Some Basic Definitions :

Economics come from Greek word Oikonomia =“House Hold”

Economics :It is the social science that analyses the production, distribution and consumption of goods and services .

The study of how we work together to transform scarce resources into goods and services to satisfy the most pressing of our infinite wants and how we distribute these goods and services among ourselves.

.

www.classmateacademy.com 1 Definition and Scope : Many Definitions

For Simplicity the various definitions may be classified as follows :

• Science of wealth

• Science of dynamic well being

• Science of choice making

• Science of Growth and Development

www.classmateacademy.com 2 1)Science of wealth : Classical Definition

• Adam Smith “ The nature and cause of wealth of nations “ An enquiry in to the nature and causes of wealth of nations . Acc to the definition Economics deals with acquisition, accumulation, expenditure of wealth. • J.B Say “ Science which deals with wealth”.

Merits of Definition : Merits of Definition : • Stress on wealth : This is a challenge • Stress on wealth : This is a challenge any nation has to inevitably answer. any nation has to inevitably answer. • Addressing Problems of Economic • Addressing Problems of Economic Growth :Creation of wealth is Growth :Creation of wealth is inextricably linked to growth which inextricably linked to growth which leads to solving the problems of leads to solving the problems of Poverty and unemployment. Poverty and unemployment. • Focus on Important Economics • Focus on Important Economics issues : Like Production, Distribution issues : Like Production, Distribution and Exchange of Wealth www.classmateacademy.comand Exchange of Wealth 3 2) Science of dynamic well being : Neo-Classical Definition

• Alfred Marshall“ wealth to welfare “ Economics is the study of mankind in ordinary business of life .It examines that part of individual and social action which is most closely connected with the use of material requisites of well being .Thus on the one side it si study of wealth and more important side study of part of man.

• Deals with business of life but more emphasis given to Man,still emphasising materials like food ,cloth, housing etc(economics activites ).

• A.C Pigou The range of our enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money.

Welfare but that which can measured by money, Money helps to quantify in economics(dealswww.classmateacademy.com with purchasing power) 4 De-Merits of Definition : • Neglect of Immaterial things : Too much stress on material things and neglect of immaterial things like Teachers, Doctors, Singers etc.

• Vague Definition of Welfare :Robins fins that the definition of welfare is very vague. It is Difficult to say which will lead to welfare and which will not. Economics is concerned with all goods and services which carry a price whether they promote welfare or not.

www.classmateacademy.com 5 3)Science of Choice Making : • Lionel Robins(1931) “ Nature and significance of Economics “ Economics studies problems which arise because of scarcity of resources Economics is the science which studies human behaviour as relationship between ends and scare means which have alternative uses.

Conclusion from Definition : • Economics is a science : Studies Human behaviour scientifically ,with in the constraints how humans try to maximize gains . • Unlimited Ends : The Human wants are never satisfied ,new wants always come up. Had ends being limited there would not have been a problem. • Scarce Resources :The resources are also limited that is another problem. • Alternative uses: Every resource has many uses hence a choice is needed. Robins is interested in study of anything which satisfies Human wants good/bad(no material/non-material division or welfare/non-welfare division) www.classmateacademy.com 6 De-Merits of Definition :

• Impersonal and colourless : By making it a positive science and excluding normative aspects he has reduced its scope. Made it Impersonal and colourless.

• Ignored macroeconomic aspects : He ignored macro economic aspects like National Income and employment .

• No Focus on Growth and Development : He takes resources as given but neglects about how to raise the resources like savings etc .

• Problem of abundance : Some times abundance of resources can also be a problem ,like in many developing countries excess problem is a concern.

www.classmateacademy.com 7 4)Science of Dynamic growth and development : Scarcity cannot be ruled out but it would be incorrect to think that resources cannot be increased by human ingenuity, exploration, exploitation and development .

• Paul A Samuelson “ Economics is the study of how men and society choose, with or without use of money to employ scarce productive resources which could have alternative uses ,to produce various commodities over time and distribute them for consumption now and in future among various groups of society “ • Material wellbeing, Welfare ,Growth over time

• Henry Smith The study of how in a civilized society one obtains the share of other people have produced and of how the total product of the society changes and is determined. • Civilized society means existence of Legal and Administrative Institutions. • JacobWeiner “Economics is what Economists do “

www.classmateacademy.com 8 Micro Economics : Prof .Boulding ,Definition: Micro economics is the study of particular firms, particular households ,individual price, wage, income, individual industries and particular commodities

• Which examines the behaviour of firm, consumers and the role of government.

Areas of Study :

• Product pricing • Consumer behaviour • Factor pricing • Economic conditions of section of people • Study of firms • Location of a industry

www.classmateacademy.com 9 Macro Economics : Mac Conel ,Definition :“Macroeconomics examines the forest and not the trees. Thus it analyses and establishes a functional relationship between large aggregates

• Which deals with Inflation, unemployment, Industrial production and the role of government

Areas of Study :

• National income and output • General price level • Balance of trade and payments • External value of money • Saving and investment • Employment and growth.

www.classmateacademy.com 10 www.classmateacademy.com 11 Nature Of Economics :

• Whether it is a Science or an Art • Whether it is a Positive science or Normative science.

Economics as science :

Science is a systematized body of knowledge about a particular branch of universe .A subject is considered science if • systematized body of knowledge which studies the relation between cause and effect. • It is capable of measurement • It has its own methodological apparatus and has the ability to forecast.

www.classmateacademy.com 12 Economics is not a perfect science :

• Economists do have uniform opinion about a particular event.

• The subject matter of economics is Human behavior which is highly unpredictable.

• Money which is used as a measure in economics is it self a dependent variable.

• It is not possible to make correct predictions about economic variables.

www.classmateacademy.com 13 Economics as Art :

• J.M Keynes said “An Art is a system of rules for the attainment of a given end”.

• Art is practice of knowledge • Science teaches us to know ,Art teaches us to do . • Science is theoretical ,Art is practical. • It is science in methodology and art in application.

Eg : Study of Unemployment is Science, But framing suitable polices for its removal is art.

Cossa “ Science requires art ,Art requires Science both being complementary to each other.

www.classmateacademy.com 14 Economics as Positive Science and Normative Science :

Positive science : Economics is a science .A Positive science analyses cause and effect relationship between variables but does not pass value judgement . • Robbins emphasized the positive nature of science . So individual with limited money may buy liquor over milk. A Society with limited resources may produce Guns over Food. No criticism ,just generalization • Marshall & Pogu emphasized the normative talked about ethical aspects which are normative.

Normative science : Its prescriptive and describes what the things should be like . Indirect Tax should be less than direct Tax.

www.classmateacademy.com 15 There are two methods of study for deriving generalization or laws

Deductive Method : Also called as analytical ,abstract or a priori method . The Logic Proceeds from General to Particular • The following steps are followed here : • Perception of problem • Defining the technical terms & making appropriate assumptions • Deducing hypothesis • Testing of Hypothesis .

Eg : Relation ship between price and demand.

Conclusions are not always valid ,they may be unture ,Universal validity of such generalization not very correct .

www.classmateacademy.com 16 Inductive Method : Conclusions are based on collection of facts and analysis of data relevant to enquiry. The logic in this case proceeds from particular to general .

The following steps are followed here : • Perception of problem • Collection Classification and analysis of data by using statistical principles . • Finding out the reasons for results and set rules for verification of principles

Eg: Nature of Consumption showing relation ship between income and consumption.

This method is used more • As Statistical rigour brings precision. • But problems with this method are inability to take into consideration all causal factors, quantification problem ,collection of facts .

www.classmateacademy.com 17 How ever in practice both methods are used . Conclusions from Deduction method are verified by using Induction method .

Eg : Man is rational :An economic principle that assumes that individuals always make prudent and logical decisions that provide them with the greatest benefit or satisfaction and that are in their highest self-interest

Marshall “pointed out that Induction and Deduction are both needed for scientific thought as the right and left foot are needed for walking”.

www.classmateacademy.com 18 Every society has to answer three questions:

• What goods and services should be produced in the country?

• How should the goods and services be produced? Should producers use more human labor or more capital (machines) for producing things?

• How should the goods and services be distributed among people?

www.classmateacademy.com 19 Types of Economy:

Capitalist Economy: It is characterised by existence of private enterprise and ownership of all important sectors.

Socialist Economy: It is characterized by existence of public enterprises or state ownership of capital in all important spheres of economic activity.

Mixed Economy : In this system, public and private sectors co-exist, India economy is a mixed economy.

www.classmateacademy.com 20 Adam Smith : • The Theory of Moral Sentiments (1759) • An Enquiry into the Nature and Cause of the Wealth of Nations.(1776)

• Market ="the invisible hand" • laissez-faire (let it be) • economics(From Mercantilism to Free trade )

Great Depression : 1929,US

John Maynard Keynes :

The end Of laissez -Faire General Theory of Employment, Interest and Money (1936)

www.classmateacademy.com 21 www.classmateacademy.com 22 Features of a Capitalist society : Its is system where means of production are owned ,controlled and run by private Individuals for profit .

No government Interference .

• Right to private property • Freedom of enterprise • Freedom to choice by the consumers • Profit Motive • Competition • Inequalities of Income

www.classmateacademy.com 23 Merits Of Capitalism :

• To attract Consumer producer will be producing new goods . • Existence of private property and driving force of profits results in high standard of living • Capitalism works automatically through price mechanism • Competition results in efficiency. • It gives freedom to producers and choice to consumers. • It results in growth of business talent, research and development of a country.

Demerits : • Inequality ,rich becoming richer and poor becoming poorer . • Emphasis on profit not welfare. • Economic crisis . • Misuse of production like production of luxury goods • Results in monopolies . • Employment uncertainty .

www.classmateacademy.com 24 socialism: Socialism is a social and economic system characterized by social ownership of the means of production and co-operative management of the economy.

was created to contrast against the liberal doctrine of "individualism", which stressed that people act or should act as if they are in isolation from one another

Utopian Socialism: ((First person)Thomas Moore,book Utopia) Marx and Engel pointed out that Saint Simon : Voluntary formation of social groups into large family like organizations.

From each according to his ability to each according to his need Saint –simon(France),RobertOwen(england),Fourier (USA)

www.classmateacademy.com 25 Robert Owen in 1827, father of the cooperative movement.

Syndicalism (France) inspired in part by the ideas of Pierre Joseph Proudhon and later by Fernand Pelloutier and Georges Sorel

Factories managed by both Workers and Specialist called Syndicates

Guild Socialism : G. D. H. Cole & William Morris. The guild socialists "stood for state ownership of industry, combined with ‘workers’ control’ through delegation of authority to national guilds organized internally on democratic lines

The Fabian Society' is a British socialist organization which was established with the purpose of advancing the principles of socialism via gradualist and reformist means.

www.classmateacademy.com 26 Communists :

Karl Marx and Fredrick Angels : The Communist Manifesto (1848) and Das Kapital (1867–1894). revolutionary socialism, and state socialism versus libertarian socialism.

Socialist Economy: It is characterized by existence of public enterprises or state ownership of capital in all important spheres of economic activity.

www.classmateacademy.com 27 Features of a Socialist Economy : In the the material means of production i.e factories ,mines, capital, are owned by community as whole represented by the state .

• Community Ownership: Profit and self interest are not the primary motive but achieving social objectives is the aim.

• Central Planning Authority.

• Absence of Consumer choice.

• Better Distribution of Income .

• No role of Price or Market Forces .

www.classmateacademy.com 28 Merits Of Socialism:

• Social Justice, equitable distribution, less inequality. • Planned development leads to better attainment of goals. • Economic stability ,less unemployment . • Right to work and minimum standard of living . • No exploitation of workers and no monopolies.

Demerits : • Domination of bureaucracy ,Corruption, Nepotism . • Restricted freedom of choice. • No incentive for people to work • Problem of Unions, too much power with worker • State monopolies ,inefficiency • Employment uncertainty .

www.classmateacademy.com 29 Mixed Economy : Take the best of Capitalist and Socialist economy while excluding the demerits of both .

Features :

• Co-existence of Public an Private Sector

• Existence of Economics Planning

• Positive role of Government

• Administered Price

www.classmateacademy.com 30 Mixed Economy Merits :

• Merits of both Socialist and Capitalist Economy • Individual freedom to start enterprises ,Freedom of consumption • Price mechanism allowed to operate • Reduced inequalities • Suitable of underdeveloped economy and in the event of economic crisis .

De-Merits :

• Balancing public and private very difficult in realty ,leads to dominance of state . • Excessive controls and Heavy taxes . • Problems of red tapism, Nepotism and Favouritism. • Socialist Oppose this, Schumpter said “Its Capitalism in oxygen tent”. It is an obstacle to full socialism and benefits capitalist.

www.classmateacademy.com 31 Gross domestic Product(GDP):It is the value of all final goods and services produced in the economy during an year.

Economic growth : It can be defined as a sustained increase in the real per capita income of a country.it is quantitative in nature.

Economic Development: It is a phenomena where growth is accompanied by redistribution of resources in favor of the relatively worse off.

Sustainable Development: It is the development process which allows for development of the present generation without compromising the capacity of future generation to meet their development needs.

UN Millennium Summit :”We the Peoples: The Role of the United Nations in the 21st Century”. MDG to be attained by 2015.

Now SDGs ,17 to be attained by 2030

www.classmateacademy.com 32 Physical quality of Life Index: Morris David His Indicators were : Life Expectancy, Infant Mortality, Basic Literacy.

Human development report (HDR,1990 Published by UNDP) Mahboob-ul-Haq & Amartya sen

Human Development Index: • Per capita -Income-as measured by real GDP per capita (PPP) • Longevity -Life expectancy at Birth • Literacy levels-Adult Literacy (2/3 weight)+ combined primary, secondary and tertiary enrollment ratio (1/3 weight).

www.classmateacademy.com 33 Industrial Revolution :

Carrying capacity : the resource extraction is not above the rate of regeneration of the resource and the wastes generated are within the assimilating capacity of the environment.

Absorptive capacity :means the ability of the environment to absorb degradation.

Fossil Fuels, Green house gases and Global Warming

1972 : Stockholm Conference on the Human Environment

1987 : Go Harlem Burtland Report : Our Common Future

1992 : Earth Summit ,Rio-de-Janerio

www.classmateacademy.com 34 Gender related Development Index(GDI): same as HDI, taking in to account only gender related indicators.

