VisionIAS Quick Revision Material December 2024 Economics

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Table of Content
National Income Accounting �� 4
Monetary Policy �� 20
Banking �� 32
Inflation �� 39
Employment and Unemployment �� 47
Union Budget �� 53
Taxation �� 65
External Sector Part 1 �� 79
External Sector Part 2 �� 84
Money Market and Capital Market �� 93
Poverty and Inequality �� 103
India and International Institution �� 113
THE WTO �� 124
Industry Part 1 �� 139
Industry Part 2 �� 158
Planning in India �� 168
Agriculture �� 174
Food Processing Industry �� 194
Infrastructure Part 1 �� 210
Infrastructure Part 2 �� 215
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QUICK REVISION MODULE
National Income Accounting
(UPSC PRELIMS 2024) ECONOMICS QRM
NATIONAL INCOME
ACCOUNTING
National Income Accounting is used to measure the economic
activity in the national economy as a whole. Some of the metrics
used for this purpose are: Gross Domestic Product (GDP), Net
Domestic Product (NDP), Gross National Product (GNP), Net
National Product (NNP), Gross National Income (GNI), and Net
National Income (NNI).
4
CIRCULAR FLOW OF ECONOMY IN AN OPEN ECONOMY
WITH GOVERNMENT AND FOREIGN SECTOR:
SAVING SAVING
FINANICAL
HOUSEHOLDS MARKET FIRMS
BORROWINGS
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SOME BASIC CONCEPTS
GDP GNP
It measures the value of final goods It is a measure of the value of output

and services produced within a produced by the
geographic boundary regardless nationals of a country irrespective of
of the nationality of the individual or the geographical boundaries.
firm. GNP = GDP + Net Factor Income
For instance, cars manufactured in from Abroad.
India by Japanese company will be In India’s case, GNP is lower than its
included in Indian GDP. GDP as net income from abroad has
always been negative in India.
NDP NNP
It is the GDP calculated after adjust- It is the GNP calculated after adjust-
ing the value of ‘depreciation’. ing the value of ‘depreciation’.
NDP = GDP – Depreciation. NNP = GNP - Depreciation
Note:
NNP is always lesser than GNP
(Reason: the Depreciation can never
be reduced to zero and will always
be positive.)
FACTOR COST (FC) MARKET PRICE (MP)
It refers to cost of all factors of It refers to the actual transacted

production used or consumed in price of goods and services.
producing goods and services.
In other words, Factor Cost (FC) =
Market Price – Net Indirect Taxes
Where, Net Indirect Taxes (NIT) =
Indirect Taxes – Subsidies
Therefore, Factor Cost = Market

Price - Indirect Taxes + Subsidies.
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Transfer Payments National Income (NI)
It refers to payments made by the It is a measure of the sum of all

government to individuals for which factor incomes earned by the citizens
there is no economic activity of a country (whether within the
produced in return by these country or abroad)
individuals. E.g. old age pensions,
scholarships etc. National Income at Factor Cost =
NNP at Market Price – Indirect Taxes
+ Subsidies.
Disposable Personal
Personal Income (PI)
Income (DPI)
It includes all income (including It refers to the amount, which in
transfer payments) which is received actual is at the disposal
by all the individuals in a year. Thus, of individuals to spend as they like
Personal income is: DPI = PI - Personal Taxes.
PI = NI + transfer payments - DPI = Consumption + Savings.
Corporate retained earnings,
income taxes, social security
taxes.
Where NI is National Income.
Real GDP Nominal GDP
It refers to the current year It refers to current year produc-

production of goods and services tion of final goods and services
valued at base year prices. Such valued at current year prices.
base year prices are constant
prices.
It is a much better way to
calculate the GDP because in a
particular year GDP may be
bloated up because of high rate
of inflation in the economy.
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COMPONENTS OF NATIONAL INCOME
Personal Consumption + Personal saving

or
Disposable Personal Income (PDI)
+ Direct personal tax

+ Misc fees and fines paid by household/Misc
Receipt of the Govt.
Personal Income
+ Corporate profit tax

+ Undistribted corporate profit
Private Income
- Net Factor Income from Abroad (NFIA)
- Interest on National debt
- Current transfers from Govt.
- Rest of the World (Net)
Domestic Factor Inncome Accruing to Private Sector
+ Income from property and entrepreneurship accuring

to govt. administrative department
+ Saving of non department enterprises
Domestic Income
+ NFIA
National Income
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MEASUREMENT OF NATIONAL INCOME IN INDIA BY
NATIONAL STATISTICAL OFFICE (NSO)
Value Added Method

Income Method Expenditure Method
(or Product Method)
VALUE ADDED METHOD

Under this method, GDP is calculated at market prices, which is the total value of outputs
produced at different stages of production. It focuses on supply side of the product.
Goods and services included Goods and services not included

in production in production
• Goods and services sold in the market. • Purchase and sale of Second hand items.
• Goods and services not sold but

• Production due to illegal activities.
supplied free of cost.
• Services provided by the agents. • Non-economic goods such as air and water.
• Transfer Payments such as scholarships,

pensions, etc.
NOTE: Only final Goods and not Intermediate Goods are taken for calculation to avoid
Double Counting.
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INCOME METHOD
This approach focuses on aggregating the payments made by firms to households, called
factor payments. It focuses on the demand side of the product.
Factors of production Types of factor incomes
Land Rent
Labour Wages
Capital Interest
Entrepreneurship Profit
GDP = Wages+ Interest + Rent +Profit + Dividend + Indirect Taxes-Subsidies+

Depreciation.
EXPENDITURE METHOD
The expenditure method measures the final expenditure on GDP. It is the total spending on
currently-produced final goods and services in an economy.
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This final expenditure is made up of the sum of 4 expenditure items,
namely:
Gross Domestic Product (GDP) = C + I + G + (X-IM)
Consumption It is the personal consumption made by households.

Expenditure (C) Payment of which is paid by households directly to the firms.
Investment Investment is an addition to capital stock of an economy in a given

time period. It includes investments by firms as well as governments
Expenditure (I)
sectors.
Government It includes the value of goods and service purchased by Government.

Expenditure (G)
NOTE: Government expenditure on pension schemes, scholarships, unemployment

allowances, etc. are not included as they come under transfer payments.
Expenditure on foreign made products (Imports) is expenditure that

Imports (IM) escapes the system.
Exports (X) It is the expenditure by other economies on our production (Exports).
Gross value added

Base Year GDP Deflator
(GVA)
Base year is the year used as It is the ratio of GDP at It is defined as the value of
the beginning or the current prices to GDP at output less the value of
reference year for constant prices. GDP intermediate consumption.
constructing an index. deflator is published on a
quarterly basis since 1996
with a lag of two months.
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It is usually assigned an GDP deflator = (Nominal The GVA at basic prices will
arbitrary value of 100. GDP/Real GDP) * 100 include production taxes and
exclude production subsidies
available on the commodity.
To make the calculation of It is a tool to measure the
GVA at basic prices =
GNP/GDP easier, inflation comprehensively.
GVA + production taxes
economists use a price index Unlike the WPI and the CPI,
less production subsidies
to find the real GNP/GDP. A GDP deflator is not based on
On the other hand, GVA at
Price index is a number a fixed basket of goods and
factor cost includes no taxes
showing the changes in the services, it covers the whole
and excludes no subsidies.
overall level of prices. It economy.
GVA at factor cost = GVA
shows a change in the
at basic prices -
general price level of an
production taxes less
economy.
production subsidies.
Unreported illegal Absence of data

Income or black on growing
economy. service sector.
Non-Monetized Work of informal

transactions sector and housewives
especially the barter are not included.
transactions
in rural areas. GNI
DIFFICULTIES IN
MEASUREMENT
OF NATIONAL
INCOME
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RECENT DEVELOPMENTS IN GDP MEASUREMENT
Measurement of growth of GDP at

Change in the base year for calculating
constant market prices intead of earlier
national accounts from 2004-05 to 2011-12.
constant prices.
Sector-wise estimates of GVA at Use of MCA21 database of Ministry

basic prices instead of earlier factor cost. of Corporate Affairs.
Improved coverage of activities of

Comprehensive coverage of the
local bodies and autonomous
financial sector.
institutions.
DEBATES AROUND GDP:
Higher economic growth may not necessarily transform into higher economic development.
This is evident from following points:
• Gender disparities are not indicated in the data of GDP.

• Does not measure sustainability of growth as the growth may be at the cost of exploitation
of environment.
• Condition of poor is not indicated. Even though Indian economy grew at a rate of over
7-8% in last decade the food inflation was at the highest levels adversely affecting the poorest
strata of the society.
• Economic inequality not revealed by GDP: Despite rapid economic growth, India is grappling
with high income and wealth inequality.
• Other intangibles not measured: Does not value intangibles like leisure, quality of life etc.
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FACTORS AFFECTING NATIONAL INCOME
Political Natural
stability Resources
Government
E.g policies, Factors
laws,
FDI, regulation Affecting
Land
National
Income
Technology
Capital
Labour and
Extrepreneur
GREEN GDP
It is an index of economic growth with the environmental consequences of that growth

factored in.
Green GDP = GDP - The Value of Environmental Degradation - P

• P = all expenditures resulting from cleaning up pollution, avoiding further environmental
damage, and health care costs of pollution-induced illnesses
• GOI is yet to implement the recommendations given by Partha Dasgupta committee in this
direction.
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HDI OR HUMAN DEVELOPMENT INDEX
United Nations Development Programme (UNDP) published its first Human Development Report
(HDR) in 1990. The report had a HDI which was the first attempt to define and measure the
levels of development. The parameters and indicators are explained in the given diagram.
COMPONENTS OF THE HUMAN DEVELOPMENT INDEX
The HDI-three dimensions and four indicators

Three dimensions
Life expectancy Mean years of Expected years of Gross national

at birth schooling Schooling income per capita
Four indicator
Health Education Living standards
Human
Development index
GROSS NATIONAL HAPPINESS
It is given holistic and due importance in consideration of sustainable development. Four

important pillars of it are:
• Sustainable and equitable socio-economic development,
• Good Governance,
• Environmental Protection,
• Cultural Promotion.
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Important Timelines of GNH
GROSS NATIONAL HAPPINESS
Idea Coined by Bhutan’s 4th Dragon king, Jige

1975 Sigme Wangchuk
Current Version developed by Center for Bhutan

Studies 2010
UN Resolution for GNH as the chief

2012
Development Indicator
World Happiness report Consisting of 83

Countries published 2013
2023 Finland topped the list and India was at 125th

rank.
STATISTICAL SYSTEMS OF INDIA
Ministry of Statistics & Programme Implementation

(MoS&PI) is the nodal ministry.
Statistics Wing Programme Implementation

National Statistical Office(NSO) Wing
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NOTE: Programme Implementation Wing has three divisions: Twenty Point Programme,
Infrastructure Monitoring and Project Monitoring and Member of Parliament Local Area
Development Scheme.
NATIONAL STATISTICAL OFFICE (NSO)
The Statistics Wing of MoS&PI is called National Statistical Office(NSO). It consists of the Central
Statistical Office (CSO), the Computer Center and the National Sample Survey Office (NSSO).
It is mandated with the following responsibilities:-

• Provides and maintains norms and standards in the field of statistics.
• Prepares national accounts as well as publishes annual estimates of national product.
• Maintains liaison with international statistical organizations.
• Compiles and releases Index of Industrial Production (IIP), Annual Survey of Industries
(ASI), etc.
• Organizes and conducts periodic all-India Economic Censuses.
• Conducts large scale all-India sample surveys for socio economic areas, such as employment,
consumer expenditure, housing conditions and environment, etc.
• Compiles and releases Consumer Price Index (CPI) Numbers and Annual Inflation rates based on
these CPI numbers
NATIONAL STATISTICAL COMMISSION (NSC)
It was set up based on recommendation of the Rangarajan Commission in 2005.
COMPOSITION
• A part-time Chairperson and four part-time Members, each having specialization and
experience in specified statistical fields.
• CEO of NITI Aayog: Ex-officio member of NSC.
• Chief Statistician of India is the Secretary to the NSC. He is also the Secretary of MoS&PI.
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FUNCTIONS
• To serve as a nodal and empowered body for all core statistical activities of the country.
• Evolve, monitor and enforce statistical priorities and standards.
• To ensure statistical co-ordination among the different agencies involved.
INDEX OF INDUSTRIAL PRODUCTION (IIP)
• IIP is used to measure the performance of industrial activity in the economy.

• It is released by NSO every month.
• The base year for calculation of IIP – 2011-12.
• Broadly, following there sectors are used for calculating the IIP.
Mining Manufacturing Electricity

(Weight: 14.37%) (Weight: 77.63%) (Weight: 7.99% )
INDEX OF EIGHT CORE INDUSTRIES
• It is released by Office of the Economic Adviser, Department for

Promotion of Industry and Internal Trade.
• It measures the performance of only 8 important sectors of the economy.
CORE INDUSTRIES
Refinery Products Electricity Steel Coal
(28.04per cent) (19.85per cent) (17.92per cent) (10.33per cent)
Crude Oil Natural Gas Cement Fertilizers

(8.98per cent) (6.88per cent) (5.37per cent) (2.63 per cent)
ANNUAL SURVEY OF INDUSTRIES (ASI)
• Conducted by NSO on annual basis.

• Principal source of industrial statistics in India.
• It covers most of the industries in the Factories Act and is broader in terms of coverage of industry
as compared to IIP.
• Industries excluded from the survey: Defence establishments, oil storage and distribution depots,
restaurants, hotels, café and computer services and the technical training institutes.
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SUSTAINABLE DEVELOPMENT GOALS (SDGS)
01 02 03 04 05
No Poverty Zero Hunger Good Health Quality Gender

and Well-Beng Education Equality
06 07 08 09 10
Clean Water Affordable and Decent Work Industry, Reduced

and Sanitation Clean Energy and Economic Innovation and Inequalities
Growth Infrastructure
11 12 13 14 15
Sustainable Responsible Climate Life Life

Cities and Consumption Action Below Water on land
Communities and Production
16 17
Peace Justice Partnerships

and Strong for the Goals
Institutions
• At 70th Session of the United Nations (UN) General Assembly (2015), document titled
"Transforming our World: the 2030 Agenda for Sustainable Development" was adopted.
• It had 17 Sustainable Development Goals (SDGs) and the associated 169 targets.
• Countries have the primary responsibility for follow-up and review at the national level.
• In India:
o MoSPI is responsible for the development of the National Indicator Framework (NIF) for
measuring the progress of the SDGs and associated target
o NITI Aayog has the overall responsibility of SDGs implementation and align the
government schemes/programs to SDGs.
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Monetary Policy
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The word ‘net’ implies that
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25
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Target for consumer
price headline inflation
= 4% +/- 2%”
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4.5%
6.5%
6.75%
6.75%
It consists of overnight as well as term
repo/reverse repos (fixed as well as variable rates)
,SDF and MSF. Standing Deposit Facility (SDF)
rate is the rate at which the Reserve Bank accepts
uncollateralised deposits, on an overnight basis,
from all LAF participants. (SDF = 6.25%)
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with 20 branches
and above
with effect from FY2025-26.
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QUE
Banking
Secondary Functions
- Transfer of funds
- Sale/Purchase of
securities
- Collection of cheques,
bills etc.
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(upto 2 Lakhs)
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the
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Some information about the
penalties for not achieving
the PSL targets can be
provided.
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36
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State Bank of India among public sector banks and HDFC Bank and ICICI
Bank among private banks
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Inflation
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1% to 3% 3% to 10%
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1986-87.
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: It is the amount by which the Aggregate Demand (AD) falls short of
Aggregate Supply (AS) at full employment level.
It leads to deflation and recession.
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It is based on prices of only those commodities whose prices are non-volatile.
It does not take into account the prices of food and fuel items.
Engel’s law
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Employment and Unemployment
(UPSC PRELIMS 2024) ECONOMICS
but
Key Concepts
WORKFORCE: It refers to those actually working or being engaged in economic activity.
NUMBER OF UNEMPLOYED = Labour Force - Work force
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EMPLOYMENT: TYPES
TYPES OF UNEMPLOYMENT IN INDIA
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For example, Candidates with BTech, MBA, applying for Group D jobs
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Female labour Over 90% of the
force participation workforce in
rate is 37% in informal sector
2023
The National Sample Survey Office (NSSO) is the principal source of data on employment/ unemployment.
Usual Status Approach Current Weekly Status Current Daily Status Constraints in
This approach estimates Approach Approach measuring Unemployment
only those persons as This approach records Under this approach, unem- in India
unemployed who had no only those persons as ployment status of a person is Informal Sector
gainful work for a unemployed who did not measured for each day in a Dominance.
major time during the have gainful work even reference week. A person Data Collection
365 days preceding the for an hour on any day having no gainful work even Challenges.
date of survey and are of the week preceding for 1 hour in a day is Societal norms
seeking or are available the date of survey. described as unemployed for discouraging women
for work. It captures both the that day. from actively seeking
It captures long-term long- term open chron- It is considered to be a work.
unemployment in the ic unemployment and comprehensive measure of Disguised Unemployment
economy. the seasonal unem- unemployment, including as survey may classify
ployment. both chronic and invisible everyone involved as
unemployment. employed, even though
Note: A person who works for the work could be
1 hour or more but less than 4 sustained by fewer
hours is recorded as people.
employed for the half day.
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Rapidly growing population, leading to a significant increase in the labor force.
Reliance on agriculture, which is seasonal, leading to underemployment or disguised unemployment.
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Aggregate Demand.
reduce power of trade unions.
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Union Budget

UNION BUDGET IN INDIA
CONSTITUTIONAL BACKGROUND
• The constitution of India does not mention the term

‘budget’.
• Article 112 provides for the Annual Financial Statement

(AFS) (commonly known as Budget).
• It shows the estimated receipts and expenditure of the

Government of India.
• The Budget division of the Department of Economic Affairs

is the nodal agency responsible for preparing the Budget.
• In 2016, Railway Budget was merged with the Union

Budget, starting with FY 2017-18.
53
BUDGET DOCUMENTS
Budget Documents presented by the Finance Minister (FM) during the Budget
session:
Annual Financial Demands for Receipts Budget Expenditure Finance Bill

Statement (AFS) Grants (DG) Budget
FRBM Act related

Memorandum Budget at a Highlights of Status of documents:
Explaining the Glance Budget Implementation of I. Macro-economic
Provisions in Announcements Framework Statement
the Finance made in FM’s Budget II. Medium Term Fiscal
Bill Speech. Policy Statement
III. Fiscal Policy Strategy
Statement.
BUDGET PROCESS
House adjourns for a

