Economy Current Affairs by Teju, Nextgen Ias - November 2020

Economy Current Affairs by Teju, NextGen IAS – November 2020
Contents
Food Inflation .................................................................................................................................................................................................................... 3

For the first time UPI has crossed 2 billion transactions .................................................................................................................................. 4
October GST Crosses Rs.1 Lakh cr, First Time in FY21 ....................................................................................................................................... 5
Tax-to-GDP ratio: ............................................................................................................................................................................................................. 7
Off-Market Transactions: .............................................................................................................................................................................................. 8

Commercial Paper: .......................................................................................................................................................................................................... 9
Government Security (G-Sec): ................................................................................................................................................................................... 10

Call Money / Notice Money / Term Money: ....................................................................................................................................................... 10
Certificate of Deposit: ................................................................................................................................................................................................... 10
Forex Derivatives: ........................................................................................................................................................................................................... 11
Production-linked incentive (PLI) scheme: ........................................................................................................................................................... 11

Emergency Credit Line Guarantee Scheme (ECLGS): ....................................................................................................................................... 12
International Digital Tax: ............................................................................................................................................................................................. 13

Organisation for Economic Co-operation and Development (OECD): ..................................................................................................... 13
Self-regulator for Digital Payment Industry: ....................................................................................................................................................... 14
eGrameen Store: ............................................................................................................................................................................................................. 14
Ways to absorb Foreign Capital Inflows ............................................................................................................................................................... 15
RBI Lets NBFCs Tie Up with Banks to Co-originate Loans to Priority Sectors ........................................................................................ 17
India, Japan, Australia to Boost Trade, Investment ........................................................................................................................................... 18
Digitalisation of Farmer Database: .......................................................................................................................................................................... 18

Women’s economic empowerment with macroeconomic growth: ........................................................................................................... 19
Contraction in GDP........................................................................................................................................................................................................ 20
Government Final Consumption Expenditure .................................................................................................................................................... 21
Gross Fixed Capital Formation (GFCF) ................................................................................................................................................................... 21

4th anniversary of Demonetisation in India ........................................................................................................................................................ 22
‘Vivad se Vishwas’ Scheme ......................................................................................................................................................................................... 24
Commercial Coal Auction: .......................................................................................................................................................................................... 24
India is a Hot Destination for Foreign Investment: ........................................................................................................................................... 25
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RBI : First-ever purchase auction of state government bonds ..................................................................................................................... 26
Aadhaar-seeding of bank accounts ........................................................................................................................................................................ 27
Mobile Money A/cs ....................................................................................................................................................................................................... 28
Centre releases Rs 6,195 Cr to 14 states: .............................................................................................................................................................. 28
Tax Terrorism: .................................................................................................................................................................................................................. 30

Atmanirbhar Package 3.0 ............................................................................................................................................................................................ 30
PLIs : Boost for Manufacturing ................................................................................................................................................................................. 32
Current Account Surplus: ............................................................................................................................................................................................ 33

Gig Economy: ................................................................................................................................................................................................................... 33
Long-Term Capital Gains Tax (LTCG) ..................................................................................................................................................................... 33
Coal Sector:....................................................................................................................................................................................................................... 34
RBIs Economic Activity Index .................................................................................................................................................................................... 35
Support-Per-Farmer Rule............................................................................................................................................................................................ 35
Aggregate Measurement of Support (AMS) ....................................................................................................................................................... 36
Social security fund for unorganised, gig and platform workers:............................................................................................................... 36
DBS to Take Over LVB in RBI Bailout Plan: ........................................................................................................................................................... 37
NCLT Approval Must for Mergers with FDI: ........................................................................................................................................................ 38
Export Oriented Units (EOU) scheme: .................................................................................................................................................................... 39
Central Repository of Information on Large Credits (CRILC): ....................................................................................................................... 40
Regional Comprehensive Economic Partnership (RCEP) ................................................................................................................................ 41
Insolvency and Bankruptcy Board of India (IBBI): ............................................................................................................................................. 41
RBI's loan restructuring scheme: .............................................................................................................................................................................. 42
Fisheries – Data Point ................................................................................................................................................................................................... 42
‘Report of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian
Private Sector Banks’ .................................................................................................................................................................................................... 43
National Floor for Minimum Wages ....................................................................................................................................................................... 43

Service Export from India Scheme (SEIS) .............................................................................................................................................................. 44
GST compensation shortfall: ...................................................................................................................................................................................... 44

Renewable Energy (RE) ................................................................................................................................................................................................ 45
Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM-KUSUM) .................................................................................... 46
National Statistical Office (NSO) .............................................................................................................................................................................. 47

Fiscal Deficit ..................................................................................................................................................................................................................... 48
Foreign Direct Investment .......................................................................................................................................................................................... 49
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This content will be filtered and made short along with the December Current Affairs of Economy
Food Inflation
➢ Food inflation refers to the condition whereby there exist increase in wholesale price index of essential
food items (defined as food basket) relative to the general inflation or the consumer price index.
➢ The average retail prices of all essential food items, except that of wheat, has increased in the past one
year with potatoes witnessing the steepest rise of 92%, followed by onions at 44%.
➢ It is created by the lethal combination of rising consumer demand and fluctuating supply.
➢ Runaway food inflation will force households to spend even more on food. Imported food staples will
become expensive, distorting the trade balance.
➢ High food inflation has emerged as a policy worry. Inflation is also the result of inefficiencies in the food
supply chain: agriculture, food processing industry and food wholesale and retail distribution sector.
Steps that the government can take to reduce food inflation:
✓ Take tech seriously: GoI should accelerate technology dissemination, especially relating to environ-
mental sustainability, climate change, crop yields and mechanisation. This will reduce dependence on
costly inputs, labour and chemicals, and stimulate food supply.
✓ Info supply chain: The government should invest in a market information system for accurate and
timely data of crop production, trade and prices. This will send right price signals from consumers to the
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supply chain, improve bargaining power and reduce business risk and response time. Research shows
that information raises net income per hectare by more than 12%.
✓ Real competition: GoI should end rent-seeking in the food supply chain by encouraging competition
through efficient markets. Removing barriers such as mandi licences and state taxation laws will punc-
ture marketing margins. Consumers rarely benefit from any crop price fall because of the marketing
margin commanded by the biggest players. A rise in crop prices, however, is quickly passed through to
protect profits. The case of onions shows how both farmers and consumers are exploited by powerful
cartels. The more intense the competition, the lower price levels are likely to be.
✓ Calm volatility: GoI should encourage strengthening of the supply pipeline by the private sector to re-
duce price volatility. There is an inverse relationship between stocks in the pipeline and prices. Smaller
the stocks lying in godowns, higher the prices shoot.
✓ Don’t keep poking: The government should stop market interventions in its zeal to balance consumer
and farmer interests.
UPSC CSE Prelims Previous Question 2011
India has experienced persistent and high food inflation in the recent past. What could be the reasons ?
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food
grains has steadily decreased in the last five years by about 30%.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a
significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct ?
(a)1 and 2 only
(b)2 and 3 only
(c)1 and 3 only
(d)1,2, and 3
UPSC CSE Mains Previous Question 1997:
Discuss the steps taken by the Government in recent years to control inflation.
For the first time UPI has crossed 2 billion transactions
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➔ UPI - Unified Payments Interface
➔ It is an immediate real-time payment system that helps in instantly transferring the funds between
the two bank accounts through a mobile platform.
➔ It is a concept that allows multiple bank accounts to get into a single mobile application.
➔ This idea was developed by the National Payments Corporation of India and is controlled by the
RBI and IBA (Indian Bank Association).
➔ For accessing the UPI service, the users need to create a Virtual Payment Address or VPA of their
choice. They need to link the VPA to their bank account.
➔ UPI first went live in April 2016
➔ For the first time Unified Payments Interface (UPI) has crossed 2 billion transactions in October 2020.
➔ A sudden surge in adoption of digital payments among first-time users because of the Covid-19 pan-
demic has, to a large extent, contributed to the milestone.
➔ The digital payments channel, operated by the National Payments Corporation of India (NPCI),
processed a total of 2.07 billion transactions worth Rs 3.86 lakh crore in October 2020.
UPSC CSE Prelims Previous Question 2017:
Which of the following is a most likely consequence of implementing the ‘Unifed Payments Interface (UPI)’?
(a) Mobile wallets will not be necessary for online payments.
(b) Digital currency will totally replace the physical currency in about two decades.
(c) FDI inﬂows will drastically increase.
(d) Direct transfer of subsides to poor people will become very effective.
October GST Crosses Rs.1 Lakh cr, First Time in FY21
➔ GST is a value-added tax levied on most goods and services sold for domestic consumption.
➔ It is an Indirect Tax
➔ It was introduced on July 1, 2017
➔ Taxable event : Supply of Goods and Services
➔ GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and
services. It is also known as consumption-based tax.
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➔ Goods and services tax (GST) collections for October 2020 crossed the Rs. 1 lakh crore mark for the first
time in the current fiscal year.
➔ Key reason for Recovery : Festival related consumption
Steps to increase GST Collections:
GST collections stood at Rs 1.05 lakh crore in October, marking a 10% growth over October 2019. This is a
excellent news from a recovery point of view, but dismal from the point of view of realising India’s tax potential.
➔ The goal should be to more than double the current tax-GDP ratio of about 17% (Centre and states)
combined.
Reason: A low tax-to-GDP ratio poses significant challenges for the government to spend money on
creating necessary infrastructure in the economy and raise investment.
➔ Higher GST collections should be achieved by moving to a simple tax system, rationalising rates, broad-
ening the base, data analytics and better tax administration.
➔ The peak 28% rate is way too high. Fewer rates — in effect, a central rate of 12% for a vast majority of
goods, a merit rate and a demerit rate — will minimise classification disputes, raise compliance and
shore up tax buoyancy. Exemptions break the GST chain and must be eschewed. A few items could be
zero rated — just as exports to keep the GST chain unbroken.
➔ Revenue authorities must briskly pursue audit trails in the income and production chain to track sources
of funds.
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➔ Data analytics should be deployed to track the physical volumes of critical raw materials used in the
manufacture of tax-evaded goods so as to tap the potential direct and indirect tax base.
➔ Taxes such as electricity and petro-fuel duties, which are embedded in domestically manufactured
products, make domestic products expensive.
➔ GST Council must bring all goods and services, including alcohol and real estate, under GST to raise
efficiency.
What is/are the most likely advantages of implementing `Goods and Services Tax (GST)’?
1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the `Current Account Defcit’ of India and will enable it to increase its foreign ex-
change reserves.
3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in
the near future.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
UPSC CSE Mains Question 2013:
Discuss the rationale for introducing Goods and Service Tax (GST) in India. Bring out critically the reasons for
the delay in roll out for its regime.
UPSC CSE Mains Question 2019:
Enumerate the indirect taxes which have been subsumed in Goods and Service Tax (GST) in India. Also,
comment on the revenue implications of GST introduced in India since July 2017.
Tax-to-GDP ratio:
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➔ It represents the size of a country's tax kitty relative to its GDP.
➔ It is a representation of the size of the government's tax revenue expressed as a percentage of the
GDP.
➔ Higher the tax to GDP ratio the better financial position the country will be in.
➔ The ratio represents that the government is able to finance its expenditure.
➔ A higher tax to GDP ratio means that the government is able to cast its fiscal net wide. It reduces
a government's dependence on borrowings.
➔ A higher tax to GDP ratio means that an economy's tax buoyancy is strong as the share of tax revenue
rises in sync with the rise in the country's GDP.
➔ Lower tax-to-GDP ratio constrains the government to spend on infrastructure and puts pressure on
the government to meet its fiscal deficit targets.
➔ The most important measure for improving tax to GDP ratio is ensuring the citizens pay their taxes.
The introduction of Direct Tax Code can help in greater compliance in this regard. Rationalisation of
GST and moving towards a two-rate structure can also help in increasing compliance and putting an
end to tax evasion.
A decrease in tax to GDP ratio of a country indicates which of the following?