Gender Empowerment Measure: captures Gender equality in three different areas • Political participation measured by women's and men's share in parliamentary seats. • Economic participation :measured by women and men's percentage shares of position as legislators, senior officers and managers and women and men's percentage shares of professionals and technical positions.

• Power over economic resources as measured by women's and men's estimated earned income.

GDI and GEM were introduced from 1995,as part of HDR

www.classmateacademy.com 35 • Gender Inequality Index (GII) : As part of HDR from 2010

• Reproductive health : Includes Maternal Mortality ratio and Adolescent fertility rate. • Empowerment : Higher Education levels and Parliamentary Seats . • Labour market participation : Participation in work Force

The World Economic Forum has been using the Gender Gap Index (GGI) in its Global Gender Gap Reports .

Green GDP: Environmentally adjusted GDP. Green GDP = GDP-Depreciation of natural Capital.

www.classmateacademy.com 36 National Income: Measurement Gross domestic Product(GDP):It is the value of all final goods and services produced in the economy during an year.

Gross National Product(GNP):it refers to the money value of total output or production of final goods and services produced by nationals of a country during a given period of time generally a year.

Unlike the GNP,GDP does not include the net factor income from abroad.

GNP=GDP+X-M X=Income received from abroad by the nationals . M= income paid to the foreign nationals with in our country.

Net Domestic Product (NDP):It is obtained by subtracting depreciation value from the GDP.

Net National Product(NNP):It is obtained by subtracting depreciation value from GNP. www.classmateacademy.com 37 Factors of Production : Land, Labor ,Capital, Entrepreneurship

Factor Cost +Indirect Taxes =Market Price. Factor Cost –subsidy=Market price. Net National Product at market Prices = GDP at factor cost +Net indirect Taxes-Subsidy.

Net National Product at Factor cost = NNP at market Prices –Net Indirect Taxes+ Subsidy.

NNP at FC =National Income Per capita income, also known as income per person, is the mean income of the people in an economic unit such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate ( National income) and dividing it by the total population.

Simon Kuznets, the economist who developed the first comprehensive set of measures of national income

www.classmateacademy.com 38 National Income earned by firms and people .It can be further divided to calculate.

Personal income (That part of national income goes to house hold ).

Undistributed profits is that part of profits which is not distributed among people. Corporate tax is imposed on earnings by companies Net interest payment by house holds to Government and firms Transfer payments from government like scholarship , pensions.

Personal Income (PI) = NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.

PDI= Personal disposable income

PDI =PI-Personal Tax payments –Non-Tax payments.

National Disposable Income = Net National Product at market prices + Other current transfers from the rest of the world.

www.classmateacademy.com 39 • Dadabhai Naoroji (1868) “Poverty and Un-British rule in India” • VKRV Rao made the first scientific estimates in 1925-29 • First official estimates in year ,1949 Ministry of commerce. • In August 1949 the Government of India appointed the National Income Committee. Prof. P C Mahalaobis was appointed as the chairman of the National Income Committee. D.R Gadgil & V.K.R.V .Rao were other members . The First Report of the Committee was published in 1951, and the Final Report in 1954.

• CSO(1950) estimates National Income of India. Now CSO is under MoSPI.

• The estimates are for a Financial Year • The per capita net national income during 2015-16 is estimated to be Rs 93,231 showing a rise of 7.3 per cent as compared to Rs 86,879 during 2014-15 with the growth rate of 9.4 per cent.

www.classmateacademy.com 40 Measuring National Income :

Three methods: • Product Method /Value added method eg. Agriculture,Forestry,mining.

• Income Method eg. Banking, Insurance.

• Expenditure Method. eg. Construction

www.classmateacademy.com 41 • Let us suppose that there are only two kinds of producers in the economy. • wheat producers (or the farmers) and the bread makers (the bakers) • Total value of wheat that the farmers have produced is Rs 100. • Out of this they have sold Rs 50 worth of wheat to the bakers. • The bakers have used this amount of wheat completely during the year and have produced Rs 200 worth of bread.

• What is the value of total production in the economy Product Method:

NVA = Net Value Addition GVA=Gross Value Addition www.classmateacademy.com 42 Expenditure Method :

C = household consumption expenditures / personal consumption expenditures I = Gross private domestic investment G = government consumption and gross investment expenditures X = gross exports of goods and services M = gross imports of goods and services

www.classmateacademy.com 43 Income Method :

W= Wages,P=Profit,In=Interest payments ,R =rent

www.classmateacademy.com 44 www.classmateacademy.com 45 GDP(at purchasing power parity) per capita, i.e. the purchasing power parity (PPP) (I.B Kravis ) value of all final goods and services produced within a country in a given year Rank Country GDP in PPP Year 1 United States 16,768 2013 2 China 16,162 2013 3 India 6,776 2013 4 Japan 4,641 2013

New Estimates :

• Base year from 2004-05 to 2011-2012 • Growth for 2013-2014 is 6.6 % ,for 2014-15 its 7.2% ,for 2015-16 its 7.6%. www.classmateacademy.com 46 www.classmateacademy.com 47 • Capital goods :They are defined as all the goods produced for use in future productive process. Eg. machinery, equipment, roads and bridges.

• Consumer Goods : Goods like food and clothing that are consumed when purchased by goods, are consumed when purchased by their ultimate consumers are called consumption goods or consumer goods.

• Consumer durables : like television sets, automobiles or home computers, although they are for ultimate consumption have one characteristic in common with capital goods – they are also durable

• ICOR: It is the ratio of investment to change in output.

www.classmateacademy.com 48 Sectors of Economy:

Primary sectors : The primary sector of the economy makes direct use of national resources .eg agriculture,fishing,mining.

Secondary sector: This sector generally takes the output of the primary sectors and manufacturing finished goods. All industrial production comes under this.

Tertiary sector: It involves providing intangible goods like services. Eg. Financial services, management, consultancy, and It are good examples of service sectors

www.classmateacademy.com 49 Country Origin of GDP Agriculture Industry Services

U.K 0.7% 21.6% 77.6% U.S.A 1.2% 20.0% 78.0% JAPAN 1.1% 27.4% 71.5% THAILAND 12.4% 41.1% 46.5% PAKISTAN 21.6% 24.9% 53.4% CHINA 10.0% 46.6% 43.3% INDIA 17.2% 26.4% 56.4%

www.classmateacademy.com 50 Share in GDP :

Primary Secondary Tertiary 1951 56 16 28 2011 13.9 27 59

Distribution of working population :

Primary Secondary Tertiary 1951 72 10.7 17.2 2011 53.5 20.9 25.6

www.classmateacademy.com 51 www.classmateacademy.com 52 Classification of Economy :

Agriculture sector: Agriculture , Fisheries, Forestry.

IndustrialSector:Mining,Manufacturing,Construction,Electricity, Gas and water.

Services Sector: Transport, Storage and Communication, Hotel, Finance ,Real estate, Public administration etc.

Primary sector: Agriculture Sector +Mining.

Secondary Sector: Industrial Sector -Mining

www.classmateacademy.com 53 S.No Category Global ranking 1 Area 7 2 Population 2 3 Labour Force 2 4 GDP(nominal) 7 5 GDP(PPP) 3 6 GDP(nominal) 138 per capita 7 HDI 135

HDR-2014 HDR-2015 HDI = 135/187 (0.586) HDI = 130/187 GDI = 132/148 (0.828) (0.609)[(0.660(m),0.525(f)] GDI =130(.795)

www.classmateacademy.com 54 HDI ranking of states in India :

Kerala>Maharashtra>Punjab>TamilNadu

As Per World Bank ,World Development Report Countries are classified based on GNI as follows

• Low Income(GNI<$936) • Middle Income Lower middle income($936-$3706) Upper middle income ($3706-$11,455) • High Income(> $11,455)

India lies in Lower Middle Income country list.

www.classmateacademy.com 55 Country GNI at exchange GNI at PPP($) rate basis($)

Switzerland 90,670 59,600

USA 55,200 52,947

Japan 42,000 37,920

Germany 47,640 43,919

U.K 42,690 39,267

INDIA 1,570 5497

CHINA 7380 12,547

www.classmateacademy.com 56 HDR-2015 ,report Data

Countries HDI HDI rank Gini GII GNI(per LBE value Coefficient capita,$)

India 0.609 130 33.6 130 5497 68

Srilanka 0.757 73 36.4 72 9779 74.8

Bangladesh 0.570 142 32.1 111 3191 71.6

Pakistan 0.538 147 29.6 121 4866 66.2

China 0.727 90 37 40 12547 75.8

Norway 0.944 1 26.8 9 64992 81.6

South 0.666 116 65.0 83 12122 57.4 Africa Russia 0.798 50 39.7 54 22352 70.1

Brazil 0.755 75 52.7 97 15175 74.5

www.classmateacademy.com 57 Poverty and Unemployment

Short Term Unemployment :

Cyclical unemployment: Unemployment due to down turn in the economy which is cyclical fluctuation in any economy, is called unemployment

• Phase of increasing growth rates • Deflation or disinflation phase • Recession • Reflation

Frictional Unemployment: Unemployment caused due to short term obstacles in the economy like change in technology is known as frictional unemployment.

www.classmateacademy.com 58 Seasonal unemployment :Reoccurrence of unemployment in a certain period of the year on a regular basis.

Disguised unemployment : when marginal productivity of surplus work force is negligible due to engagement of work force more than required is known as disguised unemployment.

Under employment: If a person is not employed according to one’s qualifications or full period is known as underemployment.

Structural unemployment: surplus of labour force in one sector of the economy and at the same time there is short supply of work force in the other sector .

Voluntary Unemployment:

Labour Force : All those who are willing to work

Work Force : Demand for labour www.classmateacademy.com 59 • Montek Singh Ahluwalia Committe,2001 the report was criticised for too much focus on Corporate sector . • SP Gupta commmittee,2001:target 10 million oppurtunities

www.classmateacademy.com 60 Poverty :

• Absolute Poverty: it is a level of income which is not sufficient to fulfill the basic needs of a person.

• Relative poverty: It is related with the unequal distribution of income in the country.

• Lorenz curve: it is a curve which shows the inequality in distribution like inequality in income.

• Gini coefficient: It is a co-efficient which shows the inequality in distribution like inequality in income. The value of Co-efficient varies between 0 and 100(in % terms)The value of the coefficient increases with increase in inequality.

• Gini coefficient =area between lorenz curve &45 line/area of below 45 line. www.classmateacademy.com 61 www.classmateacademy.com 62 www.classmateacademy.com 63 www.classmateacademy.com 64 www.classmateacademy.com 65 www.classmateacademy.com 66 www.classmateacademy.com 67 www.classmateacademy.com 68 Poverty line:

Defined on the level of nutrition-2400 cal/2100 cal(1973-74) • Lakadwala committee in 1993 ,Urban(Rs56.64) Rural(Rs49.09) • Converted to poverty line basket(monetary terms)

It is based on the consumption income in India.

Poverty rate now is 22 %(approx).

World Bank Definition:$ 1.25 per person perday. poverty Urban Rural Tendulkar(2005) 37.2%(2005) Rs 33 and 25.7% Rs 27 and 41.8% 21.9(2012) Rangarajan(2012) 29.6% Rs 47 and 30.95% Rs 32 and 26.4%

www.classmateacademy.com 69 Tendulkar 2004 2011 Poor % 37.2 21.9 Poor Cr. 41 27

Highest rural poverty Lowest poverty 1.tie: Odisha, MP 1.Kerala (7.1%) 2.Bihar 2.Himachal (8.1%) 3.Assam 3.Punjab (8.3%)

Rural poverty line (Rs) Tendulkar C.Rangarajan per day per person 27 32 per person per month 816* 972 per family of five, per 4080 4860* month

Poverty in India: Year 2011 Formula # of BPL in crores Tendulkar 27 Rangarajan 37 difference 10 crore = 100 million BPL increased

www.classmateacademy.com 70 Poverty alleviation schemes: Basic Needs Short-term Long-term ICDS,1975 Employment Guarantee TRYSEM(1979), Scheme of NREP(1980) Maharashtra(1972) Food for Work(1977-78) Rural Landless DWCRA(1982) Employment Guarantee Programe(1993) PDS (APL,BPL),1997 Jawahar/Nehru Rozgaar SEEUEY(1984) Yojana,1989 AAY,2000 SJSRY(1997) SJGSY(1999)

Annapurna Yojana,1999 Sampoorna Grameen NRLM(2011) 10Kg food grains to those Rojgaar Yojana,2001 who do not get pension MNREGA(2006)-right based approach

www.classmateacademy.com 71 Infrastructure Education Health CADP(1974) Sarva Shiksha Abhiyan ICDS,1975 (SSA)/Right to Education (RTE) DDP(1977) National Programme for MDM,1995 Education of Girls at Elementary Level (NPEGEL) IRDP(1980) Kasturba Gandhi Education NRHM,2005 Scheme(1997) MPLADS(1993) Rashtriya Madhyamik Shiksha PMSSY, Abhiyan (RMSA) 2009 PMGSSY(2000) Saakshar Bharat (Saakshar Bharat) Bharat Nirman,2005 Rashtriya Uchchatar Shiksha Abhiyan(RUSA)

www.classmateacademy.com 72 Bharath Nirman:

• Irrigation: To ensure irrigation for additional one crore hectare land by 2009.

• Roads: To link all villages of 1000 population with main roads and also to link all ST and hilly villages up to 500 population with roads.

• Housing : Construction of additional 60 lakh houses for the poor.

• Water supply : To ensure drinking water to all remaining 74,000 villages.

• Electrification: To supply electricity to all remaining 1,25,000 villages and to provide electricity connections to 2.3 cr houses.

• Rural Communication :To provide telephone facilities to all remaining 66,000(approx) villages.

www.classmateacademy.com 73 Population: Human resource Birth rate : Number of births per thousand population in a year .

Death rate: Number of death per one thousand population in a year.

Natural growth rate :The difference between birth rate and death rate is called Natural growth rate of population.

Neo-Natal Mortality rate: Number of death of children below one month of age per thousand live births.

Infant mortality Rate :Number of deaths of children below one year of age per one thousand live births.

Child Mortality: Number of deaths of children below five years of age per thousand infants.

Maternal Mortality rate: Number of maternal deaths one lakh live births.

Life expectany at birth:The average expected life of children born in a given period .

www.classmateacademy.com 74 Literacy rate: The percentage of population in the age group of 7 years and above who can read, write and understand at least one language.

