Task 8

Goods and Service Tax (GST)

Central Taxes Replaced by GST-

• Additional duties of excise

• Central Excise Duty
• Excise duty levied under Medicinal & Toiletries Preparation Act
• Additional duties of Excise levied under Textiles & Textile Products
• Additional duties of Customs(CVD & SAD)
• Service Tax
• Surcharges & Cesses
• Central Sales tax
At the state level below mentioned taxes have been replaced by GST-

• State VAT/Sales Tax

• Central Sales Tax
• Purchase Tax
• Entertainment Tax(Other than those levied by local bodies)
• Luxury Tax
• Entry Tax(All Forms)
• Taxes on lottery, betting & gambling
• Surcharges & Cesses
• Taxes on advertisements
Taxes Not Covered by GST
1. Property Tax & Stamp Duty
2. Electricity Duty
3. Excise Duty on Alcohol
4. Basic Custom Duty
5. Petroleum crude, Diesel, Petrol, ATF & Natural Gas

Highlights of the 39th GST Council Meeting

1. Deferment of the new GST return system and e-invoicing
The implementation of the new GST return system has been postponed to 1st October
2020. Also, the implementation of e-invoicing and the QR code has been deferred to 1st
October 2020.The present return system (GSTR-1, GSTR-2A & GSTR-3B) will be continued
until September 2020.
2. Changes in the GST rates
GST on mobile phones and specified parts was increased from 12% to 18%. This decision
was taken to avoid difficulties due to the inverted duty structure.
All types of matches have been rationalised to a single GST rate of 12%. Till now, the
handmade ones were taxed at 5% and the rest was taxed at 18%.
GST on Maintenance, Repair and Overhaul (MRO) service in respect to aircraft was reduced
from 18% to 5% with full ITC.
All these rate changes will come into effect from 01 April 2020.
3. Interest on delayed payments
Now, the interest for delayed GST payment will be calculated on the net tax liability. This
amendment will apply retrospectively from 1st July 2017.
4. Extension of GSTR-9 and 9C
The GSTR-9 & 9C deadline is extended to 30 June 2020 for FY 2018-19. Also, the turnover
limit will be increased from Rs 2 crore to Rs 5 crore for mandatory annual return filing.
Hence, filing GSTR-9C is optional for the taxpayers having the turnover less than Rs 5 crore.

The taxpayers with an aggregate annual turnover of less than Rs 2 crore in FY 2017-18 and
FY 2018-19 will not pay any late fee for delayed filing of GSTR-9.

5. Know your supplier

A new scheme called ‘Know your Supplier’ has been introduced so that the taxpayers are
informed about the basic details of the suppliers with whom they transact or propose to
conduct business.
6. Waiver and extension of due dates
The GSTR-1 for 2019-20 will be waived for certain taxpayers who could not opt for the
special composition scheme (notification No. 2/2019-Central Tax (Rate) dated 7th March
2019) by filing Form CMP-02.The due date of Form GSTR-3B for July 2019 to January 2020 is
extended till 24th March 2020 for taxpayers with a principal place of business in the Union
Territory of Ladakh. Also, a similar extension is recommended for Form GSTR-1 and Form
GSTR-7.
7. Amendment to revocation of cancellation
Taxpayers who have cancelled their GST registration till 14th March 2020 can file an
application for revocation of cancellation of registration. The window to fill this application
is available till 30th June 2020. The extension is a one-time measurement to facilitate those
who want to continue conducting the business.
 8. Other decisions
Infosys Chairman, Mr Nandan Nilekani to present progress updates about the GST IT
systems at the next three GST Council meetings.
The time limit for finalisation of the e-Wallet scheme for consumers is extended till 31st
March 2021.
A special GST procedure was prescribed during the CIRP period for the GST registered
corporates who are undergoing insolvency/resolution procedure under IBC Code, 2016.
A transition plan is laid down till 31st May 2020 for the taxpayers belonging to Dadra and
Nagar Haveli & Daman and Diu, due to the merger in January 2020.
Refund claims will now be processed in bulk for the benefit of the exporters.
Present IGST and cess exemptions on the imports made under the AA/EPCG/EOU schemes
will continue up to 31st March 2021.