1. Slowing economic growth rate
2. Less equitable distribution of national income
Select the correct answer using the code given below.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Off-Market Transactions:
➔ Off-market transactions are ones where two interested parties agree to buy and sell securities bilat-
erally outside stock exchange platforms.
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➔ Mutual funds, alternative investment funds and foreign venture capital investors invest in unlist-
ed securities are generally transacted off-market.
PMI or Purchasing Managers’ Index (PMI)
➢ Indicator of business activity — both in the manufacturing and services sectors.

➢ It is a survey-based measure that asks the respondents about changes in their perception of some key
business variables from the month before.
➢ It is calculated separately for the manufacturing and services sectors and then a composite index is
constructed.
➢ A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
➢ Higher the difference from this mid-point greater the expansion or contraction.
➢ In response to strong sales gains and softer containment measures related to the Covid-19 disease, firms
lifted production at the strongest pace recorded since late-2007.
➢ All three categories — intermediate goods, consumption and investment goods – reported strong
expansion in the festival period.
➢ The data adds to rising signs of a turnaround from the depths of Covid-19 lockdown in the June quarter,
when GDP contracted 23.9%.
Commercial Paper:
➔ Commercial paper, also called CP, is a short-term debt instrument issued by companies to raise
funds generally for a time period up to one year.
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➔ It is an unsecured money market instrument issued in the form of a promissory note .
➔ It was introduced in India for the first time in 1990.
➔ Companies that enjoy high ratings from rating agencies often use CPs to diversify their sources of
short-term borrowings. This gives investors an additional instrument. They are typically issued by large
banks or corporations to cover short-term receivables and meet short-term financial obligations, such
as funding for a new project.
Government Security (G-Sec):
➔ A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the
State Governments.
➔ It acknowledges the Government’s debt obligation. Such securities are short term (usually called
treasury bills, with original maturities of less than one year) or long term (usually called Government
bonds or dated securities with original maturity of one year or more).
➔ In India, the Central Government issues both, treasury bills and bonds or dated securities while the
State Governments issue only bonds or dated securities, which are called the State Development
Loans (SDLs).
➔ G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
Call Money / Notice Money / Term Money:
➔ The money market primarily facilitates lending and borrowing of funds between banks and entities like
Primary Dealers (PDs).
➔ Banks and PDs borrow and lend overnight or for the short period to meet their short term mismatches
in fund positions. This borrowing and lending is on unsecured basis.
➔ ‘Call Money’ is the borrowing or lending of funds for 1 day.
➔ Where money is borrowed or lend for period between 2 days and 14 days it is known as ‘Notice
Money’
➔ ‘Term Money’ refers to borrowing/lending of funds for period exceeding 14 days.
Certificate of Deposit:
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➔ It is a short term debt instrument
➔ It is issued by scheduled commercial banks with a maturity of 3 months to 1 year.
Forex Derivatives:
➔ A foreign exchange derivative is a financial derivative whose payoff depends on the foreign ex-
change rates of two (or more) currencies.
➔ These instruments are commonly used for currency speculation and arbitrage or for hedging
foreign exchange risk.
Production-linked incentive (PLI) scheme:
➔ To make India a manufacturing hub, govt recently announced the PLI scheme for mobile phones,
pharma products, and medical equipment sectors.
➔ It was notified on April 1 as a part of the National Policy on Electronics.
➔ It proposes a financial incentive to boost domestic manufacturing and attract large investments in
the electronics value chain.
➔ It extends an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in
India and covered under target segments, to eligible companies, for a period of 5 years with financial
year (FY) 2019-20 considered as the base year for calculation of incentives.
➔ India will extend the production-linked incentive (PLI) scheme to atleast 8 more sectors to support
domestic manufacturing which includes battery manufacturing, auto components, network products,
textiles, food processing, solar photovoltaic cells, genomics, artificial intelligence, 5G, robotics and
drones.
➔ The move is aimed at spurring local manufacturing and promoting India as an alternate global
manufacturing hub in Asia.
➔ Govt. believes that the reduced corporate tax rate of 25%, PLI benefits and phased manufacturing
plan (PMP) make India an attractive destination. The government has already rolled out a PLI
scheme worth 50,000 crore for electronics and another 10,000 crore for active pharmaceutical
ingredients (APIs).
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Emergency Credit Line Guarantee Scheme (ECLGS):
➔ Emergency Credit Line Guarantee Scheme (ECLGS) : For MSMEs and MUDRA borrowers
➔ 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited
(NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA
borrowers.
➔ Credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
➔ Tenure of the loan shall be 4 years with a moratorium period of 1 year on the principal amount.
➔ Under the scheme, lending institutions have sanctioned loans amounting to 2.03 lakh crore to 6.067
million borrowers and disbursed loans totalling 1.48 lakh crore as of date.
➔ Announced as part of the Atmanirbhar Bharat package in May to support micro, small and medium en-
terprises, the scheme provided fully guaranteed and collateral-free loans for amounts up to 20% of
outstanding loans as of February 29.
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Trade Deficit
▪ A trade deficit is an economic measure of international trade in which a country's imports exceeds its
exports.
▪ A trade deficit represents an outflow of domestic currency to foreign markets. It is also referred to as a
negative balance of trade (BOT).
Trade Deficit = Total Value of Imports – Total Value of Exports
▪ India’s merchandise exports fell 5.4% in October from the year earlier to $24.82 billion, reversing the
pickup seen in September, when it climbed about 6%. October imports also declined, by 11.56% from last
year, although less than the 19.6% drop in September.
▪ The trade deficit widened to $8.78 billion, the most in seven months. The deficit was $2.72 billion in
September.
International Digital Tax:
➔ Under the Base Erosion and Profit Shifting (BEPS) framework, large economies — barring the US —
have come together to tax the global income of digital companies.
➔ Large digital giants are under the scanner for escaping tax in several countries through complex holding
structures.
➔ Pillar 1 approach of OECD includes how digital giants allocate profits and which countries have the first
right to tax them. Pillar 2 proposes a mechanism that would determine how to calculate the amount of
taxes each jurisdiction can charge from the total profit pool.
Organisation for Economic Co-operation and Development (OECD):
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➔ It is an international economic organisation.
➔ Goal: To shape policies that foster prosperity, equality, opportunity and well-being for all.
➔ It was founded in 1961 by 18 European nations, and the United States and Canada to stimulate
economic progress and world trade.
➔ It now has 37 member countries that are mostly high-income, free-market economies.
➔ Since 2010, seven new countries have joined the OECD.
➔ Colombia has become the OECD’s 37th Member country.
➔ OECD countries and Key Partners represent about 80% of world trade and investment.
Self-regulator for Digital Payment Industry:
➔ Indian Banks Association (IBA) and its payment industry counterpart, Payments Council of India
(PCI), are in talks to set up a non-profit joint venture that will regulate the digital payments ecosystem,
➔ This will be under the Reserve Bank of India’s newly issued Self-Regulatory Organization (SRO)
framework.
➔ The new SRO for payment system operators (PSOs), as envisaged by the central bank, will broadly
liaison between the industry, government and regulators to streamline policy decisions, improve
communication, enforce standards and resolve disputes.
➔ PCI is an industry body which represents the interests of leading payment systems and settle-
ment providers such as Paytm, Google Pay, PayU among others.
➔ IBA is an association of all leading Indian banks and financial institutions.
eGrameen Store:
➔ The government’s rural ecommerce venture has touched 100-crore in turnover and nearly a million
transactions within eight months of launch.
➔ Common Service Centre (CSC) eGrameen Store launched in April, is operational across 1,20,000 lo-
cations, and already has partnerships with large multi-nationals such as Pepsi and Coca-Cola.
➔ The venture (CSC eGrameen Store) has come as a great support to citizens, especially in rural area, who
are unable to visit traditional shops and urban malls for purchase of commodities.
➔ CSC eGrameen Store got a boost after the nationwide lockdown disrupted traditional supply chains,
with village entrepreneurs collaborating with local farmers, fishermen and self-help groups to deliver
everything from pumpkins to potatoes and fresh prawns to consumers.
➔ CSC eGrameen Store comes under the Ministry of Electronics and IT.
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Ways to absorb Foreign Capital Inflows
➔ Foreign capital is money entering the country in the form of concessional assistance or
non- concessional flows.
➔ It includes Foreign direct investment, Trade credit, NRI deposits and External commercial borrow-
ings.
➔ To the extent footloose global capital, whose quantum has gone up by the trillions of dollars worth of
‘quantitative easing’ by the US Fed, European Central Bank, Bank of Japan and Bank of England in the
wake of the pandemic-induced slowdown, can find its way into real capital formation, instead of
merely inflating asset prices, both the providers of capital and the projects that receive the capital
will gain.
➔ Had India had a deep and liquid corporate debt market, the job of attracting capital to India would
have been relatively easy. But India does not have such a market. This means that global capital has to
flow into specific projects and stay put for some time, pushing up the cost of the capital.
➔ Another possibility is for the government to sponsor special purpose vehicles to receive foreign cap-
ital, offering a guaranteed return in dollar terms, sparing investors the risk of rupee depreciation.
➔ Sound macroeconomic management on a sustainable basis and regular increase in local
productivity above the rate of productivity gain in developed countries are preconditions for such
a strategy to succeed. If sufficient capital is drawn into a large enough number of commercially viable
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infrastructure projects that, together, are guaranteed to raise the economy’s productivity significantly,
such an enterprise can be managed.
➔ National Infrastructure Pipeline can come in handy, in this context, which has identified 7,269
projects worth a combined $1.5 trillion.
➔ The deeper and more liquid the market, the easier it is for foreigners to invest their capital in
India, with the government having to provide little more than integrity of accounting and governance.
➔ The goal should be to make capital inflows automatic, rather than mediated at the highest level of the
government.
Open Market Operations:
➔ Open market operations is the sale and purchase of govt. securities and treasury bills by RBI or the
central bank of the country.
➔ The objective of OMO is to regulate the money supply in the economy.
➔ When the RBI wants to increase the money supply in the economy, it purchases the government se-
curities from the market and it sells government securities to suck out liquidity from the system.
➔ RBI carries out the OMO through commercial banks and does not directly deal with the public.
➔ OMO is one of the tools that RBI uses to smoothen the liquidity conditions through the year and minimise
its impact on the interest rate and inflation rate levels.
➔ OMO is a part of credit policy.
➔ RBI will continue to conduct open market operation (OMO) purchase auctions of Rs. 20,000 crore, as
well as OMOs in State Development Loans (SDLs) to support market sentiment and assure adequate
liquidity.
➔ Since the announcements made after the Monetary Policy Committee meeting on October 9, the Reserve
Bank has expanded the scale of outright open market operation purchases of Government of India
securities from Rs. 10,000 crore to Rs. 20,000 crore per auction. It is also conducting OMO purchase
auctions in SDLs.
In the context of Indian economy,Open Market Operations refers to