TFR(Total fertility Rate)-Number of births per woman is called TFR.

Gross fertility Rate –(No. of Births)/(Female population 15-49).

Sex ratio: number of women per 1000 men. Best state –Kerala Worst state : Haryana, Punjab

Population Theories: • Malthusian Theory-An Essay on Principle of Population,1798 • Optimum population Theory • Demographic transition theory

Demographic Transition Theory: First Phase------(phase of stagnation 1901-1921) Second Phase ------(Phase of steady growth 1921-1951) Third Phase------(Phase of rapid Population growth 1951-81) Fourth Phase------(Phase of high but decelerating growth 1981-01)

www.classmateacademy.com 75 www.classmateacademy.com 76 www.classmateacademy.com 77 United States US $53,143 US $ 51,911 Canada

www.classmateacademy.com 78 Earliest references of census are found in : • 'Rig-Veda' reveals that some kind of population count was maintained in during 800-600 BC in India. • Kautilya’s ‘Arthashastra’(321-296 BC) and later, in • Abul Fazl’s ‘Ain-Akbari’ (1595-96) • First census:1872 • Second Census:1881 • The 1901 Census: Herbert Risley, The People of India(Inclusion of caste)

National Population Policy:2001 • TFR 2.1 by 2010. • Long term population stabilization by 2045. • National Population Stabilization Fund Established in 2003,under ministry of health.

Age classification: 0-14 yrs : Dependent Population 15-59 yrs : working age population 60+ yrs : Dependent Population

Demographic Dividend

www.classmateacademy.com 79 Age 0-14yrs 15-59 yrs 1971 41.2 % 53.4% 1981 38.1% 56.3% 1991 36.3% 57.7% 2013 28.4% 63.3%

In 2020 avg age ,India =29 yrs Globally ,shortage of China=37 yrs young population of USA=37 yrs 56m,India only country WesternEurope=45yrs with excess of 47 m Japan=48yrs www.classmateacademy.com 80 www.classmateacademy.com 81 www.classmateacademy.com 82 Country Infant Mortality Rate Germany 3.3 U.K 4.4 USA 6.4 Canada 4.9 France 3.4 Australia 4.1 Japan 2.4 China 12.1 India 44

www.classmateacademy.com 83 State Birth Rate Death rate IMR

Kerala 14.8 7.0 13

Tamil Nadu 15.9 7.6 24

Andhra 17.9 7.6 46 Pradesh Maharashtra 17.1 6.5 28

Karnataka 19.2 7.1 38

West Bengal 16.8 6.0 31

Punjab 16.6 7.0 34

www.classmateacademy.com 84 State Birth Rate Death rate IMR

Orissa 20.5 8.6 61

Gujarat 21.8 6.7 44

Haryana 22.3 6.6 48

Assam 23.2 8.2 58

Bihar 28.1 6.8 48

MP 27.3 8.3 62

Rajasthan 26.7 6.7 55

U.P 28.3 8.1 61 www.classmateacademy.com 85 Underweight : Children who have low weight for age.

Wasting : low weight for height, indicating acute weight loss.

Stunting : Low height for age, is caused by long-term insufficient nutrient intake and frequent infections. Stunting generally occurs before age two, and effects are largely irreversible.

NFHS-4 :

• Andaman and Nicobar Islands has the lowest IMR of 10 deaths whereas Madhya Pradesh has the highest IMR of 51 deaths. India’s current IMR is 37.

• Decline in stunting among children under five from 43% to 32%.

• Underweight children under five from 39% to 29%.

• In all the states (except Goa) more than 50% of children and women are anaemic. • To be more precise 50 per cent of the children under five are anaemic in 10 states.

www.classmateacademy.com 86 Janani Suraksha Yojana : 2005

One-time cash incentive to pregnant women for institutional/home births through skilled assistance

Indira Gandhi Matritva Sahyog Yojana:2010 A cash incentive of Rs. 4000 to women (19 years and above) for the first two live births .

Child Sex ratio(0-6 yrs) has reduced from 927 to 919.

www.classmateacademy.com 87 Census Total Population DecadalGrowth Average Annual Year (in crore) Rate (in %) Growth Rate (in%)

1901 23.84 - +0.11 1911 25.21 +5.75 +0.56 1921 25.13 -0.31 -0.03 1931 27.90 +11.00 +1.04 1941 31.87 +14.22 +1.33 1951 36.11 +13.31 +1.25 1961 43.92 +21.64 +1.96 1971 54.82 +24.80 +2.20 1981 68.33 +24.66 +2.22 1991 84.64 +23.87 +2.16 2001 102.87 +21.54 +1.97 2011 121.02 +17.64 +1.64

TFR : 2.3 (Survey ),women 48 % of population

www.classmateacademy.com 88 High Growth Rate : 1 Dadra and Nagar Haveli 55.88 % 2 Daman and Diu 53.76 % 3 Puducherry 28.08 % 4 Meghalaya 27.95 % 5 Arunachal Pradesh 26.03 %

Population Density: 2001-324 2011-382 Total Population : 1 Uttar Pradesh 199,812,341 2 Maharashtra 112,374,333 3 Bihar 104,099,452 4 West Bengal 91,276,115 5 MadhyaPradesh 72,626,809 www.classmateacademy.com 89 SEX Ratio

Country 2001 2011

World 986 984

China 944 926

India 933 943

USA 1029 1025

Brazil 1025 1042

Russian Federation 1140 1167 Japan 1041 1055

www.classmateacademy.com 90 Sex Ratio : Census Year Sex Ratio 1901 972 1911 964 1921 955 1931 950 1941 945 1951 946 1961 941 1971 931 1981 934 1991 927 2001 933 2011 943 www.classmateacademy.com 91 Sex ratio :

State 2011 Kerala 1084 Tamil Nadu 995 Andhra Pradesh 992 Orissa 978 H.P 974

Gujarat 918 Bihar 916 UP 908 Punjab 893 Haryana 877

www.classmateacademy.com 92 Literacy:

S.No. Census Year Total (%) Male (%) Female (%) 1 1901 5.35 9.83 0.60 2 1911 5.92 10.56 1.05 3 1921 7.16 12.21 1.81 4 1931 9.50 15.59 2.93 5 1941 16.10 24.90 7.30 6 1951 16.67 24.95 9.45 7 1961 24.02 34.44 12.95 8 1971 29.45 39.45 18.69 9 1981 36.23 46.89 24.82 10 1991 42.84 52.74 32.17 11 2001 64.83 75.26 53.67 12 2011 74.04 82.14 65.46

www.classmateacademy.com 93 Population Density : 1 Bihar 1106 2 West Bengal 1028 3 Kerala 860 4 Uttar Pradesh 829 5 Haryana 573

www.classmateacademy.com 94 Union Territories : Density 1 Delhi 11,320 2 Chandigarh 9,258 3 Puducherry 2,547 4 Daman and Diu 2,191 5 Lakshadweep 2,149

Decadal Growth rate : State %

1 Meghalaya 27.95

2 Arunachal Pradesh 26.03

3 Bihar 25.42

4 J & K 23.64

5 Mizoram 23.48

www.classmateacademy.com 95 Variation on religious level- • Jains - 94.1% (highest literate) • Christians - 80.3% • Buddhists - 72.7% • Sikhs - 69.4% • Hindus - 65.1% • Muslims - 59.1% States of India (in descending order) having highest literacy rate • Kerala-94.00% • Mizoram -91.33% • Goa- 88.70% • Tripura-87.22% • H.P-82.80 % States of India (in ascending order) having lowest literacy rate • Bihar (61.80%) • Arunachal Pradesh (65.38%) • Rajasthan (66.11%) • Jharkhand (66.41%) • Jammu & Kashmir (67.16%) • Uttar Pradesh (67.68%)

www.classmateacademy.com 96 Union territories of India (in descending order) having highest literacy rate • Lakshadweep (91.85%) • Daman and Diu (87.10%) • Andaman& Nicobar Islands (86.63%) • Delhi (86.21%) • Chandigarh (86.05%)

Union territories of India (in ascending order) having least literacy rate • Dadra and Nagar Haveli (76.24%) • Puducherry (85.85%) • Chandigarh (86.05%)

• Kerala has the highest male literacy followed by Mizoram, Goa and Maharashtra.

• Kerala has also the highest female literacy followed by Mizoram, Goa and Himachal Pradesh.

• Among union territories, Lakshadweep stands first both in male and female literacy.

www.classmateacademy.com 97 Life expectancy (at the time of birth) (2001-2006) : Total - 65.3 years Male - 63.87 years Female - 66.91 years

Religious Group Percent(2011) Hindus 79.5 Muslims 14.2 Christians 2.78 Sikhs 1.7 Buddhists 0.77 Jains 0.41

www.classmateacademy.com 98 Christians(2.34%): Religious Composition. Kerala Nagaland -90% Hindus:(80.45%) Mizoram -87%, Himachal Pradesh-95.4% Meghalaya-70% Mizoram-3.6%. Manipur- 32.2% Muslims:(13.5%) Goa -26.7% UP,WB Sikhs(1.87%): J&K-66.9% Punjab-70 % of population. Assam-30.9% Punjab-59.91% West Bengal -25.2% Chandigarh-16.1%, Kerala-24.7% Haryana -5.54%. Mizoram -1.14% Delhi-4.01% Jammu & Kashmir -2.04% Lakshadweep-94.3% Rajasthan-1.45% Buddhists- Maharashtra-73.4% Sikkim -28% Arunachal Pradesh Mizoram Tripura. Ladakh (Jammu and Kashmir) and Dharmshala (Himachal Pradesh) www.classmateacademy.com 99 Jains-

Maharashtra Rajasthan Gujarat Delhi.

Parsis-

Maharashtra (mainly in Mumbai) and Gujarat.

www.classmateacademy.com 100 www.classmateacademy.com 101 Urban Habitat:

• USA(77%),Russia(73),Japan(79%),Australia(91%),UK(89%)

Definition: • All the places with Muncipalities,Municipal corporations,Cantonments and Notifies urban areas.

• Census Definition Minimum population-5000 Minimum Population Density-400 per sq km. Minimum 75% of the male working population whould engage in non-agricultural activities.

• Classification of cities in India : Group 1 ------1,00,000 and above Population Group 2------50,000 -99,999 Group 3 ------20,000-49,999 Group 4 ------10,000-19,999 Group 5 ------5000-9,999 Group 6 ------Less than 5,000

Highest population in Group 1,Highestwww.classmateacademy.com number of cities is in Group-4. 102 T.N(48.5%),Mahrashtra(45.2%),Gujarat(42.6%),(Karnataka38.6%)

Slum population :MH, AP, UP, WB, TN, Del Cities :Mumbai, Delhi, Calcutta, Chennai, Nagpur, Hyderabad, Pune.

PURA : Providing urban amenities in Rural Areas

• Advocated by APJ Abdul Kalam in his vision 2020.

• Developing Agriculture and food Processing ,Reliable and Quality Electric power,Education and Health care for all Expansion of IT .

www.classmateacademy.com 103 2011- 31 % Population in India, with 53 Million plus cities

SMART Cities : 100 Smart cities ,each city to be given 100 Cr. First list-20,Second lisr-13,Third List-27

Atal Mission for Urban Renewal and Transformation (AMRUT) : 500 cities with 1 Lakh and above Population

Housing for All by 2022 : Pradhan Mantri Awaas Yojana

Heritage City Development and Augmentation Yojana(HRIDAY) Heritage linked urban development(12 cities Ajmer,Varanasi,Warangal,badami,Puri,Gaya)

Shyama Prasad Mukherji Rurban Mission (SPMRM) : • The clusters will be geographically contiguous Gram Panchayats with a population of about 25000 to 50000 in plain and coastal areas and a population of 5000 to 15000 in desert, hilly or tribal areas.

• 300 Rurban Clusters www.classmateacademy.com 104 While addressing the Constituent Assembly in 1947, Jawaharlal Nehru had said,

“This achievement (Independence) is but a step, an opening of opportunity, to the great triumphs and achievements that await us…the ending of poverty and ignorance and disease and inequality of opportunity.”

First Five Year Plan (1951-56),

“the urge to bring economic and social change under present conditions comes from fact of poverty and inequalities of wealth, income and opportunities.

Second Five year plan :

The benefits of economic development must accrue more and more to the relatively less privileged classes of society .

www.classmateacademy.com 105 Indian Planning:1950- up to now

Economic Planning is a development strategy taking into consideration limited resources to achieve long term objective in the economy.

Types of Planning: Planning on the basis of role of STATE:

Imperative Planning: All the economic decisions are taken by single central authority ,usually known as central Planning Authority.

Indicative Planning :Planning by incentive/inducement.The state interference is limited to making policy and adopting indirect control. Government takes help of private sector in plan formulating a plan .The ways of achieving such targets is left to private sectors.

Planning by Inducement: It is a feature of mixed economy.The government sets broad objectives and targets of development ,but instruments used are not like in a Planning by command,but use indirect methods like Tax benefits

www.classmateacademy.com 106 Planning on the basis of plan formulation and implementation: Centralised Planning: It is similar to planning by command .The process of plan formulation lies at the hand of a central authority usually central planning Authority.

Decentralised Planning: Planning from below.The plan is formulated a various levels ,like in India centre,state, local levels and amalgamated and a Plan is formulated at National Level.

Planning on the basis of time period of plans:

Prespective Planning :It is called a long term Plan .Under this system the plan is formulated for a longer period say 15-20 yrs

Medium Plan :Planning for a limited period say 5 years ,targets are set for five years.

Annual Plan: All the perspective and medium plans may have annual targets specified for a fixed plan.

www.classmateacademy.com 107 Flexibility or rigidity of plan :

Fixed Plan: Such are formulated time period of 5 years and 10 years. Targets are fixed for a fixed period .

Rolling Plans: This Plan contains 3 plans .Annual Plan,Five year Plan and long term plan.

History of Planning in India:

• M .Vishveshvarya(1934):”Planned Economy for India”. • National Planning Committee (1938):J Nehru. • Bombay Plan(1944):Industrailists • Sriman Narayan :”Gandhi Plan” • People Plan (1945):M.N.Roy • Jay Prakash Narayana(1950):Sarvodaya Plan.