GST Tax Slabs and Goods

No Tax

• Goods – No taxes will be levied on goods like sanitary napkins, deities made of stone,
marbles or wood, Rakhis without any precious metals like gold, silver, raw material used in
brooms, Saal leaves and fortified milk, fruits, vegetables, bread, salt, bindi, curd, sindoor,
natural honey, bangles, handloom, besan, flour, eggs, stamps, printed books, judicial
papers, newspapers
• Services – All hotels and lodges who carry a tariff below ₹ 1,000 are exempted from taxes
under GST. The list also includes IMM courses and bank charges on savings account, jan
Dhan Yojana

GST Tax Slab of 5%

• Goods – The goods which will attract a taxation of 5% under GST include skimmed milk
powder, fish fillet, frozen vegetables, coffee, coal, fertilizers, tea, spices, pizza bread,
kerosene, ayurvedic medicines, agarbatti, sliced dry mango, insulin, cashew nuts,
unbranded namkeen, lifeboats , Ethanol- Solid biofuel pellets- Handmade carpets and other
handmade textile floor coverings (including namda/gabba)- Hand-made braids and
ornamental trimming in the piece
• Services – Small restaurants along with transport services like railways and airways,
Standalone ACs non-ACs Restaurants and those which serve liquor, Takeaway Food,
Restaurants in hotels with a room tariff less than ₹7,500 (no input credit for these
restaurants), will come under this category. Special flights for pilgrims (Economy Class)
come under 5%
 GST Tax Slab of 12%

• Goods – Items coming are the tax slab of 12% include frozen meat products, butter, cheese,
ghee, pickles, sausage, fruit juices, namkeen,tooth powder, medicine,umbrella, instant
food mix, cell phones, sewing machine, man-made yarn, -Handbags including pouches and
purses; jewellery box, Wooden frames for painting, photographs, mirrors etc, Ornamental
framed mirrors, Brass Kerosene Pressure Stove, Art ware of iron, etc.
• Services – Business class air tickets will attract a tax of 12% under GST. The slab also includes
movie tickets priced under ₹100

GST Tax Slab of 18%

• Goods – As mentioned above, most of the items are part of this tax slab. Some of the items
are flavored refined sugar, cornflakes, pasta, pastries and cakes, detergents, washing and
cleaning preparations, safety glass, mirror, glassware, sheets, pumps, compressors, fans,
light fitting, chocolate, preserved vegetables, tractors, ice cream, sauces, soups, mineral
water, deodorants, suitcase, brief case, vanity case, oil powder, chewing gum, hair
shampoo, preparation for facial make-up, shaving and after-shave items, washing powder,
Refrigerators, Water Heaters, Washing Machines, Televisions (up to 68 cm), Vacuum
Cleaners, Paints, Hair Shavers, Hair Curlers, Hair Dryers, Scent Sprays, Lithium-ion batteries,
detergent, stones used in flooring, marble & granite, sanitaryware, leather clothing, wrist
watches, cookers, stoves, cutlery, telescope, goggles, binoculars, oil powder, cocoa butter,
fat, artificial fruits, artificial flowers, follage, physical exercise equipment, musical
instruments and their parts, stationery items like clips, some diesel engine parts, some
parts of pumps, electrical boards, panels, wires, razor and razor blades, furniture, mattress,
cartridges, multi-functional printers, door, windows, aluminium frames, monitors and
television screens, tyres, power banks for lithium ion batteries, video games, carriage
accessories for disabled, etc
• Services – Restaurants located inside hotels with tariffs of ₹7,500 and above, outdoor
catering(input tax credit to be available), movie tickets priced above ₹100, actual bill of
hotel stay below ₹7,500, IT and Telecom services and financial services along with branded
garments will be part of this tax slab.