(a) borrowing by scheduled banks from the RBI
(b) lending by commercial banks to industry and trade
(c) purchase and sale of government securities by the RBI
(d) None of the above
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RBI Lets NBFCs Tie Up with Banks to Co-originate Loans to Priority Sectors
➔ Reserve Bank of India has eased norms to allow co-origination of priority sector loans by banks and
non-banking finance companies (NBFCs).
➔ Co-lending model (CLM) will improve the flow of credit to the unserved and underserved sectors
of the economy at an affordable cost, considering the lower cost of funds from banks and the greater
reach of the NBFCs.
➔ Under RBI norms, banks have to compulsorily lend 40% of their net bank credit [Priority Sector
lending] for sectors like agriculture, micro and small industries, weaker sections of society and new
areas like renewable energy.
➔ Banks will take their share of the individual loans on a back-to-back basis. NBFCs have to retain a
minimum of 20% share of the individual loans on their books. This will not apply to foreign banks
with less than 20 branches.
With the reference of the Non Banking Financial Companies ( NBFCs ) in India ,
Consider the following statements:
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1. They cannot engage in the acquisition of Securities issued by the government.
2. They can not accept demand deposit like Saving Account.
Which of the statements given above is /are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2
India, Japan, Australia to Boost Trade, Investment
➔ India, Japan and Australia are likely to set up a trilateral framework to address trade and investment
barriers along with trade and investment promotion.
➔ As part of the Supply Chain Resilience Initiative (SCRI), they are also finalising Track 1.5 dialogue
wherein industry and academia would be involved apart from government to strengthen trilateral ties.
➔ The initiative, first proposed by Japan, aims to reduce dependence on China amid a likelihood of
rechurning of supply chains in the Indo-Pacific region.
➔ In 2019, the cumulative gross domestic product of the three countries was $9.3 trillion, and their
merchandise goods and services trade $2.7 trillion and $0.9 trillion, respectively.
➔ At least 10 product and service categories have been identified from the perspective of the volume of
trade in all categories of goods—raw material, intermediates, capital goods and consumer goods, and
services for collaboration.
➔ These include bulk drugs, pharmaceuticals and medical devices, auto and auto components, petroleum
and petrochemicals, steel, tourism, IT and financial services.
Digitalisation of Farmer Database:
➔ Digitalisation of farmer database based on Aadhaar that will include details about land records
and welfare schemes to help the government audit and monitor various programmes and plug any
leakage.
➔ Farmer database will become the foundation for Agristack, which integrates elements like farmer
identification, location and size of farm and cropping pattern as per the soil and climate.
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➔ Digital stack will be a key enabler for online marketing places and smart agriculture. It will
integrate all the information and provide farmers with daily prices of commodities to help them get
better realisation.
Women’s economic empowerment with macroeconomic growth:
The most compelling evidence of the strong link between women’s economic empowerment and economic
growth comes from the Nordic countries — Norway, Sweden, Denmark and Iceland. These countries have
long been champions of gender equality, both in the workplace and in the home. They are amongst the first
countries to have granted women full voting rights and implemented legal reforms prohibiting discrimination
on grounds of marriage or parenthood.
Nordic countries focused on policies that were both family- and work-friendly — these included paid and
separate parental leave for both women and men, subsidised childcare and early childhood education,
including out of school hours, and individual-based tax and benefit systems to not discourage participation in
paid work by the second wage earner.
The consequences are clear — the gains in female labour force participation produced dramatic and
measurable results. The OECD estimates that in Denmark and Sweden, increases in women’s labour force par-
ticipation accounts for 0.25-0.4 percentage points of annual growth in per capita GDP over the last four dec-
ades — to put that into dollars, the current GDP per capita in Denmark and Sweden, about $55,000-60,000,
would otherwise have been $5,000-6,000 lower.
IMF work in 2017 found that India has one of the lowest female labour force participation rates. At
around 33% at the national level in 2012, India’s female labour force participation rate is well below the global
average of around 50% and the East Asian average of around 63%. Furthermore, we have found that female
labour force participation had been on a declining trend in India, particularly since 2004-05.
This gender gap needs to be narrowed to fully harness India’s much awaited demographic dividend — without
an urgent and concerted effort to bring more women into the labour force, India risks squandering the benefits
of a young population that drove the growth of many East Asian ‘tigers’. Policy efforts should focus on
increased labour market flexibility, allowing more women to be employed in the formal sector, reforms
to improve infrastructure (particularly electricity, transport and sanitation) and higher social spending,
including in education, which leads to higher female labour force participation by boosting female
human capital.
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Contraction in GDP
GDP:
➔ GDP growth at -23.9% in Q1; first contraction in more than 40 years.