General Discussion few weeks. Standing
on Union Budget in Committees scrutinise
Union Budget is both Lok Sabha and individual ministries'
presented. Rajya Sabha. Demand for Grants.
Demand for Grants of Detailed discussion

remaining ministries and voting on certain
Appropriation and are voted upon ministries' Demand for
Finance Bills passed. together. Grants in Lok Sabha.
54
ANNUAL FINANCIAL STATEMENT
• Article 112 (central government) and Article 202 (state government) of the
constitution requires the annual financial statement to be laid before the
respective legislatures.
• It contains three types of information:
Actual figures of receipts Budget and revised Budget estimate of

and expenditure of the figure for the current the upcoming year
previous year year
• The receipts and disbursements are shown under three parts in which Government
Accounts are kept viz,
» The Consolidated Fund of India (Art. 266).
» The Contingency Fund of India (Art. 267).
» The Public Account of India (Art. 266).
GOVERNMENT ACCOUNTS
CONTINGENCY FUND
PUBLIC ACCOUNT
• Small Savings, Provident Fund, Reserve Funds, Deposits and Advances,

Suspense, Remittances and Cash Balance.
CONSOLIDATED FUND
• Revenue
» Receipts
Tax, Non Tax and Grants-in-Aid.
» Expenditure
General Services, Social Services, Economic Services and

Grants-in-Aid.
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• Capital
» Receipts
Public Debt, Loans.
» Expenditure/Payments.
General Services, Social Services, Economic Services, Public Debt,

Loans and Advances, Inter-State Settlement and Transfer to
Contingency Fund.
Funds of GOI Consolidated Public Accounts Contingency

Fund Fund
Constitutional Article 266 Article 266 (2) Article 267 (1)

Status
Income/Credit • All revenues received • Public money other • Fixed Corpus of Rs.
by Govt. of India than those under 500 Crore.
GOI. Consolidated Fund.
• All loans raised by • Such as Provident • Under Contingency
GOI through issue of Funds, Small Fund of India Act in
treasury bills, loans or Savings collections, 1950.
ways and means of funds set aside for
advances. specific expenditure
• All money received like road
through repayment of development,
loan. primary education.
Expenditure • All the legally • Developmental • Unforeseen

authorized payments works like expenditure.
such as repayment of infrastructure,
debt, giving loans to healthcare and
the state education.
governments.
Parliamentary • Prior to expenditure. • No prior approval • Approval after the

Authorization needed. expenditure.
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COMPONENTS OF THE BUDGET
• Constitution – Budget shall distinguish expenditure on revenue account from

other expenditure.
• Therefore, Budget comprises of – Revenue Account and Capital Account:
Revenue Budget Capital Budget
• Receipts of Government (tax • Loans raised by Government

Revenue Receipts from public, called market
revenues and other reve-
nues) and the expenditure loans, borrowings by
met from these revenues. Government from RBI and
other parties through sale of
• Tax revenues comprise Treasury Bills, loans received
proceeds of taxes and other from foreign Governments
duties levied by the Union. and bodies, and recoveries
of loans from State and UTs.
• Various taxation proposals
made in the Finance Bill.
• Other receipts mainly con-

sist of interest and dividend
on investments made by
Government, fees, and
other receipts for services
rendered by Government.
on debt, subsidies, etc.
• Expenditure on the normal • Expenditure on acquisition

Expenditure running of Government of assets like land, buildings,
departments and various machinery, equipment.
services, interest payments
on debt and subsidies. • Also investments in
shares & loans and advances
• Expenditure which does not granted by Central Govern-
result in creation of assets ment to State and Union
for GOI is treated as revenue Territory Governments,
expenditure. Government companies,
Corporations and other
• All grants given to State/UTs parties.
are also treated as revenue
expenditure even though • Capital Budget also
some of the grants may be incorporates transactions in
used for creation of assets. the Public Account.
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DEMANDS FOR GRANTS
Article 113 requires that any estimate seeking withdrawal of

money from the CFI should be presented to the Lok Sabha
in the form of a demand for grants.
• Generally, one Demand for Grant is presented in respect of

each Ministry or Department.
• However, in respect of large Ministries or Departments

more than one Demand is presented.
APPROPRIATION BILL
• After the demands for grants are voted by the Lok

Sabha, Parliament's approval to the withdrawal from
the consolidated fund of the amounts so voted and the
amount to meet the expenditure charged on the
consolidated fund, is sought through the
Appropriation Bill.
FINANCE BILL
• Under Article 110 (1)(a) of the Constitution, detailing

the imposition, abolition, remission, alteration or
regulation of taxes proposed in the Budget.
• A Finance Bill is a Money Bill as defined in Article 110

of the Constitution.
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TYPES OF BUDGETING
BALANCED BUDGET
• An ideal situation » When the estimated government

expenditure is equal to its estimated revenue in a
financial year.
• It is not viable for developing nations as it restricts the Revenue Spending
scope of government spending on public welfare

schemes.
SURPLUS BUDGET
• Here the expected revenue surpasses the estimated

expenditure in a financial year.(revenue more
than expenditure).
REVENUE
• Such budget can be considered during inflation

to reduce aggregate demand. EXPENDITURE
• However, it is not appropriate in cases of

deflation, economic slowdown and recession.
DEFICIT BUDGET
• When the estimated expenditure exceeds the

estimated revenue of a government in a financial year.
• This budget is helpful in times of economic recession BUDG

ET
and also in boosting employment rate. EXPEN

SES
• Disadvantage » can lead to excessive expenditures by

the government or debt accumulation.
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TYPES OF DEFICITS
Type of Deficit Revenue Deficit Fiscal Deficit Primary Deficit
Definition • The difference • Excess of total • Fiscal Deficit of the

between total expenditure over current year minus
revenue expenditure total receipts interest payments
to the total revenue excluding on previous
receipts. borrowings. borrowings.
Meaning • It indicates that the • It is a measure of • It shows the

government lacks how much the amount of govern-
sufficient revenue for government needs ment borrowings
the normal to borrow from the specifically to meet
functioning of the market to meet its the expenses by
government expenditure when removing the
departments. its resources are interest payments.
inadequate.
• Happens when the • A zero Primary
government starts Deficit means the
spending more than it need for borrowing
earns. to meet interest
payments.
• It forces the govern-
ment to disinvest or
cover the shortage by
borrowing.
Remedial • Curtail government’s • Reducing public • Similar measures as

Measures expenses. expenditure like mentioned in the
subsidies, bonus, fiscal Deficit.
• Increase tax and LTC, Leaves
non-tax receipts by encashment etc.
introducing new
taxes. • Broaden tax base
and sale of shares
• Increase the tax on in public sector
people in units.
higer-earning slabs.
60
THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT
ACT (FRBM ACT), 2003
OBJECTIVES
Financial discipline to reduce Transparency in India's fiscal

fiscal deficit. management systems.
Achieve fiscal stability and allow More equitable distribution of

RBI to target inflation. India's debt over the years.
KEY FEATURES OF ACT
• Mandatory for the government to place the following along with the Union
Budget documents in Parliament annually:
- Medium Term Fiscal Policy Statement.
- Macroeconomic Framework Statement.
- Fiscal Policy Strategy Statement.
• Proposed that Revenue deficit, Fiscal deficit, Tax revenue and the Total
Outstanding liabilities be projected as a percentage of GDP.
EXEMPTIONS
• On grounds of National Security, Calamity etc.
61
N K SINGH COMMITTEE'S RECOMMENDATIONS
PROPOSAL
• Proposed to replace the FRBM Act, 2003 with a Debt Management
and Fiscal Responsibility Bill, 2017.
TARGETS
• Use debt as the primary target for fiscal policy.
• Debt to GDP ratio should be 38.7% for the central and 20% for the
state governments by the FY 2022-23.
• By FY 2022 - 23, the fiscal deficit should be 2.5% of GDP.
FISCAL COUNCIL
• Create an autonomous Fiscal Council with a chairperson and two

members appointed by the Centre to:
- Prepare multi-year fiscal forecasts.
- Improve fiscal data quality.
- Suggest changes to the fiscal strategy.
- Advise the government on fiscal matters.
DEVIATION
• Grounds for the government to deviate from the FRBM Act targets
should be clearly specified.
BORROWINGS
• The government must not borrow from the RBI, except when:
- The Centre has to meet a temporary shortfall in receipts.
- RBI subscribes to government securities to finance any
deviations.
- RBI purchases government securities from the secondary
market.
62
FISCAL POLICY
DEFINITION
• According to IMF (International Monetroy Fund), Fiscal Policy is the use of

government spending and taxation to influence the economy.
OBJECTIVES IN INDIAN CONTEXT:
Economic Growth: Fiscal policy maintains the economy’s

growth rate so that economic goals are achieved.
Price stability: Controls the price level of the country so that

• when the inflation is too high, prices can be regulated.
•
Full employment: It aims to achieve full employment/near full
employment, as a tool to recover from low economic activity.
SIGNIFICANCE OF FISCAL POLICY IN INDIA
• Plays a key role in elevating the rate of capital formation

both in the public and private sectors.
• Taxation helps to mobilize resources for financing its social

and physical infrastructure
developmental projects.
• Provides providing stimulus to increase the savings rate.
• Gives adequate incentives to the private sector to expand its

activities.
• Aims to minimize the imbalance in the dispersal of income

and wealth.
63
REVENUE
SOURCE OF REVENUE
• Taxation remains the major source of government’s revenue.
• There is a clear demarcation of the taxation powers of the Union and the states
in the Seventh Schedule of Constitution under Article 246.
• Article 292 empowers the GOI to borrow (internally or externally) upon the
security of the consolidated fund of India.
• The Finance Commission recommends allocation of central taxes to the states.
DEFICIT FINANCING
MEANING
• Method of generating funds to finance the deficit which results from excess of
expenditure over revenue.
• It is by borrowing from the public by the sale of bonds or by printing new money.
NEED
• For developing countries, higher economic growth is indispensable.
• Growth requires expenditure. But often both the tax and non-tax revenues fail to
mobilize enough resources just through taxes.
IMPACT
• Raises aggregate expenditure increases aggregate demand while supply remains

constant inflation rise of prices of goods and services.
• Inflation Higher wage demand Increase in cost of production Lowers profits

discourages investments.
64
Taxation

TAXATION
TAXES CAN BE DEFINED AS A “COMPULSORY CONTRIBUTION
FROM A PERSON TO THE GOVERNMENT TO THE EXPENSES INCURRED IN
THE COMMON INTEREST OF ALL, WITHOUT REFERENCE TO
SPECIAL BENEFITS CONFERRED”.
TYPES OF TAXES
DIRECT TAXES INDIRECT TAXES

DIRECT TAX IS ONE THAT INDIRECT TAX IS A TAX THAT
THE TAX PAYER PAYS DIRECTLY CAN BE PASSED ON TO
TO THE GOVERNMENT ANOTHER PERSON OR
EXAMPLE GROUP EXAMPLE
INCOME CORPO- PROPERTY

RATION TAX Service Entertain-
TAX TAX VAT Tax ment Tax
65
DIRECT TAXES
1.INCOME TAX
It is a tax charged by central government on the income earned by individuals
during a nancial year.
OLD TAX REGIME NEW TAX REGIME
NO TAX- NO TAX- GREATER THAN

UP TO RS.2.5 LAKH RS.2.5 LAKH TO RS.3 LAKH
GREATER THAN GREATER THAN

RS.2.5 LAKH TO RS. 5 LAKH 5 RS.3 LAKH TO RS.6 LAKH
GREATER THAN
10 RS.6 LAKH TO RS. 9 LAKH
GREATER THAN
15 RS.9 LAKH TO RS.12 LAKH
GREATER THAN 2 GREATER THAN

RS.5 LAKH TO RS.10 LAKH RS.12 LAKH TO RS.15 LAKH
GREATER THAN 3 ABOVE RS.15 LAKH

RS.1 LAKH TO RS.15 LAKH
66
2. CORPORATE INCOME TAX
It is the tax paid by domestic companies, and foreign companies on their income
in India. The current corporate tax rates in India are as follows:
a.For Domestic Companies: The tax rate varies for different types of companies
as provided under different sections of Income Tax Act, 1961. It ranges
from 15% for newly established companies to 30% for other companies
excluding surcharges and cess.
b.For Foreign Companies: The tax rate levied on royalties or fees received by
foreign companies stands at 50%, whereas other income is taxed at a rate
of 40%.
3. MINIMUM ALTERNATE TAX (MAT)

All the companies (including foreign companies) are required to pay minimum
alternate tax at the rate of 15% on book prots if the tax calculated as normal tax
rates are less than 15% of book prots.
67
INDIRECT TAXES
1. VAT:
Is an ad-valorem tax on domestic nal consumption, levied and collected at all
stages between production and the point of nal sale. It covers both
manufacturing as well as distribution stages and does away with the multiplicity
of domestic indirect taxes like sales tax, excise duty, wholesale tax, turnover
tax etc
2. MODVAT:
Under MODVAT, a producer has to pay tax on the value of nal output but the
excise duty paid on inputs in earlier stages of production is reimbursed back to
the producer on the presentation of sales invoices
3. CENVAT:
It was introduced in the form of revamped MODVAT. It had all the features of
MODVAT, for only exception of uniform tax rate of 16% and its coverage was
extended to include capital goods
68
SPECIFIC AND ADVALOREM TAXES
Specic Advalorem
Tax – Taxes –
imposed on the Under this, tax is
basis of specic imposed on the basis
attributes of comm- of the value of the
odities like unit, commodity. An example
weight, length, size for ad valorem tax is
or volume. For ex: imposition of 28%
cloth in its GST on luxury
length units. cars..
CONSTITUTIONAL STATUS OF TAXATION
The government Article 265 of the Limited nancial

7th schedule has
of India is autho- Constitution of India powers have been
dened the list
rized to levy taxes says that "No tax given to the local
upon which centre/
on individuals and shall be levied or governments which
state or both
organisations acc- collected except by are enshrined in
Centre and state
ording to the authority of law". part IX and IX A of
can levy taxes.
Constitution. the constitution.
69
TAXATION UNDER CENTRE/STATE LIST
Union List The State The Concurr-

(List 1 of the List has only ent List has
7th schedule) those matters those matters
contains those on which the on which both
matters on State Gov- the Central
which the ernment has and State
Central Gov- the power to Governments
ernment has make laws have the power
the power to art 246(3) to make laws
make laws art 256(2)
DISTRIBUTION OF TAX
Powers of the Powers of the Residuary

Central State powers of
Government Government taxation
are covered are covered belonging
under entries under entries only to the
82-92B in List 45-63 in List Centre are
1 of the 7th 2 of the 7th covered under
schedule. schedule. Entry 97 in List
1 of the 7th
Schedule.
70
DISTRIBUTION OF TAX REVENUES
Recommendations of fteenth nance commission BY NK Singh
The share of states in the

central taxes for the 2021-
26 period is recommended
to be 41%, same as that
for 2020-21
This is less than the 42%
share recommended by
the 14th Finance Com-
mission for 2015-20
period.
The adjustment of 1% is to
provide for the newly formed
union territories of Jammu
and Kashmir, and Ladakh
from the resources of the
centre
71
TAXATION SYSTEM TAX
Taxes can also be categorized as either regressive, proportional, or progressive,

and the distinction has to do with the behaviour of the tax as the taxable base
PROGRESSIVE TAX PROPORTIONAL TAX
A tax that takes a larger A tax that takes

percentage of income the same percentage
from high-income groups of income from all
than from low-income income groups
groups
REGRESSIVE TAX DEGRESSIVE TAX
A tax that takes a larger The rate of progression

percentage of income in taxation does not
from low-income groups increase in the same
than from high-income proportion as the increase
groups in income
72
GST
GST %
It is single tax on the supply of goods and services, right from the manufacturer
to the consumer. It is essentially a tax only on value addition at each stage as input
taxes credit paid at each stage will be available in the next stage of value addition.
Under GST consumer will bear only the GST charged by the last dealer in the
supply chain, thus eliminating the cascading effects.
GST TAX SLABS
0% 5% 12% 18% 28%

Milk, Cereals, Spices, Sugar, Butter, Ghee, Ice cream, Luxury items
Fresh Fruit and Tea, Coffee, Mobiles, Hair oil, Soap, such as cars,
Vegetables, etc. Edible Oils, Processed Refrigerators, AC, Dish
Domestic LPG, food, etc. Water heaters, Washing
etc. etc. Machines, etc.
73
GOODS AND SERVICES TAX NETWORK (GSTN)
The Central and State Governments have jointly registered Goods and Services Tax
Network (GSTN) as a not-for-prot, to provide shared IT infrastructure and services to
Central and State Governments, tax payers and other stakeholders.
Initially, the Centre and the states together hold a 49% stake in the company.
Cabinet in 2018, converted the GST Network into a government-owned company.
The stake of the private companies will be acquired by the Centre and the state
governments
The restructure GSTN, with 100% government ownership shall have equity
structure between the Centre (50%) and the States (50%).
TAXES SUBSUMED UNDER GST
At Central Level At State level
State Value
Central Excise Duty
Added/Sales Tax
Additional Excise Duty Entertainment Tax
Service Tax Octroi and Entry tax
Countervailing Duty
Purchase Tax
Special Additional Luxury tax, Taxes on

Duty of Customs Lottery, Gambling
74
COMPONENTS
OF
GST
Central Integrated
GST GST
State
GST
GST COUNCIL
Chairperson Union FM
Vice Chairperson To be chosen amongst the Ministers of State Government
MOS (Finance) and all Ministers of Finance / Taxation

Members
of each State
Quorum 50% of total members
Decision By 75% majority
75
CASCADING EFFECTS OF TAXATION:
MODVAT AND CENVAT
· Taxation of inputs, like raw materials and other intermediaries had a number of
limitations The tax burden goes on increasing as raw material and nal product
passes from one stage to other because, each subsequent purchaser has to pay
tax again and again on the material which has already suffered tax. This is called
cascading effect or double taxation
· MODVAT (Modied Value Added Tax): To avoid cascading effects it was

introduced Under MODVAT, a producer has to pay tax on the value of nal output but
the excise duty paid on inputs in earlier stages of production is reimbursed back to
the producer on the presentation of sales invoices.
· CENVAT: it was introduced in the form of revamped MODVAT. It had all the features
of MODVAT, for only exception of uniform tax rate of 16% and its coverage was
extended to include capital goods.
TAX REFORMS
In the year 1991 Tax reforms were initiated in India, following the economic crisis of 1991
1. Raja Chelliah Tax Reform Committee 1992
1.Broaden the Tax base,

2.Lower marginal tax rates,
3.Reduce rate differentiation,
4.Simplify the tax structure
2. Kelkar Committee (2002) (The government setup two Task Forces i.e. on
Direct and Indirect Taxes under chairmanship of Dr. Vijay L. Kelkar)
1.Task force for direct taxes - to raise the basic exemption limit in income tax from
Rs 50,000 to Rs 1 lakh
2.Task Force on Indirect Taxes: The committee recommended widening the tax net
by expanding the service tax base and improving the tax-payers' compliance.
- Both the recommendation were accepted by the government.
76
3. Parthasarathi Shome Commission also known as The Tax Administration
Reforms Commission (TARC), 2013
1.CBDT and CBEC should coordinate and eventually be merged within 10 years
2.Taxpayer's services to be included
3.Taxpayers should be treated as customers
4.Tax payers council to be established under Finance Minister
5.The scope of Pan Card needs to be increased
KEY CHANGES MADE IN THE TAXATION IN