GST Tax Slab of 28%

• Goods – Over 200 goods will be taxes at a rate of 28%. The goods which will be part of this
category under GST are sunscreen, pan masala, dishwasher, weighing machine, paint,
cement, vacuum cleaner. Other items include automobiles, hair clippers, motorcycles.
• Services – As mentioned above, five-star hotels, whose actual bill of hotel stay above
₹7,500, racing, movie tickets and betting on casinos and racing will come under this
category.
Impact of GST on the Banking Sector

1. Difficult Registration Structure

Before the implementation of GST, all the banks and NBFCs maintained their service tax
compliance via a centralised process of registering. Even when these banks had different
branches in various states and union territories, the compliance registration was not done
separately.
With GST, banks and NBFCs need to carry out tax registration separately for every branch they
have. Since GST is a destination-based regime, it has formed a multi-stage system. The tax is
received at every stage and the tax already paid in the last stage is reduced in the next stage.
No doubt, it has streamlined the tax structure and helped the industry with enhanced cash
flow, but GST compliance is still a challenge.

2. Hassle of Input Tax Credit

Before GST, banks and NBFCs were able to opt 50% reversal of CENVAT (Central Value Added
Tax) credit that was acquired from input services and inputs. The credit for CENVAT on capital
goods was reversed without applying any conditions. Now, the terms for this reversal have
been changed and for input services, inputs, as well as capital goods, only 50% of availed
CENVAT credit is reversed.
In this reference, the impact of GST on banks is great as they are left with 50% reduced credit
on capital goods and the cost of capital is overall raised. However, this can be considered as
a benefit as well because with a unified tax regime, the production costs are reduced, which
automatically increases profitability.

3. Assessment and Adjudication

GST and its impact on the financial sector is seen in the form of assessment and adjudication
changes. Previously, banks and NBFCs had to resort to a particular state regulator, in which
that branch was registered, for assessment of service tax. With GST, every branch of banks
and NBFCs has to justify its chargeability position in the respective state and provide a reason
for input credit tax usage in different states.
Additionally, under GST, multiple adjudication authorities are involved. This leads to delay in
adjudication as there may be different opinions on one underlying issue. Pre-GST only one
adjudication authority was to be contacted for an underlying issue, which was obviously
feasible, fast, and convenient for banks.

Import and export

GST on services imported:
GST provisions put services under IGST when,
The service supplied is located outside of Indian territory.
The service is received from within Indian territory.
The place where service is supplied is in India.
Imports of services on or post 1st July 2017 are chargeable under IGST – even in case the
actual transaction was dated earlier than the date GST came into effect. Also, if a partial
payment of applicable taxes has been made under the former system, the rest of the tax to
be paid is applicable as per the GST law.
Filing Tax Returns:
GST requires monthly tax filings as opposed to the previous system where importers filed
returns as per State Taxation Laws for goods imported and as per Central Taxation Laws for
declaring countervailing duties. Now, while filing monthly GST returns, importers have to
declare the imported goods as per Table-5 and imported services under Table-6, respectively,
of the GSTR-2 form.

Exemption:
Goods being transported by air and shipments inbound were not subject to service tax under
the previous system. However, under GST, such goods are no longer excluded from taxation.
Impact of GST on import:
GST consist of CVD and SAD which means the Countervailing Duty and the Additional Duty,
which are the main factor of the import activities and the basic customs will be carried out as
before as it is an important factor in construction of the import bills.

Impact of GST on Export:

In case of Zero-rated supplies, i.e. exports, the entire supply chain is tax-free. So, no tax is
levied on input tax side or the output side. If GST is paid for exports from India at any stage in
the supply chain, the trader can export without paying IGST. He could also choose to pay the
IGST and seek a refund later.
GST Positive Impact of GDP
Now, There is only one tax rate for all which will create a unified market in terms of tax
implementation and the transaction of goods and services will be seamless across the states.
The same will reduce the cost of the transaction. In a survey, it was found that 10-11 types of
taxes levied on the road transport businesses. So the GST will be helpful to reduce
transportation cost by eliminating other taxes.
After GST implementation the export of goods and services will become competitive because
of nill effect of cascading effect of taxes on goods and products. In a research done by NCAER,
it was suggested that GST would be the key revolution in Indian Economy and it could increase
the GDP by 1.0 to 3.0 percent.
GST is more transparent in comparison to the previous law provision so it will generate more
revenue to the Government and will be more effective in reducing corruption at the same
time. Overall GST will improve the tax Compliances.
In a report issued by the Finance Ministry, it was mentioned that Make In India programme
will be more benefited by the GST structure due to the availability of input tax credit on
capital goods.
As the GST will subsume all other taxes, the exemption available for manufacturers in regards
of excise duty will be taken off which will be an addition to Government revenue and it could
result in an increase in GDP.
The GST regime has although a very powerful impact on many things including the GDP also.
The Gross Domestic Product has the tendency to loom on the shoulders of revenue generated
by the economy in a year. Still, a worthwhile point includes that the GST has the capability to
extend the GDP by a total of 2 percent in order to complete the ultimate goal of increasing
the per-capita income of every individual. Also, the GST scheme will certainly improve the
indirect revenues to the government as the tax compliance will be further enhanced and rigid,
extending the tax paying base which will add to the revenue. The increased income of the
government will redirect towards the developmental projects and urban financing creating
an overall implied scenario.
GST Negative Impact on GDP
In a report, DBS bank noted that initially, GST will lead to the rise in inflation rate which will
remain for a year but after that GST will affect positively on the economy.As we know Real
Estate also plays an important role in Indian economy but some expert thinks that GST will
impact the Real Estate business negatively as it will add up the additional 8 to 10 percent to
the cost and reduce the demand about 12 percent.GST is applied in the form of IGST, CGST
AND SGST on the Center and State Government, but some economists say that there is
nothing new in the form of GST although these are the new names of Central Excise, VAT, CST
and Service Tax etc.As every coin has two faces in the same way we tried here to familiarize
the things related to GST with both perspective i.e. positively and negatively in this article.
Despite having some factor which is being expected to affect the Economy adversely there
are so many other things which are expected with a positive impact on GDP.

ADVANTAGES OF GST TO LOGISTIC COMPANIES

COST / TIME SAVING:

Bigger warehouses and end market driven logistics planning is likely to result in meaningful
costs savings over time. On account of entry taxes and heavy paper work at state check posts,
there is an additional 5-7 hours added to the transit time for inter-state transport of goods.
Abolishment of entry tax and easier tax compliance procedures is likely result in easier
movement of goods across the country.
FORWARD INTEGRATION :

As these companies gather scale, that will enable them to offer services at lower costs. As a
result, companies for whom transportation is not a core part of their business will increasingly
outsource their logistics operations to third party logistics (3PL) and fourth party logistics
(4PL) service providers.

SINGLE RATE:

Standard tax rates will allow corporations to move away from the practice of building a
warehouse in different states to adhere to each state’s tax code. A big packaged consumer
goods company could thus make do with one large mother warehouse at critical points in the
country and employ logistics companies to manage distribution and supply chains

DISADVANTAGES OF THE PRESENT SYSTEM

State-border checkpoints, which are tasked with material scrutiny and location-based tax
compliance, negatively impact the overall production and logistics time and account for
roughly 60% of a truck’s transit time.

DEMAND OF THE LOGISTIC INDUSTRY

After much deliberation, petroleum has been brought under the purview of GST but it will be
exempt until a date announced by the GST Council. For logistics industry, petroleum is one of
the major inputs and it would be a welcome move if petroleum were to be ‘non- exempt’
right from the start. This would enable logistics companies to avail credit for the petroleum
used in the course of providing logistics services.

ADVANTAGE OVER RIVAL( due to predictability )

With GST when all check posts are gone, a truck that departs from Kashmir to Chennai ,will
reach on time. Goods will be delivered on time. Predictability levels post GST will significantly
improve. For Example if you are moving goods by air ,the price differential between air and
road is nearly one-eighth. Once logistics manager sees that he can manage his inventory in a
manner where it gets more predictable by road, people will switch more volume by road.
Monthly gst returns of FY 2017 2018