➔ As per the National Statistical Office (NSO), gross value added (GVA) came in at -22.8 %.
➔ Gross fixed capital formation was down 47 % YoY, while government final consumption expenditure
was up 16 YoY.
➔ Reserve Bank of India has projected India’s economy to contract as much as 9.5% this fiscal year
after a record 23.9% slump in the June quarter. But activity has since gained momentum with
acceleration in sale of cars, motorcycles, cement and steel raising hopes of a faster recovery even as
some sections remain crippled.
Current Scenario:
➔ Indian economy’s contraction could be a lot less than estimated earlier as business activity bounces
back from abysmal levels driven by opening up of factories and structural shifts in consumer behaviour,
though corporate investments may have to wait longer.
➔ Consumption is leading the recovery with spending accelerating and in many cases rising to
pre-Covid levels seen in January 2020.
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Do you agree with the view that steady GDP growth and low inflation have left the Indian Economy in good
shape? Give reasons in support of your arguments.
With reference to the Indian economy, consider the following statements:

1. The Gross Domestic Product (GDP) has increased by four times in the last 10 years.
2. The percentage share of Public Sector in GDP has declined in the last 10 years.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Government Final Consumption Expenditure
• Final consumption expenditure of administrative departments is equivalent to the current expenditure on

compensation of employees, purchase of non-durable goods and services net of sales and the CFC.
• By convention, expenditure on durable goods, which are used for defence, are also treated as part of con-
sumption expenditure of the Government.
Gross Fixed Capital Formation (GFCF)
➔ It is essentially net investment.

➔ It is a component of the Expenditure method of calculating GDP.
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➔ Gross fixed capital formation (GFCF), also called "investment", is defined as the acquisition of
produced assets (including purchases of second-hand assets), including the production of such
assets by producers for their own use, minus disposals.
➔ Fixed asset refers to the construction, machinery and equipment.
➔ GFCF includes Land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment
purchases; the construction of roads, railways, private residential dwellings, and commercial and
industrial buildings. Disposal of fixed assets is taken away from the total.
➔ GFCF excludes land purchases and consumption of capital.
4th anniversary of Demonetisation in India
➔ Demonetisation has helped reduce black money, increase tax compliance and formalization and given a
boost to transparency.
➔ On November 8, 2016, PM Narendra Modi announced the scrapping of the existing Rs 500 and Rs
1,000 notes.
➔ RBI said it had received Rs 15.31 lakh crore of Rs 500 and Rs 1,000 notes, or 99.3 per cent of the Rs
15.417 lakh crore worth of notes which were in circulation as on November 8, 2016.
➔ Govt. said that Rs 900 crores of undisclosed income was seized in the first four months after
demonetisation. And in the last three years, assets worth Rs 3,950 crores were seized.
22
Benefits of formalisation:
✓ First, bringing hidden money into the formal economy.

✓ Second, converting informal sector jobs into formal sector jobs.
✓ Finally, getting informal sector firms into the formal economy. Each of these steps complement the
others.
✓ On the one hand, formalisation of firms and workers enhances their profits and wages respectively
while increasing their resilience.
✓ On the other hand, bringing hidden money into the formal economy helps reduce income inequality,
thereby putting more income in the hands of the poor, who have a higher marginal propensity to
consume.
Formalisation, thus, enables greater demand creation in the economy. Furthermore, as workers and firms in
the informal sector are far more vulnerable than those in the formal sector, formalisation strengthens the
economy by providing it inherent resilience.
State PSC Previous Questions:
1) Explain the term ‘demonetisation’. Assess the effects of demonetisation of the economy and on
black money.
2) Elucidate the demonetisation scheme. In your views, upto what extent it was successful or
unsuccessful.
National Payments Corporation of India (NPCI):
➔ It is an umbrella organisation for operating retail payments and settlement systems in India.
➔ Founded in 2008
➔ NPCI is a not-for-profit organisation registered under section 8 of the Companies Act 2013
➔ Established by Reserve Bank of India & IBA
➔ NPCI was incorporated in December 2008 and the Certificate of Commencement of Business was issued in
April 2009
➔ National Payments Corporation of India (NPCI) is broadening ownership to include payment
companies and others.
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➔ The exercise is being undertaken for the first time since establishment of the country’s nodal entity for
retail payments over a decade ago, reflecting the growing user base and importance of digital payments in
India.
➔ Those being invited to become non-promoter shareholders of NPCI include a list of 131 companies
with RBI licences — foreign, private and payment (PB) banks, wallet and ATM operators, Bharat Bill Pay-
ments Operating Units (BBPOUs), TReDS firms — and other licensed entities.
➔ 12 domestic banks own 82% in NPCI, which will drop to 78% after the private placement.
‘Vivad se Vishwas’ Scheme
➔ Aim: To settle the huge number of pending direct tax cases.

➔ Benefits those whose tax demands are locked in dispute in multiple forums.
➔ Under the scheme, a taxpayer can settle litigations pending as on January 31, 2020 by paying tax on
the disputed income and obtaining a full waiver of interest and penalty.
➔ The Direct Tax Vivad se Vishwas Act, 2020 was enacted on March 17, 2020 to settle direct tax disputes
stuck in various appellate forums.
Commercial Coal Auction:
➔ Coal Mines (Nationalisation) Act, 1973 restricted coal mining operations mainly to government
entities.
➔ The recent decision to allow private firms to participate in the bidding process with a reduced up-
front amount, the facility of adjustment of upfront amount against royalty, liberal operational efficiency
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parameters, and 100% FDI through automatic route is a watershed moment for India’s energy
industry.
➔ These auctions invite participants to mine coal blocks by bids on the percentage value of coal sold that
they will be willing to share with the government. Successful bidders will obtain leasing rights from
State governments to mine a coal block for a certain period.
➔ The pilot tranche of commercial coal auctions is expected to generate about Rs 7,000 crore annually
for five states of Jharkhand, Madhya Pradesh, Odisha, Chhattisgarh and Maharashtra.
India is a Hot Destination for Foreign Investment:
➔ As the world deals with the economic impact of the Covid-19 pandemic, India, too, could be witnessing
early signs of a spur in economy activity. Over the last few months, GoI has undertaken reforms that
have provided liquidity in the financial system. During April-August, India attracted over $35 billion
as foreign direct investment (FDI), the highest ever for a five-month period.
➔ Long-term institutional investors like sovereign wealth funds (SWFs) are charged with the
responsibility of investing a nation’s money into safe assets for the long term.
➔ India has articulated a specific target of a $5 trillion GDP economy, signalling the importance it plac-
es on economic growth. A fastgrowing economy requires concomitant investment across infrastructure,
manufacturing and services.
➔ Between the 100 trillion National Infrastructure Pipeline (NIP) and the asset monetisation programme,
India’s infrastructure sector offers a multitude of investment ideas for private investors. It has created
several enabling investment structures, such as infrastructure investment trusts, toll-operate-transfer
(TOT) and hybrid annuity models, and the National Investment and Infrastructure Fund (NIIF) to suit the
investment strategies of different classes of investors.
“As global liquidity, ravaged with low or negative yields, searches for a home, there is no better investment
destination than India. A stable political environment, a reform oriented and investor-friendly government,
a large domestic market and immense opportunities across infrastructure, consumer and industrial sectors
— these all create a perfect confluence for a long, and mutually beneficial, partnership between India and
the world.”
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“Foreign Investment is far from being critical to India’s economic growth.” Comment.
RBI : First-ever purchase auction of state government bonds
➔ Reserve Bank of India (RBI) conducted its first-ever purchase auction of state government bonds in
October 2020 through open market operations (OMO), buying 10,000 crore of securities.
➔ Higher demand for the dated securities would raise their prices, bring down yields and, thus, lower
borrowing costs for the states.
➔ States have reportedly borrowed nearly 3.8 lakh crore through State Development Loans (SDL) from
the bond market during April-September. It is over 50% that in the like period last year.
➔ Govt. Bonds are debt securities.
➔ Central Government issues both, treasury bills and bonds or dated securities while the
State Governments issue only bonds or dated securities, which are called the State Development
Loans (SDLs).
Bond:
➔ A bond is a debt instrument in which an investor loans money to an entity (typically corporate or
government) which borrows the funds for a defined period of time at a variable or fixed interest
rate.
➔ Bonds are used by companies, municipalities, states and sovereign governments to raise money to
finance a variety of projects and activities.
➔ Owners of bonds are debt holders, or creditors, of the issuer.
State Development Loans (SDLs):
➔ State Governments also raise loans from the market which are called SDLs.
➔ SDLs are dated securities issued through normal auction similar to the auctions conducted for dated
securities issued by the Central Government.
➔ Like dated securities issued by the Central Government, SDLs issued by the State Governments also
qualify for SLR.
26
➔ They are also eligible as collaterals for borrowing through market repo as well as borrowing by eligible
entities from the RBI under the Liquidity Adjustment Facility (LAF) and special repo conducted under
market repo by CCIL.
Open Market Operations:
➔ Open market operations is the sale and purchase of govt. securities and treasury bills by RBI or the
central bank of the country.
➔ The objective of OMO is to regulate the money supply in the economy.
➔ When the RBI wants to increase the money supply in the economy, it purchases the government
securities from the market and it sells government securities to suck out liquidity from the system.
➔ RBI carries out the OMO through commercial banks and does not directly deal with the public.
➔ OMO is one of the tools that RBI uses to smoothen the liquidity conditions through the year and minimise
its impact on the interest rate and inflation rate levels.
➔ OMO is a part of credit policy.
Aadhaar-seeding of bank accounts
➔ Finance minister directed banks to link all accounts with Aadhaar numbers of respective
customers latest by March 31, 2021.
➔ There is only one Indian bank (SBI) in the top 100 globally, against 18 in China.
➔ Aadhar Payment Bridge System is used by the Government Departments and Agencies for the
transfer of benefits and subsidies under Direct Benefit Transfer (DBT) scheme launched by Gov-
ernment of India.
➔ It is a unique payment system implemented by National Payments Corporation of India
(NPCI).
➔ It uses Aadhaar numbers issued by UIDAI & IIN (Institution Identification Number) issued by
NPCI.
Direct Benefit Transfer (DBT):
➔ It is an attempt to change the mechanism of transferring subsidies launched by Government of India

