Trends and Policies

Trade Openness Indicator

Trade Share in GDP

Global Market Share