• Planning Commission(1950) • NDC(1952)

www.classmateacademy.com 108 Indian Planning : the changes

Phase 1:1950-51 to 1965-66---Nehruvian Era Phase 2:1965-66 to 1979-80---Indira Gandhi era Phase 3 1979-80 to 1991-92---Structural Change Beginning of liberalisation Phase 4:1991-92 to 2013-14---LPG

First five year Plan(1951-56):Development of Agriculture • Harrold-Domar Model. • CDP • Hirakud and Bhakra Nangal

Second five year plan(1956-61):Rapid Industrialisation. • Mahalanobis Model. • Influenced by soviet model. • Rapid industrialisation. • UGC,IITs • Steel Plants • Bhilai(USSR),Durgapur (Britain),Rourkela(Germany)

www.classmateacademy.com 109 Industrial Policy Resolution 1956 (IPR 1956): • exclusively owned by the state; • private sector could supplement the efforts of the state sector, • private sector.

Trade Policy : Import Substitution Protection : Tariffs and Quotas . the famous phrase--“licence-quota-permit Raj”--of C. Rajagopalachari

Industry groups Examples

Basic Industries Steel industry, Aluminium smelters, Cotton ginning mills, Sulphuric Acid & Caustic Soda Capital goods industries Machinery except electric, electric Machinery, Shipbuilding, Railroad equipment, Motor vehicles Intermediate Petroleum refinery , Ferro-Chrome alloy

Consumer goods industries

www.classmateacademy.com 110 SCHEDULE A • Arms and ammunition and allied items of defence equipment • Atomic energy. • Iron and steel. • Heavy castings and forgings of iron and steel. • Heavy plant and machinery required for iron and steel production, for mining, for machine tool manufacture and for such other basic industries as may be specified by the Central Government. • Heavy electrical plant including large hydraulic and steam turbines. • Coal and lignite. • Mineral oils. • Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold and diamond. • Mining and processing of copper, lead, zinc, tin, molybdenum and wolfram. • Minerals specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953. • Aircraft. • Air transport • Railway transport. • Shipbuilding. • Telephones and telephone cables, telegraph and wireless apparatus (excluding radio receiving sets). • Generation and distribution of electricity. www.classmateacademy.com 111 SCHEDULE B

• All other minerals except "minor minerals" as defined in Section 3 of the Minerals Concession Rules, 1949. • Aluminium and other non-ferrous metals not included in Schedule 'A'. • Machine tools. • Ferro-alloys and tool steels. • Basic and intermediate products required by chemical industries such as the manufacture of drugs, dyestuffs and plastics. • Antibiotics and other essential drugs. • Fertilizers. • Synthetic rubber. • Carbonisation of coal. • Chemical pulp. • Road transport. • Sea transport

www.classmateacademy.com 112 Third Plan(1961-1966):Self reliance and Self sustained economy • Import Substitution • Gadgil Yojana • Two wars &Political Instability • Officially declared failure

Plan Holiday:1966-69 • Three Annual Plans

Fourth Plan(1969-1974):Self reliance in growth with stability • Growth with Justice and Garibi hatao. • Aggressive policies • FERA,1973—To use forex reserves properly • Bank Nationalisation,1969 • MRTP,1969---To prevent the emergence of Monopoly. • 1971-74:Inflation(>10%),1971 War,Oil shock.(Coal-1971,General Insurance,1972,BPCL-1976,HPCL-1974-76) • Operation Smiling Buddha

Fifth Plan(1974-79):Poverty Eradication. • National emergency,1975. • 20 Point Programme. • Food for work programme started. www.classmateacademy.com 113 Programme Year Obejctive

CDP 1952 Rural development

HYVP 1966-67 To increase productivity of food grains by adopting latest varieties of inputs for crops.

Special Area Programs:

Command Area 1974-75 To ensure better and rapid Development Program utilization of irrigation capacities of medium and large projects. Desert development 1977-78 For controlling the desert Program and prevent expansion of Desert

www.classmateacademy.com 114 Programs for specific Sections(Groups):

Small farmer Development 1974-75 Technical and Financial Agency assistance to small farmers

Training rural youth for self 1979 Program of training rural employment(TRYSEM) youth for self employment

Development of women 1982 To provide suitable and children in rural areas opportunities of self- (DWCRA) employment to the women belonging to the rural families who are living below the poverty line Integrated Child 1975 Child Nutrition and Pre- Development primary education. Scheme(ICDS)

www.classmateacademy.com 115 Rolling Plan(1978-1980): • Every year performance of the plan would be assessed and a new plan would be based on such an assessment would be made for the subsequent year.

Sixth Plan(1980-85):Employment Generation(Perspective Planning) • PC--Structural changes in the economy • Liberal licensing Eg. Agro based industries • More Poverty Eradication Programmes

Seventh Plan(1985-90):Modernisation Towards 21 century • Continued sixth plan,Liberalisation in Industries like Electronics, Food Processing etc Technology missions like Oilseeds etc. • More investments in PSU,modernisation. • More Schemes like JRY

1990’s severe economic crisis,Gulf war,Credit rating agencies down graded India,NRI also with draw money from India.

Plan Holiday (1990-92):Annual Plans • 24,July,1991 –Liberlisation –”New Industrial Policy” www.classmateacademy.com 116 Milton Friedman:

Chicago School of Economics

Reaganomics and Thatcherism

Trickle-down theory

Neo Right Policy – Privatization, Liberalization

www.classmateacademy.com 117 Regulating Body Area year

SEBI(Formerly Capital Market 1992(formed 1988,but Controller of Capital statutory body in 1992) Issues) IRDA Insurance sector 1999 CCI (MRTP) Competition 2002 TRAI Telecom 1997 PFRDA Pension 2003 FSSAI Food Safety and 2011 Standards Authority of India

IWAI Inland Waterways 1986 Authority of India

CERC Central electricity 1998 Regulatory Commission www.classmateacademy.com 118 Eighth Plan (1992-97):Human Resource Development • John Miller • Employment, Education and Public Health • Economic growth 6.7%

Privatization : Privatization is to increase participation of private sector in the public sector companies by capital investment or by management or both or to hand over a public sector unit to a private company .

Liberalization :It is the process by which government control is relaxed or abolished.

Globalization :The process of amalgamation of Economy with the world economy is called Globalization . It is signified by lower duties on import and export.

Disinvestment: To reduce the government share in the public sector is called disinvestment.

Ninth Plan(1997-2002):Growth with Social justice and Equity • Focus on agriculture and rural development to eradicate poverty. • Problems in International level

www.classmateacademy.com 119 Liberalization • All kinds of licenses were abolished ,but for 18 sectors in 1991,now it has come down to 3. • De-reservation of SSI items. (842 in 1991 ) • MRTP,1969 removed and replaced by CCI,2002

Privitisation :

• Denationalisation : Complete sale to private sector . Eg : Alywn to Mahindra,Maharashtra scooters to Bajaj. • Joint Venture: Government retain ,26%,51% or 74% of ownership. • Workers cooperative : ownership to workers. Kamani Tubes, Central Jute and Mewar Textiles, Hoist O’ Mech and Calcutta Chemicals etc. • Token Privatisation: Sale of 5-10 % to market forces,Disinvestment

www.classmateacademy.com 120 Globalisation to Integrate the Indian Economy with the World Economy :

• Reduction of trade barriers. • Creation of an environment. • Creation of an environment for free flow of technology. • from the point of view of developing countries, creation of an environment in which free flow of labour or human resources can take place among different countries of the world.

www.classmateacademy.com 121 Tenth Plan (2002-2007): Growth, equality & employment generation

Eleventh Plan(2007-2012):Towards faster and more inclusive Growth

Twelfth Plan(2012-2017):Faster,More Inclusive and sustainable Growth

1. Economic Growth • Real GDP Growth Rate of 8.0 per cent. • Agriculture Growth Rate of 4.0 per cent. • Manufacturing Growth Rate of 10.0 per cent.

2. Poverty and employment • Poverty to be reduced by 10% • Generate 50million additional Employment opportunities in non-farm sector and provide skill certification to equivalent numbers.

3. Education • Mean years of schooling to be seven years • Enhance access to higher education by creating additional 2 Million seats • Eliminate gender and social gap in school education (girls,SC,ST,Muslims,etc)

www.classmateacademy.com 122 4.Health • IMR-25,MMR-1,CSR(950) • TFR-2.1 • Reduce under Nutrition among children by half among 0-3 yrs children.

5. Infrastructure Including rural Infrastrucure: • All weather road connectivity • Two laning of state highways • Teledensity-70%

6. Environment and sustainability • Green cover 1 million hectares • 30,000 MW renewable energy • Reduce emission intensity by 20-25%,reduction over 2005 levels by 2020.

7.Service Delivery • 90% financial Inclusion. • Subsidies be given through DTC.

www.classmateacademy.com 123 Schemes of New Government :

• Pradhan Mantri Jan Dhan Yojana : 28 Aug,2014 : • Rupay Debit card(19.11 cr cards ) • Accident insurance cover of Rs 1L • Life insurance cover of Rs30,000to those who opened account before 16,Jan • 28 Jan : 12.31cr (7.36 in rural areas ,4.95 in urban areas ) • 23.98 %with zero balance(Rs 43,347 cr deposits)

Swach Bharat Mission : 2oct,2014 by 2oct 2019 Awareness,solidwaste,sanitation, 2.4 cr toilets constructed .

J : JanDhan Yojana, 125.5 m JanDhan bank accounts A : Aadhaar,757m Aadhaar numbers M : Mobile numbers, 904m mobile phones .

PAHAL : (Pratyaksh Hanstantrit Labh) : 01/01/2015 launched throughout the country

Pradhan Mantri Ujjwala Yojana. : To reach 10 cr left over Household of total of 24 cr Launched on 1st May 2016 from Ballia in U.P. 5 Crore LPG connections in the name of women in BPL (Below Poverty Line). Financial support of Rs 1600 for each LPG connection to the eligible BPL households.

To be implemented in three years 2016www.classmateacademy.com-17, 2017-18 and 2018-19. 124 Atal Pension Yojana : APY is applicable to all citizen of India aged between 18-40 years, would receive the fixed monthly pension of Rs. 1000 to Rs 5000 at the age of 60 years, depending on their contributions.

Government would co-contribute 50 per cent of a subscriber’s contribution or Rs 1,000 per annum, whichever is lower to each eligible subscriber account for a period of of 5 years from 2015-16 to 2019-20.

Pradhan Mantri Jeevan Jyoti Bima Yojana: Eligibility: Available to people in the age group of 18 to 50 and having a bank account. People who join the scheme before completing 50 years can, however, continue to have the risk of life cover up to the age of 55 years subject to payment of premium. Premium: Rs 330 per annum. It will be auto-debited in one installment. Payment Mode: The payment of premium will be directly auto-debited by the bank from the subscribers account. Risk Coverage: Rs. 2 Lakh in case of death for any reason.

Pradhan Mantri Suraksha Bima Yojana: Eligibility: Available to people in age group 18 to 70 years with bank account. Premium: Rs 12 per annum. Payment Mode: The premium will be directly auto-debited by the bank from the subscribers account. This is the only mode available. Risk Coverage: For accidental death and full disability – Rs 2 Lakh and for partial disability – Rs 1 Lakh. www.classmateacademy.com 125 Sugamya Bharat Abhiyan(Accessible India Campaign ) : Is the nationwide campaign for achieving universal accessibility for all citizens including Persons with Disabilities, to be able to gain access and live independently. DEC-3, International day of Persons with disability.

Beti Bachao BetiPadhao Programme (BBBP) : 22 Jan,2015 at Panipat,Haryana First in 100 dist,Haryana-835 Sukanya Samriddhi account" special account for girl child, Rs1000 at time of birth ,then any amount in multiples of hundred and at 18 yrs,Rs 1,50,000

Sansad Adarsh Gram Yojana(SAGY): 11Oct,2014 One Model village -2016 Two Model Villages -2019 Vanbandhu Kalyan Yojana : One Block In Tribal areas (schedule 5 states),10 cr for all round development .

“Ek Bharat Shreshtha Bharat” programme will be launched to link States and Districts in an annual programme that connects people through exchanges in areas of language, trade, culture,www.classmateacademy.com travel and tourism. 126 Start Up India

• Single Window Clearance even with the help of a mobile application • 10,000 crore funds of fund • 80% reduction in patent registration fee • Modified and more friendly Bankruptcy Code to ensure 90-day exit window • Freedom from mystifying inspections for 3 years • Freedom from Capital Gain Tax for 3 years • Freedom from tax in profits for 3 years • Eliminating red tape • Self-certification compliance • Innovation hub under Atal Innovation Mission • Starting with 5 lakh schools to target 10 lakh children for innovation programme

www.classmateacademy.com 127 Stand Up India Scheme to promote entrepreneurship among Scheduled Caste/Scheduled Tribes (SC/ST) and Women entrepreneurs.

• The Scheme seeks to facilitate at least two such projects on an average one for each category of entrepreneur per bank branch,2.5 lakhs

• The Stand-up India is component of Start-up India, Stand up India slogan anchored by Department of Financial Services (DFS) to encourage greenfield enterprises by Women and SC/ST entrepreneurs.

• It will refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount 10,000 crore rupees

• It would provide women and SC/ST entrepreneurs bank loans repayable up to 7 years. It would be between 10 lakh to 1 crore rupees for greenfield enterprises in the non-farm sector.

www.classmateacademy.com 128 Pradhan Mantri Kaushal Vikas Yojana

• PMKVY is a flagship scheme that would ensure that the youth undergo skill training under NSDC and this scheme would affect the skill sets of around 24 lakh individuals across the length and breadth of the country. • The National Skill Qualification Framework (NSQF) would be the benchmark of training programs carried out under the PM Kaushal Vikas Yojana. • The scheme would also award monetary rewards to the successful trainees on completion and the certifications and assessments would be carried out by third party assessment bodies. • The average monetary reward given to each trainee would be around Rs 8,000

www.classmateacademy.com 129 Agriculture :The Back bone to Indian Economy • 50% of work force and 14 % GDP. • The share of agriculture in employment was 48.9 per cent of the workforce [National Sample Survey Office (NSSO), 2011-12] while its share in the Gross Domestic Product (GDP) was 17.4 per cent in 2014-15

Land Reforms: • Abolition of intermediaries • Tenancy reforms Regulation of rent Security of tenure Ownership rights to tenants • Land ceilings.