on January 1, 2013.
➔ It was launched in 20 districts, covering scholarships and social security pensions initially.
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➔ This program aims to transfer subsidies directly to the people through their bank accounts.
➔ The primary aim of this Direct Benefit Transfer program is to bring transparency and terminate pilferage
from distribution of funds sponsored by Central Government of India.
➔ In DBT, benefit or subsidy will be directly transferred to citizens living below poverty line
➔ Central Plan Scheme Monitoring System (CPSMS), being implemented by the Office of Controller Gen-
eral of Accounts, will act as the common platform for routing DBT.
➔ CPSMS can be used for the preparation of beneficiary list, digitally signing the same and processing of
payments in the bank accounts of the beneficiary using the Aadhaar Payment Bridge of NPCI
➔ Former Union Minister for Rural Development of India Jairam Ramesh and former Chief Minister of Andhra
Pradesh N. Kiran Kumar Reddy inaugurated the scheme at Gollaprolu in East Godavari district on 6
January 2013.
➔ M Veerappa Moily formally launched the scheme direct benefit transfer for LPG (DBTL) Scheme in 20 high
Aadhaar coverage districts.
Benefits and potential drawbacks of ‘cash transfers’ to ‘Below Poverty Line’ (BPL) households. Comment.
Mobile Money A/cs
➔ The number of registered mobile money accounts in India witnessed a quantum leap from just 73 per
thousand adults in 2015 to 1,265 in 2019, suggesting a massive improvement in access to
digital financial services in recent years, showed data released in an International Monetary Fund
(IMF) report.
➔ The report defines ‘mobile money’ as a financial service offered by a mobile network operator
(MNO) or another entity that partners with an MNO, facilitated by a network of mobile money
agents.
➔ Reserve Bank of India (RBI) data released recently showed a huge jump in digital transactions over
the past five years. Between FY16 and FY20, digital payments have grown at a compounded annu-
al growth rate of 55.1% – from 593.61 crore in the year through March 2016 to 3,434.56 crore in the
last fiscal.
Centre releases Rs 6,195 Cr to 14 states:
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➔ Govt. released Rs 6,195.08 crore to 14 states on account of the eighth equated monthly installment of
Post Devolution Revenue Deficit Grant.
➔ 15th Finance Commission (Chair: Mr N. K. Singh) Key recommendations in the first report
(2020-21 period) - Devolution of taxes to states: The share of states in the centre’s taxes is
recommended to be decreased from 42% during the 2015-20 period to 41% for 2020-21. The 1%
decrease is to provide for the newly formed union territories of Jammu and Kashmir, and Ladakh
from the resources of the central government.
➔ Revenue deficit grants: In 2020-21, 14 states are estimated to have an aggregate revenue deficit of Rs
74,340 crore post-devolution.
With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?
1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent.
2. It has made recommendations concerning sector-specific grants.
(a) 1 only
(b) 2 only
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(c) Both 1 and 2
(d) Neither 1 nor 2
Revenue Deficit
 It is the difference between the revenue receipts (RR) and the revenue expenditure (RE)
 Revenue deficit arises when the Govt's actual net receipts is lower than the projected receipts.
Example:
 If a country expects a revenue receipt of Rs 100 and expenditure worth Rs 75, it can result in net rev-
enue of Rs 25.
 But the actual revenue of Rs 90 is realised and an expenditure is Rs 70. This translates into net reve-
nue of Rs 20, which is Rs 5 lesser than the budgeted net revenue and called as revenue deficit.
Tax Terrorism:
➔ ‘Tax Terrorism’ essentially means undue exercise of power by tax authorities to levy taxes using
legal or extra-legal means.
Atmanirbhar Package 3.0
➔ Govt. announced Rs 2,65,080 crore under the third phase of the Atmanirbhar Bharat Abhiyan, which is
15 per cent of the GDP.
➔ Rs 1.45 lakh crore was allocated to give a boost to manufacturing, followed by Rs 65,000 crore for
agriculture (fertiliser subsidy), and Rs 10,200 crore for industrial infrastructure, incentives and domestic
defence equipment.
➔ Rs 900 crore will be given to the Department of Biotechnology to research and develop the vaccine of
COVID-19.
➔ Rs 3,000 crore will be given to Exim Bank in the form of a credit line to increase project exports.
➔ Investment of Rs 6,000 crore as equity in the debt platform of NIIF.
➔ An additional provision of 18,000 crores for the Pradhan Mantri Awas Yojana Urban. This will benefit the
poor of the country and create more than 78 lakh employment opportunities.
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➔ On combining all the three stimulus measures announced by the Centre so far, the entire COVID-19
relief package amounts to Rs 29,87,641 crore.
➔ Under the credit guarantee scheme for stressed sectors, the entities will get additional credit up to 20
percent of outstanding credit, and the repayment can be done in five years. The repayment process will
be covered as 1 year of the moratorium and four years of the repayment period.
➔ Govt. has also extended the Emergency Credit Line Guarantee Scheme for MSMEs, businesses, MUDRA
borrowers and individuals (loans for business purposes) till March 31, 2021.
First Stimulus:
• Focused on containing the damage of the lockdowns by addressing the cash-flow mismatch. This was
done using emergency credit facilities, macro-prudential policies, deferred taxes and regulatory
forbearance.
• The objective was to prevent massive bankruptcies and to a major degree the objective has been met.
Second Stimulus:
• It was given to primarily the government employees as they did not witness an income shock as such,
with the objective of incentivising them to spend.
• Additionally, the government reiterated its commitment towards maintaining its expenditure and
pushed state governments to keep up with their expenditure commitments, including those on capital
outlays.
Third Stimulus:
• It comes at a time when the worst seems to be over and the economy seems to be transitioning from
the normalisation of economic activity stage to the growth recovery stage.
• One of the key issues that we must recognise is that economic activity recovers faster than labour
markets. That is, economic activity will get back to the pre-Covid levels faster and labour market, or ra-
ther job creation will follow with a lag. This makes front-loading of government expenditure is
important.
• The rural employment guarantee scheme could cushion some of the impact. However, the problem
would be more so in the urban and semi-urban areas. A good scheme in that regard is the scheme
31
launched to cover the EPFO contribution for companies with less than 1,000 employees for employees
with wages up to Rs 15,000 for fresh employees.
• Emergency credit line guarantee scheme which has been extended till 31 March 2021, and the govern-
ment has extended support to 26 sectors that are most stressed because of the pandemic.The move is
important as it provides adequate time for companies to make use of the additional capital get back to
normal operations.
PLIs : Boost for Manufacturing
➔ Govt. approved Production-Linked Incentives (PLIs) worth Rs. 1.45 lakh crore for 10 sectors
including white goods, automobiles, pharmaceuticals and textiles, seeking to attract big-ticket invest-
ment.
➔ Of this, the most is for automobiles and auto components at Rs. 57,042 crore, followed by battery man-
ufacturing at Rs. 18,100 crore, in order to boost electric vehicle manufacturing.
➔ Under the scheme, cash subsidy is provided to companies as a percentage of incremental sales
from the base year, which is the year the scheme comes into effect from. Percentage of incentive is
worked out in accordance with the disadvantage faced by the sector and varies sector to sector.
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➔ PLI scheme is already operational for mobile phone manufacturing, active pharmaceutical ingredients
(APIs) and medical devices with an outlay of Rs. 51,000 crore. The latest announcement will take the
total amount of incentives under the PLI programme to nearly Rs. 2 lakh crore. In the case of mobiles,
the starting incentive rate is 6%, going down to 4% in the fifth and final year.
➔ The scheme will make Indian manufacturers globally competitive, attract investment in the areas of core
competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance
exports and make India an integral part of the global supply chain.
➔ PLI programme is part of the government’s plan to make India an attractive manufacturing destination
and promote self-reliance besides helping the country emerge as a viable alternative to China. Other el-
ements of this strategy include the reduction in corporate tax rate to 25% and the phased manu-
facturing plan (PMP), aimed at increased indigenisation.
➔ The government has identified 24 focus sectors as part of its manufacturing push via the PLI and PMP
schemes.
Current Account Surplus:
➔ Current account surplus refer to positive current account balances, meaning that a country has more
exports than imports of goods and services.
Gig Economy:
➔ The word “gig” includes all freelancers, disconnected from the workplace.
➔ Example: drivers of Uber, delivery boys of Zomato, plumbers and electricians of Urban Clap
➔ The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with
clients or customers through an online platform.
Long-Term Capital Gains Tax (LTCG)
➔ Long Term Capital Gains Tax or LTCG Tax is the tax levied on the profit generated by an asset such as
real estate and shares, which is held for a long time period.
➔ The period of holding to be defined as “long term” or “short term” varies from asset to asset, as per the
government rules.
33
➔ If an asset is held for less than 36 months, any gain arising from selling it is treated as a short-term capi-
tal gain (STCG).
➔ If an asset is held for 36 months or more, any gain arising from selling it is treated as a ‘long-term’
capital gain (LTCG).
Coal Sector:
➔ Coal India will invest Rs. 2,00,000 crore in modernisation and diversification. Of this, 1,20,000 crore will
be spent towards coal infrastructure only.
➔ As on date, Coal India is extracting around 700 million.
➔ China burns 3.5 billion tonnes coal annually and their industry and economy is growing because coal is
one of the most economical sources of power.
➔ Coal India – Maharatna Company
➔ Coal in India was first mined in 1774 when John Sumner and Suetonius Grant Heatly of the East India
Company commenced commercial exploitation in the Raniganj Coalfield along the Western bank of
Damodar River.
➔ National Coal Development Corporation (NCDC) was established in 1956 with the aim of increasing
coal production efficiently by systematic and scientific development of the coal industry.
➔ Indira Gandhi administration nationalized coal mining in phases – coking coal mines in 1971–72 and
non-coking coal mines in 1973. With the enactment of the Coal Mines (Nationalization) Act, 1973, all
coal mines in India were nationalized on 1 May 1973.
➔ In March 2015, the government permitted private companies to mine coal for use in their own cement,
steel, power or aluminium plants. The Coking Coal Mines (Nationalization) Act, 1972 and the Coal Mines
(Nationalization) Act, 1973 were repealed on 8 January 2018. In the final step toward denationalization,
on 20 February 2018, the government permitted private firms to enter the commercial coal mining
industry. Under the new policy, mines will be auctioned to the firm offering the highest per tonne price.
Consider the following statements :