BUDGET 2021-22
Corporate tax rate slashed to the lowest in the world
Faceless Assessment and Faceless Appeal introduced
Exemption from ling tax returns for senior citizens over 75 years
Agriculture and Infrastructure Development Cess : it will be levied on petrol and diesel
at the rate of Rs 2.5 and Rs 4 per litre respectively
The tax holiday for startups has been extended by to 31st March 2022
To aid to economic development like roads, bridges,

yovers, railways, ports, etc.ke
To provide welfare policies for the marginalized section

of the society example Pensions for the elderly and
benets schemes to the unemployed or the ones below
the poverty line
SOCIAL AND
To fund public health and education expenses like
ECONOMIC schools, hospitals, housing projects for the poor, etc.
OBJECTIVES
OF TAXES To improve income distribution
To bring about rapid economic growth, reduce

inequalities of incomes, promote stability and to achieve
other socio-economic objectives
77
KEY TERMS DEFINITIONS
It is levied on capital gains incurred by individuals and corporations.
Capital Gains tax:
For example sale of stocks, bonds, precious metals and property
Imposed on assumption of the government that a rm or a person
Presumptive tax possesses tax paying capacity but avoiding the.
Ex. Minimum Alternate Tax (MAT)
TDS is deducted from an individual's income on a periodical
Tax Deducted or occasional basis. Can be applicable for regular as well as
at Source irregular incomes Ex salary, commission, interest, rent
It refers to income tax payable on capital raised by unlisted
Angel tax companies via issue of shares where the share price is seen in
excess of the fair market value of the shares sold.
It means transfer of funds (usually black money) to a foreign
country (usually a tax heaven or low tax jurisdiction) for
Round Tripping
investing them back in the home country. It is done for
conversion of black money into white money and to avoid tax
It is the responsiveness of tax revenue to the overall change in
Tax Buoyancy national income/GDP and change in tax provisions
These are countries, usually small, which maintain secrecy of
Tax Havens capital ows, liberal economic laws and very low tax rates
Example: Mauritius
It is imposed on commodities which has negative externality
Pigovian Tax
(harmful for society). For e.g-Pollution tax
When government puts illegal and extra-legal pressure on
Tax Terrorism taxpayers to extract more tax from honest taxpayer, this
enthusiasm of government is referred to as tax terrorism.
levied on certain goods deemed harmful to society and
Sin tax
individuals. For e.g- Cigarettes, Gutka, Fat tax
Tax to gross domestic product (GDP) ratio is the ratio of taxes

Tax to GDP collected by a government and the GDP of the nation.
The Gross Tax-to-GDP ratio was 11.2% and the Direct taxes to
GDP ratio hit a 15 year high of 6.1% in the year 2022-23
It means reducing tax liability through legal means by misusing

Tax Avoidance
exemptions, deductions and loopholes of taxation system.
78
External Sector Part 1

( UPSC PRELIMS 2024) ECONOMICS QRM
EXTERNAL SECTOR
MANAGEMENT PART - 1
I. BALANCE OF PAYMENT (BOP)

It records the transactions in goods, services and assets between residents of a
country with the rest of the world for a specied time period typically a year.
It includes transactions by a country's individuals, companies, and government

bodies.
Transactions include imports and exports of goods services and capital as well as
transfer payments, such as foreign aid and remittances.
79
2. COMPONENTS
CURRENT ACCOUNT
Transfer
Trade in Goods Trade in Services Payments
Consists of Gifts,
Exports of Imports of Net Factor Net Non-Factor Remittances and
Goods Goods Income Income Grants
Net Income Shipping, Banking
from Insurance, Tourism
Compensation Software Services,
of Employees etc.
Net
Investment
Income
CAPITAL ACCOUNT
External External
Investments Borrowings Assistance
Examples: External Examples:

Direct Portfolio Commercial Government Aid,
Investment Investment Barrowings, Inter-governmental,
Short-term Debt Multilateral and
Examples: FDI, Examples: FII, Bilateral Loans
Equity Capital, Offshore
Reinvested Funds
Earning and
other
Direct Capital
Flows
80
Important Note:
IMF introduced the new accounting standards in the sixth edition of the Balance
of Payments and International Investment Position Manual (BPM6).
According to the new classication, the transactions are divided into three
accounts: current account, nancial account and capital account.
Almost all the transactions arising on account of trade in nancial assets such
as bonds and equity shares are now placed in the nancial account.
RBI made changes in the structure of BoP accounts. However, RBI continues to
publish the BoP accounts as per the old system also.
3. WHY BALANCE OF PAYMENT IS ZERO?
The sum of all transactions recorded in the balance of payments is zero because:
Every credit appearing in the current account has a corresponding debit in the
capital account, and vice-versa.
If a country exports an item (a current account transaction), it effectively imports
foreign capital when that item is paid for (a capital account transaction).
However, in reality, the central bank / tax authorities do not have complete
details of all nancial transactions. Also the currency rates keeps uctuating.
Thus, there will be statistical discrepancies, errors and omissions. Therefore, BoP
is expressed as:
Current account + Capital account + net errors and omissions = 0 (balance

of payment)
81
4. CURRENT ACCOUNT DEFICIT (CAD)
It is the shortfall between the money owing in on exports and the money
owing out on imports.
It measures
The gap between the money received into and sent out of the country on the trade
of goods and services.
The transfer of money from domestically-owned factors of production abroad.
Balance of Trade measures only the gap in

earnings and expenditure on exports and
imports of goods.
CAD AND
Balance on Current Account includes Balance
BALANCE
of Trade and balance on invisibles.
OF TRADE
Net Invisibles is the difference between the value of

exports and value of imports of invisibles.
Invisibles include services, transfers and ows of
income that take place between different countries.
Services trade includes both factor and non-factor
income.
Factor income includes net international earnings on
factors of production (like labour, land and capital).
Non-factor income is net sale of service products like
shipping, banking, tourism, software services, etc.
Boosting exports and curbing non-essential

imports such as gold, mobiles and electronics.
WAY TO
DEAL WITH
CAD Currency hedging and easing rules for manufa-
The Current cturing entities to raise foreign funds.
Account Decit
could be
reduced by
Review debt investment limits for FPIs.
82
5. GLOBAL ECONOMIC ENVIRONMENT
Post pandemic global economic recovery has been – Incomplete and Unequal.
Incomplete – Stronger than expected recovery in second half

of 2020, but GDP remains below pre-pandemic level in most countries.
Unequal – Countries (such as china) that have recovered are witnessing

unbalanced growth trajectory - private consumption lagging investment.
Amid uncertain global economic environment, India's external sector looks

strong due to:
Resumption of Sustained
Surplus Current portfolio capital Robust FDI build- up of
Account Balance inows, inows foreign exchange
reserves.
5
83
₹

EXTERNAL SECTOR
External Sector Part 2
MANAGEMENT PART-2
EXTERNAL INVESTMENT TYPES
FOREIGN
INVESTMENT
DIRECT INDIRECT
INVESTMENT INVESTMENT
WHOLLY OWNED INVESTMENT BY

SUBSIDIARY - Investment FOREIGN INSTITUTIONAL
JOINT VENTURE -
INVESTMENT -
in the businesses by foreign Joint vetures between
entity established or
citizens usually involving the foreign and incorporated outside
majority stock ownership of domestic companies. India which proposes to
the enterprise. make investment in India.
84
FDI AND FPI IN INDIA AND EXTERNAL
COMMERCIAL BORROWINGS
FOREIGN INVESTMENT
FOREIGN DIRECT INVESTMENT

₹ ₹
FOREIGN PORTFOLIO INVESTMENT
• Automatic Route
• Government Route
FOREIGN DIRECT INVESTMENT
• More than 95% of the FDI comes in India through the ‘Automatic Route’ where
no government approval is required and are subject to only sectoral laws.
• FDI is an investment from a party in one country into a business or
corporation in another country with the intention of establishing a lasting
interest.
FORMS OF FDI
• Greenfield Investment : It is the direct investment in new facilities or the

expansion of existing facilities. It is the principal mode of investing in
developing countries.
• Mergers and Acquisition : It occurs when a transfer of existing assets from
local firms takes place.
TYPES OF FOREIGN DIRECT INVESTMENT
• Foreign direct investments are commonly categorized as horizontal,

vertical, or conglomerate.
• With a horizontal FDI, a company establishes the same type of business
operation in a foreign country as it operates in its home country. A
U.S.-based cellphone provider buying a chain of phone stores in China is
an example.
85
• In a vertical FDI, a business acquires a complementary business in another
country. For example, a U.S. manufacturer might acquire an interest in a
foreign company that supplies it with the raw materials it needs.
• In a conglomerate FDI, a company invests in a foreign business that is
unrelated to its core business. Because the investing company has no prior
experience in the foreign company’s area of expertise, this often takes the
form of a joint venture.
FOREIGN PORTFOLIO INVESTMENT
• FPI stands for foreign portfolio investment, which is an investment by

non-residents in Indian securities, such as shares, bonds, debentures, and
derivatives.
FOREIGN DIRECT INVESTMENT FOREIGN PORTFOLIO INVESTMENT
It is only in equity/shares. It is in both equity and debt.
Generally, through secondary market

It happens through primary market. but can happen through primary market
as well.
The foreign investor appoints Board

Foreign investors generally do not
of Directors and involved in
get involved in the decision Making.
decision making.
It is in general capital market.

It is sector specific.
sector/company.
It is a long-term investment as to
It is generally short-term investment.
turn the company profitable.
86
EXTERNAL COMMERCIAL BORROWING
ECB is different
from FDI in the sense ECB can be
that FDI is the foreign accessed under two
money invested to routes, viz.,
finance equity capital. Automatic Route
Whereas, ECB is any and Approval Route.
kind of funding other
than equity.
It refers to Masala Bonds are a

commercial loans kind of ECB where the
availed from bonds are issued
non-resident lenders outside India but
with minimum denominated in Indian
Rupees, rather than
average maturity
of 3 years. EXTERNAL the local currency.
COMMERCIAL
BORROWING
SPECIAL DRAWING RIGHTS
It is an international reserve asset, created by the IMF to supplement

its member countries’ official reserves. 1.
The value of the SDR is based on a basket of five major

2. currencies - the US $, Euro, Chinese renminbi (RMB), Japanese yen,
and the British pound sterling.
The SDRs are allocated to the member countries in proportion to

their quota subscriptions. Only the IMF members can participate in 3.
SDR facility.
4. SDRs being costless as it is just a book entry in the Special Drawing

Account of the IMF, is often called paper gold.
87
GLOBAL DEPOSITARY RECEIPTS/AMERICAN DEPOSITARY RECEIPTS
It is a negotiable instrument that can be traded like any

1. other security instrument freely.
Global
Via this investor wants to invest money in the company
Depositary 2. listed in India A (in which it cannot directly invest).
Receipts/
American
Depositary 3.
Under this Overseas Depository Bank gives an
acknowledgement slip to the investor that some shares
Receipts are being held on your behalf.
This acknowledgement slip is called Global Depository

4. Receipts (GDR) or “American Depository Receipt” (ADR)
in case of US/American investor.
CURRENCY SWAP AGREEMENTS
The currency swap agreement between two countries is entered between the
Central Banks of the two countries. One country exchanges its national
currency for that of another or even a third one. Examples :
- India and Japan signed currency swap agreement
in 2018 worth $ 75 billion. India can/will get Yen
(or dollars) from Japan worth max $ 75 billion
and Japan will get equivalent Indian Rupees as
per the market exchange rate at the time of
transaction.
- In July 2020, India and Sri Lanka signed a
currency swap agreement worth $ 400 million
in which India will give dollars to Sri Lanka and
in return India will get ‘Sri Lankan Rupee’.
FOREIGN EXCHANGE RESERVES IN INDIA
Presently India’s For-ex reserves as on March 8 is around

$636 billion and our monthly imports (goods and ser-
vices) are around $50 billion.
88
At end-September 2023, India’s external debt was
placed at US$ 635.3 billion.
FOREIGN EXCHANGE RATE DETERMINATION IN INDIA
EXCHANGE RATES – CONCEPTS
₹ Currency depreciation is a decrease in the value of a

currency in a floating exchange rate system due to market
forces.
Depreciation
An increase of value of a currency, is currency appreciation.
Appreciation
₹ It means official lowering of the value of a country's

currency within a fixed exchange rate system.
Devaluation
₹
Under this the central banks do nothing to directly affect
the level of the exchange rate and is also known as floating
Flexible exchange rate system.
Exchange Rate
89
Under this system a country’s central bank typically uses an
₹ open market mechanism and is committed at all times to
Fixed buy and/or sell its currency at a fixed price in order to
Exchange Rate maintain its pegged ratio.
It is a mix of a flexible exchange rate system and a fixed

rate system So, if the Rupee has become very volatile and
₹
is depreciating against dollar then, RBI starts selling dollars

in the market from its foreign exchange reserves to check
Managed the appreciation of dollar and keep the rupee stable and
Floating Rates prevent its depreciation.
TYPES OF EXCHANGE RATE SYSTEM
Nominal Exchange Rate is the relative price of the currencies of two countries.
For example, if the exchange rate between the U.S. dollar and the Indian Rupee
is Rs. 60 per dollar, then you can exchange one dollar for 60 Rupees in world
markets for foreign currency.
Real Exchange Rate It tells us the rate at which we can trade the goods of one
country for the goods of another and is the relative price of the goods of two
countries.
Nominal Effective Exchange Rate (NEER) is the weighted average value of

nominal exchange rate of the rupee against the currencies of major trading
partners of India.
Real Effective Exchange Rate (REER) is the weighted average of Real

Exchange Rates of Rupee against the currencies of major trading partners of
India.
Purchasing Power Parity tells us how much of a basket of internationally

traded goods and services can be bought with Indian rupee in India the same
basket can be bought in the US with the help of a dollar.
90
CAPITAL AND CURRENT ACCOUNT
CONVERTIBILITY IN INDIA
CAPITAL ACCOUNT CONVERTIBILITY
• Currency convertibility is the ease with which a

country's currency can be converted into gold or
another currency.
• At present, India allows full convertibility in

current account but only partial convertibility
in capital account.
• S. S. Tarapore Committee has recommended

to move towards full CAC.
POSITIVES NEGATIVES
It would facilitate further liberalisation

It could destabilise an economy.
and increase foreign investment.
Increasing openness create

It could lead to massive capital flows in
opportunities for avoiding capital
and out of the country.
account restrictions.
It can lead to free exchange of currency Currency appreciation/depreciation

at lower rates. could affect the trade balance.
CURRENT ACCOUNT CONVERTIBILITY
• RBI does not allow full conversion of Rupee into foreign currencies and
foreign currencies into Rupee for transactions under capital account of BoP.
• There are restrictions/limits imposed by the RBI and government
on the value of transactions that anybody can do under capital
account.
• Example - if someone wants to borrow $5 billion as External
Commercial Borrowing (ECB) then RBI has put restrictions and may
not convert the whole $5 billion into Rupees.
91
ECONOMIC INTEGRATION
Free Trade Agreements (FTA): A free trade

agreement is a preferential arrangement in which
members reduce tariffs on trade among them-
selves, while maintaining their own tariff rates for
trade with non-members. Example - South Asia
Free Trade Agreement (SAFTA).
Customs Union (CU): A customs union is a free

trade agreement (FTA)in which members apply a
common external tariff (CET) schedule to imports
from non-members. Example EU-UK custom
Union.
Common Market (CM): A common market is a

customs union (CU) where movement of factors of
production is relatively free amongst member
countries. Example - East African common market.
Economic Union (EU): An economic union is a

common market (CM) where member countries
coordinate macro-economic and exchange rate
policies. Example - European union.
₹
92
Money Market and Capital Market

Money Market
and Capital Market
Financial Market
It refers to a system consisting of Financial Institutions (Bank, NBFC), instruments (shares, bonds),
organization (stock exchange), and regulatory bodies (RBI, SEBI) which facilitate financial transactions.
Objective: To mobilize household savings and capital flow for the benefit of the market.
93
Financial Market
Money Market Capital Market
Deals in short term financial transactions (i.e. upto Deals in medium (1 to 5 yrs.) and long term (>5
1 yr.) yrs.) financial transactions.
A source of working capital finance of firms. A source of financing capital assets.
Deals only in bonds: Deals in bonds as well as Equity.
Commercial Bill
Commercial paper etc.
General public participation is limited. Public participation is significant.

Organised and unorganised sector. Mainly confined to organised sector.
RBI is the prime regulator. SEBI is the prime regulator.
Money Market
The short term financial market of an economy.
Trading of money between individual or groups (i.e. financial

institutions, Government companies etc.)
Segments of Money Market
Organised Sector Unorganised Seector
Banks Sub-markets of Money lenders and Hundi

Money Market Indigenous bankers
Treasury Commercial Commercial Certificate of Call

Bill Paper Bill Deposit Money Market
94
Money Market Instruments
1) Treasury Bill (TB)
Used by Central Government to fulfil its short term (upto 364 day) liquidity requirement.
Variants of Tbs
a) 14-day (every week on Fridays)

b) 91-day
c) 182-day Tbs
d) 364-day Tbs
2) Commercial paper (CP)

Unsecured security.
It is a short-term debt instrument issued by companies to raise funds generally for a time period up
to one year
Issued at discount to their face value.
Issued in multiple of Rs1 Lakh subject to minimum value of Rs 25Lakhs.
Maturity: from 14 days to 1 year.
One of most important sources of working capital finance of large firms.
3) Commercial Bill
Unsecured security.
Issued by one merchant firm to another against a credit transaction.
Source of working capital for small companies.
4) Certificate of Deposit
A Security/Bond which is issued by Bank to depositors of funds.
Issued in multiple of Rs1Lakh subject to a minimum value of Rs 25Lakhs.
Issued at discount.
Similar to FDs but these are negotiable and tradable in money market.
5) Inter Bank Call Money market

An interbank call money market is a short-term money market which allows for large financial institutions
to borrow and lend money at interbank rates
Very Short term Loan- Usually for 1 or 2 days or maximum can be for 14 days.
Interest charged on such loans is called the Call Money Rate (CMR) which is market-determined.
CMR serves as a benchmark for monetary policy operations. Eg- if the interest rate is high, RBI will buy
securities.
It helps in the optimum use of liquidity.
95
6) Hundi
A Commercial Bill of unorganised sector/market. It is issued by one firm to another against credit
transactions.
These are not discounted/accepted by banks.
They are mostly on a trust basis.
Note: Discount and Finance House of India (DFHI), serves as a secondary market for the money market
instruments eg-CD, CP etc.
Capital Market
(Long term financial market of an economy)
Primary Market Secondary Market
First time sale of security eg-IPO ( Initial Public Existing securities are bought and sold.
Offer).
Company sells to Investor. Investor sells to investor.
Company fixes price. Prices are determined by demand and supply.
Firm raises funds for long term. It provides liquidity to existing securities.
Indian Capital Market System
Government Industrial Securities Development Financial

Securities Market Financial Intermediaries
Institutions
New Issue market IFCI Merchant Banks
ICICI Mutual funds

Old issue market
SFG Leasing
Companies
IDBI
Venture Capital
Companies
IIBI
Others
UTI
96
Primary Capital Market
Securities are issued to the public/ investor for the first time.
Here, a transaction takes place between the company and investors.
Means of raising funds at Primary Market