• Green Revolution Production =Productivity*area Increase in production through productivity is known as Green revolution Inputs: Irrigation,HYV,Fertilizers and pesticides. IAAP,HYVP,1966

www.classmateacademy.com 130 HYV:

ICAR: Crop specific Institutes responsible for developing the seeds.

Chemical Fertilizers: NPK(ideally 4:2:1) N-Urea P-DAP,SSP K-MOP Micro Nutrients: Boron,Zinc

Subsidized: APM-Adminstered Price Mechanism. Deregulation of Phosphatic and Potash fertilizers in 1992 Now to reduce subsidy ,NBS nutrient based subsidy for P,K

Irrigation: • Of the total area under food grains, only 48.3% area is irrigated . • 60% irrigation is tube wells,30%-canals. www.classmateacademy.com 131 Irrigation :

Ultimate irrigation Potential of 140 million hectares, As of 2006-07 the potential developed was 103 million hectares. Major &Medium(40%) ,Minor Irrigation (60%)

CAD : Command Area Development Programme (1973-74) The objective of the scheme is to maximise productivity in the irrigation command areas . AIBP : Accelerated Irrigation Benefit Programme.(1996-97) Central assistance to state to complete projects approved by Planning Commission. 89 irrigation projects under AIBP.(Budget)

NABARD : RIDF • A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about ` 20,000 crore.(Budget) • Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked. • sustainable management of ground water resources with an estimated cost of ` 6,000 crore will be implemented through. • 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA

www.classmateacademy.com 132 Pricing in Agriculture:

Minimum Support Price(MSP): It is fixed before sowing i.e start of the season. 23 crops are under MSP+ Sugar cane CACP,1965

Procurement Price: It is the price at which the government procures foodgrains for buffer stock and PDS.

Issue Price : It is the price at which the government sells the agricultural produce from its stocks.

PDS : FCI keeps stock of food grains for the government . Food Subsidy-Consumer Subsidy + Buffer Subsidy. Consumer subsidy: the difference of procurement price and issue price. Buffer subsidy : it is the cost incurred between the point of purchase and point of sale 1997-TPDS(APL+BPL) 2000-AAY(Poorest of the poor) NFSA-National Food security Act. Ever green revolution,Second Green Revolution,Rainbow Revolution.

www.classmateacademy.com 133 Agriculture finance:27% institutional sources,22%--non institutional sources,51% unable to get any loan.

Short Term: 0-15 months Medium Term: 15-5 Years Long term: 5> years

Cooperatives: Started in 1904 Three Tier Structure : Primary Credit Societies,DCCB,SCB

www.classmateacademy.com 134 Commercial Banks: After Nationalisation,60% credit through Commercial banks.

Lead Bank Scheme : 1969 RRB,1975:Set up by lead banks at district level with primary objective of branch expansion and lending to rural areas.9% lending. Initially 5 RRBs in 1975,owned by Centre(50%) ,state(15%) ,commercial bank (35%). Narasimhan Committee & Khusro Committee problems of RRB. RBI committee for restructuring RRB, M.C Bhandari Committee As on June 30, 2006, there were 196 RRBs with a network of 14,500 branches. KCC,Kisan Credit Card Scheme:Kisan Credit Card (KCC) Scheme was introduced in 1998-9 Issued by commercial banks,cooperatives and RRB. Commercial banks have issued maximum no of KCC.

Priority Sector Lending: Decided by RBI, Indian Banks-40%,Foreign Banks-32% (Agriculture) www.classmateacademy.com 135 NABARD,

• Separated from RBI in 1982 ,Apex Institution • A refinance Institution to Banks and Financial Institutions lending to Agriculture and rural Development . • NABARD refinances to Agriculture,SSI,Cottage ,Village,Handicrafts & Rural crafts. • It provides short-term loan to SCB,RRB, etc • Long term Loans to state governments to mshare capital for Co- Operatives • Responsibility to inspect RRBs,SCB,PCB.

RIDF ,rural Infrastructure Development Funds,1996 • 1996

www.classmateacademy.com 136 Agriculture Insurance: NAIS,1999:To protect Banks MNAIS-Modified NAIS WBCIS-Weather based Insurance scheme,2007 Pvt Companies-IFFCO-TOKYO,ICICI-LOMBARD CPIS-

Agriculture Insurance Company of India Limited: GIC(35%),NABARD(30%), remaining by Four PSU

Micro Finance: Started in 1992,MFIs

RKVY-Rashtriya Krishi Vikas Yojana NCM,2004-MS Swaminathan National Policy For farmers,2007

www.classmateacademy.com 137 www.classmateacademy.com 138 www.classmateacademy.com 139 www.classmateacademy.com 140 www.classmateacademy.com 141 Commodity/Gr Area(million Output(million Yield(kg/Hectar oup hect) tonnes) e) Food grains 122.1 252.7 2070 Rice 43.9 104.8 2390 Wheat 31 88.9 2872 Pulses 23.1 17.2 744 Oilseeds 25.7 26.7 1037 Cotton 13.1 35.5 461 Sugarcane 5.1 359.3 70

www.classmateacademy.com 142 www.classmateacademy.com 143 Challenges :

• Agriculture Census 2005–06 avg size-1.23Hc,less than 2 hectares comprising 83% of farmers &41% of area.

• Reforming APMC, Model Act in 2003 was directed towards allowing private market yards, direct buying and selling, and also to promote and regulate contract farming

Vegetables,fruits- Second largest Producer only 6-7 % processed. 65%-US,23%-china.

• Extension primarily a state responsibility. ATMA-in all districts but quality should be emphasised.

www.classmateacademy.com 144 National Food Security Mission (NFSM): Rice-10mt,Wheat- 8mt,Pulses -4mt,Coarse cerelas-3mt

National Food Security Mission-Commercial Crops : cotton, jute and sugarcane.

Mission for Integrated Development of Horticulture (MIDH)

NHM-National horticulture mission Horticulture Mission for north-east and Himalayan States (HMNEH) NBM-National Bamboo Mission.

Paramparagat Krishi Vikas Yojana :

DD Kisan Channel: launched on 26 May 2015.

www.classmateacademy.com 145 New Schemes :

Pradhan Mantri Krishi Sinchayee Yojana : 28.5 lakh hectares will be brought under irrigation(Budget)

Neeranchal National Watershed Project: Integrated watershed management program (IWMP)

Soil Health Card : Swasth Dharaa. Khet Haraa scheme will cover all 14 crore farm holdings by March 2017

Shanta Kumar Committee on FCI

www.classmateacademy.com 146 Pradhan Mantri Fasal Bima Yojana :

• premium will be 2 % of the sum insured for Kharif season crops and 1.5 % for Rabi season crops. The rates are also applicable for oilseeds. • The premium rates for commercial crops like cotton and other horticultural crops will be 5 % of the insurance sum assured. • Prime Minister Fasal Bima Yojana ` 5,500 crore.

E-NAM :National Agriculture Market (NAM) : • setting up of an appropriate common e-market platform that would be deployable in selected regulated wholesale markets in States/Union Territories (UT) desirous of joining the e-platform • The Small Farmers Agribusiness Consortium (SFAC) will implement the national e-platform and will cover 250, 200 and 135 mandis during 2015-16, 2016-17 and 2017-18 respectively

www.classmateacademy.com 147 Live Stock :

• India ranks first in milk production, accounting for 18.5 per cent of world production, achieving an annual output of 146.3 million. • The per capita availability of milk in India has increased from 176 grams per day in 1990-91 to 322 grams per day by 2014-15. • National Programme for Bovine Breeding and Dairy Development (NPBBDD), • National Livestock Mission (NLM) is being implemented with the objectives of sustainable development of livestock sector, focusing on improving availability of quality feed and fodder,

• ` 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds

www.classmateacademy.com 148 • Fisheries constitute about 1 per cent of the GDP of the country and 5.08 per cent of agriculture GDP

• India is the second largest producer of fish in the world contributing 5.68 per cent of global fish production.

• It is also a major producer of fish through aquaculture and ranks second in the world after China.

www.classmateacademy.com 149 Industry: Its Development

Industrial Policy-1948: • Public sector emphasized • Private sector given limited role(lack of capacity + willingness) Industrial development act ,1951

Industrial Policy ,1956 Role of Public sector expanded. Schedule A-17 Public sector. Schedule B -12 Public+private

Industrial Policy,1973: Joint Sector was allowed in important and export oriented Industries. Eg.Maruti,Vespa,HeroHonda.

Industrial Policy,1980: Beginning of Gradual Liberalisation process in the country Agro based industries,backward areas and export oreinted industries

www.classmateacademy.com 150 Liberalization :It is the Process by which government control is relaxed or abolished.

Privatization :Privatization is to increase the participation of private sector in the public sector companies by capital investment or by management or both or to hand over a public sector unit to private company.

Globalization: The process of amalgamation of an economy with world economy is called Globalization. It is signified by lower duties on import and export .

Disinvestment: To reduce the government share in the public sector is called disinvestment.

New Industrial Policy,1991: • Except 18 industries all other were freed from compulsory licensing in 1991,now only 3 (Atomic energy,Atomic minerals and railways) • MRTP,1969 is replaced by competition act,2002 • FERA,1973 replaced by FEMA,2000.

www.classmateacademy.com 151 Public sector: Changes • Now only Three reserved –Atomic energy, atomic minerals and railways. Entry of Private sector in to other areas , • Policy of recommending sick PSUs to BIFR, to revive/rehabilitate sick unit, with social security schemes for workers. • BIFR was established in 1987, under The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). • But from 1 June 2016 by official notification government of India closed BIFR and established National Company Law Tribunal and National Company Law Appellate Tribunal.

• Offloading of Public sector shares to Mutual Funds,Financial Institutions and workers. • Policy of MOU-Arjunsen Gupta Committee PSU granted more managerial and financial autonomy . Beginning of Navratna,Maharatna,Mini-ratna.(1,2)

Present status : 298 CPSEs ,235(operational) and 63 (under construction)

www.classmateacademy.com 152 Policy of disinvestment. : Disinvestment is the process through which privatization takes place. Rangarajan Committee(1993 ) recommended for substantial disinvestment.

Complete Privatization : VSNL (sold to Tatas), IPCL(Sold to Reliance ) Issues : • Pricing was a problem. • Most of them had huge land in Cities. • Public sector monopoly being replaced by Private sector monopoly. • Public sector companies were not allowed to bid during sale.

• BRPSE,(2004)-Board of Reconstruction of Public Sector Enterprises-to revive sick PSU units.

• VRS-Golden Handshake. • National Investment Fund(2005):

www.classmateacademy.com 153 Maharatna Navratna Miniratna Category-I Miniratna Category-II

A score of 60 (out of 100), based on six parameters which include net profit, net Three years with an average worth, total annual net profit of over Rs. manpower cost, total 2500 crore (earlier was cost of production, Have made profits 5,000 Cr), cost of continuously for the Have made profits OR Average annual Net services, PBDIT last three years or continuously for the Eligibility worth of Rs. 10,000 crore for (Profit Before earned a net profit of last three years and 3 years (earlier was 15,000 Depreciation, Interest Rs. 30 crore or more should have a Cr), OR and Taxes), capital in one of the three positive net worth. Average annual Turnover of employed, etc., ANDA years Rs. 20,000 crore for 3 years company must first (earlier was 25,000 Cr) be a Miniratna and have 4 independent directors on its board before it can be made a Navratna. up to Rs. 1,000 crore or 15% of their net Rs. 1,000 crore - Rs. 5,000 worth on a single up to Rs. 500 crore or up to Rs. 300 crore or Benefits for crore, or free to decide on project or 30% of equal to their net up to 50% of their net investment investments up to 15% of their net worth in the worth, whichever is worth, whichever is their net worth in a project whole year (not lower. lower. exceeding Rs. 1,000 www.classmateacademy.comcrores). 154 Maharatna CPSEs • Bharat Heavy Electricals Limited • Coal India Limited • GAIL (India) Limited • Indian Oil Corporation Limited • NTPC Limited • Oil & Natural Gas Corporation Limited • Steel Authority of India Limited Navratna CPSEs • Bharat Electronics Limited • Bharat Petroleum Corporation Limited • Hindustan Aeronautics Limited • Hindustan Petroleum Corporation Limited • Mahanagar Telephone Nigam Limited • National Aluminium Company Limited • NMDC Limited • Neyveli Lignite Corporation Limited • Oil India Limited • Power Finance Corporation Limited • Power Grid Corporation of India Limited • Rashtriya Ispat Nigam Limited • Rural Electrification Corporation Limited • Shipping Corporation of India Limited www.classmateacademy.com 155 Foreign Sector: • After 1991, Policy is to promote foreign investment in India. • FDI, allowed in some sectors up to 100%. • FDI statistics of the last fifteen years reveal that the services sector has accounted for the highest inflows (17.6 per cent of total FDI inflows into India) followed by construction development (8.8 per cent), computer hardware and software (7.2 per cent), telecommunications (6.6 per cent) and the automobile industry (5.2 per cent). • Source of FDI: Singapore, Mauritius, Netherlands and the USA account for the major share . Out of FDI equity inflows of US$24.8 billion during 2015-16 (April-November), more than 60 per cent have come from two geographically small countries named Singapore and Mauritius.

Top states attracting FDI : 1Delhi (29.20) 2 Maharashtra (20.16) Karnataka (12.04) 4 Tamil Nadu(10.24) 5 Gujarat (5.13) 6 Andhra Pradesh(3.73) www.classmateacademy.com 156 • FDI Automatic Route : Only information to RBI. • FDI less than 3000cr approval from FIPB. More than that Govt approval.

• MAKE IN INDIA (24 Sep 2014): • Manufacturing sector to 25 per cent of the GDP by 2020, 100 million additional jobs in manufacturing by 2022. • 5 thrust sectors, along with details of the FDI Policy, • National Manufacturing Policy, Intellectual Property Rights and the proposed National Industrial Corridors including the Delhi Mumbai Industrial Corridor (DMIC) • Atal Innovation Mission • Standup-India ,Start –Up India. • Global Competitiveness Index of the World Economic Forum: at position 55, India went up 16 rungs in 2015- 16, further improved to 39 in 2015-2016 • Doing Business Index ,published by World Bank rank 130/189

www.classmateacademy.com 157 • FIIs allowed to invest in Indian Capital Market.

• Indian Companies allowed to raise ADR/GDR

www.classmateacademy.com 158 There are about 460 million workers in the country. Classification of Industries: • No of Employees There are about 29 million Organised(>10), Unorganised(<10) workers in the formal sector. • Turnover criteria • Small sector

Small Scale sector: Definition based on Investment amount .

Since 2006 MSME Act

Manufacturing Services Micro 25 lakh 10 Lakh Small 5 cr 2 cr Medium 10 cr 5 cr

www.classmateacademy.com 159 SIDBI-Small Industries Development Bank of India,1990

Recent Measures: Credit Linked capital subsidy scheme: SMERA(Small and Medium Enterprises Rating Agency)

Some Important Committees of small scale sector

Abid Hussian Committee: Small Scale Sector. Meera Seth Committee: Handloom Sector. M.L Kapoor Committee: Better Credit facility to Small scale sector . Arjun Sengupta Committee(2004): National Commission on Enterprises in Unorganised Sector.

IIP- Index of Industrial of Production(now base 2004-05,Base=100): 682 items Mining: 14.17% Basic Goods: Manufacturing: 75..53% Capital Goods: Electricity : 10.32% Intermediate Goods: Consumer Goods: The index for eight core industries (comprising coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity with a combined weight of

37.90%. www.classmateacademy.com 160 MSME 3.61 cr units (MSME )employ 8.05 cr,37.5% of GDP,45% Exports

Schemes :

• Prime Ministers employment Generation Programme • Micro and small Enterprises –Cluster Development Programme • Credit Guarantee Fund Scheme for micro and small Enterprises • Performance and Credit Rating Scheme • Assistance to Training Institutions • Scheme of Fund for Regeneration of Training Industries • Udyog Aadhar Memorandum (UAM): All information may be submitted on a self-certification basis. • A scheme for Promoting Innovation and Rural Entrepreneurs (ASPIRE)

www.classmateacademy.com 161 Recent Initiatives to boost Industrial growth :

E-Biz project : G2B portal to serve as one stop shop foe delivery of services ,24*7

Skill development : 31 Industry/employer led Sector Skill Councils and aligned with 25 sectors of ‘Make In India’.

Labour reforms : Shram Suvidha Portal launched for online registration of units,filing of self-certified,simplified,single online return .

Mudra Bank : (Micro Units Development Refinance Agency) 8 April 2015. 5.77 crore small business units Fund : Rs 20,000 crore. Loan amount based on stage of business Shishu : Rs 50,000 Kishor : Rs 50,000-5,00,000 Tarun : Rs 10,00,000

Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to ` 1,80,000 crorewww.classmateacademy.com. 162 Services Sector :

• The services sector in India remains the most vibrant sector in terms of contribution to national and state incomes, trade flows, FDI inflows, and employment.

• Services sector growth accelerated to 10.3%(2014-15).

• Delhi is at the top in services GSDP with a share of 87.5 % followed by Maharashtra at 63.8 %

• Growth rate , Puducherry had the highest services growth at 16.3 % followed by Meghalaya at 13.2 %, Jammu and Kashmir had the lowest services growth at 2.0 %.

• Highest FDI inflows and also growth.

• India’s services exports grew from US$16.8 billion in 2001 to US$155.6 billion - which constitutes 7.5 % of the GDP - in 2014, making the country the eighth largest services exporter in the world.

• India’s services exports in global services exports at 3.2 % in 2014, is nearly double its share of merchandise exports in global merchandise exports at 1.7 %.

www.classmateacademy.com 163 Tourism :

• Highest International tourist arrivals in France 83.8 m(first ),India 7 m

• e–Tourist visa (e-TV) :facility for the citizens of 113 countries at 16 airports

• New Schemes : Swadesh Darshan, National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD) .

• Medical tourism, the Government of India has launched India’s Healthcare Portal and Advantage Health Care India.

www.classmateacademy.com 164 Transportation Sector

Roads : • With about 52.32 lakh km of road network comprising National Highways, State Highways and other roads, India has the second largest road network in the world. • Road transportation carries 85 per cent of the passenger and 70 per cent of the freight traffic. • National Highways (NH) in the country cover a total length of 1,00,475 km constitute only 2 per cent of total road length in the country but account for 40 per cent of traffic.

Bharatmala programme: By 2022 • Development of State Roads along Coastal areas / Border areas, including connectivity of non-major ports. • Backward Areas, Religious, Tourist Places Connectivity programme. • Setubhratam Pariyojana which is for the construction of about 1500 major bridges and 200 ROBs / RUBs. • District Head Quarter Connectivity Scheme

www.classmateacademy.com 165 Railways :

• By the end of year 2004,the network of Indian ailways was spread over 63,221 route kms. Out of this network, 46,807 route kms are Broad-gage, 13,290 route kms are Metergauge and 3,124 route kms. are Narrow-gauge.

• Passenger traffic currently contributes around 30 per cent of total revenues and the rest (70 percent) comes from freight traffic.

”Rail Badhe, Desh Badhe”

Wi-Fi facility at 400 stations. Tejas trains(Bullet train-130kmph), Antyodya express(only unreserved coaches), UDAY(double-decker ) and Humsafar train (exclusively three-tiered AC train).

Bullet Trains

www.classmateacademy.com 166 Ports :

India has 12 major ports and about 185 minor ports over its coastline spread over 7,000 kms. Major ports are managed by the Central Government and account for over 75 per cent of total cargo.

Sagar Mala project is a strategic and customer-oriented initiative of the Government of India to modernize India's Ports so that port- led development can be augmented and coastlines can be developed to contribute in India's growth.

Sagarmala Development Company ,20th July 2016 with an initial authorized share capital of Rs 1000 Crore.

www.classmateacademy.com 167 Inland Waterways Transport Sector :

• Considering its potential in terms of fuel savings, environment friendliness and cost effectiveness for transportation of bulk goods, dangerous goods, etc, there is renewed focus by government in this sector.

• Jal MargVikas Project with World Bank assistance of R4200 crore.

• To provide a thrust to the IWT sector, on the legislative front, it has been decided that in addition to the existing 5 national waterways, 106 more waterways across 24 states would be declared as National Waterways

www.classmateacademy.com 168 Telecommunications :

• Overall tele density in the country has increased from 79.4 per cent at the beginning of the financial year to 81.5 per cent at the end of October 2015, while total broadband connections have touched 120.9 million (at end-September 2015).

• BharatNet: BharatNet / National Optical Fibre Network (NOFN) project is planned to connect all gram panchayats (approximately 2.5 lakh) in the country through optical fibre, utilizing existing fibre of PSUs, namely BSNL, RailTel and Power Grid, and laying incremental fibre wherever necessary

• Digital India, launched on 2 July 2015 programme is a flagship programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy.

• National e-Governance Plan (NeGP) in 2006. 31 Mission Mode Projects

covering various domains werewww.classmateacademy.com initiated. 169 E-Kranti : NeGP 2.0

Namely ‘Transformation and not Translation’, • Integrated Services and not Individual Services’, • Government Process Reengineering (GPR) to be mandatory in every MMP’, ‘ICT Infrastructure on Demand’, • Cloud by Default’, • Mobile First’, • Fast Tracking Approvals’, • Mandating Standards and Protocols’, • Language Localization’, • National GIS (Geo-Spatial Information System)’, • Security and Electronic Data Preservation’.

IT (Indian Talent) + IT(Information technology) =IT (India Tommorow)

www.classmateacademy.com 170 Postal System : • The modern postal system, the most preferred facilitator of communication, was established in India by Lord Clive in the year 1766 and it was further developed by Warren Hastings in the year1774.

The Post Office Act of 1854. • At the time of Independence, there were 23,344 post offices throughout the country. Of these 19,184 post offices were in the rural areas and 4,160 in the urban areas. Today India has the largest postal network in the world with 1,54,939 Post Offices, of which 1,39,222 (89.86 per cent) are in rural areas and 15,717(10.14 per cent) are in urban areas. • Speed Post was started in August 1986 for providing time-bound and express delivery of letters and parcels weighing upto 35 kg between specified stations in India. • Project Arrow entails comprehensive improvement of the ‘core operations’ of the Post Offices as well as modernized ambience under ‘Look & Feel’ silo of the project.

www.classmateacademy.com 171 Airports • Mumbai and Delhi account for the largest share of all air traffic (domestic plus international) in India. • Airports are under the management of Airports Authority of India. Private investments are to be drafted for the up gradation of the four major airports (Delhi – Mumbai – Kolkata and Chennai). • A new airport promoted by Kerala State Government has come up in Kochi with private investor participation. • New ‘greenfield’ airports under private ownership are coming up at Bangalore and Hyderabad.

www.classmateacademy.com 172 Energy : India is the fourth largest consumer of energy in the world after USA, China and Russia 67% of rural area has acess to power coal-67% DDUGJY : Deendayal Upadhyaya Gram Jyoti Yojana (Garv : Grameen Vidyutikaran app) • Separation of agriculture and non-agriculture feeders • Augmentation of transmission and distribution • Metering in rural areas

Garv : Grameen vidyuthikaram app ,18452 villages electrification monitoring of villages.

IPDS : Integrated Power Development Scheme. Strengthening transmission network.

Pradhan Mantri Ujala Yojana : Led distribution ,total of 77 cr Leds. DELP : Domestic Efficient Lighting Programme EESL : Efficient Energy Services Limited Pub ltd

UDAY : Ujwal Discom Assurance Yojna • Improving operational efficiencies of discoms, • Reduction of cost of power, • Reduction in interest cost of discoms and • Enforcing financial discipline on discoms through alignment with state finances. www.classmateacademy.com 173 Social Infrastructure Education: spending on education 3% of GDP. RTE Sarva Shiksha Abhiyan : Implemented since 2000 to address the needs of children in the age group 6-14.

National programme for Education of Girls at Elementary Level: NPEGEL, Implemented in rural areas where the level of rural female literacy is less than the national national average.(educationally backward blocks).

National Programme for Mid-day Meals:since 1995 one of the worlds largest scheme.

Kasturba Gandhi Balika Vidyalaya: These are residential schools at the upper primary level for girls belonging predominantly to SC,ST,OBC and minority communities.

Rashtriya Madhyamik Shiksha Abhiyan (RMSA) 2009 : With an aim to ensure GER of 100 per cent by 2017 and universal retention by 2020.

www.classmateacademy.com 174 ASER report : Enrolment in government schools in rural areas, from 72.9 per cent in 2007 to 63.1 per cent in 2014. private schools which have registered an increase in enrolment from 20.2 per cent in 2007 to 30.7 per cent in 2014.

Class –V students who can read class 2 book

In Government schools, the decline is from 56.7 % in 2007 to 42.2 % in 2014. children who can do division in standard V has declined from 41 %in 2007 to 20.7 % in 2014 in rural areas.

Padhe Bharath Bade Bharath : focuses on early reading, writing and comprehension and early grade mathematics.

Deendayal Upadhyaya grameen Koushalya Yojana(Ddu-GKY) : Training and career development . It aims to target youth, under the age group of 15–35 years. A corpus of Rs 1,500 crore and is aimed at enhancing the employability of rural youth. www.classmateacademy.com 175 Nai Manzil : Education and skill development of dropouts without a formal school- leaving certificate to obtain one and find better employment.

Pandit Madan Mohan Malaviya Mission for Teachers Training: Dec 25

Udaan The number of girls joining the IITs is really low when compared to the total enrollment in technical education. Merely 10-12 per cent of girls are able to clear the entrance to these premier technical education institutions.

Saransh : On-line facility by CBSE Board has launched ‘It helps the schools to look at their performance at an aggregate level and at the level of each student.

E-pathshala : Students, parents and teachers can access study material online.

www.classmateacademy.com 176 Shaladarpan : which was launched earlier in Kendriya Vidyalayas, in which parents will be kept informed about the child's presence, mark-sheets and time table etc. Shala Siddhi same as above now to all schools.

Nai Roshini : Leadership training programme for minority women.

MANAS (Maulana Azad National Academy for Skills) Upgrading entrepreneurial skill of minority youth for sled employment

www.classmateacademy.com 177 Health : Spending on Health 1.3% of GDP.

National Health Mission (NHM) Encompasses its two sub-missions, the National Rural Health Mission (NRHM) and the newly launched National Urban Health Mission (NUHM).

National Rural Health Mission: A scheme that operates through out the country with speicial focus on 18 states which include 8 Empowered action group of states(Bihar,Jh,MP,Ch,UP,Orissa& Raj).

Accredited Social Health Activists (ASHAs) is the first port of call in the community especially for marginalized sections of the population, with a focus on women and children. 9.15 lakh ASHAs and link workers have been selected in entire country, out of which 8.42 lakh have been given the orientation training and engaged Further, 8.82 lakh ASHAs have been provided with drug kit.

Pradhan Mantri Swasthaya Suraksha Yojana : To reduce the regional imbalances in the availability of affordable and reliable tertiary health care services. Setting up of 6 AIIMS like institutions .Upgrading 13 existing government medical college institutions. www.classmateacademy.com 178 www.classmateacademy.com 179 Mission Indradhanush (25 dec): To cover all the children who are either unvaccinated or are partially vaccinated against 7 preventable diseases Diphtheria,Whooping Cough,Tetanus,Polio,Tuberclosis,Measles, Hepatitis B by 2020. Japanese Encephalitis (JE), rotavac [2] and Haemophilus influenzae type B (HIB) are also being provided in selected states. 7 April 2015-World Health Day- in 201 high focus districts ,Immunization –From 65% to 90%.

India declared itself free yaws

Maternal and Neonatal Tetanus Eliminated (MNTE)

The Rashtriya Bal Swasthya Karyakram (RBSK) has been launched to provide child health screening and early interventions services by expanding the reach of mobile health teams at block level. These teams will also carry out screening of all the children in the age group 0-6 years enrolled at Anganwadi Centres at least twice a year.

The Rashtriya Kishor Swasthya Karyakram (RKSK) was launched in January 2014 with an overarching aim to address sexual and reproductive health, nutrition, injuries and violence (including gender based violence), prevention of non-communicable diseases, mental health and substance misuse related concerns of 253 million adolescents of our country . www.classmateacademy.com 180 Financial System in India Financial System------Money Market +Capital Market

Money market: Short term ,up to 1 year Capital market : more than 1 year.

Money market Instruments: • Call Money market • Treasury Bill market • Commercial Bill market • Certificate of Deposit • Commercial Paper Market

Treasury Bill markets:treasury bills are issued with three maturities – 91 days, 182 days and 364 days.

www.classmateacademy.com 181 Capital Market : Internal + External

Internal Source: Shares + Debentures+ Reinvestment of Profit

External Sources: Banks + Financial Institutions.

Shares: they are associated with a company, all shares have equal value hence called as equity shares. Ordinary : They are normal shares. Preference : They have some preference over ordinary shares. Eg fixed dividend ,company (usually no voting rights )is winded up .

Debenture: It is an instrument used by companies to get a loan.

Convertible: Convertible to share on maturity. Non- Convertible: Principle is paid on maturity.

Buy back of shares: Usually done by promoters. Splitting of shares :Conversion of shares in to more shares of less denomination.

IPO: Initial Public Offer. FPO: Forward Public offer.

www.classmateacademy.com 182 BSE: Bombay stock exchange ,oldest stock exchange in India ,1875

NSE: Established on recommendation of Pherwani Committee ,started in 1994

Depository system : In this system there is no physical transfer of securities change in ownership is done through electronic ledger entry transfer.

Demutualization :Transforming the legal structure of an exchange from a mutual form(non-profit organisations) to a business corporation form is referred to as demutualisation.

MCX-SX: Third Stock exchange of the country. United Stock Exchange of India : The Fourth stock exchange at the national level. BSE-30,BSE-50,NSE-50,NSE-500.

Bull: These are he investors who buy at low prices and after some time sell at higher prices. Bear: These are the investor who first sell at higher price and after some time purchase at lower prices.

Gilt Edged Security: Government www.classmateacademy.comsecurity. 183 Merchant Bank : These are not Banks ,they are financial intermediaries which provide various financial services like management of the new issue , arrangement of loans financial advice etc.

Seed Capital: Seed Capital refers to the cash you need to get your business started, The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own , or until it is ready for further investments.

Angel Investor : Is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity

Venture Capital Fund: For new or specialised areas funding is provided.

Crowdfunding : It is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet

www.classmateacademy.com 184 www.classmateacademy.com 185 Futures : Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price.

Forwards : A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation

Forward Market Commission(FMC):It is the agency to regulate commodity futures in India. Commodity Futures market in India :

MCX : Multi Commodity Exchange ,Mumbai.

NCDEX : National Commodity and Derivatives Exchange ,Mumbai.

www.classmateacademy.com 186 NPS: New Pension Scheme,2004 The NPS was made mandatory for central government employees from Apr 1 ,2004 SEBI: Established in 1992,as a regulator of capital market.

It the autonomous regulatory authority of the capital market with wide spread powers .

Insider Trading : Getting information about the company which is other wise not available in all.

www.classmateacademy.com 187 Monetary Sector : Money and Inflation. Money :It’s a medium of exchange. Its legal tender . Inflation : is a sustained increase in the general price level of goods and services in an economy over a period of time. Deflation : A reduction in the level of national income and output usually accompanied by reduction in price level. Stagflation :Is a term used in economics to describe a situation where the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.

Measurement of Inflation : In India we use different indices for different purposes. WPI(2004-05)-Base 100(676 commodities): • Primary articles(20.11%),Fuel & Power(14.91%),Manufactured goods(64.97%) Food articles(24.27%)

• CPI-AL : It is used for revision of minimum wages of agricultural workers. • CPI-RL : • CPI-IW: It is used for wage revision of industrial workers. • CPI-UNME: It is used by services sector like revision of DA by government.

www.classmateacademy.com 188 CPI-UNME: is published by CSO ,rest by Ministry of labour.

Headline Inflation vs Core Inflation : Head line inflation rate is about total inflation in the economy while core inflation excludes food and energy prices.

New CPI series : 2011 CPI(Urban),CPI(Rural),CPI(Combined)(Base 2010-100) 310-Towns,1181-Villages.

Reasons for inflation : • Demand Pull • Cost Push

Effects: • Supply side • Demand side • Savings • Imports/Exports

www.classmateacademy.com 189 RBI-Reserve Bank Of India Functions:

Normal Central Bank Functions:

• Issue of currency notes: Section 22 of 1934 act only RBI can do this.

• Banker to the Government : Except J&K,Centre and state ,keep cash balaces,exchange remittances etc

• Banker’s Bank & Lender of Last Resort

• Controller of Credit

• Regulation of Foreign Exchange:

• Collection and Publication of Data

www.classmateacademy.com 190 Scheduled Bank : Which are entered in the Second Schedule of RBI,Act 1934 ,they have a Paid up Capital and reserves of not less than 5 Lakhs .

www.classmateacademy.com 191 Instruments of credit Control:

There are Two Instruments Quantitative and Qualitative Instruments.

Quantitative Instruments :

Bank Rate : The rate at which RBI lends loans to the banks.

CRR : The ratio of demand and term deposits with the banks that they have to keep with the RBI.

SLR : The ratio of demand and term deposit with the banks that they have to keep in liquid form i.e cash , gold and permitted securities

OMO: Sale and Purchase of securities by the RBI is termed as open market operations

Qualitative Credit Controls : • Minimum Margins for lending against specific securities. • Ceiling on amount of credit for certain purposes . • Discriminatory rate of Interest on certain types of advances .

www.classmateacademy.com 192 Monetary Policy :The tool of macroeconomic policy which involves the regulation of money supply, credit and interest rates in order to control the level of spending in the economy.

Objectives : Financial stability, adequate flow of credit, Inflation and unemployment, High Economic growth.

Instruments of Monetary Policy : The direct instruments include cash reserve ratio (CRR), liquidity reserve ratios, directed credit and administered interest rates.

Indirect Instruments : Instruments consist of the repos (repurchase agreements), Open Market Operations (OMOs), refinance facility, and the discount window of RBI.

• OMO is resorted to when the central bank attempts to change the liquidity condition for a longer term.

www.classmateacademy.com 193 Repo Rate : It is the rate at which RBI provides short term loan to the banks. Reverse Repo Rate: It is the rate at which the banks park their funds with RBI for short term.

Liquidity Adjustment Facility (2000): For 1-day and 3-days on friday

Narasimham Committee of 1991 for improving the financial health of Bank. SLR (From 38.5 to 25% ),CRR (From 15% to 3-5%)

Narasimham Committee on Banking Sector Reforms (1998), move from direct methods to Indirect methods for credit control.

www.classmateacademy.com 194 Before,1990 s : Monetary policy lacked depth and Liquidity • SLR requirement (38.5 in the early 1990’s), CRR was gradually to 15 per cent in the early 1990’s. more emphasis on direct instruments . From 1990’s, • OMO introduced in 1992, • LAF ,2000 for repo and reverse repo transactions • SLR,CRR reduced • Bank rate introduced in 1997 • Interest rate de-regulation : PLR : Prime Lending Rate • It is the rate applicable to more credit worthy borrower (safest loan). • If lending is less than PLR it is called Sub-PLR.

Base Rate : It is the minimum rate of lending of the bank.

MCLR : Marginal Cost Of Lending rate ,from April 2016. The MCLR should be revised monthly by considering some new factors including the repo rate and other borrowing rates. Specifically the repo rate and other borrowing rates that were not explicitly considered under the base rate system,facilitates monetary transmission

www.classmateacademy.com 195 • From April,2014 the RBI had announced its intent to anchor its monetary policy To headline CPI (combined ) .

• RBI signed an agreement with central government called Monetary policy framework convention on 20 Feb,2015 that puts responsibility on RBI to target maximum tolerable inflation CPI to achieve price stability.

MPC : Monetary Policy Committee of 6 members,3 by govt,3 from RBI Chetan Ghate(ISI), Pami Dua,(DSE) and Ravindra Dholakia,( IIM-A). The Interest rate now to be decided by MPC not RBI governor.

www.classmateacademy.com 196 BASEL : 1974 under the auspices of the Bank for International Settlements (BIS), called the Basel Committee on Banking Supervision was formed

BASEL -3:To be Introduced in India by 31st March 2019.

Basel1 : 1988 Basel 2: 2004 Basel 3: 2010

CAR/CRAR: Capital Adequacy ratio,Ratio of capital and Risk assets.

Capital adequacy ratio that banks must maintain is 8%.

Minimum capital adequacy ratio (including the capital conservation buffer) is 10.5%.

www.classmateacademy.com 197 Banks Board Bureau (BBB) :The Banks Board Bureau has been formed to advise the government on top-level appointments at public sector lenders, will held its first meeting on April 8 this year.

Mission 'Indradhanush‘ :The seven elements include Appointments, Board of bureau, Capitalisation, De-stressing, Empowerment, Framework of accountability and Governance reforms.

www.classmateacademy.com 198 Private Banks in India :

Universal Banks

1994 : Axis Bank(earlier UTI) HDFC Bank IndusInd Bank

1996 ICICI Bank

2003 Kotak Mahindra Bank Yes Bank

UNIVERSAL BANKS(2015) Mumbai - IDFC Kolkata - Bandhan

www.classmateacademy.com 199 Small finance bank :

• Total of 10 banks have been given license .

• The firms must have a capital of ₹100 crore. Existing non- banking financial companies (NBFC), micro-finance institutions (MFI) and local area banks (LAB) are allowed to set up small finance banks.

• The promoters should have 10 years experience in banking and finance. The promoters stake in the paid-up equity capital will be 40% initially which must be brought down to 26% in 12 years.

• 75% of its net credits should be in priority sector lending and 50% of the loans in its portfolio must in 25 lakh range.[2]

www.classmateacademy.com 200 Payment Banks :

Permission to 11 entities,

What they can do

• They can’t offer loans but can raise deposits of upto Rs. 1 lakh, and pay interest on these balances just like a savings bank account does. They cannot lend. • They can issue debit cards and ATM cards usable on ATM networks of all banks.

• They can enable transfers and remittances through a mobile phone.- They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone

• Provide forex cards to travellers, usable again as a debit or ATM card all over India,They can offer forex services at charges lower than

bank www.classmateacademy.com 201 Advantages :

• The Reserve Bank expects payment banks to target India’s migrant labourers, low-income households and small businesses, offering savings accounts and remittance services with a low transaction cost.

• It could be uneconomical for traditional banks to open branches in every village but the mobile phones coverage is a promising low-cost platform for quickly taking basic banking services to every rural citizen.

• Controlling black money .Create market for Government Securities and reduce burden on commercial banks to meet SLR requirement

• Tech Mahindra, • CholamandalamBSE Murugappa Group and • Dilip Shantilal Shanghvi of Sun Pharmaceuticals have abandoned their plans to set up

www.classmateacademy.com 202 www.classmateacademy.com 203 Fiscal Sector: Taxes, Centre-state, Budget

Progressive Taxation : The tax system in which tax rates increase with increase in tax base i.e income tax in India.

Regressive Taxation: The tax system in which tax rates decrease with in crease in tax base .

Proportional Tax system : The tax system in which there is no change with change in tax base , eg .corporate tax, customs duties, central excise .

Direct Tax : The tax in which the impact and incidence of tax is one the same entity; i.e income tax, corporate tax. In case of direct tax the burden of tax cannot be shifted.

Indirect Tax : The tax in which the impact and incidence of tax is on different entities. i.e service tax ,custom duties etc.

Ad valorem Tax : If the tax is levied on the basis of value of the product or service in percentage terms.

www.classmateacademy.com 204 Countervailing Duty : The duty imposed on imported goods equivalent to the domestic taxes on domestic products.

Dumping Duty :This duty is imposed on imported goods if the exporting country is exporting the products on the price which is less than the domestic price of the product.

Securities Transaction Tax (STT):The tax imposed on transaction of securities in capital market in India since 2004-2005.it varies from 0.017% -0.125%

Tobin Tax :The tax Imposed on International Transactions of Currencies.

Commodity Transaction Tax : It is just like STT but is imposed on commodities in the futures market.

Service tax : This tax was first imposed in India in 1994-95,on three services,at the rate of 5 %.But now a negative list of 17 services exits in India,since 2013

MAT: This tax is levied from those companies which are zero tax companies because of various rebates and exemptions.

www.classmateacademy.com 205 Centre –State : Financial Relations

Federal Structure ----Division of powers between Centre and states

Unitary Bias----more powers to centre.

Centre ------> State(gives money to states).

• Share in taxes –decided by finance Commission.(Art-280).

• Grants-in-Aid(one part reco –F.C +Discretionary Grants).

• Loans (Planning Commission ).

www.classmateacademy.com 206 Finance Commission

• Article 280-Finance Commission • Chairman +four members • Chairman, Judge, Person having knowledge and experience in finance, accounts and economics.

Functions

• Distribution of net proceeds of tax between centre and state.

• Principles that should govern grant-in-aids to the state by the centre

• Measures needed to augment the Consolidated fun of state to supplement the resources of Municipalities

• Any other matter referred to it by the president. www.classmateacademy.com 207 Finance Commission : K.C.Neogi(First), Vijay Kelkar (13 Finance Commission.) Y V Reddy (14 Finance Commission.)

Recommendations :

• Share of States to be 42% of the divisible pool . • As service tax is not levied in the State of Jammu & Kashmir, proceeds cannot be assigned to this State.

Grant –in-Aid states

• To strengthen Panchayats & Municipalities . • A basic grant, and a performance one for gram panchayats and municipal bodies • To account revenue deficit. • Removed BRGF

www.classmateacademy.com 208 Division of Taxes:

Taxes Right to Right to Right to Impose Collect Use Income Tax, Corporate Tax, Service Tax, Central excise Centre Centre Centre and states

Sales Tax, State Excise Tax , Entertainment Tax ,Land States States States revenue, Tax on agricultural Income Estate duty on all except agricultural land, tax on rail Centre Centre States fare and freight ,terminal tax on rail, sea and air travel and transport ,tax on sale of news papers and advertisements Stamp duty, Excise Duty on medicines and cosmetics Centre States States

www.classmateacademy.com 209 FFC : Share of states from divisible pool to 42 %

• Devolution to States by 55% as a result of the 14th Finance Commission award. • 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission

www.classmateacademy.com 210 Fiscal capacity/Income distance :The income distance criterion was first used by Twelfth FC, measured by per capita GSDP as a proxy for the distance between states in tax capacity. When so proxied, the procedure implicitly applies a single average tax-to GSDP ratio to determine fiscal capacity distance between states.

Fiscal discipline as a criterion for tax devolution was used by Eleventh and Twelfth FC to provide an incentive to states managing their finances prudently

www.classmateacademy.com 211 VAT: In this tax system, tax is imposed on every stage of production or sale of goods and services on the basis of value addition in each stage.

1981, Manufactured VAT L.N Jha Committee led to introduction of 1986,Mod VAT 2000, CENVAT

Goods Services Centre CENVAT Service Tax State VAT/ST -

• Vijay Kelkar Committee,2002 :Recommended the implementation of VAT at state level also. • Haryana(First state ,2003)…UP was the last state now all states follow this system. • GST proposal since 2006 .

www.classmateacademy.com 212 GST : Goods & Services Tax .

• 122 Amendment Bill ,GST. The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016. • The GST is actually a tax on final consumption

• On 12 August 2016, Assam became the first state to ratify the bill.

• The GST shall have two components: one levied by the Center (Central GST), and the other levied by the States (State GST)

• GST council: Will oversee the GST regime, Headed by Union Finance Minister and with representatives from all States.

• Every decision of the GST council needs to be taken with a three-fourth majority: the States have two-thirds voting power and the Centre has one-third. It is to be hoped that this accommodative spirit of cooperative federalism prevails.

• The threshold turnover for a business to be covered by the GST, Rs.20 lakh,

• Expected ,Merit rates (12 per cent), standard rates (18 per cent) and de-merit rates (40 per cent). Certain goods will be exemption.

www.classmateacademy.com 213 Service tax In India: Started by Union Government in 1994-95,Telephone,General Insurance & Stock Broking. Now a Negative list of 17 Commodities Exist . 92 Amendment act ,Service tax may be levied by Centre but Collected and appropriated by Centre and State.

Contribution from Different Taxes: • Corporation Tax • Income Tax • Union Excise tax • Customs Tax • Service Tax

DTC,1961 to be changed

www.classmateacademy.com 214 Fiscal Sector :

Union Budget

Revenue Expenditure

Revenue Capital Plan Non-Planned Account Account Expenditure Expenditure

Tax Non Tax Revenue Capital

Fiscal & Dividend Interest Tax on Tax on Tax on other and profits receipts income property services services

www.classmateacademy.com 215 Budget : It is always an estimate of Receipts & Expenditure.

Receipts:

Revenue receipts • Tax revenue • Non-tax revenue(Interest,dividend,fines )

Capital receipts • Repayment of loans • Other receipts • Loans and Other Liabilities

• Revenue: Income which is to be received in the present year.

• Capital : Income which will be received in the Future(more than a year) or spent as part of repayment of previous obligation.

www.classmateacademy.com 216 Expenditure:

Planned • Expenditure in the budget on the recommendation of PC.

Non-Planned • Interest Payment • Subsidies • Defence • Public Administration

Expenditure on Revenue Account :

Those consumed in the present year. e.g : maintenance of canal , Rent of buildings, Salaries of Government Officials etc.

Expenditure on Capital Account :

Those that create Capital assets. E.G : Constructing canals , new buildings etc. www.classmateacademy.com 217 Revenue Deficit: Excess of revenue expenditure over revenue receipts .

Revenue receipts = Tax revenue +non-tax revenue. Revenue expenditure=Plan+ Non-Plan.

Budget Deficit :It is the excess of total expenditure over total receipts.

Total expenditure = Revenue expenditure+ capital expenditure. Total revenue = Revenue receipts + Capital receipts .

Fiscal Deficit : Total expenditure –Total receipts (but the receipt component does not include borrowings and other liabilities).

Primary Deficit: The fiscal deficit minus interest payments. What it tells us is the extent to which the Government’s borrowings are used to service old loans.

Deficit Financing : It is the difference between expenditure and receipts .

www.classmateacademy.com 218 Financial Sector Legislative Reforms Commission (FSLRC)

Public Debt Management Agency (PDMA)

www.classmateacademy.com 219 Budget :

• Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.

• Revenue Deficit target from 2.8% to 2.5% in RE 2015-16.

www.classmateacademy.com 220 Fiscal Policy : It is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.

Fiscal Stimulus: An increase in Public Spending or a reduction in the level of taxation that might be performed by a government in order to encourage and support economic growth. Most government bail out package form part of fiscal stimulus.

Laffer Curve :

Chelliah Committee : Related to Direct tax reforms ,1991

www.classmateacademy.com 221 Fiscal cost of subsidies : Rs 3,78.000 L cr ,4.2 % of GDP

FRBM,Act : Fiscal Responsibility and Budget Management act,2003 Initial targets : • Revenue deficit -0 % • Fiscal deficit -3% by 2008-09

• Due to recession now targets changed to 2016-17 on the recommendation of Rangarajan Committee.

• As per Finance Act 2015, the target dates for achieving the prescribed rates of effective deficit and fiscal deficit (3% fiscal deficit) were further extended by 3 years to March 2018. • A five-member committee under former revenue secretary N K Singh to review the working of the 12-year old FRBM Act and examine the feasibility of a fiscal deficit range instead of a fixed target.

www.classmateacademy.com 222 Main Features of FRBM act , 1. The Act mandates the central government to take appropriate measures to reduce fiscal deficit to not more than 3 percent of GDP and to eliminate the revenue deficit by March 31, 2009 and thereafter build up adequate revenue surplus. 2. It requires the reduction in fiscal deficit by 0.3 per cent of GDP each year and the revenue deficit by 0.5 per cent. If this is not achieved through tax revenues, the necessary adjustment has to come from a reduction in expenditure. 3. The actual deficits may exceed the targets specified only on grounds of national security or natural calamity or such other exceptional grounds as the central government may specify. 4. The central government shall not borrow from the Reserve Bank of India except by way of advances to meet temporary excess of cash disbursements over cash receipts. 5. The Reserve Bank of India must not subscribe to the primary issues of central government securities from the year 2006-07. 6. Measures to be taken to ensure greater transparency in fiscal operations. 7. The central government to lay before both Houses of Parliament three statements – Medium-term Fiscal Policy Statement, The Fiscal Policy Strategy Statement, The Macroeconomic Frame work.

www.classmateacademy.com 223 www.classmateacademy.com 224 Foreign Sector: After Independence : The immediate policy was based on import restrictions.

Quantitative Restrictions (QRs): • Negative list –NO Import is allowed. • Canalised –Import only of essential items but through specified agencies. • OGL- Open general license .

Tariff barrier: High rates if Import.

Non-Tariff barrier: Restrictions of import on the ground of Technology level, human health ,environment etc. e.g: No car of less than E-IV standards is allowed ,Banning certain chemicals in Food.

During 1970’s SE Asian countries proved that aggressive policies can be used to increase the exports.

In 1980s we started export Promotion policy . 1985 : First Export –Import Policy (EXIM Policy started ) ,3 years

www.classmateacademy.com 225 1992: First five year EXIM policy which was co-terminus with Five Year Plan.

Due the reforms of 1991,

Imports : Procedures for imports were simplified, QRs removed, Tariff rates reduced now stand at 10% for most of the goods.

Exports : More Emphasis and new schemes to increase the exports from India. e.g EPCG: Export Promotion of Capital goods Scheme.

SEZ,Act 2005 : Started in India ,Asia First EPZ-Kandla,1965. AEZ: Agriculture Export Zones, Nodal Agency –APEDA (Min Of Commerce) AEZ-Chillies-Guntur AEZ-Mangoes-Vijayawada AEZ-Hyderabad-Grapes,Mangoes

www.classmateacademy.com 226 Exim Policy 2002 -2007 , • Focus Africa . • Reviving relations with CIS Countries.

FTP-2004 Introduction of many schemes: • Focus Market Scheme(FMS) • Focus Product Scheme(FPS) • Vishesh Krishi Upaj Yojana (VKUY) • Served From India (SIF)

FTP-2009 : FPS,FMS,MLFPS,VKGUY,AIIS(Agri Infrastructure Incentive scheme) Other Policies : Look East Policy: To diversify the direction of our trade, Today the trade with Asia is 50-55 % of our Total Trade.

Free Trade Area(FTA) : It is an agreement between two countries or a group of countries for concessional Import duty rates.(Only Goods)

Comprehensive Economic Cooperation Agreement (CECA/CEPA) :This includes not only goods but also services, investments, recognition of degrees etc.

www.classmateacademy.com 227 Negative List : The duty concessions will not be available on the goods included in the negative list .

The whole negotiation is about negative list .

Rule of Origin(ROO) :It should be originated from the country .If at least 35 % of value addition is in the region.

Positive List : Concession will be available only to the items in this list . E.g SAFTA.(2006).

Composition of Trade- Imports Exports • POL 1.Engineering Goods • Capital Goods 2.POL • Electronic Goods 3.Gems & Jewellery • Gold & Silver 4. Agriculture and allied • Chemicals 5.Textiles • Pearls & Stones 6.Chemicals

www.classmateacademy.com 228 Trade :

World level % Exports Imports 2004 0.8% 1.0% 2012 1.7% 2.5 %

Exports : Region 2004 2013 Europe 23.6% 18.6% NA 20.1 17.2 Asia 47.9 49.4 Africa 6.7 9.9

www.classmateacademy.com 229 Survey :2014

Imports % of Total China 11.2 UAE 7.6 SA 6.8 USA 5.1

Exports % Total UAE 11.7 USA 11.6 China 5.3 Singapore 4.5

www.classmateacademy.com 230 Balance of Payments: BOP

Bop is an account of transactions between a country and rest of the world.

Part 1 Accounts –Current Account : • Imports-Imports of goods (services not included) • Exports Balance of Trade =Export-Import • Invisibles(Net): Services, remittances . • Current Account Balance : BoT+ Invisibles.

Part 2 –Capital Account : • Capital Account (Net): Investment (Net)-FDI,FII Loan(Net)-ECB etc. Banking-NRI deposit etc.

Over all BOP: Current + Capital . This should be positive. Increase in BOP ,so this surplus is shifted to forex reserves.

www.classmateacademy.com 231 Country Reserves in Billion dollars 1 China 3840 2 Japan 1312 3 Switzerland 526.6 4 Russia Federation 388.5 5 Brazil 363.6 6 Korea, Republic of 363.2 7 China, Hongkong 344.6 8 India 320.6 9 Germany 192.7 10 Thailand 163.7

Foreign exchange reserves touched highest ever level of about 350 billion US dollars.(Budget )

www.classmateacademy.com 232 Convertibility Of Rupee :

Convertibility: Permission to convert domestic currency into foreign currency and foreign currency into domestic currency.

Rupee made Convertible on Trade Account in 1993-93 Rupee made Convertible on Current Account in 1994-95

For Capital Account Convertibility , a committee was established in 1997, called Tarapore Committee Again in 2006 Same committee was appointed .

Present Status :

Rupee remain Partially convertible in Capital Account.

FDI,FII,ECB there are limits that are specified to each sector with in the limits they are convertible outside the limits they are not .

www.classmateacademy.com 233 CAG(Art 148-151)

• BR Ambedkar said it will the most important organisation in under the Constitution it will be the guardian of Public Purse.

• Lord Canning had initiated a major administrative reorganization. This led to the setting up of, for the first time, in May 1858, a separate department with an Accountant General at the helm.

• The budgeting system laid the foundation stone of Imperial Audit.

• Sir Edward Drummond took charge in November 1860 as the first Auditor General.

• The term Comptroller and Auditor General of India was first used in 1884.

• The Montford Reforms of 1919, the Auditor General became independent of the Government.

• The Government of India Act 1935 strengthened the position of the Auditor General by providing for Provincial Auditors General in a federal set-up. • the last British Auditor General Sir Bertie Monro Staig

www.classmateacademy.com 234 Article 148 :

There shall be a Comptroller and Auditor-General of India who shall be appointed by the President

Article 149 :

The Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament and CAG(Duties, Powers , and conditions of service)act,1971

Article 151 :

The reports of the Comptroller and Auditor-General of India relating to the accounts of the Union shall be submitted to the president, who shall cause them to be laid before each House of Parliament.

The reports of the Comptroller and Auditor-General of India relating to the accounts of a State shall be submitted to the Governor of the State, who shall cause them to be laid before the Legislature of the State. www.classmateacademy.com 235 Independence :

• Process of removal similar to SC judge • Not eligible for further service conditions under GOI. • Privileges cannot be reduced during his term. • Salary and other service conditions are determined by the parliament and equal to that of Judge of SC.

Duty of CAG:

His main role is to audit the income and expenditure of the Governments, Government bodies and State-run corporations.

www.classmateacademy.com 236 Absolute advantage : The capability to produce more of a given product using less of a given resource than a competing entity.

Adam Smith : Wealth of Nations

Out -Put Per Day Of Work :

Food Clothing

Country A 6 3

Country B 1 2

www.classmateacademy.com 237 Comparative advantage : The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

David Ricardo : Out -Put Per Day Of Work: Food Clothing Country A 6 3 Country B 1 2

Out-Put after 6 Days : Food Clothing Country A 18 9 Country B 3 6

Food Clothing Country A 36 0 Country B 12 www.classmateacademy.com 238 WORLD TRADE ORGANISATION

GATT- General agreement on tariffs and trade

MFN –Most favored nation

URUGUAY round of negotiations ---1986-1994

Arthur Dunkel came up with a draft which led to establishment of WTO on 1st Jan 1995

RUSSIA and VANAUTU(2012) Tajikistan(2013),Yemen(2015),Seychelles(2015)(Total -161)

Roberto Azevedo—present Director General

www.classmateacademy.com 239 Agreements under WTO

ATC-Agreement on Textiles and Clothing

TRIPS-Trade related intellectual property rights

2001 Doha round of talks: • AOA-Agreement on Agriculture • NAMA- Non Agriculture Market Access • GATS-General agreement on trade and services

• Uruguay Round : maximum support to agriculture is 10 %

• G-33 proposed a change to this

www.classmateacademy.com 240 WORLD BANK • International bank for reconstruction and development – IBRD, 1944 Also known as WORLD BANK

• International Finance Corporation –IFC, 1956

• International Development Association-IDA, 1960

• International Centre for Settlement of Investment Disputes-ICSID, 1966

• Multilateral Investment Guarantee Agency-MIGA, 1988

• WDR

www.classmateacademy.com 241 • International Monetary Fund, 1944

• SDR-Special Drawing Rights: Official currency of IMF • The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold— which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, the SDR was redefined as a basket of currencies. Currently, • the Chinese Renminbi (RMB) as the fifth currency, effective October 1, 2016 • Voting % USA – 16.75 INDIA- 2.34 CHINA- 3.81

• WEO

Shareholding of 2.75%. India is the eighth largest member of IMF

www.classmateacademy.com 242