1. Coal sector was nationalized by the Government of India under Indira Gandhi.
34
2. Now, coal blocks are allocated on lottery basis.
3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self suffcient in
coal production.
Which of the statements given above is/ are correct?
(a) 1 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
RBIs Economic Activity Index
➔ Economic Activity Index for India constructed from 27 monthly indicators using a dynamic factor
model suggests that the economy rebounded sharply from May/June 2020 with the reopening of the
economy, with industry normalising faster than contact-intensive service sectors.
Support-Per-Farmer Rule
35
➔ US, EU, Australia and others seeks to reduce the farm subsidies given by countries with higher potential
to distort global markets.
➔ India wants to create a level playing field by getting rid of the aggregate measurement of support
(AMS) or trade-distorting farm subsidies given by the developed countries.
➔ US, EU and Canada give $160 billion of trade-distorting form of farm subsidies to products including
cotton, wool and tobacco.
➔ India proposes Support-Per-Farmer Rule at WTO.
Aggregate Measurement of Support (AMS)
➔ WTO’s Agreement on Agriculture (AoA) classifies domestic support or subsidies given by the
government to farmers into different categories.
➔ An important type of subsidies or supports is Aggregate Measurement of Support (AMS).
➔ The AMS represents trade distorting domestic support and is referred as the “amber box”.
➔ As per the WTO provision, AMS is a trade distorting subsidy. Since it distorts trade by directly
influencing production and price in an economy, the AMS is categorized as a ‘reducible’,
‘non permissible’ or ‘non-exempted’ subsidy.
In the context of which of the following do you sometimes find the terms 'amber box, blue box and green box'
in the news?
(a) WTO affairs
(b) SAARC affairs
(c) UNFCCC affairs
(d) India-EU negotiations on FTA
Social security fund for unorganised, gig and platform workers:
➔ Labour ministry published draft rules for operationalising provisions in the Code on Social Security,
2020.
36
➔ The code envisages a social security fund for unorganised, gig and platform workers, among other
measures.
➔ The scheme can provide disability cover, accident insurance, health and maternity benefits and old age
protection.
➔ The schemes will be funded by contributions to the social security fund. The central and state
governments can also contribute to it.
➔ Currently, unorganised gig and platform workers are not eligible for any social security benefits.
Consider the following:

1. Hotels and restaurants
2. Motor Transport undertakings
3. Newspaper Establishments
4. Private Medical Institutions
The Employers of which of the above can have the “ Social Security coverage under Employees State Insurance
Scheme”?
1) 1, 2 and 3 only
2) 4 only
3) 1, 3 and only 4
4) 1, 2, 3 and 4
DBS to Take Over LVB in RBI Bailout Plan:
➔ DBS Bank India Ltd (DBIL) will take over ailing Lakshmi Vilas Bank (LVB) in a bailout proposed by
Reserve Bank of India (RBI).
➔ DBS Bank became the first major global bank to voluntarily form a subsidiary to tap the Indian
market.
➔ LVB became the third major lender to face such a moratorium in less than two years after Yes Bank and
Punjab and Maharashtra Co-operative Bank.
➔ RBI monitors the performance of private banks and large Non-Banking Financial Companies (NBFCs).
37
➔ One safety net for small depositors is the Deposit Insurance and Credit Guarantee Corporation
(DICGC), an RBI subsidiary, which gives insurance cover on up to Rs. 5 lakh deposits in banks.
What are the signals from RBI and GoI?
✓ Hint to foreign banks: The legal entity acquiring LVB is an Indian company, not branches of an
overseas bank. ‘Subsidiary or branches’ has been a recurrent theme in banking regulation with RBI
changing its stance with global crises. After the 1997 Asian financial crisis, RBI was keen that
foreign banks run the Indian business as part of their main operations and balance-sheet — a
safeguard to ensure that they don’t snap ties like fair weather friends at the hint of a trouble in Asia.
✓ Laws allow RBI to exercise a sweeping display of authority, the curious style and strategy to bail out
weak private sector banks is coming to the fore. For years, fragile banks — like Global Trust and
United Western — were force-merged with large public sector banks (PSB).
The Reserve Bank of India regulates the commercial banks in matters of

1. liquidity of assets
2. branch expansion
3. merger of banks
4. winding-up of banks
Select the correct answer using the codes given below.
(a) 1 and 4 only
(b) 2, 3 and 4 only
(c) 1, 2 and 3 only
(d) 1, 2, 3 and 4
State PSC Mains Previous Question:
Discuss the challenges of banking sector in India.
NCLT Approval Must for Mergers with FDI:
38
➔ From now onwards all mergers and acquisitions involving foreign direct investment will require
approval of the National Company Law Tribunal as a “necessary precondition”.
➔ As per the SOP, investments from an entity of a country that shares a land border with India, or
where the beneficial owner of an investment into India is situated in or is a citizen of any such country,
would require clearance from the home affairs ministry.
National Company Law Tribunal (NCLT):
➔ It is a quasi-judicial body in India that adjudicates issues relating to companies in India.