(I) Initial Public Offering (IPO): It is a process when an unlisted company raises funds by offering its shares to the
public and consequently gets listed on a stock exchange.
(ii) Follow on Public Offer (FPO): When a listed company comes out with a fresh issue of shares or makes an offer for
sale to the public to raise funds it is known as FPO.
Note: It is an issuance of additional shares made by a company after an initial public offering (IPO).
(iii) Preferential issue: It refers to the procedure of bulk allotment of fresh shares to a specific group of
individuals, venture capitalists, companies, or any other person by any particular company for fund raising.
Note: The preferential issue is neither a public issue nor a rights issue.
(iv) Rights Issue: Issue of shares to existing Equity shareholders in proportion to their existing shareholding.
(v) Private Placement: When a company offers its securities to a small group of investors, it is called private
placement. Such securities may be bonds, stocks or other securities, and the investors can be both
individual and institutional.
Secondary Capital Market

Existing securities are traded i.e bought and sold. Here, transactions take place between various investors.
It provides liquidity to existing securities; reflects the company’s performance.
Types of Secondary Market
Organised Exchange Over - the -Counter

eg - BSE, NSE etc. Exchange
In General, Market is divided as
Forward Market
Spot Market
Derivative trading.
Transactions are completed
on the spot at the prevailing
price.
Delivery is compulsory.
Forward Future Options Swaps
contract contract
Call Put
In this market, contracts are made to buy or sell something in future at a pre-
determined rate and date.
Delivery is not compulsory.
97
Types of Derivatives
(I) Forward - It is a customized contract between two entities, where settlement takes place on a specific date in
the future at pre-agreed price.
(ii) Future - A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price.
(iii) Option - An Option is a contract which gives the right, but not an obligation, to buy or sell the
underlying at a stated date and at a stated price. Options are of two types - Calls and Puts options:
Call options give the buyer the right but not the obligation to buy a given quantity of the underlying asset,
at a given price on or before a given future dates.
Put options give the buyer the right, but not the obligation to sell a given quantity of underlying asset; at a
given price on or before a given future date.
(iv) Swap - These are contracts of forward markets to exchange a commodity or security with another at a
pre- determined ratio & date.
Exchanges in India
I) Bombay Stock exchange (BSE)
It is the oldest stock exchange of Asia.
Established in 1875 as the Native Share and Stockbrokers Association.
> 5000 companies listed.
Indices - BSE Sensitive Index (Sensex)
- BSE - 100
- BSE - 200
- Bankex, etc.
ii) National Stock Exchange
Established in 1992 on the recommendation of Pherwani committee as the most modern stock exchange of the
country.
It was promoted by IDBI & other public sector FIs.
It can be stated that over 1500 companies are listed.
Indices - Nifty (50 companies)
- Nifty Junior.
- S & P 100 etc.
III) Multi Commodity Exchange of India (MCX-SX)

Established in 2003.
It was granted license by SEBI in 2012 to operate as stock exchange.
It offers trading in commodity derivative contracts across varied segments including bullion, industrial metals,
energy and agricultural commodities.
Indices - SX-40.
iv) Over the counter exchange of India Ltd. (OTCEI)
Established in 1990 & became operational in 1992.
Facilitate trade in securities of those companies whose paid up capital is 30 lakhs & above.
98
(v) Regional Stock Exchanges
They serve as a link between the local companies and local investors.
Each regional stock exchange follows its own practice and procedures in respect of listing and trading of
securities, clearing and settlement of transaction, and risk containment measures.
Some examples of Regional Stock Exchanges are – Calcutta Stock Exchanges; Pune Stock Exchange etc.
Securities and Exchange Board of India (SEBI)

Established in 1988 as a Non-Statutory body.
Granted statutory status on the recommendation of Narasimham Committee in 1992 through SEBI Act, 1992.
Functions of SEBI :
(i) Regulation of capital market (Primary as well as secondary market).
(ii) To register and regulate all intermediaries in stock exchanges like share brokers, underwriters, Mutual
Fund etc.
(iii) To check malpractices in stock exchanges.
(iv) To protect investor's interest and to promote investors education and awareness.
Depository Receipt (DR)

A type of negotiable ( transferable) financial security traded on a local stock exchange usually in the form of
equity, issued by a foreign publicly listed company.
The DR, which is a physical certificate, allows investors to hold shares in equity of other countries.
Types (Depending on the location in which these receipts are issued)
If issued in USA If issued in India In General
American Depository Indian Depository Receipts Global Depository Receipts

Receipts (ADRs) (IDR) (GDR)
A certified negotiable Transferable securities to be listed on Any instrument in the form of a

instrument representing the Indian stock exchanges in the form depository receipt created by a
shares of a foreign company of depository receipts created by a foreign depository outside India
issued by an American bank Domestic depository in India against and authorised by a company
that can be traded in U.S. the underlying equity shares of the making an issue of such
financial markets. issuing Company which is depository receipts.
incorporated outside India.
99
Mutual funds (Mfs)
It refers to a pool of money accumulated by several investors who aim at saving and making money through their
investments.
The corpus of money so created is invested in various asset class eg-Debt funds, Equity etc.
Gains and losses are shared by all the investors in accordance with their proportion of contribution to the corpus.
Registered with SEBI.
Exchange Traded fund (ETF)

These are mutual funds listed and traded on stock exchange like shares.
ETFs are created by Institutional investors swapping shares in an index basket for units in the fund.
The Government has latched upon the ETF route to disinvest its holding in public sector undertaking. Eg- Bharat 22
ETF, a fund which houses 22 public sector companies.
Corporate Bond
Corporate bonds are debt securities issued by private and public corporations to raise funds for various purposes
like building new plant, purchasing equipment etc.
An investor who invests in these bonds is lending money to the corporations and in return, gets interest along with
the principal amount.
Investing in corporate bond does not provide ownership in the company unlike investing in equity shares.
Participatory notes (P-Notes)

Participatory notes or P- Notes are financial instruments issued by foreign institutional investors to investors and
hedge funds who wish to Invest in Indian stock markets. These are also called as Offshore Derivative Instruments.
P- Notes, mostly used by overseas High Net Worth Individual (HNI), hedge funds and other foreign institutions, allow
such investors to invest in Indian market through registered foreign Institutional investors (FIIs).
100
Important Associated Terms
Arbitrage
It refers to buying some asset and simultaneously selling it in another market to take advantage of price
differentials.
Angel Investors
They are High Net-Worth Individuals (HNIs), who provide capital for a business start-up, usually in exchange for
convertible debt or ownership equity.
Angel investors usually give support to start-ups at the initial moments and when most investors are not prepared
to back them.
Bear Market
Refers to the market where share prices are continuously declining.
Its downward trend makes investors believe that the trend will continue, which, in turn, perpetuates the
downward spiral.
During a bear market, the economy slows down and unemployment rises as companies begin laying off
workers.
Bull Market
Refers to a market that experiences a sustained increase in market share prices.
It ensures investors that the uptrend will continue over the long term.
It signifies that the country's economy is strong and employment levels are high.
Bonds
The refers to high-security debt instruments that enable an entity to raise funds and fulfil capital requirements.
Bonds are classified into different categories as per the model of return and validities of legal obligations.
Buy- Back of Shares

Under this, the company can buy back a certain percentage of its shares from the market directly.
SEBI has imposed certain restrictions on buy-back.
Derivatives
A derivative is a contract between two parties which derives its value/price from an underlying asset.
The most common types of derivatives are futures, options, forwards and swaps.
Demat/ Dematerialised trading

It is a form of trading in which computer records of transactions are maintained instead of issuing documents like
share certificates, etc.
Demutualization
Separation of ownership, management, and brokerage rights in the stock exchange.
Hedge Fund
It is a private portfolio of investments that uses investment and risk management strategies to generate returns.
It is a relatively aggressive type of fund that is used by high net worth investors.
Insider Trading
It refers to buying/selling of a company shares on the basis of price-sensitive unpublished information.
101
Index
A benchmark that is used by investors and portfolio managers to measure market performance. Nifty and Sensex
are such benchmarks.
Liquidity
It refers to how easily a stock can be sold off. A share that can be sold off quickly i.e. has high trade volumes is
said to be highly liquid.
Over- the-counter market
It is a decentralized market in which market participants trade stocks, commodities, currencies, or other
instruments directly between two parties and without a central exchange or broker.
Net Asset Value

It the company's total assets minus its total liabilities.
NAV per unit is simply the net value of assets divided by the number of units outstanding.
Shares
Shares are the smallest denomination of a company's stocks, indicating a portion of ownership of the company.
Equity Shares
They are long-term financing sources for any company and are issued to the general public and are non-
redeemable in nature.
Investors in such shares hold the right to vote, share profits and claim assets of a company.
Preference Shares
They are generally issued to an investor as a guarantee of the payment of cumulative dividend before returns are
distributed among ordinary shareholders.
However, preference shares do not have any associated voting and membership rights which are provided on
common shares.
Sweat share
A share given to the employees of the company without any charge.
Speculation
It refers to buying and selling of some asset with some time lag in order to make a profit by changes in market
prices in the future.
Underwriting
It involves determining the risk and price of a particular security.
It is a process seen most commonly during initial public offerings, wherein investment banks first buy or
underwrite the securities of the issuing entity and then sell them in the market.
Venture Capital
It is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage,
and emerging companies that have been deemed to have high growth potential or which have demonstrated
high growth.
Copyright @ by Vision IAS

All rights are reserved. No part of this document may be reproduced, in a retrieval system or transmitted in any from
or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of Vision IAS
102
Poverty and Inequality

(UPSC PRELIMS 2024) ECONOMY
103
104
GNI per capita (in current
Group Countries such as
USD, updated March 2024)
Low income < 1,135 Somalia, Afghanistan, Sudan, Madagascar
India (2,390), Bangladesh, Sri Lanka,
Lower-middle income 1,136 to 4,465
Nepal, Pakistan
Argentina, Maldives, Indonesia, China,
Upper-middle income 4,466 to 13,845
Brazil, Iraq
Australia, Japan, Singapore, Seychelles,
High income > 13,846
US, UK
105
269.3 million
106
Total Excluded
Households based on
fulfilling any of the 14
parameters of exclusion
like motorized
vehicle/fishing boat;
Mechanized agricultural
equipment; KCC limit of
over Rs. 50,000/-, etc.
107
108
109
40.6% of the national wealth.
62% of the national wealth.
110
111
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112
India and International Institution

(UPSC PRELIMS 2024)
INDIA & INTERNATIONAL
INSTITUTIONS
After the Great Depression of the 1930s, there was a need to establish a
framework for economic cooperation and development that would lead to
a more stable and prosperous global economy.
Therefore, an international Conference of 44 nations was held Bretton Woods,
New Hampshire, United States in July 1944. This led to formation of
Bretton Woods Twins.
BRETTON WOODS TWINS
INTERNATIONAL MONETARY FUND

WORLD BANK (WB)
(IMF)
113
International Monetary Fund (IMF)
About It was created in 1945.

It is a specialized agency of the United Nations.
Membership 190 countries. India is a founder member of IMF.
Headquarters Washington, D.C.
Governance Structure
Board of Governors Executive Board Managing Director

Every member country It is entrusted with the Head of IMF who is
delegates a management of elected by
representative, usually day-to-day policy the Executive Board
heads of central banks decisions. The Board for a 5 year term
or ministers of finance. comprises 24 executive of office.
directors
Promote international monetary cooperation.

Facilitate the expansion and balanced growth of
international trade.
Primary aims Promote exchange stability.
Assist in the establishment of a multilateral system of
payments.
Make resources available (with adequate safeguards) to
members experiencing balance-of-payments difficulties.
114
1.Keeping track of global economy and the economies of
member countries:
a.Bilateral surveillance
Ensure stability a.Bilateral surveillance – On a regular basis, usually
of global once a year, IMF conducts in depth appraisals of each
monetary member country’s economic situation.
b.Multilateral
b.Multilateral surveillance
surveillance – It carries out extensive
system by:
analysis of global and regional economic trends.
2.Lending to countries with balance of payments difficulties.
3.Giving practical help to members to modernise their
economic policies and institutions.
It is the capital subscriptions that each member countries

contribute to IMF.
It is broadly based on relative position of the member
QUOTAS = country in the world economy.
Weighted
average of
GDP (50%),
Openness Resource Voting Power Access to SDR Allocations
(30%), Contributions Quotas are a key Financing Quotas determine
Quotas determine determinant of Quotas determine a member's share
Economic the maximum voting power in IMF the maximum in a general
Variability amount of financial decisions. Members amount of loans a allocation of SDRs.
resources a get one vote per member can
(15%) and member is obliged SDR100,000 of obtain from the
to provide to the quota plus basic IMF under normal
International IMF. votes, which are the access.
Reserves (5%) same for all
members.
Voting power of a country is based on its quotas. Thus vote

share of:
o U.S. = 17.43%, China’s = 6.40%, and India’s = 2.75%
It is an interest bearing international reserve asset, which can

Special be exchanged for freely usable currencies. It was created by
Drawing the IMF in 1969. SDRs are allocated to the member in
Rights (SDR) proportion to their quota subscriptions. Value of the SDR is
based on a basket of five major currencies:
43.38% 29.31% 12.28% 7.59% 7.44 %

US Dollar Euro Chinese Renminbi Japanese Yen British pound
sterling
115
Criteria for inclusion in the SDR basket:
If the member is one of the top five exporters of the world.
Determined to be “freely usable” currency by the IMF.
The total amount that a country is entitled to draw is

determined by the amount of its quota.
‘Gold tranche’ or ‘Reserve tranche’ -
o It is the borrowing of first 25% of the member’s quota.
Lending by IMF o It can be easily drawn by countries with BOP problems.
o No conditions are attached to such drawings.
o No interest for the first credit tranche is required to be
paid.
o But the repayment has to be done within 3-5 years
period.
Beyond reserve tranche, the credit is available with limits on
its amount and subjected to IMF approval.
External Sector Global Financial

Report Stability Report
PUBLICATIONS
World Economic Fiscal Monitor

Outlook
116
WORLD BANK (WB)
About
It was founded in 1944 as the International Bank for Reconstruction and
Development (IBRD) and was soon called the World Bank.
It has expanded to a group of 5 development institutions called the World
Bank Group.
The term World Bank is used for two organisations – IBRD and IDA.
Headquarters Washington D.C. (USA)
WORLD BANK GROUP (WBG)
International Bank for Reconstruction & Development (IBRD)

(189 Members)
It offers assistance to middle-income and poor, but creditworthy, countries.

It works as an umbrella for more specialized bodies under the World Bank.
It was responsible for the reconstruction of post-war Europe.
International Development Association (IDA) (174 Members)

It was founded in 1960.
It puts greater emphasis on lending to the poorest countries.
These loans come in the form of "credits" and are essentially interest-free.
International Finance Corporation (IFC) (186 Members)
Founded in 1956 to promote private sector investments (foreign and local).

It acts as an investor in capital markets and helps governments to privatize
inefficient public enterprises.
Multilateral Investment Guarantee Agency (MIGA) (182 Members)
MIGA offers insurance against the political risk (turmoil or instability) that an
investment in a developing country may bear.
117
International Centre for Settlement of Investment Disputes
(ICSID) has 165 members (signatory and contracting states).
It facilitates and works toward a settlement in the event of a dispute between

a foreign investor and a local country.
India is not a member to ICSID.
Membership
To become a member, a country must first join IMF.
Membership in IDA, IFC and MIGA are conditional on membership in IBRD.
Organisation Structure:
o World Bank Group is governed through Boards of Governors and Boards
of Executive Directors.
o President of World Bank comes from the largest shareholder (United States)
and members are represented by a board of governors.
IBRD IDA IFC

The International The International The International
Bank for Development Finance
Reconstruction and Association Corporation
Development
MIGA ICSID
The Multilateral The International
Investment Centre for
Guarantee Agency Settlement of
Investment
Disputes
118
INTERNATIONAL BANKS
INTERNA
ASIAN DEVELOPMENT BANK (ADB)
About Five largest Share holders
Established in 1966 to foster economic Australia

growth and co-operation in the region of
Japan
Asia and the Far East. 6.3% 5.8%
India
It is owned by 68 members of whom 49
are from Asian Region.
It is an official UN Observer.
6.4%
15.6%
China 15.6%
Headquarters Manila, Philippines
U.S.A
119
Organisation Setup
President Board of Governors Board of Directors
He is also the ADB's highest policy- The Governors elect

Chairperson of ADB’s making body. 12 members to form
Board of Directors. the Board of Directors.
It comprises of one
Elected by ADB’s representative from
Board of Governors. each member nation.
NEW DEVELOPMENT BANK (NDB)
About
Founded by BRICS Nations (Brazil, Russia, India, China and South Africa).
Formed at the 6th BRICS Summit (Fortaleza, Brazil) in 2014.
Initial authorized capital: US$ 100 billion.
1st chair of the Board of Governors shall be from Russia.
1st chair of the Board of Directors shall be from Brazil.
1st President of the Bank shall be from India.
Headquarters Shanghai, China
Function
To support infrastructure and sustainable development efforts in BRICS
and other underserved, emerging economies for faster development
through innovation and cutting-edge technology.
120
ASIAN INFRASTRUCTURE INVESTMENT
BANK (AIIB)
About
It is multilateral development bank focused on developing Asia, but with
members from all over the world.
It was established by the AIIB Articles of Agreement.
Members: 109 countries
Headquarters Beijing, China.
ORGANISATION
Board of Governors
Board of Directors
It consists of one Governor and one
They are responsible for the direction of
Alternate Governor
the Bank’s general operations
appointed by each member country.
and exercising all powers delegated to
it by the Board of Governors.
AFRICAN DEVELOPMENT BANK (AFDB)
About
It is a financial provider to African governments and private companies
investing in the regional member countries (RMC).
Founded in 1964.
Members
81 Members.
India is a member of AfDB.
Headquarters Abidjan, Cote d'Ivoire.
121
EUROPEAN BANK FOR RECONSTRUCTION
AND DEVELOPMENT (EBRD)
About
Initially focused on former Eastern Bloc. Later, it expanded support to more
than 30 countries from Central Europe to Central Asia.
Founded in 1991.
Members
71 Members.
India joined as the 69th member in 2018.
Headquarters London, United Kingdom.
ISLAMIC DEVELOPMENT BANK GROUP (ISDB)
About
Focused on Islamic finance.
Saudi Arabia is the largest shareholder.
Founded in 1975.
Members
57 Members.
India is not a member
Headquarters Jeddah, Saudi Arabia.
DEVELOPMENT BANK OF LATIN

AMERICA – CAF
About
Also known as Corporacion Andina de Fomento – Banco de Desarrollo de
América Latina.
Founded in 1968
Members
21 Members.
India is not a member.
Headquarters Caracas, Venezuela.
122
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123
THE WTO

THE WTO
The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading nations and ratified in
their parliaments. The goal is to ensure that trade flows as smoothly, predictably and
freely as possible.
FACT FILE
•Location: Geneva, Switzerland

•Established: 1 January 1995
•Created by: Uruguay Round negotiations (1986-94)
•Membership: 164 members representing 98 per cent of world trade
•Budget: 197 million Swiss Francs for 2020
•Secretariat staff: 623
FACT
•Head: Ngozi Okonjo-Iweala
124
•Functions:
– Administering WTO trade agreements
– Forum for trade negotiations
– Handling trade disputes
– Monitoring national trade policies
– Technical assistance and training for developing countries
– Cooperation with other international organizations
WTO MEMBERS AND OBSERVERS
WTO members Others WTO observers
The WTO has 164 members, accounting for 98% of world trade. A total of 25 countries
are negotiating membership.
EVOLUTION OF THE WTO
The WTO’s creation on 1 January 1995 marked the biggest reform of

international trade. It also brought to reality — in an updated form —the
failed attempt in 1948 to create an International Trade Organization. Over
the years, efforts and attempts made by GATT to reinforce and extend the
multilateral system, resulted in the Uruguay Round culminating to the
Marrakesh Declaration and the creation of the WTO (Refer the following
timeline related to the evolution of WTO.)
125
GATT YEARS
1947 1964-67 1986-94

Kennedy Uruguay
GATT
Round Round
1960-61 1973-79 1995
Dillon Tokyo
WTO
Round Round
Number of 123 (the Marrakesh

countries 23 26 62 102 number of Declaration)
members
Transitional Stages
Tariffs & Tariffs & Tariffs, Non-Tariffs
Subjects
covered
Tariffs Anti-dumping Non-Tariffs measures,services,
measures measures, intellectual property,
“Framework” dispute settlement,
agreements creation of WTO etc
WTO SECRETARIAT
– The WTO Secretariat, based in Geneva, is headed by a Director- General.
Note: The Secretariat does not itself have a decision-making role.
– The Secretariat’s main duties are to supply technical support for the various
councils/committees/Ministerial conferences/ developing, to analyze world
trade etc
ACCESSIONS
To join the WTO, a government has to bring its economic and trade policies in
line with WTO rules and negotiate its terms of entry with the WTO membership.
126
DECISION MAKING OF WTO
WTO is a member-driven consensus-based organization. All major decisions in the WTO are
made by its members. A majority vote is also possible but it has never been used in the WTO.
The WTO’s agreements have been ratified by all members parliaments.
Ministerial Conference
General Council General Council
meeting as Trade Policy meeting as Dispute
Review Body Settlement Body
General Council
Appellate Body
Committees on Dispute Settlement Panels
Trade and Environment
Trade and Development
Sub-Committee on Least-
Developed Countries Council for Trade Council for Trade-Related Council for Trade Trade Negotiations
Regional Trade Agreements in Goods Aspects of Intellectual in Services Committee
Balance of Payments Property Rights
Restrictions
Budget, Finance and Committees on Committees on Doha Development
Administration Agenda Negotiations:
Agriculture Trade in Financial
Working parties on Anti-Dumping Practices Services Trade Negotiations
Accession Customs Valuation Committee and
Import Licensing Commitments its bodies
Working groups on
Market Access Working parties on Special Sessions of
Rules of Origin
Trade and technology transfer Domestic Regulation Services Council/
Safeguards
GATS Rules TRIPS Council/
Inactive: Sanitary and Phytosanitary Measures
Dispute Settlement
Subsidies and Countervailing Measures
Relationship between Body/ Agriculture
Technical Barriers to Trade
Trade and Investment Committee/Trade
Trade Facilitation
Interaction between Trade and Development
Trade-Related Investment Measures
and Competition Committee/ Trade
Working party on and Environment
Plurilaterals
State Trading Enterprises Committee
Trade in Civil Aircraft
Plurilateral Committee Negotiation groups on
Information Technology Government Procurement Market Access
Agreement Committee Committee Rules
127
BASIC PRINCIPLES
PRINCIPLES OF THE TRADING SYSTEM
Trade without discrimination: Most Favoured Nation and National Treatment.
Encouraging development and economic reform, more beneficial for less

developed countries - giving them more time to adjust, greater flexibility, and
special privileges.
Promoting fair competition: discouraging "unfair" practices such as export

subsidies and dumping products etc.
Predictability: through binding and transparency.
Free trade: gradually, through negotiation (lowering tariff and non-tariff barriers
through "progressive liberalization").
MOST - FAVOURED NATION

Non - discriminatory treatment between products of WTO Members. But there are some
exceptions to these provisions of MFN, e.g. Special exceptions allowed under FTA, special
access to developing countries, protection against unfair trade practices etc.
NATIONAL TREATMENT
Non-discriminatory treatment between imported and domestic products.
Note: National treatment only applies once a product, service, or an item of intellectual
property has entered the market. Therefore, charging customs duty on an import is not a
violation of national treatment.
128
TIMELINE OF MINISTERIAL CONFERENCE
Geneva, Buenos Aires,

Switzerland 12 10-13 December
-17 June 2022 2017(The Elevent Nairobi, 15-19
(12th Ministerial Ministerial December 2015.
conference Conference TFA
“Geneva package” signed.)
adopted)”
Bali, 3-6
Hong Kong,
December Geneva, 15-17
13-18 Decenber
2013(Key December 2011.
2005.
takeaway: Peace
clause)
Doha, 9-13
November 2001(
DDA,NAMA etc Issue Seattle,
taken up: Public November 30
Cancun, 10-14 stockholding, Special
September 2003. December
and differential
3,1999.
treatment,
Compulsory licensing
etc)
Abu Dhabi, UAE

26 -29 February
Singapore, 9-13 Geneva, 18-20
2024 (13th
December 1996. May 1998.
Ministerial
conference)
129
DDA: DOHA DEVELOPMENT AGENDA
The Doha Round of trade negotiations which began in 2001 remains unfinished
due to differences among members on various issues (Some of them are shown
below.) DOHA
DEVELOPMENT
AGENDA
• Lowering of
agricultural tariffs
G20 EU
(Including
The Doha
India
Deadlock
and
Brazil) Greater market
US
access to industrial • Deeper cuts in domestic
products and services agricultural subsidies
• Accepting lower EU market
access
WHAT IS TRADE FACILITAION AGREEMENT?

The TFA is an agreement that is for expediting the movement, transit, release, and clearance of goods to
enchance global trade. In order for the TFA to enter force, it was necessary for two thirds of the WTO
membership (110 members) to ratify the Agreement. On 22 February 2017, the two-third requirement
was reached (112 members).
BACKGROUND OF TFA
Bureaucratic Unnecassary Restriction

inefficiencies and costs and delays High cost of trade. on global trade
red tape. for trades. growth.
NAMA
NAMA (Non-Agricultural Market Access) refers to all products not covered by the Agreement
on Agriculture. They are sometimes referred to as industrial products or manufactured goods.
It is part of the WTO negotiations in Doha Development Round. It aims to reduce both tariffs
and non-tariff barriers.
130
AGREEMENTS
The WTO oversees about 60 different agreements which have the status of international legal
texts. Some of the most important agreements are as follows:
1. GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

This agreement deals with reduction in trade barrier for goods. Some of the
specific sectors or issues dealt: Agriculture, Health regulations for farm
products (SPS), Textiles and clothing, Product standards (TBT), Investment
measures, Anti-dumping measures, Customs valuation methods, Rules of
origin, Import licensing, Subsidies and counter-measures etc.
GATT EXCEPTIONS AND WAIVERS

The GATT recognized that there are circumstances in which strict adherence to these principles
would be inappropriate.
E.g. measures considered "necessary" to protect public health, provided

General
their application does not constitute arbitrary or unjustifiable
exceptions
discrimination.
Customs Unions Countries that offer each other more favourable treatment within a cutom`s
and Free union or RTA were allowed to waive full adherence to the MFN clause.
Trade
Agreements
Include exceptions related to national security or balance of payment

Others problem; waivers e.g. permissions granted by WTO Members allowing
another Member to not comply with its normal commitments.
2. GENERAL AGREEMENTS ON TRADE IN SERVICES (GATS)

The GATS was inspired by essentially the same objectives as its
counterpart in merchandise trade, GATT. Services negotiations
in the WTO follow the so-called positive list. West is pushing
hard to move from positive list approach to negative list
approach. India is against this concept as it will throw open
almost whole Indian services sector to western multinational
giants. Negotiations in services under GATS are classified in
4modes, interests of different countries depend upon this
classification –
131
Country A Country B
Mode 1: Cross-border supply

Supply (by e-mail; electronic means)
Juridical or Consumer
natural person
For eg. BPO, KPO or
LPO service. Here, it`s
in India`s interest to
push for liberalization
given its large human
resource pool and
Mode 2: Consumption abroad comprtitive IT industry.
Juridical or Supply
Consumer Consumer
natural person
(traveller,enterprise
buying processing
Mode 3: Commercial presence services etc.)
Juridical or Affiliate Supply

natural person established Consumer
Eg: Education Sector,

Medical sector etc. It is
Mode 4: Presence of natural persons in West`s interest to
push for this mode.
Juridical or
Juridical or natural person Supply
Consumer
natural person (self-employed
etc.)
Eg: Visa fee,its term
etc.
3. TRIPS
The TRIPS Agreement plays a critical role in facilitating trade in knowledge and
creativity, in resolving trade disputes over intellectual property. Intellectual
Property comprises 2 distinct forms:
a) LITERARY & ARTISTIC WORKS
b) INDUSTRIAL PROPERTY
(TRIPS contains requirements that nations' laws must meet for copyright
rights; geographical indications, including appellations of origin;
industrial designs; integrated circuit layout-designs; patents;
monopolies for the developers of new plant varieties; trademarks; trade
dress; and undisclosed or confidential information etc.)
4. TRIMS
The Agreement on Trade-Related Investment Measures (TRIMS) states that
WTO members may not apply any measure that discriminates against foreign
products or that leads to quantitative restrictions, both of which violate basic
WTO principles E.g., local content requirements.
132
5. AGREEMENT ON AGRICULTURE
Agriculture Agreement is to reform trade in the sector and to make policies

more market oriented. The agreement does allow governments to support
their rural economies, but preferably through policies that cause less distortion
to trade. It also allows some flexibility in the way commitments are
implemented.
NON-TARIFF MEASURES (NTMS)
Trade-related
intellectual
Property rights Technical barriers
to trade
Subsidies
Sanitary and
phytosanitary
Quantitative measures
restrictions
Government
purchase Trade in
services
133
THREE "PILLARS" OF THE AGREEMENT ON AGRICULTURE
AGREEMENT ON AGRICULTURE (AOA)
MARKET ACCESS DOMESTIC SUPPORT EXPORT COMPETITION

Article 4, 5 and Article 3, 6, 7 and Article 3, and 8-11
Annex 5 Annexes 2, 3, 4
Tariffs: Green Box Export Subsidies
- Tariffication
- Reduction Anti-Circumvention
Commitments Blue Box
- Food aid
- Export credits
Tariffs Rate Quotas Development Box
Amber Box
Special Safeguards
- De minimis
- Commitments
Explicit non-tariff This may result in

barriers were dumping of cheap
removed in most products. Safeguards
cases. like SSM, SP etc
comes into play to
avoid this.
CATEGORIES OF DOMESTIC SUPPORT
Subject to
reduction
EXEMPT FROM REDUCTION commitments
All other
NO/minimal support
Production
effects on Development
limiting
trade or programmes
programmes
production De minimis
Green Box Art. 6.2 Blue Box Amber Box
134
6. THE TECHNICAL BARRIERS TO TRADE AGREEMENT (TBT)
Even though countries’ rights to adopt the standards they consider appropriate, is recognized,
this agreement is to ensure that regulations, standards, testing and certification procedures do
not create unnecessary obstacles.
AGREEMENT ON TECHNICAL BARRIERS TO TRADE

It applies to all goods...
- Technical regulation (mandatory)
- Standards (voluntary)
- Conformity assessment procedures TBT
SPS
But: its provisions do not apply to sanitary or phytosanitary (SPS) MEASURES
THE WTO TBT AGREEMENT
VOLUTARY MANDATORY
Conformity
Assessment
Procedures
Standards Technical
Regulations
Safeguarding the
Avoid unnecessary right of Members to
barriers to regulate for legitimate
international trade objectives
(E.g. human health
and safety, environment
Non-discrimination protection, consumer
protection, quality)
Use of relevant international standards
7. THE SANITARY AND PHYTOSANITARY (SPS) AGREEMENT

It came into effect on January 1, 1995 with the establishment of the World Trade
Organization (WTO). The SPS Agreement is a government-to-government interaction and
applies only to those governmental measures that can affect international trade. It is
concerned with the application of food safety and animal and plant health regulations.
135
ECONOMIC INTEGRATION
Economic integration is an arrangement among nations that typically includes the reduction
or elimination of trade barriers and the coordination of monetary and fiscal policies.
Economic
Market
Common
Market
Custom Union
CECA
FTA
PTA
Specialists in this area define seven stages of economic integration as shown in the diagram.
1. PTA – PREFERENTIAL TRADE AGREEMENT

A preferential trade agreement, is a trading bloc that gives preferential access to certain
products from the participating countries. This is done by reducing tariffs but not by abolishing
them completely. A PTA can be established through a trade pact. It is the first stage of
economic integration where there is a positive list of products on which duty is to be reduced.
Some examples:
• Asia-Pacific Trade Agreement (APTA) : It an initiative of the United Nations Economic
and Social Commission for Asia and the Pacific (ESCAP).
• India-Mercosur Preferential Trade Agreement (PTA)
2. FTA – FREE TRADE AGREEMENT
A FTA is a trade bloc which eliminates tariffs, import quotas, and preferences on most (if not
all) goods and services traded between them. Thus, there is only a negative list on which duty
is not reduced E.g.
• Evolution of SAPTA to SAFTA (South Asian PTA to FTA)
• ASEAN FTA (Trade agreement within the Southeast Asian nations)
136
3. CECA COMPREHENSIVE ECONOMIC COOPERATION AGREEMENT
& CEPA COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT
When the countries go beyond FTA and agree for a greater degree of economic intergration
which includes improving the attractives to capital and human resources, and to expand trade
and investment, it would result in CECA or CEPA.
CEPA has a bit wider scope than CECA as it includes trade in services and investments too.
4. CUSTOMS UNION
An agreement among countries to have free trade among themselves and to adopt common
external barriers against any other country interested in exporting to these countries. Some
examples:
• Southern Common Market – Mercosur
• Gulf Cooperation Council (GCC)
• East African Community (EAC)
5. COMMON MARKET
A type of custom union where there are common policies on product regulation, and free
movement of goods and services, capital and labour.
6. ECONOMIC UNION
An economic union is a type of trade bloc which is composed of a common market with a
customs union. The participant countries have both common policies on product regulation,
freedom of movement of goods, services and the factors of production (capital and labour)
and a common external trade policy.
7. MONETARY UNION
When an economic union involves unifying currency, it becomes an economic and monetary
union. E.g. – Euro!
137
INDIA AND FTAS
• India has long-standing commitment to multilateralism under WTO agreements but in line with
global trends, India has made use of FTAs as a key component of its trade and foreign policy.
• So far, India has mainly focused on partnering with other Asian countries, and in goods more so
than in services (e.g.: Sri Lanka, Afghanistan, Thailand, Singapore, Bhutan, Nepal, Korea, Malaysia and
Japan and regional trade agreements SAFTA and ASEAN).
• More recently India has signed 3 FTAs i.e. India-Mauritius CECPA (implemented in 2022), India-UAE
CEPA (implemented in 2022), India-EFTA FTA (expected to be implemented in 2025)
CONCEPT OF SPAGHETTI-BOWL EFFECT / NOODLE BOWL EFFECT
Concept was propounded by world’s foremost trade economist Prof Jagdish Bhagwati. He
argues that so many FTAs with their differential tariff rates, rules, procedures etc. leads to
complexity and discriminatory trade policy and results in often contradictory outcomes
amongst bilateral and multilateral trade partners.
MEGA-REGIONALISM
Until recently, FTAs were signed mainly bilaterally and regionally but of late PTAs have begun
to transcend into mega-regional agreements, which would encompass a large share of world
GDP and trade. E.g.: TPP, TTIP (trans-Atlantic trade and investment partnership between EU
and USA)
India
Current Bilateral/Multilateral FTA's
Proposed/Suspended Bilateral/Multilateral FTA's
138
Industry Part 1 2024
139
This Act brought under Union's It provides for the constitution
control the development and of Advisory and Development
regulation of a number of Councils to advise the
important industries which was Government of India on
deemed expedient in 'public matters concerning the
interest'. development and regulation of
the Scheduled industries
(mentioned in First Schedule
of the Act)
It also provides for registration, It also enables the union to

licensing and investigation of levy and collect a cess on the
the Scheduled industries. It Scheduled industries.
envisages regulation of Management of any
production, distribution and undertaking can also be taken
prices including prohibition on over.
reducing the production.
140
Under this, indus-
tries which were
government-owned
and in which the
private sector
enterprises were Although these
expected to industries were
Of these, four indus- supplement the left to the
tries viz. arms and efforts of the private sector,
ammunition, atomic government were the sector was
energy, railways and included. kept under state
air transport were to control through
be government a system of
monopolies. In the licenses. No new
remaining thirteen industry was
industries, all new allowed unless a
units were to be license was
established by the obtained from
government or public the government.
sector, but existing
units in the private
sector were allowed
to exist and expand.
Monopolies
Inquiry
commission
It identified high-priority industries where investment from large

industrial houses and foreign companies would be permitted.
The list of industries reserved for small scale sector was

expanded.
141
It was guided by the considerations of capital intensive growth with
employment generation taking a somewhat backseat. Key measures
suggested in the policy were:
Effective Operational Management of the Public Sector to
re-establish its lost credibility
Promotion of Economic Federalism through integrated
industrial development by removing the divisions between small
scale and large scale industries
raised from Rs. 1 lakh to Rs. 2 lakh
142
Removal of Regional Imbalances through dispersal of industries to
backward, rural and urban areas
It simplified the process of regularisation of unauthorised excess
capacity in the private sector. However, for firms falling within the
MRTP Act and Foreign Exchange Regulation Act (FERA), this was not
applied.
For promoting exports, exemption of export oriented units from
MRTP Act and allowing duty free import of capital goods and raw
materials was envisaged.
Specifying that deliberate mismanagement and financial impropri-
ety would not be tolerated, genuine sick units were proposed to be
merged with the healthy ones wherever possible.
143
144
145
146
389
29.2.2024
147
148
149
150
January 2023 4.5% 9% 12.7% 5.8%
January 2024 3.2% 5.9% 5.6% 3.8%
January
2023 9.8% 10.5% 1.4% 11.3% -8.2% 6.5%
January
2024 2.9% 4.1% 4.8% 4.6% 10.9% -0.3%
151
India is the second-largest steel producer globally after China. India has become the 2nd
largest consumer of finished steel in the world after China.
152
The domestic apparel & textile industry in India contributes approx. 2.3 % to the country’s
GDP, 13% to industrial production and 12% to exports. India has a 4% share of the global
trade in textiles and apparel.
India is one of the largest producers of cotton and jute in the world. India is also the 2nd
largest producer of silk in the world and 95% of the world’s hand-woven fabric comes from
India. Total textile exports are expected to reach $65 Bn by FY26 and is expected to grow
at 10% CAGR from 2019-20 to reach $190 Bn by 2025-26.
The textiles and apparel industry in India is the 2nd largest employer in the country provid-
ing direct employment to 45 Mn people and 100 Mn people in allied industries.
153
India’s domestic production has increased at a CAGR of 13% from $49 Bn in FY17 to $101 Bn
in FY23. The country's electronics export is expected to reach $120 Bn by FY26. Electronic
exports have become the 6th largest export commodity group as of Mar 2023
The electronics market in India is valued at $155 Bn with domestic production accounting for
65%. 100% FDI is allowed under the automatic route. In the case of defence electronics, FDI up
to 49% is allowed through automatic route and beyond 49% requires government approval.
India ranks 60 in Network Readiness Index 2023, a jump of 7 ranks from 67 in 2021.
Semicon India Program: It was launched with an incentive outlay of $10 Bn with the
vision to develop a sustainable semiconductor and display ecosystem in the country. This
program will establish India as global hub for semiconductor and display manufacturing,
promote self-reliance, strengthen resilience in global supply chains, and pave the way for
India’s technological leadership in the industry.
India is the 3rd largest energy and oil consumer in the World. India is the 4th largest
importer of liquefied natural gas (LNG).
India consumed 192.7 MMT petroleum products and 55.1 BCM natural gas in Apr-Jan
2024, making a growth of 5.2% and 9.9% over the Apr-Jan 2023.
As on Apr 2022, estimated reserves of crude oil in India stood at 651.77 Mn tonnes, and
natural gas stood at 1138.67 Bn cubic meters.
India has set a target to raise the share of natural gas in the energy mix to 15% by 2030
from about 6.7% now.
154
India increased the ethanol blending in petrol from 1.53% in 2013-14 to 10.17% in 2022 and
advanced its target of 20% ethanol blending in petrol from 2030 to 2025-26. Further, Ethanol
blending with Petrol was 12.2% during Jan 2024 and cumulative ethanol blending during Nov-Jan
2024 was 11.2%. India has set a target of setting up 12 Commercial Scale 2G Bio-Ethanol Projects
with Viability Gap Funding of up to INR 150 Cr per project under the Pradhan Mantri Ji-VAN Yojana.
Target of setting up 5000 Compressed Biogas (CBG) units under the Sustainable Alternative
Towards Affordable Transportation (SATAT) Scheme.
155
156
Smart and Efficient
Revision for Success in
UPSC Prelims
Why Revision is Essential Before Prelims Examination?
scan the QR Code:
To know more and

Revision is crucial in the preparation for the UPSC Prelims due to the vast syllabus and the highly Quick Revision Material
competitive nature of the examination. Effective revision consolidates knowledge, aids in
long-term retention, and boosts confidence, allowing aspirants to access information quickly
and accurately during the exam.
Advantages of Smart Revision Before the Prelims Exam
Efficiency in Enhanced Identification of Integration of Effective Building

Syllabus Retention and Weak Areas Current Affairs Time Management Confidence and
Coverage Recall Reducing Anxiety
Smart Revision Techniques
1. Active Recall: Practice 2. Spaced Repetition: 3. Mock Tests: Regularly 4. Focused Revision:
retrieving information Revisit topics at simulate exam conditions Prioritize high-yield
from memory to regular intervals, to to identify focus areas and topics and current
enhance retention. solidify memory. current status. affairs.
5. Mind Maps: Use visual aids 6. Interleaved Practice: 7. Peer Discussions: Engage
such as infographics, mind Mix different subjects to improve with peers to discuss and
maps, etc. to organize and problem-solving skills and higher quiz each other on key
connect concepts. retention over time. topics.
VisionIAS Quick Revision Classes

Thematic Coverage of GS Prelims Syllabus: Covers essential subjects such as History, Polity,
Economy, Environment, Geography, etc.
scan the QR Code:
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Quick Revision Classes
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Smart Content from QRM: Efficient, comprehensive revision using our Quick Revision Module.
One-to-One Mentorship: Personalized guidance from experienced UPSC trainers and toppers.
Student Portal Access: Live and recorded sessions available through an exclusive portal.
Online Sectional Mini Tests: Regular assessments with detailed feedback for strategy refinement.
Smart revision is key to mastering the UPSC Prelims. By adopting strategic revision techniques and leveraging VisionIAS Quick
Revision Classes, aspirants can enhance their preparation and boost their exam confidence.
157
Industry Part 2
Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover
Manufacturing Investment in Plant and Investment in Plant and Investment in Plant and
Enterprises and Machinery or Equipment: Machinery or Equipment: Machinery or Equipment:
Enterprises Not more than Rs.1 crore and Not more than Rs.10 crore Not more than Rs.50 crore and
rendering Annual Turnover; not more and Annual Turnover; Annual Turnover; not more
Services than Rs. 5 crore not more than Rs. 50 crore than Rs. 250 crore
158
The maximum cost of the project/unit admissible in the manufacturing sector is Rs. 50 lakhs
and in the business/service sector is Rs. 20 lakhs.
the credit facility is available without

third-party guarantee.
SFURTI enables assistance up to Rs 2.5 crore for the development of 'regular' clusters with 500
artisans or less and up to Rs 5 crore for the development of 'major' clusters with more than 500
artisans.
“up to Rs.5 lakh crore” to eligible MSMEs
159
Transfer of risk: Risks are fully appraised early on to
determine project feasibility. Private entities usually
have more experience in cost containment. This allows Unequal distribution of benefits: In public-private
the collaboration to fully appraise and determine the partnerships, the private sector's profit motives can
project feasibility. potentially lead to the prioritisation of financial gains
Realistic objectives: Private partner can serve as a over addressing public needs.
check against unrealistic government promises or
expectations.
160
Under the amended model concession agreement for TOT projects, the frequency of checks has been increased from two
to three times to ensure corresponding changes in the concession period are made upfront in case there is variation in toll
collection while the threshold for checking has been reduced from 20% to 5%.
“The amendments made to the model concession agreements for TOT & BOT are largely positive for the private sector and
bring better clarity on issues related to debt due, capacity augmentation and compensation payable by the authority.
However, whether these changes will give a fillip to BOT projects remains to be seen,” Akshay Purkayastha, director,
consulting, CRISIL Market Intelligence and Analytics said.
The National Highways Authority of India, under MoRTH, aims to bid out 53 projects worth over Rs 2.2 lakh crore and covering
a length of 5200 km.
At present, projects are being awarded on engineering procurement construction (EPC) or hybrid annuity mode (HAM) due
to various challenges in implementation of BOT projects.
The government has taken many initiatives in the past for revival of BOT projects including schemes like harmonious
substitution, one time fund infusion, rationalized compensation, premium deferment and allowing refinancing.
ENGINEERING, PROCUREMENT AND CONSTRUCTION

(EPC) MODEL PARTNERSHIP
161
Labour is the subject under the Concurrent list of Seventh Schedule of the Indian Constitution.
162
163
164
(CSR)
165
166
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meet the demands of the points while reading, then subject, topic, and subtopic for
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Use diagrams, flowcharts, and mind Create a dedicated sec�on and link it Frequently revisit your notes to
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rela�onships between topics. comprehensive understanding. your reten�on.
Use bullet points, headings, and subheadings to structure your notes clearly.
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Designed and developed for smooth understanding, learning, reten�on, and reproduc�on of content in the UPSC Examina�on.
Further, it also facilitates smart and efficient note-making.
Simplified Complex Topics: Makes tough subjects easier and more diges�ble for be�er understanding.
Up-to-date Informa�on: Offers latest, relevant study materials aligned with current exam requirements.
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167
Planning in India
168
And Jawaharlal Nehru was
made the Chairman of the Committee.
Great Depression
169
India adopted centralised planning after independence.
170
171
172
2019
173
Agriculture
AGRICULTURE
INTRODUCTION
Agriculture is the primary source of livelihood for about 58% of

India’s population.
“The share of agriculture in total Gross Value Added

(GVA) of economy has declined from 35% in 1990-91 to
15% in 2022-23”
India ranks first in the world with highest net cropped area
followed by US and China.
174
AGRICULTURE & ALLIED SECTORS
Growth rate of GVA at basic prices in percent
6.16
4.11
3.96
3.51
2011-12 2019-20 2020-21 2021-22

1st Revised Provisional 1st Advance
Estimates Estimates Estimates
8 Overall GDP Agriculture
4
PERCENT
0
1950/51 1985-90 1992-97 1997-02 2002-07
to
1984/85
Fig: Average Annual Growth Rate of GDP and Agriculture in India (at Constant
Prices)
175
% SHARE IN EMPLOYMENT % SHARE IN GVA
15.3 Industry 28.25 27

25.3
21.7
53.33
30.7 Services 49
63
Agriculture
43.9 18.42 14.5
1991 2018 2022 2023
CROPPING PATTERN
It indicates the temporal and/or spatial arrangement of crops in a

particular area. There are different types of cropping patterns depending on the
availability of various factors/resources.
CROPPING SYSTEM
It comprises all cropping patterns grown on the farm and their interaction
with farm resources, other household / farm enterprises, available technology
which determine their makeup and the physical, biological, technological and
sociological factors or environments.
176
MAJOR CATEGORIES OF CROPPING PATTERN FOLLOWED IN INDIA
Kharif (monsoon crops) Rabi (post-monsoon crops)
Non-Rice- Wheat and Rabi-Jowar-

Rice based
Based Gram Based Based
Relay Cropping - seed of Maize- These two Along with

succeeding crops like based crops are Jowar, bajra,
lentil, gram, pea, Bajra-based grown under pulses,
lathyrus,berseem, linseed Cotton- identical oilseeds and
etc. is sown through based climate and tobacco are
broadcasting in maturing can often be grown as
rice crop. It is done in substituted for alternative
both upland and lowland each other. crops.
rice culture.
Mixed varietal cropping
of rice - Mixing the seeds
of early rice (ahu) with
late maturing deep water
rice (bao).
It is mainly practiced in
West Bengal.
CROPPING SYSTEM
Planting arrangements in time and space on a piece of land, and associated
crop management techniques.
1. CROP SUCCESSION
More than one year
• Monoculture
• Rotation
• Fallow Cropping
2. CROPPING PATTERN
One Year
177
2A. SINGLE CROPPING 2B. MULTI CROPPING
One crop, one piece of land More than one crop, one
• Tree crop planting pattern piece of land
• Annual crop spatial pattern
SEQUENTIAL CROPPING INTERCROPPING
Growing two or more crops Growing two or more

convectively crops simultaneously
• Double crop • Mixed crop
• Triple crop • Row inter-crop
• Relay crop • Strip crop
• Cover crop • Multi storey-crop
3. CROP MANAGEMENT TECHNIQUES

Actions on piece of land
• Irrigation
• Soil tillage
• Harvest
• Varieties
• Weed control
• Fertilizer application
MIXED CROPPING VS INTERCROPPING
MIXED CROPPING INTERCROPPING
• Aimed to minimize the risk of • Aimed to increase productivity

crop failure. from unit area.
• Seeds of different crops are • Seeds are not mixed.
mixed together before sowing. • Crops can be sown at the same or
• All the crops are sown at the different time.
same time. • Different crops are grouped in
• Crop sowing is random. different rows or columns.
• Pest control is relatively difficult. • Pest control is relatively easier.
• Equal emphasis is given to all the • More emphasis is given to main
crops. crops.
• Same fertilizer and pesticide is • Specific fertilizer and pesticide is
applied to all crops. applied to each crops.
178
CROPPING INTENSITY
It refers to number of crops cultivated in a piece of land per annum is cropping

intensity.
Cropping Intensity = Gross Cropped Area / Net Sown Area x 100
Gross Cropped Area (GCA) is the total area sown once as well as more than
once in a particular year. On the other hand, Net Sown Area is the area sown
with crops but is counted only once.
RECENT TREND IN AGRICULTURE SECTOR
Dominance of food crops over non-food crops.
Dominance of cereals among food crops.
Decline in coarse cereals.
Declining importance of Kharif crops (Reason: The Kharif crops are more
monsoon dependent than Rabi crops).
Declining share of Agriculture in India’s GDP (50% of GDP in the 1950s to

less than 20 % in the current times).
Increasing Trend in Horticultural and Floricultural Output.
Expansion of Trade in agricultural products.
Growing trend of institutionalization of agricultural credit.
Growing Volume of Subsidies (in respect of fertilizer, irrigation and electricity

charges etc.).
179
ORGANIC FARMING
Organic production is a holistic system designed to

optimize the productivity and fitness of diverse
communities within the agro-ecosystem, including
soil organisms, plants, livestock and people.
PRINCIPAL EFFECT
• Crop rotation. • Reduced soil loss.
• No agrochemicals. • Lower energy use.
• No GMOs. • Lower water consumption.
• No synthetic fertilizers. • Improved soil water
• Organic fertilizers. holding capacity.
• Reducing the use of non - • Increased soil organic
renewable resources. matter.
• Use of local resources. • Larger floral, faunal and
microbiological
biodiversity.
Fig: The main principles and effects of organic farming.
“India is home to around 55 per cent of the total organic producers in

the world, and accounts for 4.7 million hectares of the total global
organic cultivation area of 96.4 million hectares, according to the World
of Organic Agriculture 2024 report”.
ISSUES
• Multiple certification systems: These are not only cumbersome and
time-consuming, but also expensive.
• Expensive organic produce discourages customers, affects sales.
• Productivity dips in the beginning, making transition process more

difficult.
180
HYDROPONICS
Hydroponics is the method of growing plants without soil, using mineral nutri-
ent solutions in water. Plants are suspended with their roots submerged in water
that contain plant nutrients. The roots absorb water and nutrients, but do not
perform the anchoring function. Therefore, the plants must be mechanically
supported from above.
• The core elements required are: Fresh water, Oxygen, Root Support, Nutrients,
Light.
IMPORTANCE OF HYDROPONICS
• Conservation of water and nutrients
• Controlled plant growth; In deserts and
• In deserts and arctic regions, hydroponics can be an effective alternative
method.
ADVANTAGES
• Grow Anywhere
• Higher Yields
• Need fewer Resources
• Easy troubleshooting etc.
181
AEROPONICS
The aeroponic system is the high-tech type of hydroponic gardening. The

growth medium in this type is primarily air. The roots hang in the air and
are misted with nutrient solution. The misting is usually done for every few
minutes, as roots will dry out rapidly if the misting cycles are interrupted.
AQUAPONICS
Aquaponics is a system of a combination of conventional aquaculture with

hydroponics in a symbiotic environment, in which plants are fed with the
aquatic animals’ excreta or wastes. These wastes are broken down by nitrifying
bacteria initially into nitrites and later into nitrates that are utilized by the plants
as their nutrients. Thus, the wastes are utilized and water is recirculated back to
the aquaculture system.
Plant removes Nutrient rich

nitrates from water
the water
Clean water
Pump
182
HORTICULTURE
Horticulture is a branch of agriculture that deals with cultivation of fruits,

vegetables, and ornamental plants.
There are four main classes of horticulture:
(i) Pomology (fruit farming),
(ii) Olericulture (vegetable farming),
(iii) Floriculture (flowers farming),
(iv) Landscape gardening.
ZERO BUDGET NATURAL FARMING
It (ZBNF) is a natural farming technique, developed by Subhash Palekar, in

which farming is done
without use of chemicals which reduces the cost of production down to zero due
to utilization of all the natural resources available in and around the crops.
The Andhra Pradesh government is supporting the ZBFN movement of the
farmers and has planned to become the First State to become “100% Natural
Farming State” by 2024.
THE FOUR ELEMENTS OF ZERO BUDGET NATURAL FARMING
BEEJAMRUTHAM JEEVAMRUTHAM MULCHING WAAPHASA

Seed treatment Ensuring soil Trees, cover crops, Water vapour
with cow dung and fertility through and crop residues. condensation for
urine based cow dung, and better soil
formulations. cow urine based moisture.
concoctions.
183
CONSERVATION AGRICULTURE
CA is a farming system that can prevent losses of arable land while

regenerating degraded lands. It conserves natural resources, biodiversity
and labor. Here, Zero/ Minimal tillage is combined with intercropping
and crop rotation.
Minimum soil Permanent soil cover: Crop rotation or

disturbance crop residue or live mulch intercropping
Fig: Three principles of Conservation agriculture.
IS CONSERVATION AGRICULTURE ORGANIC?
Conservation agriculture and organic farming both maintain a balance between

agriculture and resources, use crop rotation, and protect the soil’s organic
matter. However, the main difference between these two types of farming
is that organic farmers use a plow or soil tillage, conservation
agriculturists use natural principles and do not till the soil.
KEY DIFFERENCES BETWEEN NATURAL FARMING AND

ORGANIC FARMING
NATURAL FARMING ORGANIC FARMING

• No external fertilizers are added to • Organic fertilizers and manures
soil. are added to farmlands.
• No plowing, no tilting of soil and • It requires basic agro practices like
no fertilizers, and no weeding is plowing, tilting, weeding, etc. to be
done. performed.
• It is an extremely low-cost farming • It is still expensive due to the
method, completely molding with requirement of bulk manures, and
local biodiversity. it has an ecological impact on sur
rounding environments.
184
SUSTAINABLE AGRICULTURE
A farming system that is "capable of maintaining their productivity and

usefulness to society indefinitely and must be resource-conserving, socially
supportive, commercially competitive, and environmentally sound."
Soil and water

conservation
Efficient use of Natural processes

limited irrigation to control
water weed
Major components
of sustainable
agricultural system
Crop rotations Integrated pest

management
Integrated nutrient
management
185
AGRICULTURAL MARKETING
It refers to all the activities, agencies and policies involved in the

procurement of farm inputs by the farmers and the movement of agricultural
produce from the farms to the consumers.
The Indian ICAR includes three important functions involved in agricultural
marketing, namely
• Assembling (concentration)
• Preparation for consumption (processing) and
• Distribution.
TYPES OF AGRICULTURAL MARKETING IN INDIA
Traditional Marketing Cooperative Emerging Models of

Methods Marketing Method Agri Marketing
Here, the produce is Agriproducts are eg:
directly sold by the directly purchased from 1. National Agriculture
farmers involving farmers through Market (eNAM)
number of marketing network of 2. Farmer Producer
intermediaries. Close to NAFED, thus Organizations
50% of the agricultural eliminating middlemen. 3. Contract Farming
produce in India is sold 4. Commodity and
via these channels. Future Market
Agricultural Produce Market Committee (APMC)
Agricultural Produce Market Committee (APMC) is a statutory market

committee constituted by a State Government in respect of trade in certain
notified agricultural or horticultural or livestock products, under the APMC Act.
Agriculture is a ‘state’ subject. Therefore, numerous mandis under various

APMC laws of states exist where first sale of notified commodity happens.
The Ministry of Agriculture and Farmers' Welfare made attempts to overhaul

the regulatory system by proposing the Model APMC Act, 2003 and Model
State/UT Agricultural Produce and Livestock Marketing (Promotion &
Facilitation) Act, 2017.
186
AGRICULTURAL RESEARCH AND EXTENSION
The agricultural extension is helpful in transferring relevant knowledge

and information to farmers as well as in translating policy directions into
action.
EDUCATION
FARMERS
RESEARCHER EXTENSION
Fig: Agricultural extension as part of Agricultural Knowledge System/Agricultu-

ral Knowledge Information System.
AGRICULTURE RESEARCH SPENDING

3.06
1.82
(As of % of Agri GDP)
1.20
0.62
0.30
INDIA CHINA US BRAZIL SOUTH

AFRICA
Fig: Agriculture Science and Technology Indicators (ASTI) data reveal that India
currently spends 0.30 per cent of agriculture GDP on agricultural research.
187
HISTORICAL BACKGROUND OF AGRI. RESEARCH AND EXTENSION
• The history dates back to 1880 with the establishment of Department of

Agriculture in each Indian province.
• Later, in response to the Montagu-Chelmsford Reforms in 1919, the Imperial
Agricultural Research Institute (IARI) was established to foster Agri
research and education.
• Agricultural extension in the post-Independence era was largely the func-
tion of State Departments of Agriculture.
• The Indian Council of Agricultural Research (ICAR) began its participation in
agricultural extension through National Demonstrations in 1964.
• In 1970’s, transfer of research and education to State Agricultural Universities
(SAUs), World Bank sponsored Training and Visit System (T&V), the launch of
Krishi Vigyan Kendras (KVKs) by the ICAR etc. were some of the important
steps taken.
• The government introduced the Agricultural Technology Management
Agency (ATMA) in 1998 to push more Agri extension.
• The establishment of Agri-Clinics and Agri-Business Centers (AC & ABC)
Scheme was to support private sector initiatives in extension.
The Department of Agricultural Research and Education

(DARE) was established in the erstwhile Ministry of
Agriculture (currently Ministry of Agriculture and Farmers'
Welfare) in December 1973. DARE coordinates and promotes
agricultural research and education in the country. Department of Agricultural Research
and Education
The Indian Council of Agricultural Research (ICAR) was

established in 1929 as a registered society under the
Societies Registration Act, 1860. It is an autonomous
organization under the DARE. The ICAR has played a
pioneering role in ushering Green Revolution.
188
ANIMAL HUSBANDRY AND ALLIED SECTOR
Animal husbandry is the branch of agricultural

sciences that deals with the study of various
breeds of domesticated animals and their
management for obtaining better products and
services.
STATUS
“THE OF ANIMAL REARING
CONTRIBUTION IN INDIA
OF LIVESTOCK IN TOTAL AGRICULTURE AND
ALLIED SECTOR GVA (AT CONSTANT PRICES) HAS INCREASED FROM
• The contribution
24.32PER of livestock
CENT (2014-15) in total agriculture
TO 30.13PER and allied sector GVA
CENT (2020-21)”.
(at constant prices) has increased from 24.32per cent (2014-15) to
30.13per cent (2020-21)”.
• “Livestock sector contributed 4.90per cent of total GVA in 2020-21”.
• India is the highest livestock owner of the world.
• As per the 20th Livestock Census, the total Livestock population is 535.78
million in the country showing an increase of 4.6% over Livestock
Census-2012.
• The number of usually working persons engaged in Animal production, Mixed
Farming, Fishing and Aquaculture are in descending trend correspondingly
(2017-2018 data).
The Livestock Census is the main source of Livestock data in the country. It is
conducted across the country periodically since 1919. It usually covers all
domesticated animals and head counts of these animals are taken. So far, 20
Livestock Censuses were conducted in participation with State Governments and
UT Administrations.
Note: Department of Animal Husbandry & Dairying releases this census.
189
CONTRIBUTION OF MILK LIVESTOCK POPULATION 2019 -
PRODUCTION BY COW, SHARE OF MAJOR SPECIES
BUFFALO AND GOAT IN 2018-19
GOAT, 3% EXOTIC COWS, 1% PIG OTHERS

1.69% 0.23%
NON-DESCRIPT CROSSBRED
BUFFALO, 14% COWS, 26%
GOAT CATTLE
27.80% 35.94%
SHEEP
INDIGENOUS
INDIGENOUS 13.87% BUFFALO
COWS, 10% 20.45%
BUFFALO, 35%
NON-DESCRIPT
COWS, 11%
Contribution of milk production by cow,

buffalo and goat in 2018-19.
LIVESTOCK POPULATION, 2012 & 2019 OF MAJOR STATES
80.0
68.7 67.8
70.0
57.7
60.0 56.8
50.0
In million
40.6
40.0 36.3 37.4 36.5
32.9 34.0
29.4 32.5 33.0 32.6
30.3 29.0
30.0 26.7 27.7 27.1 26.9
20.0
10.0
0.0
Uttar Rajas- Madhya West Bihar Andhra Mahar- Telan- Karn- Gujarat
pradesh than Pradesh Bengal Pradesh ashtra gana ataka
Livestock Census 2012 Livestock Census 2019
190
MAJOR CROP AREAS
Rice
Wheat
Jowar(Sorghum)
Bajra(millet)
Forest and Scrub
Sparse vegetation
Areas with two predominate crops
Fig: Major Agricultural Regions or Zones of India
191
AGRICULTURE MAP (COMMERCIAL CROPS)
Sugarcane
Cotton
Jute
Tea
Coffee
192
Smart and Effective
Notes Making for UPSC CSE
Principles and Strategies
Why Notes Making?
Note-making for the UPSC exam is a strategic tool that significantly enhances an aspirant's ability to understand, retain, and
revise the vast curriculum effec�vely. This personalized study aid helps in breaking down complex topics into diges�ble pieces,
facilita�ng easier recollec�on and efficient last-minute revisions.
Principles of Notes Making

Personalize Notes: Understand your learning style for effec�ve customiza�on which should be
prepared in an integrated manner for both Prelims and Mains examina�on.
Format Choice: Opt for digital, handwri�en, or a hybrid approach based on learning ease.
Summariza�on and Organiza�on: Condense passages, use bullet points for clear organiza�on.
Current Affairs Integra�on: Enhance note relevance by integra�ng current affairs with sta�c topics. Scan to access
Essential Learning
Language Precision: Emphasize keywords, concepts, and examples; avoid complete sentences. Resources.
Smart Strategies for Effective Notes Making

Reliable Sources Summarize and Organize Link to the UPSC Syllabus
Choose reputable sources that Highlight or underline important To ensure easy referencing of
meet the demands of the points while reading, then subject, topic, and subtopic for
examina�on. summarize these in your own words. efficient exam prepara�on.
Integrate Visual Aids Current Affairs Regular Revision

Use diagrams, flowcharts, and mind Create a dedicated sec�on and link it Frequently revisit your notes to
maps to visualize complex to corresponding sta�c topics for a reinforce your memory and improve
rela�onships between topics. comprehensive understanding. your reten�on.
Use bullet points, headings, and subheadings to structure your notes clearly.
VisionIAS Smart Quality Content

Designed and developed for smooth understanding, learning, reten�on, and reproduc�on of content in the UPSC Examina�on.
Further, it also facilitates smart and efficient note-making.
Simplified Complex Topics: Makes tough subjects easier and more diges�ble for be�er understanding.
Up-to-date Informa�on: Offers latest, relevant study materials aligned with current exam requirements.
Analy�cal Skills Development: Boosts essen�al cri�cal and analy�cal thinking through quizzes.
Resource Op�miza�on: Uses infographics & smart presenta�ons for more efficient �me and resource Scan to know more,
explore, and integrate
u�liza�on.
the Smart Quality
Enriched Presenta�on: U�lizes thema�c colors and tables for fast informa�on iden�fica�on and recall. Content in your learning.
193
Food Processing Industry DELIVERY
QUICK REVISION MODULE ( UPSC PRELIMS 2024)
FOOD PROCESSING
INDUSTRIES & PDS
FOOD PROCESSING INDUSTRIES
Include a variety of operations by which the raw foodstuffs are
made into products which are suitable for consumption, cooking,
or storage.
PRIMARY SECONDARY TERTIARY

PROCESSING PROCESSING PROCESSING
Cleaning, grading, Basic value addition. High value addition

powdering and refining E.g.- tomato-puree, products.
of agricultural produce. ground coffee, processing E.g.- jams, sauces, biscuits
E.g.- grinding wheat into of meat products. and other bakery products
flour. ready for consumption.
194
SUPPLY CHAIN OF THE
FOOD PROCESSING SECTOR
A supply chain is a network between suppliers (farmers) of raw material, company
(food processor) and distribution network to market the finished products.
INPUTS PRODUCTION PROCUREMENT PRIMARY SECONDARY TERTIARY

& STORAGE PROCESSING PROCESSING PROCESSING
UPSTREAM DOWNSTREAM
REQUIREMENTS REQUIREMENTS
Accessibility to raw materials. Latest processing techniques.

Modern extraction techniques. Latest processing machinery.
Good linkages with farmers. Quality testing facilities.
Storage facilities for raw materials Organized retail stores for faster
like Grains, Meat, and Fish. distribution.
Quality testing facilities.
Transport facilities.
195
LOGISTICS
It includes overall process of managing how the resources are acquired, stored, and
transported to their final destination.
INBOUND LOGISTICS OUTBOUND LOGISTICS
They are related to the upstream They are related to the downstream
activities. operations.
They include all the movement of the It involves all the movement of the
product before manufacturing, i.e. product once it is a finished good to
receiving materials, storing them various markets.
and the manufacturing processes.
LINKAGES
They measure the capability of an industry to generate demand for the products
of/in the other industries.
BACKWARD SIDEWAYS FORWARD

LINKAGES LINKAGES LINKAGES
It is linked with the
use of byproducts and
The connectivity of the waste products of the The connectivity of FPIs
FPIs with sources of raw main base industrial with the markets through
material supply. E.g., activity. distribution network
supply of raw material comprising of physical infra
like tomatoes to a For example: the like storages, road and rail
ketchup manufacturer. byproducts and wastes network, etc.
can be used further in
production of fuel,
biofuels, paper.
196
FOOD PROCESSING INDUSTRY
AND ECONOMIC DEVELOPMENT
Attracted FDI 15 times

100% FDI expansion in
is allowed worth INR
500 billion domestic
in the processing
sector. in the last
nine years. capacity since
Contribution Contributio Seventh

to agri n to GVA largest
exports is 23 stands at exporter of
percent, up 1.8 per agricultural
from 13 cent. and
197
GOVERNMENT SCHEMES RELATED
TO FOOD PROCESSING SECTOR
PM KISAN SAMPADA YOJANA (PMKSY)
A. Key Features of the scheme:

1.To support financial, technical and business support for setting up /
upgradation of micro food processing enterprises.
2.Total outlay – 10,000 Cr, to support 2 lakh micro food processing
enterprises.
INTEGRATED CREATION / INFRASTRUCTURE

MEGA EXPANSION OF
FOOD COLD CHAIN & FOOD PROCESSING FOR AGRO-
VALUE ADDITION & PRESERVATION PROCESSING
PARKS INFRASTRUCTURE CLUSTERS
CAPACITIES
CREATION FOOD SAFETY HUMAN

OF BACKWARD & QUALITY OPERATION
RESOURCES &
& FORWARD ASSURANCE GREENS
INFRASTRUCTURE INSTITUTIONS
LINKAGES
PM KISAN SAMPADA YOJANA (PMKSY)
B. Major achievements of the scheme (till Dec, 2023):

1.Beneficiaries: 61,796 individuals, 34 FPOs, 433 SHGs and 19 Producer
Co-operative Societies.
2.Most SHGs beneficiaries: Bihar (176)
3.Most FPOs beneficiaries: Karnataka and Tamil Nadu (7 each)
198
VALUE ADDED
PRODUCTS CC CC s: Collection Centres.
PPC FARMER Aggregation Points.
1 CC GROUPS
DOMESTIC SALES
& PRODUCTS CC PPCs: Primary Processing
Centres.
Pre-cooling, Grading &
CC Sorting, waxing, packing,
MEGA PPC SELF HELP Temporary Storage. Supply
FOOD 2 CC GROUPS
PARK to CPC or direct market.
CC
CPC: Central Processing
Centres.
FRESH CC Core, Basic Enabling,
PRODUCTS PPC Non-core infrastructure,
3 CC FARMERS
SDF sheds, Processing
DOMESTIC CC units.
RETAIL SALES
PM FORMALISATION OF MICRO FOOD

PROCESSING ENTERPRISES SCHEME (PMFME)
TOTAL OUTLAY: RS. 10,000 CRORE

2,00,000 FPOs/SHGs/Cooperatives and working micro enterprises to be
directly benefitted
Expected to generate 9 lakh skilled and semi-skilled jobs
To be implemented over a 5-yr period from 2020-21 to 2024-25
Cluster apporach.
Focus on Perishables.
199
OPERATION GREENS
It was announced in the budget speech of Union Budget 2018-19 on the line of
“Operation Flood.” Initially it was only limited to TOPs (Tomato, Onion and Potato).
But now it has been transformed from TOPs to TOTAL to cover other fruits and
vegetables. The scheme has two-pronged strategy:
SHORT TERM STRATEGY - PRICE STABILISATION MEASURES

NAFED will be the Nodal Agency. MoFPI will provide 50% of the subsidy on
transportation and storage facilities for TOP crops.
Market Intelligence and Early Warning System (MIEWS) Portal for monitoring
prices, generating alerts and disseminating relevant information related to TOP
crops.
LONG TERM STRATEGY - INTEGRATED VALUE CHAIN
DEVELOPMENT PROJECTS
Formation and capacity building of FPOs, quality production, post-harvest
processing facilities, agri-logistics, etc.
200
OTHER SCHEMES
NIVESH BANDHU
DISTRICT
LEVEL RESOURCES
OF AGRI HORTI
It is the investor facilitation portal under the PRODUCTION
Ministry of Food Processing Industries.

LATEST
The portal is a one stop solution to all the FOCUS
SECTORS UPDATE
ON FOOD
investors who are looking to invest in India PROCESSING
SECTOR
in the food processing sector.
STATE
POLICIES PUBLICATIONS
MODERNIZATION OF ABATTOIRS
Objective of the scheme is to modernise existing abattoirs or establish modern

abattoirs under PPP mode with the involvement of local bodies (panchayats or
municipalities).
TRIFOOD PROJECT
Ministry of Tribal Affairs, Ministry of FPI along with TRIFED have initiated the
project.
It aims to enhance the income of tribals through better utilization and value
addition to the Minor Forest Produce (MFP) collected by the tribal forest gatherers.
201
PDS - FOOD DISTRIBUTION
& MANAGEMENT
The Public distribution system (PDS) is a food security system established under
the Ministry of Consumer Affairs, Food, and Public Distribution.
Provide essential Insulate

consumer goods at consumers from
cheap and subsidized impact of
prices. rising prices.
OBJECTIVES
Indirect check
on the open Maintain the
market prices of minimum nutritional
various items. status.
PUBLIC DISTRIBUTION SYSTEM (PDS)
CENTRAL GOVERNMENT STATE GOVERNMENTS

On behalf of central They undertake operational
government, Food Corporation responsibilities like allocation
of India (FCI), undertakes within the State, identification of
procurement, storage, transportation eligible families, issue of Ration Cards
and bulk allocation of food grains and supervision of the functioning
to the State Governments. of Fair Price Shops (FPSs) etc.
202
FARMER STATE BENEFICIARY
GOVERNMENTS
Sells the
produce to FCI Distribution End
at Minimum of commodities user.
Support Price to FPS.
FCI FAIR
(MSP). PRICE
Allocation to SHOPS (FPS)
state governments Sale of
at Central Issue commodities
Price (CIP). at CIP to the
beneficiaries.
NOTE:
Presently, the commodities included under the PDS are wheat, rice, sugar
and kerosene.
Some States/UTs also distribute additional items such as pulses, edible oils,
iodized salt, spices, etc.
203
EVOLUTION OF PDS IN INDIA: 1930S TO PRESENT
2001-PUCL 2013-
1940s- 1997- 2000- 200- National
TPDS Antyodaya vs. UoI Case
PDS PDS Control SC declared Food
General Revamped Anna Yojana Order Security Act
PDS to Target "poorest To administer “right to food” To provide
entitlement target poor as fundamental
scheme of the poor" TPDS right to food
households right to the poor
FOOD CORPORATION OF INDIA (FCI)
FCI is a statutory organisation set up in 1965

under Food Corporation Act 1964.
FCI is mandated with three basic objectives:
1. Provide effective price support to the farmers.
2. Procure and supply grains to PDS for distributing to
economically vulnerable sections of society.
3. Maintain a strategic reserve to stabilize market
(for basic food grains).
204
NATIONAL FOOD SECURITY ACT, 2013
It marks a paradigm shift in approach to food security – from welfare to rights

based approach.
Key Features of the Act:
About 67% of total population (75% of rural and 50% of urban population)
is covered.
Special focus on nutritional support to pregnant women, lactating mothers
and children up to 14 years.
Ration cards are issued in name of the eldest woman the household.
State Governments has responsibilities to identify households within 365 days
of the passage of the act.
Food security allowance, if concerned state government is not able to
provide the food grain.
205
GOVERNMENT SCHEMES
TARGETED PUBLIC DISTRIBUTION SYSTEM (TPDS)
Targeted households are entitled to 5kg food grains per person per month at
following rates - coarse grains (Rs.1 per kg), wheat (Rs.2 per kg) and rice
(Rs.3 per kg).
Joint operational responsibility of Central and State/UT Governments.
End retail price is fixed by States/UTs.
Intended beneficiaries: All India coverage of up to 75% of the rural population
and 50% of the urban population.
ANTYODAYA ANNA YOJANA (AAY)
It covers poorest of the poor families from amongst the BPL families covered
under TPDS.
It is a part of NFSA and the households are entitled to 35 Kg of food-grains
per month.
States/UTs are required to bear the distribution cost, including margin to dealers
and retailers as well as the transportation cost.
Intended beneficiaries:
Landless agriculture labourers, marginal farmers, rural artisans persons earning
their livelihood on daily basis in the informal sector.
Households headed by widows or terminally ill persons/disabled persons/persons
aged 60 years or more with no assured means of subsistence or societal support.
All primitive tribal households.
All eligible Below Poverty Line (BPL) families of HIV positive persons.
206
INTEGRATED MANAGEMENT OF PDS
It is a central sector scheme with following objective:

To integrate PDS system of States/UTs with Central System.
Introduction of National Portability: Provide the option to PDS beneficiaries to
lift their entitled food-grains from the Fair Price Shops (FPS) of their choice at
the national level.
ONE NATION, ONE RATION CARD
Intra-State and Inter-State Portability: Beneficiary will be able to buy subsidized

food grains from any FPS across the country using their existing/same ration
card that is Aadhaar linked.
207
ISSUES RELATED TO PDS IN INDIA
Improper Lack
targeting and issue Leakages of storage
of ghost beneficiaries. and diversion capacities.
Import burden Burden of Issues reagarding

during shortfall in subsidy has Aadhar authentication
domestic procurement. increased. of beneficiaries.
MINIMUM SUPPORT PRICES (MSP)
It is a form of market intervention by the Government of India to insure agricultural

producers against any sharp fall in farm prices.
Commission for Agricultural Costs and Prices (CACP), an attached office of Ministry
of Agriculture and Farmers Welfare, recommends the MSPs of 23 commodities to
the government:
7 CEREALS 5 PULSES
Paddy, Gram,
wheat, tur,
maize, moong,
sorghum, urad,
pearl millet, lentil/
barley and Masur.
ragi.
7 4 COMMERCIAL
OILSEEDS CROPS
Groundnut, rapeseed/mustard, Copra, sugarcane, cotton

soyabean, seasmum, sunflower,
and raw jute.
safflower, nigerseed.
208
MSPs are fixed by the government, each year, after taking into account the
recommendations of the CACP.
FACTORS CONSIDERED WHILE RECOMMENDING THE MSPs
Cost of Changes in Input-output Trends in

production input prices price parity market prices
Demand Inter-crop Effect on Effect on

and supply price parity industrial cost cost of living
structure
Effect on Parity between Effect on

International prices paid and issue prices and
general price price situation prices received by implications for
level the farmers. subsidy
NOTE: In addition to the MSP announced by the Central Government, the State
Governments also declare a bonus, over and above the already declared MSP so as
to promote agriculture practices in their respective States.
MISCELLANEOUS:
Procurement Prices - These are higher than MSP and are meant essentially for the
purchase of quantities needed by the Government to maintain its PDS and for
building up the Buffer Stock.
Central Issue Prices - These indicate prices at which the Government supplies food
grains through Fair Price shops and ration depots.
209
Infrastructure Part 1

INFRASTRUCTURE PART-1
INFRASTRUCTURE
What is Infrastructure?
Infrastructure is the basic facilities i.e. physical and organizational structures and
facilities that are required for the operation of a country, city, or an area. Without
infrastructure facilities, such as power, transport, telecommunications, sanitation,
etc. either economic production will suffer or the quality of life will deteriorate. One
could thus view these activities as essential inputs to the economic system.
210 www.visionias.in Vision IAS 1

Types of Infrastructure
Classification I
• Soft Infrastructure
◦ Consists of institutions that usually require human capital and help deliver certain services
to the population.
◦ Examples: Hospitals, Banks, Schools, Colleges and Judiciary
• Hard Infrastructure
◦ Includes physical systems that is necessary to run a modern, industrialized nation.
◦ Examples: roads, highways, bridges, vehicles, oil rigs/refineries etc.
• Critical Infrastructure
◦ Assets defined by the government as being essential to the functioning of a society and
economy.
◦ Examples: Telecommunications, space, defense etc.
Social Infrastructure
Social Infrastructure Economic Infrastructure
It helps the economic system from outside. It helps the economic system from inside.
i.e. indirectly) (i.e. directly)
It improves the quality of human resources. It improves the quality of econominc
Expenditure on it, will raise the stock of resources.
human capital. Expenditure on it, will raise the stock of
For example, health, education and housing. physical capital.
For example, energy, transport and
communication.
www.visionias.in Vision IAS 2 211

Significance of Infrastructure
Increases the productivity of the factors of production
Improves the quality of life and life chances.
Improvements in water supply and sanitation reduces morbidity caused

by waterborne diseases.
Social infrastructure increases the quality of life of workers, thereby

increasing their efficiency.
Better means of transport and communication, robust system of banking

and finance generates better inter-industrial linkages.
Railways
• Indian Railways is the fourth largest network in the world (lengthwise).

• It is also the largest passenger and fourth largest freight transporting railway system globally.
• However, the modal share of railways in the transportation of surface freight has declined
from 86.2 per cent in 1950-51 to 33 per cent in 2015.
212 www.visionias.in Vision IAS 3

Recent Initiatives
• National Rail Plan: To develop infrastructure by 2030 to cater to the traffic

requirements up to 2050.
• Freight on Priority policy: A customer-centric approach to expand the freight carried
from the traditional segments as well as attracting new customers to its fold.
• Dedicated Freight Corridors (DFCs): It will decongest the existing Indian Railway
network, increase the average speed of goods trains from existing 25 to 70 kmph., run
heavy haul trains and reduce the logistic cost of transportation.
• Installation of Indigenous Train Collision Avoidance System (TCAS): For
increased safety of the passengers.
• Meri Saheli: For focused action on security of women travelling in trains.
• Rail Drishti Portal: An information portal that brings key details from various sources
on a single dashboard in order to promote transparency and accountability
Telecommunications
• India is the world’s second-largest telecommunications market with a subscriber base

of 1.16 billion.
• The number of internet subscribers in the country increased to 881.25 million as of
March 2023.
• Around 759 million Indians are active internet users and access the internet at least
once a month. The active internet user base in India is expected to grow to 900 million
by 2025.
Recent Initiatives
• Bharat Net: To provide network infrastructure with affordable broadband connectivity

on a non-discriminatory basis to all households in the country.
• 5G Rollout: Prime Minister launched the 5G services on 1st Oct 2022. 5G network has
been rolled out in all 28 states and 8 UTs now. This is one of the fastest 5G rollouts in
the world.
• Prime Minister Wi-Fi Access network Interface (PM-WANI) Scheme: It aims to
setup Public Wi-Fi Networks through Public Data Offices (PDOs) spread across length
and breadth of the country to accelerate proliferation of Broadband Internet services.
• Production Linked Incentive (PLI) Scheme: It earmarks INR 12,195 Cr for
manufacturing of telecom and networking products. Further, incentives worth more
than INR 4,000 Cr have been earmarked for the Design Led Manufacturing Scheme of
the existing PLI Scheme.
www.visionias.in Vision IAS 4 213

Energy
• India’s energy mix is dominated by coal followed by oil, biomass, renewable and clean
energy and nuclear energy.
• India is the world's third largest energy consumer. However its per capita energy
consumption is about one-third of the global average.
Recent Initiatives
• Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY): Launched in 2014 the

DDUGJY program achieved 100% village electrification on April 28, 2018.
• Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA): It aims to achieve
universal household electrification by providing electricity connections to all willing
un-electrified households in rural and all poor households in urban areas across the
country. It has provided electricity connections to 2.86 crore unelectrified
households as of June 2023.
• PM-Surya Ghar – Muft Bijli Yojana: It aims to provide free electricity to one crore
households in India, who opt to install roof top solar electricity unit.
• National Green Hydrogen Mission: It aims to make India the Global Hub for
production, usage and export of Green Hydrogen and its derivatives.
• National Bioenergy Programme: It will comprise of the following sub-schemes –
Waste to Energy Programme (energy from Urban, Industrial and Agricultural Wastes
/Residues), Biomass Programme, Biogas Programme (family and medium size Biogas in
rural areas).
214
Infrastructure Part 2
INFRASTRUCTURE PART-2
ROAD SECTOR
• India has the second largest road network in the world of about 63.32 lakh km.
• Share of transport sector in the GVA for 2021-22 was about 4.5%.
215
SHARE OF
TRANSPORT
SECTOR 4.5 %
Road Air Water

Transport Railways Transport Transport
3.1% 0.7% 0.1% 0.1%
Government Initiatives
Bharatmala Pariyojana
Aims at construction/ up-gradation of National Highways of 34,800 km length
over a period of 5 years (2017-18 to 2021-22)
The project is to be funded through debt funds, private investment or from central
road fund or toll collection
Infrastructure Investment Fund (InvIT)

InvIT to monetize its completed stretches of public funded national highways with
the objective of mobilizing additional resources through capital markets
It is similar to mutual funds that allow investment from individuals and institutional
investors in infrastructure projects to earn a portion of the income as return
216
Special Accelerated Road Development Programme for the
North-Eastern region (SARDP-NE)
It envisages improvement of road connectivity to the State capitals with district
headquarters in the north-eastern region. It aims to improve about 4,099 km in
the North-East in Phase A
North-East Road Network Connectivity Project Phase I - improve infrastructure in
Meghalaya and Mizoram and enhance connectivity with inter-state roads and
international borders
To widen and revamp 1.25-lakh km of roads, Government of India has approved
the launch of Phase-III of its rural road programme Pradhan Mantri Gram Sadak
Yojana (PMGSY)
PMGSY
years at an estimated cost of Rs 80,250 crore (US$ 11.48 billion)
Interim Budget proposal for 2024-25
The Interim Budget Out of the outlay, Government will Increase of 11.1%
2024 raised the ₹1.68 lakh crore is soon modify the in the infrastructure
allocation for the earmarked for Model Concession expenditure at
Road Ministry mar- investment in NHAI Agreement to ₹11,11,111 crore
ginally to ₹2.78 for the develop- attract private against a budgetary
lakh crore from ment of national investment into the allocation of ₹10
₹2.7 lakh crore in highway corridors sector. lakh crore in
Union Budget under Bharatmala 2023-24.
2023. Pariyojana.
Speeding Ahead
National Highways
Year Construction (in kms)
2013-14 91,287
2014-15 97,830
2015-16 1,01,010
2016-17 1,14,158
2017-18 1,26,500
2018-19 1,32,500
2020-21 1,38,376
2021-22 1,41,345
2022-23 1,44,955
Source: MORTH Annual Report 2022-23
217
Recommendations of
Rakesh Mohan Committee
Roads should not be looked at in isolation, but as part of an integrated

multi-modal system of transport.
The program of PMGSY should be expanded to achieve universal connectivity
to all habitations on time bound basis
P
RAILWAYS
The national railway network is divided into 17 zones, which are further subdivided into
divisions. There are a total of 68 divisions. As on 31 March 2020, there were 40 Rail-
way PSUs under direct administrative control of Ministry of Railways.
Key Developments
Bibek Debroy Committee

Private entry into running both freight and passenger trains should be allowed.
Ministry of Railways has invited private participation for operation of passenger
train services
Indian Railways network attracting investments of an estimated 30,000 crore which is

expected to begin in 2023
218
Pros and Cons of privatization in railways
P .
It would ensure improved quality of service with competitive fares.
The privatization will also help in accommodating the latest technology
in railway coaches, online services etc.
Challenges
Privatization in railways might create a private monopoly.
Private companies are unpredictable in their dealings and do not share

their governance secrets with the world at large.
High costs and lower returns, policy uncertainty, lack of a regulator to
procedural/operational issues such as delays in land acquisition etc.
Dedicated Freight Corridors (DFCs)
The Indian Railways' quadrilateral linking the four metropolitan cities of Delhi, Mumbai,
Chennai and Howrah, commonly known as the Golden Quadrilateral; and its two diag-
onals (Delhi-Chennai and Mumbai Howrah), adding up to a total route length of
10,122 km carries more than 52% of the passenger traffic and 58% of revenue earning
freight traffic of IR.
219
Few Sanctioned Dedicated Freight Corridors are
Other announced
corridors
Western Dedicated Eastern Dedicated East-West Corridor
Freight Corridor Freight Corridor (KolkataMumbai);
Ludhiana Punjab to North-South Corridor
Dadri, U.P to Jawaharlal
Dankuni West Bengal (Delhi-Chennai);
Nehru Port, Mumbai
— 1856 km East Coast Corridor
— 1504 km
(KharagpurVijaywada);
Southern Corridor
(Chennai-Goa)
Government initiatives
1. The Indian Railways announced the 'Clone Train Scheme', wherein it planned to
run a clone train with the train of the same number, to help and provide relief to
2. Indian Railways sanctioned a feasibility study for seven bullet train projects - all
open to PPP investments
3. The Ministry of Railways decided to create a special cell, Project Development
direct investment (FDI)
4. The introduction of the Amrit Bharat Station Scheme aims to enhance and modernize
railway stations throughout the Indian Railways network.
5. A National rail Plan (NRP) 2030 has been developed with a view to develop
infrastructure by 2030 to cater to the traffic requirements upto 2050 and increase
modal share of rail in freight to 45%.
220
Recommendation by Various
Committees for Reforms
Bibek Debroy Committee

ailways need to be re-drawn, consistent
with principles and norms nationally and internationally accepted.
Setting up an overarching Railway Regulatory Authority of India (RRAI) as an
independent regulatory body.
Constructing new suburban lines should be undertaken as joint ventures with
state governments. There are too many Zones and Divisions and thus a
rationalization exercise is required.
Rakesh Mohan Committee
Separation of railways management and operations from the Government.
Accounting system to be revamped into a company account format in line with
the Indian GAAP (Generally Accepted Accounting Principles).
Indian R
growing FMCG, Consumer Durable and Information Technology, containerized
cargo and other segments like automobiles, etc.
Establishment of National Board for Rail Safety & Establishment of Railway
Research and Development Council.
Budget 2024-25 proposals for Railways
Indian Railways will upgrade Budget announced three major

40,000 bogies to Vande Bharat railway economic corridors like
standards. Energy, mineral and cements
corridor, Port connectivity
corridors, and High traffic
density corridors.
221
CIVIL AVIATION
India is the third largest domestic market for civil aviation in the world
The civil aviation sector contributes to 5% of GDP and 4 million jobs”.
Here has been an increase in air cargo, both domestically and internationally,
Director General of Civil A

aviation under the Ministry of Civil Aviation
RCS – UDAN (Regional Connectivity Scheme – Ude Desh ka Aam Nagrik)

UD
no lower limit set for hilly, remote, island and security sensitive regions.
The scheme seeks to reserve a minimum number of UDAN seats i.e. seats at
The scheme UDAN envisages providing connectivity to un-served and under-served

airports of the country through revival of existing air-strips and airports.
National Civil Aviation Policy

India to become 3rd largest civil aviation market by 2022 from 9th.
Domestic ticketing to grow from 8 Cr in 2015 to 30 Cr by 2022.
Cargo volumes to increase by 4 times to 10 million tonnes by 2027.
222
PORTS AND SHIPPING
Shipping is essential to both commodity and services trade of any country.

India has a coastline spanning about 7,500 km.
Around 95 per cent of India's trade by volume and 68 per cent in terms of
value is transported by sea
Inland waterways
Inland Water Transport (IWT) carries less than 2 per cent of India's organized
The Inland Waterways Authority of India (IWAI) is mandated to develop and

maintain infrastructure for fairway, navigational aids and terminals
223
Sagar Mala Project

Focuses on modernizing and developing ports, enhancing port connectivity,
supporting coastal communities and stimulating port-linked industrialization.
Jal Marg Vikas P

Uttar Pradesh, Bihar, Jharkhand and West Bengal through the development
of national waterways-1.
14 mega Coastal Economic Zone (CEZs) is proposed to be established.
Each CEZ will be an agglomeration of coastal districts within a State.
Aims to double the share of water transportation in the modal mix.
Aims to reduce the logistics costs for foreign and domestic trade, leading to
an overall cost savings of INR 35,000 to INR 40,000 Cr annually by 2025.
Model Concession Agreement

for Port Development
Union Cabinet approved changes in the model concession agreement (MCA) for
public-private partnership projects (PPP) in major ports conceived under
Sagarmala programme.
It provides an exit route to developers where they can divest their equity up to 100
per cent after completion of two years from the Commercial Operation Date (COD)
The royalty to the developer will be charged on basis of per million tonne of
cargo handled
A complaint portal for port users and a monitoring arrangement has also been
introduced for keeping periodical status report of the project
224
THE MAJOR PORT AUTHORITIES ACT, 2021
It vests the administration, control and management of such ports upon the Major
Port Authorities Board. These Boards will replace the existing Port Trusts.
The Boards of Port Authority have been delegated full powers to enter into con-
tracts, planning and development, fixing of tariff except in national interest, security
and emergency arising out of inaction and default.
The Act defines PPP projects as projects taken up through a concession contract
by the Board. For such projects, the Board may fix the tariff for the initial
bidding purposes.
It will reorient the governance model in central ports to landlord model, whereby
port infrastructure is leased to private operators but ownership of the port remains
with port authority.
Vadhavan Port: The Union Cabinet has given its 'in-principle' approval for setting up
a Major Port at Vadhavan, located about190 km north of JNPT in Maharashtra.
225
For inland waterways
The ministry is augmenting the capacity of NW-l under the Jal Marg Vikas project
To provide institutional funding, the Government has proposed to allocate

2.5 per cent of the proceeds of Central Road Fund (CRF) for development and
maintenance of National Waterways
Other Initiatives
Project Unnati: An exercise was undertaken to prepare a Quantitative
of Major Ports in India
IMO Hong Kong International Convention.
Identity Document (BSID), capturing the facial biometric data of seafarers
226
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1

It measures the value of final goods It is a measure of the value of output

FACTOR COST (FC) MARKET PRICE (MP)

It refers to cost of all factors of It refers to the actual transacted

Therefore, Factor Cost = Market

It refers to payments made by the It is a measure of the sum of all

Real GDP Nominal GDP

It refers to the current year It refers to current year produc-

Personal Consumption + Personal saving

+ Direct personal tax

+ Corporate profit tax

Domestic Factor Inncome Accruing to Private Sector

+ Income from property and entrepreneurship accuring

Value Added Method

VALUE ADDED METHOD

Goods and services included Goods and services not included

• Goods and services not sold but

• Transfer Payments such as scholarships,

Factors of production Types of factor incomes

GDP = Wages+ Interest + Rent +Profit + Dividend + Indirect Taxes-Subsidies+

Consumption It is the personal consumption made by households.

Investment Investment is an addition to capital stock of an economy in a given

Government It includes the value of goods and service purchased by Government.

NOTE: Government expenditure on pension schemes, scholarships, unemployment

Expenditure on foreign made products (Imports) is expenditure that

Exports (X) It is the expenditure by other economies on our production (Exports).

Gross value added

Unreported illegal Absence of data

Non-Monetized Work of informal

Measurement of growth of GDP at

Sector-wise estimates of GVA at Use of MCA21 database of Ministry

Improved coverage of activities of

DEBATES AROUND GDP:

• Gender disparities are not indicated in the data of GDP.

It is an index of economic growth with the environmental consequences of that growth

Green GDP = GDP - The Value of Environmental Degradation - P

COMPONENTS OF THE HUMAN DEVELOPMENT INDEX

The HDI-three dimensions and four indicators

Life expectancy Mean years of Expected years of Gross national

GROSS NATIONAL HAPPINESS

It is given holistic and due importance in consideration of sustainable development. Four

GROSS NATIONAL HAPPINESS

Idea Coined by Bhutan’s 4th Dragon king, Jige

Current Version developed by Center for Bhutan

UN Resolution for GNH as the chief

World Happiness report Consisting of 83

2023 Finland topped the list and India was at 125th

STATISTICAL SYSTEMS OF INDIA

Ministry of Statistics & Programme Implementation

Statistics Wing Programme Implementation

NATIONAL STATISTICAL OFFICE (NSO)

It is mandated with the following responsibilities:-

NATIONAL STATISTICAL COMMISSION (NSC)

It was set up based on recommendation of the Rangarajan Commission in 2005.

INDEX OF INDUSTRIAL PRODUCTION (IIP)

• IIP is used to measure the performance of industrial activity in the economy.

Mining Manufacturing Electricity

INDEX OF EIGHT CORE INDUSTRIES

• It is released by Office of the Economic Adviser, Department for

Crude Oil Natural Gas Cement Fertilizers