Monthly gst returns of FY 2018 2019

Monthly gst returns of FY 2019 2020

 SEASONAL CHANGES
A good monsoon brings economic prosperity for the whole country and boosts the Indian
economy as agriculture contributes around 16 percent of the total GDP (Gross Domestic
Product).A large number of Indian farmers are still dependent on the monsoon rains for
various agricultural activities.High temperature and heavy rainfall in the summer months are
important for different types of kharrif crops.The winter rain supplemented by irrigation is
important for rabi crops.
A normal rainfall is important for adequate agricultural production in order to maintain food
prices. Food prices depend upon the agricultural output. In the absence of a good monsoon,
the entire nation may be destabilized because of food inflationSeveral dams, reservoirs, rivers
and canals in India are rain-fed and depend upon the monsoon rains.Other economic
activities like forestry and fishing are also influenced directly by the amount of
rainfall.Monsoon rain gives us respite from the high and intolerable summer heat and brings
back life to the living earth.
Monsoon also has a role to play in the social-cultural unity of India. People of India,
particularly the farmers, eagerly wait for the monsoon rains. We know the monsoon winds
provide water for the various agricultural activities. The agricultural calendar, and the social-
cultural life of the people including their festivities, revolve around the monsoon phenomena
and in a way binds the people of India together. Different harvest festivals in our country such
as Bihu in Assam, Pongal in Tamil Nadu, Poonam in Kerela and Lohri in Punjab are celebrated
to mark a good harvest. If the rainfall is good, the entire country celeberates and if the
monsoon fails, it brings famines and a year of sorrow for everyone.

Effect on demand
In a good monsoon season, farm output goes up, boosting demand for consumer goods as
well as income of rural people. All of this leads to a stronger economic outlook that in turn
help lift equities, especially of companies selling goods in rural areas.
However, a poor monsoon season weakens demand for FMCG products, tractors, two-
wheelers, rural housing. Also, it forces the government to spend on the import of food as well
as take measures like farm loan waivers.
The Monsoon rains in India also replenish reservoirs and groundwater that helps in improving
irrigation and also boosts hydropower production. Moreover, a good Monsoon season can
reduce demand for subsidized diesel used for pumping water from wells, ground, ponds or
rivers for irrigation.
Monsoon effect on inflation, RBI policy
A good Monsoon season leads to bumper farm output that keeps food prices under control.
This is so because food accounts for 50% of the country’s consumer price index, which is
closely monitored by RBI.
During droughts, the government has to support farmers through incentives, subsidies. These
widen fiscal deficit. Good monsoon season, hence, also checks government spending.A poor
monsoon season can have a rippling effect on India’s economy and growth.A strong
correlation between rainfall and agriculture GDP has been established by data analysis in past.

Impact of seasons on different sectors

Agriculture
GDP from agriculture was 4860.94 INR Billion in the first quarter of 2019. Data indicates that
actual rainfall is directly proportional to the growth rate of agriculture GDP. Rainfall between
96% and 104% of the long-period average or LPA is considered normal. Droughts in the years
2014 and 2015 lowered the yield while improved monsoon prospects in 2016 and then in
2018 helped the country reach a record high of 5869.41 INR Billion in the fourth quarter of
2018. A poor monsoon shower means lower agricultural yield not only from the Kharif sowing
season but also for the Rabi sowing season which is largely dependent on irrigation
Rural Businesses and Industries
FMCG products, two-wheelers and to some extent four-wheelers, tractors, agrochemicals,
etc. are the worst sufferers in case of a weak monsoon season. Rainfall-dependant rural
spending power decides the demand for the aforementioned segment. Besides, higher
production of agricultural raw materials assists companies in dealing with packaged products.
Also, sectors such as fertiliser and irrigation stand to gain with a good monsoon.
Construction
Rural housing is a monsoon favoured sector. Therefore, construction-related industries such
as cement and infrastructure companies have booming business during good monsoon. While
in case of a failing or bad rainfall hinders customer purchasing powers leading to lowering
stock values and investor losses.
Power Generation
The hydro-power sector installed in the country’s perennial rivers is severely affected if
monsoon fails due to lower water levels. Hydro-electric power constitutes about 40% of
power from sources of rivers as well as monsoon winds. Thus, power generation and even
irrigation facilities take major hits during a bad monsoon. The cascading effect of this scenario
is also seen in increased power cuts to households, productivity loss and increased
operational costs for power-hungry industries.

Banking and Finance

A non-favourable monsoon means that farmers will likely default on their loans thereby
making the banks’ non-performing assets rise. Consequently, interest rates are raised so as
to counter inflation in the economy but this leads to more customers postponing loan
applications. Therefore, availing of loans for cars, homes, etc. is either delayed or cancelled
due to high rates. Now, this means that the banks incur a double layer of loss with new
customers avoiding new loans and existing customers defaulting on the old loans. Even NBFCs
and microfinance institutions profit from a healthy rural economy due to the expansion of
credit. It also improves the consistency and reliability of repayments.
The Stock Market
Monsoon is a major macroeconomic event and is dutifully tracked by investors, the
government, and common citizens, given its substantial impact on the economy and also its
unpredictability. Poor rainfall forecasts are showcased in the equity market the following day
with dips, while normal rainfall forecasts show gains in the stock market. The larger the
variation from the average monsoon, the sharper is the stock market reaction.
Monsoon projections done by IMD

Impact of Monsoon Season on Stock Market

It is the third consecutive year where Indian Meteorological Department (IMD) and Skymet
has forecasted normal monsoon. It is a favorable news for the economy and stock market,
being more as sentimental driven, has reacted positively as usual.
The below table data depicts that in FY18-19, there is 42 percent probability of normal
monsoon with 96-104 percent of LPA rainfall range whereas below normal monsoon has 30
percent probability with 90-96 percent of LPA rainfall range.
*LPA stands for Long Average Period * Model Error of +/- 5%
It is clear from the below data that the day IMD announces monsoon forecast, movement can
be seen in the equity market. A deficient rainfall forecast results in decline of equity market
whereas normal rainfall forecast leads to some gains. The impact on equity market is more or
less directed towards sentimental and temporary based.

But the dependency of monsoon has declined over the years. Various other factors need to
be considered such as upcoming elections, government spending in rural areas, foreign
investments, amendments in monetary and fiscal policies and government’s grants and
subsidies. There may be other economic, political and international factors as well. We can
see in 2001, market fell due to 9/11 attack, 2008 biggest fall in market due to sub-prime crises
and 2009 recovery of stock market after crises.
There is correlation of about 0.20 (indicates weak positive correlation) between monsoon and
stock market. There is hardly enough correlation to justify that deficit/normal monsoon has
much bearing impact on downwards/upward movement in stock market.
The above figure shows that in 2008 when rainfall was normal, BSE SENSEX return was
negative whereas in 2009 when rainfall was deficient, SENSEX achieved highest return. So it
can be concluded that there is not much impact of monsoon on stock exchange.

MONETARY POLICY
Following are the highlights of the seventh bi-monthly monetary statement for 2019-20 by
the RBI amid COVID-19 pandemic:

• Monetary Policy Committee (MPC) advances meeting scheduled for Apr 1-3
• Repo rate slashed by 75 basis points to 4.4%
• Reverse repo rate cut sharply by 90 basis points to 4% making unattractive for banks
to deposit funds
• MPC votes unanimously for a reduction in the policy repo rate
• MPC decides to continue with the accommodati .
• Committee votes 4:2 in favour of rate cut; unanimous on change in stance
2 MPC members Chetan Ghate and Pami Dua voted for a 50 bps rate cut
• Several measures taken to infuse liquidity of about Rs 3.74 lakh crore into the financial
system.
• RBI to undertake repo operation to infuse Rs 1 lakh crore Cash Reserve Ratio (CRR)
cut sharply by 100 bps to 3 per cent releasing Rs 1.37 lakh cr into the system
• RBI assures to work in mission mode, monito .

Impact of interest rate changes on a few of the Sectors:

1. Financials:
With low-interest rate levels, the banks have the option to lend at a lower interest rate in sync
with the Repo or to lend at the existing levels.
Suppose the cost of funds decrease due to lower repo rate, and it continued to lend at
previous lending rates then the margins of the banks tend to expand for a few quarters.
Also, in few banks where it lowers the lending rate, more customers are attracted to borrow
from them, thus increasing the Advances or the Loan book. Higher interest rates impact just
the opposite way.
2. Real estate:
Real Estate is a capital-intensive sector which means that there is a need for a huge amount
of funds if one desires to buy a property.
During times of high-interest rates, being a retail customer, we would definitely tend to avoid
Home Loans to buy a property or land. Thus, the demand for the real estate sector would be
low during these times.
And suppose, there is a low-interest-rate environment then, we won’t hesitate to buy home
loans and pay our EMIs as the installments will below. During the lower interest rate
environment, we can expect better growth in the Real Estate sector.
3. Consumer Discretionary:
These are basically the non-essential items, for example, Cars, bikes, etc. Suppose we are in a
situation where the interest rate is high then we would want to defer from buying a car at the
moment as the EMIs would be high, but a low-interest rate situation would definitely be a
positive for this segment.

So, I hope you all have got an idea as to how the RBI uses the monetary policy to control the
flow of money into the system.
There are a lot of other things which it takes into consideration while making the decisions.
However, that is not the scope of this report.
In this blog, we have known the tools the RBI has and how it uses to control the money in the
economy.
Along with it, how does it affect us both as a borrower and as an investor.
 UNEMPLOYMENT
India has been a country with a large mass population, and thus, employment has been a
constant issue. Owing to the factor of large educated masses, finding jobs has become a
difficult task to be dealt with. Since our Independence, the Government has taken steps to
provide a solution to this issue, but there has never been a reliable solution to it. In this article,
we will address some active initiatives taken by the Government of India to curb
unemployment.
Certain factors responsible for Unemployment are listed below:
a) Backward Agriculture
b) High Population Growth
c) Defective Education System
d) Exploitation of Resources
e) Low means of Self-Employment

Initiatives by the government to solve the problem of unemployment:

1 Integrated Rural Development Programme (IRDP)
The Government of India introduced IRDP in 1978-79, intending to create full employment
opportunities in the rural areas. This program included agriculture, forests, fisheries, animal
husbandry, cottage industries, construction of canals, roads, and so on. To provide
employment, a sum of INR 312 crores was also spent in the Seventh plan, which benefited
182 families.

2. Training for Self–Employment:

The program was launched on August 15th, 1979, and is called the National Scheme of
Training of Rural Youth for Self Employment (TRYSEM). Its main objective is to reduce
unemployment among the youth. Under this, during the seventh plan, around 11.6 lakh youth
given training, which gave young men financial assistance from banks, which varies from INR
3000 to INR 5000 to start any work.
Composite Rural Training and Technical Centres were set up to give training to 2.8 lakh rural
youth during 1995-96.
3. Jawahar Rozgar Yojana:
This started on April 28th, 1989, intending to employ one member of every rural family. The
job is provided for around 50 to 100 days per year at a workplace, which is nearby the place
of residence. 30% of the employment generated is reserved for women. The Central
Government has the duty to finance around 80% of the program, which reduces the burden
of the state government to only 20%. National Rural Landless Employment Guarantee
Programmes were merged with the Jawahar Rozgar Yojana in the year 1989.

4. Nehru Rozgar Yojana (NRY):

The Yojana was started in the year 1989 and included three schemes under itself :
a) The first scheme provides a subsidy to urban poor so that they can set up micro-enterprises.
Under this program, in the year 1995, 1.25 lakh families were benefitted.
b) The second scheme ensures arrangements for wage-employment to laborers in the cities
with less than 10 lakh population is by the means of providing Indian Economic Development
and Elementary Static facilities. In the year 1995, under this scheme, 93 lakhs days of
employment have been provided.
c) The third scheme provides urban poor with employment opportunities like house repairing,
etc.

5. The Swaran Jayanti Rozgar Yojana:

The plan, which started on 1st December, is meant for providing employment to unemployed
in urban areas. It aims at providing self or wage employment to unemployed youth of urban
areas. It works upon two plans:
a) Urban Self- Employment Programme
b) Urban Wage Employment Programme
75% of the expenditure is incurred by the Central Government, and the rest is upon state
governments. A sum of INR 125 crore was spent upon this during 1997-98.

6. Drought Prone Area Programme:

This program was launched in 70 districts of 13 states, which were prone to drought. It has
proved fruitful in removing seasonal unemployment, and under the sixth plan, the program
has provided 17 crore and 70 lakh employment days. Under the seventh plan, INR 474 crores
were spent on this program.

7. Prime Minister’s Integrated Urban Poverty Eradication Program (PMIUPEP):

The program has been implemented in 1995-96 and aims to provide employment to the poor
in the urban area. It aims to cover 50 lakh urban poor from 345 towns. The total expenditure
of INR 800 crores is under the Central government, and the rest is with the state’s
government.

8. Pradhan Mantri Gram Sadak Yojana (PMGSY):

It is a nationwide plan for the country to provide good all-weather connectivity of roads to
unconnected villages. This was introduced in the year 2000 and aimed for the following:
a) To provide roads to all villages with a population of 1000 people and above by the year
2003
b) To also provide roads in hill states, desert areas, and tribal areas with a population of 250
and above.
The scheme has changed the conditions of many villages which fall under the scheme.

9. National Rural Employment Guarantee Act:

This act was later named as Mahatma Gandhi National Rural Employment Guarantee Act –
MGNREGA. It aims to guarantee the Right to Work and was passed in September 2005.
a) The main objective is to enhance the livelihood in the rural areas by providing 100 days of
wage employment in a financial year to every household which has adult members to do
unskilled manual work.
b) Employment has to be provided within 5 kilometers of the applicant’s residence.
c) The minimum wage has to be provided.
d) If the government fails to provide the employment, it has to pay unemployment allowances
as compensation.

10. Employment Assurance Scheme:

The Employment Assurance Scheme (EAS) was launched in the year 1994 in 1752 blocks,
which are backward in the country. Its main objective was to provide 100 days of the unskilled
manual job to the poor in Rural areas.
Apart from the above 10, the Government of India has also launched several other
employment and educational schemes such as the NTR Vidyonnathi Scheme for the
empowerment of the country’s youth.
 ELECTIONS

The Year 2004 – Congress Back to Power as UPA

After the 2004 election result, the market lost 15% in 2-3 trading session as the results were
not according to the market sentiment.
Congress had formed a government while the market was hoping for an NDA government.
But after the initial disappointment, the market saw the bull rally till late 2007 accompanied
by high GDP growth rate and foreign investment flowing to India.
The global financial crisis of 2008 brought an end to the bull market, but the market started
recovering in 2009 by the time India went for polls.
The Year 2009 – Congress Continues for a Second Term
In 2009, UPA again came to power.
The market gained 17% in a single day, but as the second tenure of UPA government was
filled with scams, the market remained choppy.
For the whole economy, it was a troublesome period. The Sensex had gained 15.5% during
the first three years. However, confidence in the government was low.

The Year 2014 – NDA Comes in with BJP in Full Majority – Modi Wave
As the NDA came into power again with a full majority in 2014, the market was euphoric, the
volatility reduced to 9.1% from 17.96% and the market rallied to a record high.
The expectation for the economic reform and stable government was the main reason behind
it.
In the past four years, the Sensex has grown 40% which is being termed as slow growth
because NDA was in the majority. The global factors such as high oil price, weakening Rupee
are somewhat responsible for this.

2004UPA (United Progressive Alliance)The Sensex shot up by 13 percentage points after the
public viewed Dr. Manmohan Singh and P Chidambaram as reform-friendly.
2009UPA (United Progressive Alliance)The Sensex was at par with no major policy change as
compared to UPA-1.
2014NDA National Democratic AlliancePolicy reforms undertaken by the Modi government
at the initial stage such as fiscal consolidation, curbing of inflation drove the Sensex by 9
percentage points
We can also look at the performance of Sensex in the past four Lok Sabha elections in order
to gauge the performance of what it has been like in the markets just before the voting year.
Election Year Sensex Points Preceding Year Sensex Points Difference
April 19, 2004 5800 April 17, 2003 2984 2816
April 15, 2009 11284 April 15, 2008 16153 (4869)
April 4, 2014 22359 April 3, 2013 18801 3558

We can witness the following by looking at trends that have emerged six months after the
election results:

Year Part in power Consequence(After six months)

2004 UPA The Sensex shot up by 13 percentage points after
the public viewed Dr. Manmohan Singh and P
Chidambaram as reform-friendly.
2009 UPA The Sensex was at par with no major policy
change as compared to UPA-1
2014 NDA National Democratic AlliancePolicy reforms
undertaken by the Modi government at the initial
stage such as fiscal consolidation, curbing of
inflation drove the Sensex by 9 percentage points