➔ Constituted under section 408 of the Companies Act, 2013
➔ Established on 1st June, 2016 (Companies Act, 2013)
➔ Formed on recommendation of the V. Balakrishna Eradi committee on law relating to the insolvency and
the winding up of companies
➔ It is the adjudicating authority for the insolvency resolution process of companies and limited liability
partnerships under the Insolvency and Bankruptcy Code, 2016.
➔ Total: 16 benches
It has the power under the Companies Act to adjudicate proceedings:
Initiated before the Company Law Board under the previous act (the Companies Act 1956);
Pending before the Board for Industrial and Financial Reconstruction, including those pending under the
Sick Industrial Companies (Special Provisions) Act, 1985;
Pending before the Appellate Authority for Industrial and Financial Reconstruction; and
Pertaining to claims of oppression and mismanagement of a company, winding up of companies and all
other powers prescribed under the Companies Act.
Export Oriented Units (EOU) scheme:
➔ Introduced in 1981
➔ Aim : To increase exports from India, to thereby increase foreign exchange earnings and create
employment.
➔ Units registered under the EOU scheme are required to export 100% of their products unless they sell a
portion of it to Domestic Tariff Area (DTA).
39
➔ EOU can be set up anywhere in the country, provided it meets the scheme’s criteria. On the other
hand, an SEZ is a specially demarcated enclave that is deemed to be outside the Customs jurisdiction
and therefore, a foreign territory.
Among the following states, which one has the most suitable climatic conditions for the cultivation of a large
variety of orchids with minimum cost of production, and can develop an export oriented industry in this field ?
(a) Andhra Pradesh
(b) Arunachal Pradesh
(c)Madhya Pradesh
(d)Uttar Pradesh
Outline the role of agriculture in India’s export since 1950.
Central Repository of Information on Large Credits (CRILC):
➔ RBI has set up CRILC to collect, store, and disseminate credit data to lenders.
➔ Banks will have to furnish credit information to CRILC on all their borrowers having aggregate fund-
based and non-fund based exposure of Rs.5 crores and above.
➔ Banks had to classify borrowers as Special Mention Accounts (SMA) of various levels to gauge the
probability of such accounts turning bad.
Cryptocurrency:
➔ It is a digital or virtual currency designed to work as a medium of exchange.

➔ It uses cryptography to secure and verify transactions as well as to control the creation of new units of a
particular cryptocurrency.
➔ It typically does not exist in physical form (like paper money) and is typically not issued by a central
authority
➔ Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryp-
tocurrency
40
➔ Top Cryptocurrencies→Bitcoin, Ethereum, Ripple, NEO, Litecoin, Bitcoin Cash, Libra, Binance coin etc.
With reference to 'Bitcoins', sometimes seen in the news, which of the following statements is/are correct?
1. Bitcoins are tracked by the Central Banks of the countries.
2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
3. Online payments can be sent without either side knowing the identity of the other.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Regional Comprehensive Economic Partnership (RCEP)
➔ It was introduced during the 19th ASEAN meet held in November 2011.
➔ RCEP negotiations were kick-started during the 21st Asean Summit in Cambodia in November 2012.
➔ Member states of ASEAN and their FTA partners are Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and
New Zealand.
➔ RCEP aims to create an integrated market with 16 countries, making it easier for products and ser-
vices of each of these countries to be available across this region.
➔ RCEP's share of the world economy could account for half of the estimated $0.5 quadrillion global
(GDP, PPP) by 2050.
The term 'Regional Comprehensive Economic Partnership' often appears in the news in the context of the af-
fairs of a group of countries known as
(a) G20
(b) ASEAN
(c) SCO
(d) SAARC
Insolvency and Bankruptcy Board of India (IBBI):

41
➔ Established on 1st October, 2016 under the Insolvency and Bankruptcy Code, 2016 (Code).
➔ It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies,
Insolvency Professional Entities and Information Utilities.
➔ It includes 10 representatives i.e. representatives from Reserve Bank of India, Ministry of Finance, law
and corporate affairs.
IBBI board includes:
▪ Chairman
▪ Three members from the government
▪ One member from RBI
▪ Five members are nominated by the Central Government of which three functions as full time
members
RBI's loan restructuring scheme:
➔ Only those borrowers who were making regular repayments for their loan, and were not overdue for
more than 30 days as of March 31, 2020 are eligible to benefit from this scheme.
➔ Lenders have a maximum of 180 days time to implement resolution or restructuring plans for corpo-
rate borrowers.
➔ The scheme is applicable for all personal and corporate loans that came under stress due to
COVID-19.
➔ Under existing rules, banks have to set aside 15 % of the total loan value as provision buffer when
they restructure.
Fisheries – Data Point
➔ India is the 2nd major producer of fish through aquaculture in the world.
➔ India is the 4th largest exporter of fish in the world as it contributes 7.7% to the global fish produc-
tion.
➔ Fish constituted about 10% of total exports from India and almost 20% of agriculture exports in
2017-18.
➔ The fisheries and aquaculture production contribute around 1% to India’s GDP and over 5% to the
agricultural GDP.
➔ Pradhan Mantri Matsya Sampada Yojana: The programme aims to achieve 22 million tonnes of fish
production by 2024-25. Also, it is expected to create employment opportunities for 55 lakh people.
42
‘Report of the Internal Working Group to Review Extant Ownership Guidelines
and Corporate Structure for Indian Private Sector Banks’
➔ Released by RBI.
➔ This report emphasises ‘capital-based’ licensing of private banks.
➔ Report has stressed on the entry of ‘big’ private banks by recommending Rs. 1,000 crore as the initial
paid-up voting equity capital.
➔ One of the objectives of allowing new-generation private banks was to enhance competitive efficiency
of PSBs.
National Floor for Minimum Wages
➔ Ministry of Labour and Employment had constituted an expert committee in January 2017, under the
Chairmanship Dr. Anoop Satpathy to review and recommend methodology for fixation of National
Minimum Wage (NMW).
➔ Internal panel of the labour ministry in its report recommended to fix the need based national minimum
wage for India at INR 375 per day.
➔ It had also suggested a minimum monthly wage of Rs. 9,750 and a housing allowance of Rs. 1,430 for
city-based workers.
➔ Higher minimum wage will lead to inflation.
Assertion (A):
Minimum wages in India are fixed in accordance with the levels of living and the labour participation ratios.
Reason (R) :
All workers covered by the Minimum Wages Acts are above the poverty line.
Of these statements
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not the correct explanation of A
(c) A is correct while R is wrong
(d) A is wrong while R is correct
43
Service Export from India Scheme (SEIS)
➔ It was launched in 2015.

➔ It covers 9 broad sectors, including business services, communication, construction and tourism.
➔ Aim: To boost exports
➔ It offers incentives of 5-7% of net foreign exchange earned.
➔ Under the scheme, benefit is extended in the form of duty credit scrip which enables the holder to
import all goods which are freely importable without payment of basic customs duty.
➔ The scrip and the goods imported against the scrip are freely transferable.
Assertion (A) :
The rate of growth of India’s exports has shown an appreciable increase after 1991.
Reason (R) :
The Govt. of India has resorted to devaluation.
(a) Both A and R are true, and R is the correct explanation of A
(b) Both A and R are true, but R is not a correct explanation of A
(c) A is true, but R is false
(d) A is false, but R is true
GST compensation shortfall:
➔ After the introduction of GST States have very limited taxation rights as most of the taxes, barring those
on petroleum, alcohol, and stamp duty, were subsumed under GST.
➔ GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of
states’ total revenues.
➔ Under GST (Compensation to States) Act, 2017, states are guaranteed compensation for loss of
revenue on account of implementation of GST for a transition period of 5 years between 2017 and
2022.
44
➔ The compensation is calculated based on the difference between the states’ current GST revenue and
the protected revenue after estimating an annualised 14% growth rate from the base year of
2015-16.
➔ GST Council placed two options for borrowing by states to meet the shortfall in GST revenues, pegged
at Rs 2.35 lakh crore in the current fiscal.
➔ As per the Centre's calculation, the compensation requirement by the states in the current fiscal would
be Rs 3 lakh crore, of which Rs 65,000 cr is expected to be met from the cess levied in the GST regime.
Hence, the total shortfall is estimated at Rs 2.35 lakh crore.
➔ Rs 97,000 crore is on account of GST shortfall, while the rest is due to the impact of Covid-19 on the
economy.
First Option: A special window can be provided to the states, in consultation with the RBI, at a reasonable
interest rate for borrowing of Rs 97,000 crore. The amount can be repaid after 5 years of GST implementatation
ending 2022 from cess collection.
Second Option: Borrow the entire Rs 2.35 lakh crore shortfall under the special window
➔ Kerala and West Bengal have become the latest states to choose the central government’s first option
to meet their GST compensation shortfall and will cumulatively get Rs. 10,197 crore through the
Centre's special borrowing window.
➔ Kerala has been permitted to borrow 4,522 crore and West Bengal 6,787 crore, which is 0.5% of their
respective gross state domestic product (GSDP).
➔ 25 States and 3 UTs selected option 1 upto now.
Write about GST and its impact on Indian Economy.
Renewable Energy (RE)
➔ Under the Paris climate agreement, India has pledged to reduce the emissions intensity of its GDP
by 33-35% from 2005 levels, and achieve about 40% cumulative electric power generation capacity
from non-fossil fuels by 2030.
45
➔ It has set the ambitious target for achieving a total installed RE capacity of 175,000 MW by 2022,
with 100,000 MW coming from solar and 60,000 MW from wind.
➔ India’s total RE capacity has grown 2.5 times, and solar energy about 13 times, since 2014, making it the
4th largest in the world.
➔ RE now constitutes over 24% of the country’s installed power capacity and around 12% of total
electricity generation.
➔ India’s RE programme is driven by private sector investment. During the last six years, it has attracted
over 4.7 lakh crore investment, including FDI of about 42,700 crore.
➔ The renewable energy capacity in India is currently 136 giga watts, which is about 36% of our total
capacity.
With reference to the Indian Renewable Energy Development Agency Limited (IREDA), which
of the following statements is/are correct?
1. It is a Public Limited Government Company.
2. It is a Non-Banking Financial Company.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM-KUSUM)
➔ Ministry of New & Renewable Energy (MNRE)

