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Economics Class 01

GDP ESTIMATION IN INDIA (05:03 PM)

GDP Calculation changes introduced in 2014-15.

In 2015, the Central Statistics Office (CSO) introduced a new series of national account
statistics.

The Base Year of the GDP Series was revised from 2004-05 to 2011-12.

Base year is revised periodically to take into account the structural changes which have
been taking place in the economy and to depict a true picture of the economy.

The new series incorporates the latest recommendations of the System of National
Accounts, 2008, the international guidelines on the compilation of national accounts.

WHY GDP IS NOT A VERY GOOD MARKER TO MEASURE DEVELOPMENT

It doesn't take into account externalities such as crime, pollution, inequality, and depletion
of natural resources.

It doesn’t measure aspects like Environmental protection, family bonding etc.

GDP also includes socially negative activities if it generates economic output. For Example,
the money spent on the repair work after the train crash is counted in GDP.
Non-Inclusion of Social Aspects of people’s life such as state of health, quality of education,
etc.

NATIONAL MULTIDIMENSIONAL POVERTY INDEX (MPI) (05:20 PM)

Poverty line Only talking about consumption or income level.

Poverty is a multidimensional concept not just deprivation on income and consumption.

Other parameters include standard of living etc. This is what the MPI is doing.

NATIONAL MPI

First ever National MPI was released in 2021 (based on data taken from NFHS-4 ).

Under the government’s Global Indices for Reforms and Growth (GIRG) initiative, NITI Aayog
is the nodal agency for MPI.

GIRG monitors India’s performance on various important social and economic parameters.

Methodology used in Computing India’s National MPI (Alkire-Foster Methodology): It

identifies people as poor or not poor based on a dual-cut-off counting

method.

According to the AF methodology, an individual is considered MPI poor if their deprivation

score equals or exceeds India’s national MPI poverty cut-off of 33.33%.

DIRECT BENEFIT TRANSFER (05:40 PM)

Spending on subsidies is high, still leakages are high -This is the ground for introducing DBT.

Transfers should be linked to inflation and the product market- These two challenges have
to be addressed to make DBT successful.

KEY ENABLERS FOR DBT

JAM (Jan Dhan, Aadhaar, and Mobiles) trinity: Enabled transfer benefits in a leakage-proof,
well-targeted, cashless, and timely manner.

Business Correspondents (BC) Infrastructure: Ensure that payments are disbursed to the
beneficiaries on time, at their doorstep, and of full value.

Moving away from the Branch-led to Employee-led.

Payments Bank: Increased the penetration level of financial services in remote areas of the
country.

Mobile money: Develop a comprehensive eco-system for cashless transactions over a

mobile platform using Aadhaar as an identifier.

SELF-HELP GROUPS (05:50 PM)

Formal grouping registered as a trust or cooperative society where the members will be
encouraged to save and how manage finances.

SHG is a village-based financial intermediary committee usually composed of 10-20 local

women.

It is voluntary in nature.

India has around 1.2 crore SHGs, 88% of them all women-based.

SHG success stories include Kudumbashree in Kerala, Jeevika in Bihar, Mahila Arthik Vikas

Mahamandal in Maharashtra, and Looms of Ladakh.

Group responsibility: In an SHG, all members of a group take responsibility for a loan that an
individual member takes.

SIGNIFICANCE

Financial inclusion.

Women empowerment.

Poverty alleviation.
CHALLENGES

One of the major challenges is the scalability.

Democratic management.

MICROFINANCE IN INDIA (06:00 PM)

It is a collateral-free loan and for low-income households only.

Eligibility: 3 lakh/annum to avail microfinance.

Loan either from the bank or NBFC MFI.

STATE FINANCES (06:07 PM)