➔ Aim: To add solar and other renewable capacity of 25,750 MW by 2022
➔ The Scheme provides for installation of solar pumps, solarization of existing grid-connected agricultural
pumps and installation of grid connected renewable power plants.
➔ (PM-KUSUM) scheme is in place to enhance farmers’ income, reduce diesel use on farms, ensure
availability of secure power and water supply, and reduce the subsidy burden on states.
46
➔ Under it, renewable power plants of 10,000 MW capacity will be installed, 20 lakh standalone solar
pumps will replace diesel pumps, and 15 lakh grid-connected pumps will be solarised.
➔ Solarisation of agricultural feeders is also included in the scheme to significantly reduce the subsidy
burden of states.
'Net metering' is sometimes seen in the news in the context of promoting the
(a) production and use of solar energy by the households/consumers
(b) use of piped natural gas in the kitchens of households
(c) installation of CNG kits in motorcars
(d) installation of water meters in urban households
National Statistical Office (NSO)
➔ It consists of Central Statistics Office (CSO) and the National Sample Survey Office (NSSO).
➔ NSO is headed by the Secretary, Ministry of Statistics and Programme Implementation.
➔ It was envisaged firstly by Rangarajan Commission to implement and maintain statistical standards
and coordinate statistical activities of Central and State agencies as laid down by the National
Statistical Commission (NSC).
➔ National Statistical Office will release the official estimate of gross domestic product (GDP)
numbers.
The new Gross Domestic Product (GDP) series released by the Central Statistical Organisation (CSO) in February
1999 is with reference to base price of
(a) 1991-92
(b) 1992-93
(c) 1993-94
(d) 1994-95
47
Fiscal Deficit
➔ Fiscal deficit is the difference of government expenditure and government revenue.(assume that
government expenditure is more than revenue).
➔ More fiscal deficit means government has no money, he has to borrow money from central bank or
through some bond/scheme.
➔ If government is borrowing from RBI, in other words RBI has to print more money, so it will in-
crease the liquidity of money in the market. So people will have more money in their hand, but we
have limited resources. For example, before there was 5 car buyers for 1 car, now there is 10 car buyer
for 1 car. So demand for car will increase and it will increase the price of car. So price of everything will
go up. Ultimately Inflation will go up.
➔ If government is borrowing money from people as bond or some scheme through, government
has to pay high interest after some year. So people will invest their money in government
schemes, so liquidity of the money will come down. Before we have 5 car buyer for 1 car, now we
have 2 car buyer for 1 car, so car price will go down. Price of everything will go down, people will buy
less things. It will slow down the industrial growth and it will be deflation in the country. It will make
economic growth sluggish. And in the situation of the deflation, Government has to pay high interest to
the people.
➔ Third case, government has to borrow money from world bank or from some other country. Be-
cause of that Government has to devalue it’s currency.
➔ As government has no money, government can’t bring any new development scheme. It will become
difficult to tackle any crisis over country.
➔ Centre’s fiscal deficit stood at Rs. 9.53 lakh crore at the end of October 2020, 20% higher than
Rs 7.96 lakh crore budgeted for FY21
48
In the context of governance, consider the following:

1. Encouraging Foreign Direct Investment inflows.
2. Privatization of higher educational Institutions.
3. Down – sizing of bureaucracy.
4. Selling / offloading the shares of Public Sector Undertakings.
Which of the above can be used as measures to control the fiscal deficit in India?
(a) 1, 2 and 3 (b) 2, 3 and 4
(c) 1, 2 and 4 (d) 3 and 4 only
What do you mean by fiscal deficit? How is this different from primary deficit? What are the
significances of these deficits for development? Can the goals of development be achieved without
having high fiscal deficit? Give reasons.
Foreign Direct Investment
➔ Foreign direct investment is a form of investment that earns interest in enterprises which function out-
side the domestic territory of the investor.
➔ Foreign direct investment is a component of a country's national financial account.
➔ Foreign direct investment is a lead driver for economic growth and brings certain benefits to national
economies.
49
➔ It can contribute to Gross Domestic Product (GDP), Gross Fixed Capital Formation (total investment in a
host economy) and Balance of Payments.
➔ Mauritius was the top source of FDI in the quarter ended September 30, 2020 and the US jumped to
the 3rd position from 5th in the trailing quarter.
➔ Almost $17.5 billion of FDI came in August 2020 alone, the highest monthly inflows seen this fiscal, data
released by the Department for Promotion of Industry and Internal Trade (DPIIT).
➔ Gujarat attracts most FDI in Apr-Sep 2020.
A great deal of Foreign Direct Investment ( FDI ) to India comes from Mauritius than from many major and ma-
ture economics like UK and France. Why?
(a)India has preference for certain countries as regards receiving FDI.
(b)India has doubled taxation avoidance agreement with Mauritius.
(c) Most citizens of Mauritius have ethnic identity with India and so they feel secure to invest India.
(d)Impending dangers of global climate change prompt Mauritius to make huge investment in India.
50

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Economy Current Affairs by Teju, NextGen IAS – November 2020

Food Inflation .................................................................................................................................................................................................................... 3

Off-Market Transactions: .............................................................................................................................................................................................. 8

Government Security (G-Sec): ................................................................................................................................................................................... 10

Certificate of Deposit: ................................................................................................................................................................................................... 10

Forex Derivatives: ........................................................................................................................................................................................................... 11

Production-linked incentive (PLI) scheme: ........................................................................................................................................................... 11

International Digital Tax: ............................................................................................................................................................................................. 13

Self-regulator for Digital Payment Industry: ....................................................................................................................................................... 14

eGrameen Store: ............................................................................................................................................................................................................. 14

Ways to absorb Foreign Capital Inflows ............................................................................................................................................................... 15

India, Japan, Australia to Boost Trade, Investment ........................................................................................................................................... 18

Digitalisation of Farmer Database: .......................................................................................................................................................................... 18

Gross Fixed Capital Formation (GFCF) ................................................................................................................................................................... 21

Commercial Coal Auction: .......................................................................................................................................................................................... 24

India is a Hot Destination for Foreign Investment: ........................................................................................................................................... 25

Mobile Money A/cs ....................................................................................................................................................................................................... 28

Centre releases Rs 6,195 Cr to 14 states: .............................................................................................................................................................. 28

Tax Terrorism: .................................................................................................................................................................................................................. 30

PLIs : Boost for Manufacturing ................................................................................................................................................................................. 32

Current Account Surplus: ............................................................................................................................................................................................ 33

Aggregate Measurement of Support (AMS) ....................................................................................................................................................... 36

Social security fund for unorganised, gig and platform workers:............................................................................................................... 36

DBS to Take Over LVB in RBI Bailout Plan: ........................................................................................................................................................... 37

NCLT Approval Must for Mergers with FDI: ........................................................................................................................................................ 38

Export Oriented Units (EOU) scheme: .................................................................................................................................................................... 39

Central Repository of Information on Large Credits (CRILC): ....................................................................................................................... 40

Regional Comprehensive Economic Partnership (RCEP) ................................................................................................................................ 41

Insolvency and Bankruptcy Board of India (IBBI): ............................................................................................................................................. 41

RBI's loan restructuring scheme: .............................................................................................................................................................................. 42

Fisheries – Data Point ................................................................................................................................................................................................... 42

Private Sector Banks’ .................................................................................................................................................................................................... 43

National Floor for Minimum Wages ....................................................................................................................................................................... 43

GST compensation shortfall: ...................................................................................................................................................................................... 44

National Statistical Office (NSO) .............................................................................................................................................................................. 47

Foreign Direct Investment .......................................................................................................................................................................................... 49

Steps that the government can take to reduce food inflation:

UPSC CSE Prelims Previous Question 2011

UPSC CSE Mains Previous Question 1997:

For the first time UPI has crossed 2 billion transactions

UPSC CSE Prelims Previous Question 2017:

October GST Crosses Rs.1 Lakh cr, First Time in FY21

Steps to increase GST Collections:

UPSC CSE Prelims Previous Question 2017:

UPSC CSE Mains Question 2013:

UPSC CSE Mains Question 2019:

UPSC CSE Prelims Previous Question 2015:

A decrease in tax to GDP ratio of a country indicates which of the following?

PMI or Purchasing Managers’ Index (PMI)

➢ Indicator of business activity — both in the manufacturing and services sectors.

Government Security (G-Sec):

Call Money / Notice Money / Term Money:

Production-linked incentive (PLI) scheme:

International Digital Tax:

Organisation for Economic Co-operation and Development (OECD):

Self-regulator for Digital Payment Industry:

Open Market Operations:

UPSC CSE Prelims Previous Question 2013: