INDIAN ECONOMY notes

Contents
MODULE – 1 Structure of Indian Economy .................................................................................. 5

Structural change in Indian Economy ............................................................................................. 7
Salient Features of Indian Economy ............................................................................................... 8
Other salient features of the Indian Economy................................................................................. 9
More salient features of the Indian Economy ............................................................................... 11
More features of Indian Economy ................................................................................................ 14
Human Development Index (HDI) ............................................................................................... 15
Concept of human development ............................................................................................... 15
Concept of Human Development Index ................................................................................... 15
More on Human Development Index (HDI) ................................................................................. 15
Normalized Indices ................................................................................................................... 16
Gross National Happiness Index ................................................................................................... 16
Domain of GNHI ...................................................................................................................... 16
Data of World Happiness Report .................................................................................................. 17
Natural Resources ......................................................................................................................... 18
Natural Resources according to World Trade Organization ..................................................... 18
Features of natural resources .................................................................................................... 18
Land resources .......................................................................................................................... 18
Land use pattern in India........................................................................................................... 18
Forest resource .............................................................................................................................. 20
Forest......................................................................................................................................... 20
Classification................................................................................................................................. 20
Forest policy, 1952........................................................................................................................ 20
Forest policy, 1988........................................................................................................................ 21
State forest cover in India ............................................................................................................. 22
Water Resources ........................................................................................................................... 23
National Water policy ................................................................................................................... 23
National Water Policy, 2002 ......................................................................................................... 23
National Water Policy, 2012 ......................................................................................................... 23
Mineral resources .......................................................................................................................... 23
Mineral resources distribution in India ......................................................................................... 24
State wise number of reported mines and more about mineral policy .......................................... 25
National Mineral Policy ................................................................................................................ 25
National Mineral Policy 2019 ....................................................................................................... 25
Infrastructure ................................................................................................................................. 26
Health infrastructure ................................................................................................................. 28
Educational infrastructure ......................................................................................................... 29
Housing ..................................................................................................................................... 30
Water and sanitation ................................................................................................................. 30
MODULE – 2 Indian Agriculture ................................................................................................. 30
Agriculture and Allied Sector Report ....................................................................................... 30
Cropping Pattern ........................................................................................................................... 31
Types of cropping system ......................................................................................................... 31
Factors affecting cropping pattern ............................................................................................ 31
Irrigation ....................................................................................................................................... 32
Sources of irrigation .................................................................................................................. 32
Irrigation system in India .............................................................................................................. 32
Initiative by govt. and stats ....................................................................................................... 32
Rural labor – Agricultural labor .................................................................................................... 33
Causes of agricultural labor ...................................................................................................... 33
Types of agricultural labor ........................................................................................................ 33
Characteristics ........................................................................................................................... 33
Agricultural credit (Finance)......................................................................................................... 34
Institutions which provide credit to farmers ............................................................................. 34
Classification of agricultural credit ........................................................................................... 34
Policy initiative by govt. ........................................................................................................... 35
Facts and figures of agricultural credit ..................................................................................... 35
MODULE – 3 Industrial Development in India ........................................................................... 36
Industry ..................................................................................................................................... 36
Objectives of policy .................................................................................................................. 36
Industrial Policy, 1948 .............................................................................................................. 37
Industrial Policy Revolution, 1956 ........................................................................................... 37
Monopolies and Restrictive and Trade Practices (MRTP) ....................................................... 39
Small-scale industries / MSME .................................................................................................... 40
Product group of MSME [350 items and 8 items reserved for handy-craft] ............................ 41
Public Sector Enterprises .............................................................................................................. 42
Objectives of Public Sector Enterprises .................................................................................... 42
Forms of public sector enterprises ............................................................................................ 42
GDP contribution of public sector enterprises .......................................................................... 43
Industrial sickness ......................................................................................................................... 43
SICA ......................................................................................................................................... 43
MODULE – 4 Foreign/International Trade .................................................................................. 44
Role of international trade ........................................................................................................ 44
Cons of international trade ........................................................................................................ 45
Composition of international trade in India .............................................................................. 45
Composition of export .............................................................................................................. 45
Composition of import .............................................................................................................. 46
Direction of Indi a’s International Trade.................................................................................... 46
India’s export destination .......................................................................................................... 46
Balance of Payment (BoP) ............................................................................................................ 47
Features ..................................................................................................................................... 48
Components of BoP .................................................................................................................. 48
About BoP investment and borrowings ........................................................................................ 48
Change in reserve ...................................................................................................................... 49
Measures to check deficit in BoP.............................................................................................. 49
Foreign Direct Investment ............................................................................................................ 49
Top investors of FDI in India and top FDI services and products in India .............................. 50
Prohibition of FDI in India ....................................................................................................... 50
FDI norms liberalized by govt. of India.................................................................................... 50
Recent developments in the foreign sector in India .................................................................. 50
MODULE – 5 Banking Sector ...................................................................................................... 52
India’s Baking Structure ........................................................................................................... 52
Reserve Bank of India ................................................................................................................... 53
Functions of RBI ....................................................................................................................... 53
RBI’s Developmental role ........................................................................................................ 54
Composition of RBI .................................................................................................................. 54
Commercial Banks ........................................................................................................................ 54
Functions of commercial banks ................................................................................................ 55
Primary functions ...................................................................................................................... 55
Secondary functions .................................................................................................................. 55
Types of commercial banks ...................................................................................................... 55
Capital Market .............................................................................................................................. 56
Role of capital market ............................................................................................................... 56
About financial institutions ....................................................................................................... 56
Instruments in capital market .................................................................................................... 56
Share market history in India .................................................................................................... 57
State level financial institutions ................................................................................................ 57
Legislation governing the capital market .................................................................................. 58
Primary market.............................................................................................................................. 59
Secondary market.......................................................................................................................... 59
Stock exchanges in India .............................................................................................................. 59
Available stock exchanges in India............................................................................................... 59
Rural Banking ............................................................................................................................... 60
Importance of rural finance ........................................................................................................... 60
Evolution ....................................................................................................................................... 60
MODULE 6 – Public Finance in India ......................................................................................... 61
Public Revenue ............................................................................................................................. 61
Sources of public revenue ......................................................................................................... 61
Characteristics of taxes ............................................................................................................. 62
Cannons of taxation .................................................................................................................. 62
Public Expenditure ........................................................................................................................ 62
Objectives ................................................................................................................................. 63
Classification (modern & classical economist)......................................................................... 63
Capital expenditure ................................................................................................................... 64
Revenue expenditure ................................................................................................................. 64
Developmental expenditure ...................................................................................................... 64
Non-developmental expenditure ............................................................................................... 64
Growth of public expenditure in recent years ........................................................................... 64
Reasons for rise in govt. expenditure for recent years in India ................................................ 64
Public Debt.................................................................................................................................... 65
Types of public debt.................................................................................................................. 65
Ways to repay debt.................................................................................................................... 65
Budget ........................................................................................................................................... 66
Objectives ................................................................................................................................. 66
Types of budgets in India .......................................................................................................... 66
Union Budget of India 2021 ......................................................................................................... 67
Finance commission...................................................................................................................... 67
Functions ................................................................................................................................... 68
15th Finance Commission............................................................................................................. 68
Key Points ................................................................................................................................. 68
MODULE – 1 Structure of Indian Economy

19th January 2022
Economy- org. and institutional setup of a region where the economic agents carry the economic
activities.
It can be also referred as economic system which is composed of people and institutions their
relationship to productive resources.
EXTRA -
National Income - c (household)+ I (industries/firms) + g (govt.) + x (foreign income)
It is an economic system which involves the system of production, distribution, consumption of

goods and services in a country or region. It comprises of the economic structure of a society
where a large set of inter-related production and consumption activities takes place. Here the
economic agents identify, develop, process and trade the scare resources to attain maximum
satisfaction. The institutional setup in an economy mainly includes everything related to
management of economic affairs and providing social and economic justice.
STRUCTURE OF ECONOMY can be defined as the inter-related process of demand and

supply of productive factors like- natural resources, labor, capital, technology and their
composition in employment and production in different sector of economy is knows as structure
of economy.
On the basis of nature of activity

SECTORS - PRIMARY, SECONDARY AND TERTIARY
Primary - agriculture and allied sectors activities such as extraction and exploitation of natural
resources and which leads to production of goods. Involves- agro business, live stocks, mining
and forestry.
Agriculture sector is facing the issue of disguised unemployment and diminishing return.
Why labor is considered as active factor of production?

Why agriculture is considered as fixed factor of production?
20th January 2022

Secondary - those activities are those that take the raw materials produced by the primary sector
and process them into manufactured goods and products. It includes those industrial activities
which results in transformation of natural products into other forms of final goods which is used
for ultimate consumptions by the consumers and intermediate goods /capital goods which are
used for the production process.
EXTRA -
Includes the industrial sector of the economy and transformation of raw material into finished
good or can be worked as an intermediate goods.
The industrial goods are classified based on the scope of their use.
1. CAPITAL GOODS
2. INTERMEDIATE GOODS
3. CONSUMER GOODS
a. CONSUMER DURABLE
b. NON - DURBALE GOODS
Sub classification of secondary sector are- manufacturing sector, construction and lastly
electricity, gas and water supply.
Tertiary – it provides intangible goods that is services which supports the production process of
primary and secondary sector, it does not involve does not involve in the production of a good
but it helps in the production process through generating services to aid a support for primary
and secondary sector.
The various sub sectors of tertiary sector are- Trade, hotels, transport and communication,
financing, insurance real estate, business services, community services and social services.
Home work – GDP contribution of the sub categories/sectors from the secondary and tertiary
sector in the financial year 2019-20 and 2020-21.
21st January 2022
Structural change in Indian Economy

The process of structural transformation or change from low to high productive sectors.
The structural change of an economy refers to the interrelationship between economic
activities of different sectors and their contribution to national output. Structural transformation
is an economic phenomenon which includes industrialization, urbanization, development of
human capital and agricultural transformation.
The two models which deals with the concept of structural change are Colin Clark model and
Simon Kuznet model.
1. Colin Clark Model (3 sector hypothesis) – Colin Clark developed a 3-sector
hypothesis to explain the concept of economic transformation where the model divides an
economy into 3 sectors of activity.
a. Primary sector
b. Secondary sector
c. Tertiary sector
During a structural change in an economy the economic activity shift from primary to
secondary and then finally to tertiary sector.
According to this model countries with low per-capita income and GNP (Goss National
Product) are in the early stage of development and main part of their income is contributed by
primary sector. Countries with more advanced state of development with middle income
generate their income mostly from secondary sector while the highly developed countries with
high income have the major part of contribution in national output through tertiary sector.
2. Simon Kuznet Model – Simon Kuznet marked the structural transformation with
employment shift and share of contribution of different to national income according to
Kuznet there are 3 stages or transformation or structural change in an economy.
a. Primary stage – the first stage has the pre dominance of primary activities and at
this stage there is slow growth rate and low demand for the manufacturing goods.
b. Secondary stage – there is a shift in gravity from primary sector to secondary
sector activities at this particular stage of economic transformation people in the
society divert more towards the industrial development taking place in the
economy and the employability in the secondary sector increases hence, the per-
capita income of the people increase which typically increase the demand for the
industrial goods and hence as a result, the production activity in the industrial
sector increases hence, at this secondary stage of transformation the
manufacturing sector starts contributing more to the national output.
c. Developed/ tertiary stage – the factor productivity growth spreads to all the
productive and advanced sectors of the economy as the demand for the services
also increases and hence, here service sector emerges as the largest contributors in
terms of employment and national output.
25th January 2022
Salient Features of Indian Economy

Types of economic systems
• Capitalism – it is particular mode of the org. of production which is characterized

by wage, slavery production of profit creation of surplus value. (Karl Marx)
• Socialism – it is an economic system where the means of production are either
owned or controlled by the state.
IMPORTANT POINT
J. M. Keynes in 1936 strongly suggested govt. intervention in the economic activities to correct
the economic crisis he suggested an increase in govt. expenditure by producing and supplying
some basic goods and services which are known as public goods and as these public goods are
available at free of cost or at low price these public goods create demand in the economy.
• Mixed – it is an economic system where the govt. intervent to prevent undue

concentration of economic power, monopolistic and restrictive trade practices. There is a
balance between the ownership of factors of production and production activities between
public and private sector.
The private sector is influenced by profit motive production activities while the investment
activities decision of the public sector is based on social welfare the distribution system of
certain goods and services in mixed economy are made available to the population at free or
subsidized way by the state while for certain goods and services the prices are decided in the
open market but regulated by the govt.
Definition of mixed economy by Paul Samuelson
Mixed economy is an economic system where some planning of production is taken by govt.
directly and some such and other activities are taken by private sectors.
India as a mixed economy
India adopted this approach in post-independence. The industrial policies implemented in the
year 1948 and 1956 have helped the private and sector to co-exist. Also, with the liberalization of
the Indian economy the opportunities for the expansion and growth of private sector are
enhanced. Also, after economic stagnation during imperial rule, India has adopted policies for
economic growth and lay foundation for technological, scientific and industrial development.
Mixed economy in India is that it permits adequate freedom to different economic units like
consumers, factors of production and private initiative. In mixed economic system, the state
makes efforts to provide maximum welfare to workers and other citizens. The government makes
provision for the employees for housing, education, minimum wages, good working conditions,
etc. The resources are utilized in the best possible manner in the Mixed Economic System. The
Central Government makes economic planning for optimum use of the resources and thus the
shortage is avoided.
27th January 2022
Other salient features of the Indian Economy

UNWSEP - United Nations World Economic Situation and Prospect
Country classification according to United Nations

Developed country refers to the sovereign state whose economy has highly progressed and
possess great technological infrastructure as compared to other nations which is accompanied by
an effective rate of industrialization, low level of income disparity and poverty and high standard
of living.
Under-developed economy is that country that has low levels of living standard, low per-
capita income, unused natural resources and dependencies on foreign countries while the
developing economy has a standard of living which is better than the under-developed economy
but the per-capita income and living standard remains low to that of advanced economy.
GNI is the value of all income produced by the country’s residents within its geographical
borders plus net receipts from abroad.
Country classification according to World Bank (GNI$PPP)

The World Bank has used an income classification to group countries for analytical purposes for
many years. Since the present income classification was first introduced 25 years ago there has
been significant change in the global economic landscape. As real incomes have risen, the
number of countries in the low-income group has fallen to 31, while the number of high-income
countries has risen to 80. As countries have transitioned to middle income status, more people
are living below the World Bank’s international extreme poverty line in middle income countries
than in low-income countries. These changes in the world economy, along with a rapid increase
in the user base of World Bank data, suggest that a review of the income classification is needed.
A key consideration is the views of users, and this paper finds opinions to be mixed: some critics
argue the thresholds are dated and set too low; others find merit in continuing to have a fixed
benchmark to assess progress over time. On balance, there is still value in the current approach,
based on gross national income per capita, to classifying countries into different groups.
Features of Indian Economy
• India is considered as low-middle income country where its GNI$PPP lies

between $1046-$4095
• According to Centre of Monitoring Indian Economy (CMIE) in December 2021
published the data on the unemployment rate in India which stood at 7.98%.
• Patents and trademark till financial year 2015-16 were (6,326) and (65,045)
respectively. But in the year 2020-21 it has been increased to (28,391) and (2,55,993)
respectively.
• Entrepreneur skills in India used to very low according to Global
Entrepreneurship Monitor (GEM) [fear-failure factor was 44% and intention to
entrepreneurship was 9%] but in 2017 there were positive changes as [fear-failure factor
was 37% and intention to entrepreneurship was increased to 14.9%], and in 2020 GEM
published that 1.24 lakh new venture grown in India.
• Income Inequality report 2020 there was high income disparity in India where top
10% of the population holds 57% of national income, then India’s middle class which is
relatively poor holds 25.9% of national income and rest the below section. Moreover,
taxation system of India plays an important but still cannot solve the issue of income
inequality in the country.
The NITI Aayog data shows, Kerala has emerged as the state with the lowest poverty across
India, according to NITI Aayog's first Multidimensional Poverty Index (MPI) report. Kerala
(0.71 per cent), Goa (3.76 per cent), Sikkim (3.82 per cent), Tamil Nadu (4.89 per cent) and
Punjab (5.59 per cent) have registered the lowest poverty levels in the country and are at the
bottom of the index. As per the index, Bihar, Jharkhand and Uttar Pradesh are the poorest states.
In Bihar, 51.91 per cent population is poor, followed 42.16 per cent in Jharkhand, 37.79 per
cent in Uttar Pradesh. While Madhya Pradesh (36.65 per cent) has been placed fourth in the
index, Meghalaya (32.67 per cent) is at the fifth spot. Among union territories (UTs), Dadra
and Nagar Haveli (27.36 per cent), Jammu & Kashmir, and Ladakh (12.58), Daman & Diu (6.82
per cent) and Chandigarh (5.97 per cent), emerged as the poorest UTs. Puducherry having 1.72
per cent of its population as poor, Lakshadweep (1.82 per cent), Andaman & Nicobar Islands
(4.30 per cent) and Delhi (4.79 per cent) have fared better.
28th January 2022
More salient features of the Indian Economy

• Gender disparity – Gender inequality index (GII) reviews 3 dimensions of
gender inequality (economic opportunity, political empowerment and education
attainment) the ranking published by GII in 2020 India ranked 112 among 156
countries and in 2021 ranking India’s rank fall down to 148 among 156 countries.
According to world economic forum women contribution in GDP was 17% and global
percentage was 37%. Moreover, if we look into the Artificial Intelligence (AI) sector
India has the 2nd largest AI workforce but also has the highest gender gap in AI
sector/industry and only 22% female workforce contribute in AI from India. Furthermore,
around 19 lakh crores left unpaid for the housewife.
• Technological advancement/development – India ranks 3rd in technological
transformation and favorable decisions in the world. Global Innovation Index India ranks
in 46th position among 50 countries but still becoming a major player in the innovation
sector at a global level.
• Industrial development – there has been a snail growth rate in industrial growth
and if we look into the 8 core industries of Indian industrial sector which are natural
gas, crude oil, refinery products, cement, steel, fertilizers, electricity and coal; in which
only electricity showed a positive growth rate and rest showed the negative growth rate.
Industrial production in India increased 3% for October 2021 this due to the booked
measures taken by the govt. such as Atmanirbhar Bharat Abhiyan.
• Agricultural sector – contribution in GDP has declined from 18.2% to 17.8% in
2019-20.
• Hunger and malnutrition - according to Global Hunger Index India’s position
fell down to 101 among 116 countries with a score of 27.5, India has a level of hunger
that is serious. For each country, values are determined for four indicators –
undernourishment, child wasting, child stunting and child mortality.
• Demographic dividend – Demographic dividend refers to the growth in an
economy that is the result of a change in the age structure of a country’s population.
The change in age structure is typically brought on by a decline in fertility and
mortality rates. The demographic dividend comes as there’s an increase in the working
population's productivity, which boosts per capita income.
• According to United Nations Population Fund Association demographic
dividend is the economic growth potential resulting out of change in the population age
structure with a large section of population in the working age group as compared to the
non-working age population of below 14 years and above 65 years this subsequent
change in the age structure gives a boost to the economic productivity that occurs when
the larger proportion of people are there in the workforce.
31st January 2022
More features of Indian Economy

• Occupational structure – it refers to the distribution of the workforce or the
population engaged in the productive sectors of the economy. Like in Indian economy
there is a change in economy/occupational structure in post-independence period where
the share of agriculture has gradually decreased and the share of service sector in labor
force participation accelerated.
• Human Development Index (HDI) – India dropped one spot to 131 among 189
countries in the 2020 human development index, according to a report released by the
United Nations Development Program (UNDP). Human Development Index is the
measure of a nation's health, education, and standards of living. Life expectancy of
Indians at birth in 2019 was 69.7 years while Bangladesh has a life expectancy of
72.6 years and Pakistan 67.3 years, the 2020 Human Development Report said. India,
Bhutan (129), Bangladesh (133), Nepal (142) and Pakistan (154) were ranked among
countries with medium human development. India's HDI value for 2019 is 0.645 which
put it in the medium human development category. India has been positioned at 131
out of 189 countries and territories, according to the report. India had ranked 130 in
2018 in the index.
Human Development Index (HDI)

Concept of human development
According to Professor Amartya Sen in order to achieve well-being and higher productivity is
known as Human Development. People’s choice include income, knowledge, health, a clean
physical environment, political freedom. Professor Amartya Sen included certain extended set of
choices which covers desire to live long, to have a comfortable standard of living, to be gainfully
employed, to breath clean air to be free, to live in a community and participate in the community
life, to have access of the resources needed for decent standard of living.
Concept of Human Development Index

Human Development Index is a summary measure of achievement in 3 dimensions of human
development that is long and healthy life (health index HI), access to knowledge (education
index EI) and decent standard of living (income index YI/II)
The 3 dimensions of HDI and the first dimension will be Health Index (HI)
A long and healthy life which shows the life expectancy at birth. -> is number of years a newly
born infant expected to live and this index shows the progress made in health infrastructure,
control over infant and child mortality and progress made in providing nutritional food.
1st February 2022
More on Human Development Index (HDI)

Second dimension will be Education Index (EI)
Education index shows standard of literacy and literacy rate of the economy it focuses on govt.
policies and initiative to build up a quality education infrastructure. The education index is
measured through the geometric means of the two indices
• Mean years of schooling index i.e., MYSIS (years that a person 25 years of age or older
has spent in school.)
• Expected years of schooling index i.e., EYSI (years that a 5-year-old child spend in
school throughout his life.)
Mean Years of Schooling Index (MYSIS) it is a calculation of numbers of years of education

received by people of 25 years of age and above in their lifetime.
Expected Years of Schooling Index (EYSIS) is a calculation of number of years a child of
school entrance age is expected to spend at school and at university it is the sum of specific
numbers of years in primary, secondary and tertiary education.
Third dimension will be Income Index (II/YI) [GNI$PPP]
Income index shows the standard of living of the people it is an economic indicator which
shows access to resources and bundle of commodity in order to gain maximum satisfaction.
HDI is the geometric mean of the above three normalized indexes.
Normalized Indices
To be discussed in the next class
2nd February 2022
Gross National Happiness Index

FUN FACT: Bhutan has officially adopted Gross National Happiness instead to Gross
Domestic Product as the main development indicator. It has been declared in Bhutan that if the
govt. cannot create happiness for its people there is no purpose for the govt. to exist Article – 9
of the constitution of Bhutan directs the state to promote those conditions which enables
the pursuit of Gross National Happiness as happiness is the ultimate desire of every
individual.
Gross National Happiness (GNH) is based on 4 pillars culture for the basis of all development,
socio-economic development, care for environment and good governance.
Domain of GNHI
1. Psychological wellbeing
2. Health
3. Time use
4. Education
5. Cultural diversity and resilience
6. Good governance
7. Community vitality
8. Ecological diversity and resilience
9. Living standards
Data of World Happiness Report

The World Happiness Report is a publication of the United Nations Sustainable Development
Solutions Network it contains the ranking of national happiness based on the respondents
ranking (best possible life – 10, worst possible life – 0) based on the 9 domains and 33
indicators.
Psychological
Wellbeing
• Life satisfaction
• Positive emotions
• Negative emotions
Living Standards • Spirituality
Health
• Mental health
• Assets
• Self reported health
• Housing status
• Household per capita • Healthy days
income
• Disability
Ecological
Diversity and
Resilience Time Use
GNH
• Ecological Issues • Work
• Responsibility towards • Sleep
environment
• Wildlife damage (Rural)
• Urbanization issues
Community
Vitality Education
• Donations (time & • Literacy
money) • Schooling
• Community relationship • Knowledge
• Family • Value
• Safety
Cultural Diversity
Good Governance
and Resilience
• Gov’t performance
• Fundamental rights • Speak native Language
• Services • Cultural Participation
• Political Participation • Artistic Skills
• Driglam Namzha
3rd February 2022
Natural Resources
Natural Resources according to World Trade Organization
It is the stock of material that exist in the natural environment that are both scares and
economically useful in production or consumptions either in raw state or after process in the
production activities.
Features of natural resources

• Uneven distribution
• Externalities
• Price fluctuations
• Varied forms and functions of natural capital
Land resources
Land is finite resource which comprises of soil, mineral, water and forest.
Food and agriculture org. UN

Land resource refers to a delineable area of the Earth surface and encompassing all the attributes
of the biosphere immediately above or below its surface.
Land use pattern in India

Land use pattern in India represents the physical characteristics of land and the framework of
capital and labor to use a particular type of land. It includes all types of arrangement activities
and inputs by which people change or maintain the quality of certain land cover for its specific
use.
Geographical area
Those ecosystems in which less than 1/3 of the area has vegetation is considered as baren
land. It includes desert, beaches, sand dunes, exposed rocks, dry slate, strip-mines, gravel
pits.
Land use to grow grasses either grow naturally through self-seeded or through cultivation
which is mainly used as common grazing land for a village or for an area and that has not
been used in any type of crop rotation for 5 years or more.
4th February 2022
Forest resource
Forest
The United Nations Food and Agriculture Organization (FAO) defines a forest as land spanning
more than 0.5 hectares with trees higher than 5 meters and a canopy cover of more than 10% or
trees able to reach these thresholds.
Classification
CLASS DESCRIPTION
Very dense forest All lands with tree canopy density of 70% and
above
Moderately dense forest All lands with tree canopy density between
40% -70%
Open forest All lands with tree canopy density between
10%-40%
Scrub Forest lands with canopy density less than
10%
Non-forest Lands not included in of the above classes
Forest policy, 1952

Aims – the basic issue is to protect the forests, whenever they are situated within the boundaries
of the nation. Moreover, the principal aim of the forest policies was to ensure environmental
stability and maintenance of ecological balance including atmospheric equilibrium. Furthermore,
they introduced 3 generalized aims
1. Protecting the forest from illicit felling, encroachment, forest fires, grazing
etc.
2. Reducing the damage to the forest from insects, fungus and diseases.
3. Reforesting areas that may need trees for the ecological balance of the
region.
Failure of the 1952 forest policy
The National Forest Policy, 1952 was inadequate to reduce forest depletion. Forest being a state
subject, there was no serious effort made for the prevention and conservation of the forests.
Commercial outlook always dominates and the industrial demands were met without ensuring
natural regeneration or compensator reforestation.
The political environs indiscriminately used the forests land for furthering their political
interests. Maximization of the short- term benefits of economic development was the priority and
the concepts of sustainability, protection and conservation of the forests was almost forgotten. As
the final result from this policy a new formation of policy brought under action and thus, the
govt. came up with the National Forest Policy 1988.
Forest policy, 1988

Aim
Maintenance of environmental stability through preservation and, where necessary, restoration of
the ecological balance that has been adversely disturbed by serious depletion of the forests of the
country. Conserving the natural heritage of the country by preserving the remaining natural
forests with the vast variety of flora and fauna, which represent the remarkable biological
diversity and genetic resources of the country. Checking soil erosion and denudation in the
catchment areas of rivers, lakes and reservoirs in the interest of soil and water conservation, for
mitigating floods and droughts and for the retardation of siltation of reservoirs and may more.
Positive aspects
• This policy considers the importance of conservation of the forests, which is a national
wealth.
• The policy emphasizes that 1/3rd of the plains and 2/3rd of the hilly regions must be
covered with forests.
• This policy reiterates the need to carry out afforestation, social and farm forestry on a
large-scale to see the results.
• This policy recognizes the customary privileges that belong to the people living in the
forests and has enacted clauses to protect the rights and concessions of these people.
Negative aspects
• This policy considers the importance of conservation of the forests, which is a national
wealth.
• The policy emphasizes that 1/3rd of the plains and 2/3rd of the hilly regions must be
covered with forests.
• This policy reiterates the need to carry out afforestation, social and farm forestry on a
large-scale to see the results.
• This policy recognizes the customary privileges that belong to the people living in the
forests and has enacted clauses to protect the rights and concessions of these people.
Forest cover area, increase and decrease in forest cover area and about tribal area.
State forest cover in India

24% of the total geographical area of India is covered with forest. The Indian forests accounts to
2% of the forests in the world.
Forest cover in Indian states
(i) Madhya Pradesh – 11%

(ii) Arunachal Pradesh – 9%
(iii) Chhattisgarh – 8%
Highest proportion of forest cover
The highest proportion of forest, that is, area covered under forest as compared to the
geographical area of the state is as follows:
• Mizoram – 85%
• Arunachal Pradesh – 79%
• Meghalaya – 76%
• Manipur – 74%
• Nagaland – 74%
The very dense forest cover in India has increased by 20% between 2011 and 2021. The open
forest cover increased by 7%.
7th February 2022
Water Resources
Meaning
It refers to supply of ground water and surface water in a given area.

Ground water
Ground water is water that accumulates underground. It can exist in spaces between loose
particles of dirt and rock, or in cracks and crevices in rocks.
Surface water
Surface water is water located on top of the Earth 's surface such as rivers, creeks, and wetlands.
This may also be referred to as blue water. The vast majority is produced by precipitation and
water runoff from nearby areas.
National Water policy

National Water Policy is formulated by the Ministry of Water Resources of the Government of
India to govern the planning and development of water resources and their optimum utilization.
The first National Water Policy was adopted in September, 1987. It was reviewed and
updated in 2002 and later in 2012.
National Water Policy, 2002

This policy emphasizes planning, development and management of water resources in a national
perspective through well-developed information system and river basin organizations for the
integrated and multidisciplinary management of entire drainage basins. It has prioritized
water allocation.
National Water Policy, 2012

Draft National Water Policy 2012 as recommended by National Water Board in its 14th
meeting held on 7th June, 2012. The objective of the National Water Policy is to take
cognizance of the existing situation, to propose a framework for creation of system of laws and
institutions and for a plan of action with a unified national perspective. Moreover, the primary
focus was on clean drinking water, hydropower, irrigation enhancement, navigation and lastly
for industrial use.
Mineral resources
Mineral resource is the mineral deposit consisting of useful concentration that may or may not
exceed economic cost for obtaining the valuable minerals. The technological process, the needs
of the economy and prices in the market,
depends on whether and when the
rock/mineral becomes raw material.
Mineral resources distribution in

India
Conventional wisdom and geological
evidence suggest that India is richly
endowed with mineral resources.
Explorations have found over 20,000
known mineral deposits and recoverable
reserves of more than 60 minerals.
India produces as many as 95 minerals, which includes 4 fuel, 10 metallic, 23 non-metallic, 3
atomic and 55 minor minerals (including building and other materials).
11 states account for 90 % of the total number of operational mines (Andhra Pradesh, Orrisa,
Chhattisgarh, Jharkhand, West Bengal, Maharashtra, Tamil Nadu, Gujarat, Madhya Pradesh,
Rajasthan, and Karnataka).
The total value of mineral production (excluding atomic & fuel minerals) during 2020-21 has
been estimated at Rs.1,29,950 crores.
Indian mining industry is characterized by a large number of small operational mines. The
number of mines which reported mineral
production (excluding REPORTING MINES IN INDIA – atomic, fuel, and minor
minerals) in India was 1430 1303 in 2019-20 as
against 1427 in the previous year.
PUBLIC SECTOR – 146
PRIVATE SECTOR – 1,284
FUEL MINERALS – 87%
NUMBER OF REPORTING
MINES FOR FUELS – N/A
8th February 2022
State wise number of reported mines and more about mineral policy
1. Madhya Pradesh 6. Tamil Nadu
2. Gujarat 7. Chhattisgarh
3. Karnataka 8. Rajasthan
4. Orrisa 9. Goa
5. Andhra Pradesh 10.Maharashtra
Three types of mineral resources
• Metallic
• Non-metallic
• Minor minerals – Andhra Pradesh ranked 1 in production (31.9%), Rajasthan then
Gujarat. Moreover, Granite has the largest share i.e., (20%)
In minor-minerals decorative stones have emerged as a major contributor to mineral output and
exports. In terms of mantellic minerals and in terms of non-metallic minerals copper ore,
diamond, Sulphur have been reported public sector.
Mineral policy 1948, (1957), [1994], 2019
National Mineral Policy

The first National Mineral Policy was enunciated by the Government in 1993 for liberalization
of the mining sector. The National Mineral Policy, 1993 aimed at encouraging the flow of
private investment and introduction of state-of-the-art technology in exploration and mining.
National Mineral Policy 2019

According to this policy natural resources including minerals are shared inheritance where the
state is a trusty on behalf of the people and therefore, it is imperative that allocation of mineral
resources is done in fair and transparent manner. To ensure equitable distribution of mineral
wealth.
Provisions of the national mineral policy

• Since mining contribute significantly to the state revenue there is a need for an efficient
regulatory mechanism to prevent illegal mining. The mining administrative tribunal will
be checking the illegal mining activities.
• Mining needs to be carried out in an environmentally sustainable manner keeping the
benefits of all stake.
• The management of mineral resource is the responsibility of both center and state govt. in
terms of Entry – 54 of the Union List – 1 and Entry – 23 of the State List – 2 of 7
schedule of constitution of India.
• In order to make the regulatory mechanism conducive for ease of doing business there
will be transparent procedure for getting mineral concession.
• The core function of the state in mining will be facilitation and regulation of mining
activities and making provisions for developing infrastructure and tax collection.
• While the govt. agencies will continue to perform the task assigned to them for survey
and exploration the private sector will also be encouraged to take up exploration
activities, the states maybe mandated to create dedicated funding for boosting activities
without additional burdens on the miners.
• Exploration shall be incentivized to attract private investment as well as state of art of
technology.
• The regulatory authority will be suitability strengthen through capacity building
measures, man-power, equipment and skill set.
• An integrated approach should be encouraged encompassing mineral and regional
development as well as social and economic wellbeing of the locals particularly tribal
population.
• The govt. shall set a benchmark against which all the mining operations will be evaluated
in terms of comparative performance on sustainable development framework.
The policy also pays due attention and have made provisions for the safety of mine workers
welfare of tribal communities living in scheduled areas which are rich in mineral resources and
development of research in mining methods.
9th and 10th February 2022
Infrastructure
Infrastructure was first coined by Paul Rosenstein – Rodan.
Infrastructure is the capital stock that provides public goods and services which produces various
positive externalities on production activities and quality of life.
It is broadly divided into 2 categories:

1. Physical infrastructure
2. Social infrastructure
• Physical infrastructure – it includes transportation, power (hardware component),
communication (software component).
o HARDWARE COMPONENT
▪ Transportation sector- roadways, railways, civil-aviation and ports
▪ Roadways – in 2021, contributed 67% in total transport sector of GDP. In
2021, September 3,824 kms of road network was constructed.
▪ Railways – India being 3rd largest network under single management India
has 68,102 rail connectivity providing a safe travel and top-notch
facilities. In between year 2014-2021 a new track land of average of
1,835 km have been added each year. Also taken major steps in
redevelopment of station. Passengers for the year 2020-21 have been
recorded 1,250 million. This year has shown fall in no. of passengers
using railway which resulted in decrease in rail revenue frame by 1.1%.
the railway has also strengthened the agriculture sector by Krishi Rail
Service. Also, the govt. has taken the special project to connect different
terrain such as Rishikesh and also the capitals of North-East states.
▪ Civil-aviation – the Vade Bharat Mission which was launched on May
2020 it evacuated the stranded Indians all over the world. In domestic
traffic in India civil-aviation has registered a growth of 14% per annum.
The govt. has introduced air transport bubble with specific countries,
disinvestment of Air India; privatization, modernization and boosting
regional connectivity by Udaan Program. Total cargo carried in 2021
reached 2.88 lakhs million tones.
▪ Ports – traffic handled by ports in 2021 was 4.6% lower than that of the
previous year and this is mainly due to the disruption in the international
trade. The Sagar Mala Project is a national Program to accelerate the
75km long navigation water ways.
Power is among the most critical component of infrastructure, crucial for the economic growth
and welfare of nations. The existence and development of adequate infrastructure is essential for
sustained growth of the Indian economy.
India’s power sector is one of the most diversified in the world. Sources of power generation
range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power
to viable non-conventional sources such as wind, solar, and agricultural and domestic waste.
Electricity demand in the country has increased rapidly and is expected to rise further in the
years to come. In order to meet the increasing demand for electricity in the country, massive
addition to the installed generating capacity is required.
Indian power sector is undergoing a significant change that has redefined the industry outlook.
Sustained economic growth continues to drive electricity demand in India. The Government of
India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the
same time, the competitive intensity is increasing at both the market and supply sides (fuel,
logistics, finances, and manpower).
By 2022, solar energy is estimated to contribute 114 GW, followed by 67 GW from wind power
and 15 GW from biomass and hydropower. The target for renewable energy has been increased
to 227 GW by 2022.
In FY22 (until October 2021), the total thermal installed capacity in the country stood at 234.44
GW. Installed capacity of renewable, hydro and nuclear energy totaled 103.05 GW, 46.51 GW
and 6.78 GW, respectively. Total FDI inflow in the power sector reached US$ 15.36 billion
between April 2000 to June 2021, accounting for 3% of the total FDI inflow in India.
o SOFTWARE COMPONENT
▪ Telecommunication – internet and telephone subscribers have increased
21,200.88 million. 45% for rural area and 55% for urban area. Wireline
connection has increased by 0.2% whereas wireless has increased by
seven-folds. And the tele-density in India stands at 96.22% and after U.S.,
India stands at second largest market in numbers of apps download. The
govt. has implemented comprehensive telecom development plan for
North-East region and islands to provide mobile connectivity in the
uncovered villages. There has been huge surge in the data consumptions
due to online education, work from home, inter-personal connect through
social media, virtual meetings etc. reforms are also ongoing to create an
environment for investment in 5G network.
• Social Infrastructure – the public spending for the social infrastructure has increased to
first by pandemic second by lively hood due to lock down. For the year 2021 the
expenditure on social infrastructure stood at 26% of the total public expenditure.
Education – 8.8%, Health – 6.6%, Others – 10.6%.
Health infrastructure
o 3 tiers in Health Infrastructure – rural, semi-urban, urban health infrastructure
or can be also considered as -> (primary, secondary and tertiary)
Covid-19 vaccination Program to strengthen health infrastructure of country in that Union
Budget 2021-22 has allocated Rs. 35k crores for vaccine under covid-19 vaccination Program
as per govt, data as on January 16, 2022. A total of 156.76 crores dozes of covid-19 vaccine
has been administered.
• Rural health center (sub-center) is considered as lowest tier sub-center. This center is
assigned task relating to inter-personal communication in order to provide services in
relation to maternal and child health family welfare, nutrition and immunization. A sub-
center is for population of 3,000 in hilly area, and 5,000 in plain region with one nurse
(female) and one health care worker.
• Primary health care center is for 20,000 people in hilly area and 30,000 people in plain,
the main objective of primary health care center is to provide primary health care services
and maintain acceptable standard of quality health care in rural areas. A primary health
care center has one medical officers, 14 para medical and other staff.
• Community health care center is for population 80,000 in hilly region, 1.2lakh in plain
region. Community health care center are at block level. Community health care center
should have at least 1 OT, 30 beds, 1 X-Ray machine and labor room with a surgeon,
physician and gynecologist supported by para-medical staff.
• Sub-district hospital caters about 5-6lakh people.
• District hospitals provide curative services at district level. District hospitals covers
primary health care for urban poor. And includes facilities such as OTs, beds more than
community health care center, X-Ray machines, gynecologist supported by para-medical
staffs, surgeons, physician, burn treatment room and special care room for new born
babies.
11th February 2022
• The health scheme started by govt. applicable in both public and private sector are
Ayushman Bharat Yojana, Rastriya Swasthya Bharat Yojana, Aam Admi Bima Yojana,
Rashtriya Swasthya Kishor Karyakram, Pulse Polio Program, Integrated child
development services, Rashtriya Arogya Nidhi etc.
Educational infrastructure
• Number of primary of schools in India is 12.22 Lakhs, the secondary schools in India is
2.85 Lakhs, colleges – not accurate data, universities – 1,043.
• For the year 2019-20 improvement in gross enrollment and improvement in gender
parity is seen. The pandemic has witnessed a significant change the enrollment ratio has
adversely affected as enrollment rate have gone down and drop-out rate have been
increased.
• The govt. has started virtual learning platform such as E-Pathshala, SWAYAM,
National Repository of Open Educational Resources, DIKSHA and National Digital
Library of India.
• The govt. has also initiated certain schemes such as Rashtriya Sarv Siksha Abhiyan, Sarv
Siksha Abhiyan, Rashtriya Madhyamik Siksha Abhiyan, Rashtriya Uachtar Siksha
Abhiyan and mid-meal Program.
• Moreover, govt. has initiated the establishment of 14 world class central university, the
govt. has initiated technology development mission with that initiative have been taken in
higher education sector such as certain training schemes where in makes 9 Lakh
students employable. Furthermore, initiated in DLP and E-learning also setting up of
20 new IIITs and setting up of entrepreneurship schools different scholarship
programs.
• 374 model colleges to be setup in the remote rural areas to remove regional imbalance.
Housing
• India has started with many housing programs such as Atal Avaas Yojana, Pradhan
Mantri Avaas Yojana, Hriday (city development and augmentation programs).
• Govt. has also initiated schemes to make housing more affordable and for the citizen
who buying home for the first time the govt. has also brought up schemes to give certain
relief while buying homes and making it more convenient.
Water and sanitation

The Department of Drinking Water and Sanitation provides technical and financial
assistance to the States to provide safe and adequate drinking water to rural India with focus on
service delivery. The Department’s Centrally Sponsored Scheme, the National Rural
Drinking Water Program (NRDWP), was restructured and subsumed into Jal Jeevan Mission
(JJM) to provide Functional Household Tap Connection (FHTC) to every rural household
i.e., Har Ghar Jal, by 2024. The kinds of works/ schemes which are proposed to be taken up
under JJM include In-village water supply (PWS) infrastructure for tap water connection to
every household; reliable drinking water source development/ augmentation of existing sources;
transfer of water (multi-village scheme; where quantity & quality issues are there in the local
water sources); technological intervention for treatment to make water potable (where water
quality is an issue, but quantity is sufficient); retrofitting of completed and ongoing piped water
supply schemes to provide FHTC and raise the service level; grey water management and
capacity building of various stakeholders and support activities to facilitate the implementation.
14th February 2022
MODULE – 2 Indian Agriculture

Agriculture is the science, art and practice of activities relating to production, processing,
marketing, distribution, utilization and trade of food, fiber and other related products.
Agriculture and Allied Sector Report

Growth rate 3.6% during 2021 this was possible due to good monsoon and various govt.
measures to expand finance availability, improved investment, market facilities, support farm
infrastructural development and raising the supply of high-quality inputs. Atma Nirbhar Bharat
Abhiyan along with other initiative launched at the right time so long to expand the growth of
agri.
India is the 2nd largest fish production in the world accounting for 7.56%. The annual average
growth rate for 2021 is 10.87%
Cropping Pattern
Cropping is the proportional area under different crops at a particular point of time. It shows the
appropriate setting of the land for a crop or set of crops for cultivation. It is the set of
combination of crops which farmer opt for a particular region for their farm practices. It means
both the time and space for the cultivation of crops, cropping pattern of a region are decided by a
large number of climates parameters accompanied by various socio-economic parameters which
determines the overall appropriateness of cultivation of a crop or a set of crops. Cropping pattern
differs over a region because the rainfall received by various regions widely varies also irrigation
facilities, traditional practices, dietary habits, crops suitable for local ecological environment,
consideration of commercial viability and assurance of stability of risk coverage.
Types of cropping system

1. Rabi crops – Autumn (October to March) [wheat, barley, peas, gram, mustard, etc.]
{Punjab, Haryana, Himanchal Pradesh, Jammu & Kashmir, Uttarakhand, Uttar Pradesh}
2. Kharif crops – (July to October) [rice, maze, jawar-bajara, tuar, moong, urad, soya-bean,
cotton, jute etc.] {Assam, West Bengal, Costal regions of Orrisa, Andhra Pradesh,
Telangana, Tamil Nadu, Kerela, Maharashtra}
3. Zaid crops – (March to June) [seasonal foods, vegetable and fodder] {Northern and
North-Western states}
Factors affecting cropping pattern

• Infrastructure facilities
• Physical factor (soil, climate, weather etc.)
• Socio-economic methods
o Economic factors
▪ Financial resources of the farmers
▪ Size and type of the land holding (land ownership and tenure)
▪ Prize of the crops
▪ Govt. policies regarding farmers
▪ Technological accessibility
▪ Management of land and water resources
15th February 2022

Irrigation
Artificially, supply of water to the dry lands by the help of pipes and streams is knows as
irrigation. Irrigation overcomes the deficiency in rainfall for growing crops by artificially
supplying water to the agricultural field or land in accordance with crop requirement throughout
the cropping period.
Sources of irrigation
• Ground water
• Tube wells (deep – 80-100ft) (shallow – 30-40ft and above)
• Rivers
• Streams
• Tanks
• Man-made canals
o Canal – it is defined as artificial channel constructed on ground to carry water
from a river or from another reservoir to the field.
Irrigation system in India

The system is divided into irrigation projects named as-
• Minor irrigation project in India – these are small projects which cost less than Rs. 25
Lakhs and the Cultivable Command Area (CCA) is up to 2,000 Hectares.
• Medium irrigation project in India – these projects cost between Rs. 25 Lakhs to Rs. 5
Crores and the CCA is between 2,000 to 10,000 Hectares.
• Major irrigation project in India – these projects cost more than Rs. 5 Crores and the
CCA is more than 10,000 Hectares.
Initiative by govt. and stats

• The govt. has launched Pradhan Mantri Krishi Sichaii Yojana to increase the strength
of micro irrigation projects.
• National Commission of Integrated Water Resource said that the water requirement
for irrigation alone is 1,191 billion cubic meters and hence the govt. is taking proper steps
to develop the proper resources and irrigation infrastructure to utilize every drop of water
and to reduce the dependencies on rains.
• Talking about irrigation potential – Created and Utilization [ Irrigation Potential
Created and Irrigation Potential Utilized].
o Potential created – 94.73 million hectares
o Potential utilized – 84.70 million hectares
• Ground water contributes more than 79% of total ultimate potential through minor
irrigation.
• Uttar Pradesh and Bihar are the two largest states in term of potential due to major and
medium irrigation potential.
• Major and medium irrigation potential with irrigation potential is also present in Madhya
Pradesh, Andhra Pradesh and Maharashtra.
• The largest irrigation potential of minor is in Uttar Pradesh and also Uttar Pradesh
stands at top in all types of projects.
• NITI Aayog has taken its more crop per drop, major action (surface irrigation system)
scheme for development of agriculture.
• National Mission of Sustainable Agriculture helps in building the capacity of irrigation
techniques and optimization the utilization of water resources.
• Rural Infrastructure Development Fund for minor irrigation project and selected
medium irrigation projects.
• Also, the improve in the efficiency of irrigation technologies, common area
development program have launched with a funding pattern of ratio 50:50.
16th February 2022
Rural labor – Agricultural labor

Agricultural labor committee 1950-51 – those people were regarded as agricultural labor who
were engaged in raising crops on payment of wages for more than of half of total numbers of
days for which he has performed the work during the year.
2001 census mentioned agricultural labor as – a person who works on another person’s land
for wages in cash or in kind or in share will be regarded as agricultural labor.
Causes of agricultural labor

• They are land-less
• They have small and sub-marginal land holdings
Types of agricultural labor

1. Seasonal agricultural labor – during the peak time period they are hired and employed
for a short period of time.
2. Bonded agricultural labor – the wages for these labors are determined by customs or
traditions
3. Casual labor – they are employed for a daily wage basis and generally employed on
peace work system
4. Contractual agricultural labor – these people enter into agricultural labor through a
contract with the employer and can be for short and as well as long period of time.
5. Small or marginal agricultural labor – they usually have uneconomic land holding and
so they work under other people land.
Characteristics
• Scatters
• Unskilled and untrained (wages of Rs.308 for semi-skilled labor)
• Do not have bargaining power
• They are migratory in nature
In Indian Constitution article – 23 states that agricultural slavery is an offence also the
Constitution has highlighted the dignity of human labor and the need for protecting and save
guarding the interest of the labor as human being and this has been enshrined in chapter – 3
article [16, 19, 23, 24] the directive principles of state policy to save guard the dignity of these
labor.
The Minimum Wages Act, 1948 clearly specify the state govt. should fix minimum wage which
should be applied in agricultural sector. The minimum wage differs state to state deepening of
standard of living and total cost. The govt. has encouraged the formation of to provide
employment to the agricultural labor. Steps have been taken through land reforms for
resettlement of land-less labor and providing them with land. Special agency for development
agricultural labors and marginal farmers and agricultural labors development agencies has been
formed to improve the condition of agricultural labor. The govt. has also enacted and extended
various social security to protect the social and economic rights of the labors.
17th February 2022
Agricultural credit (Finance)

Agriculture culture credit is the amount of investment fund available to the farm sector for the
development of different aspects of farm sectors.
Institutions which provide credit to farmers

• RBI
• NABARD
• Commercial banks
• Rural corporate banks
• Rural banks
Classification of agricultural credit

Agricultural credit can be classified on the basis of repayment period and purpose of credit
• Repayment period
o Short term (around 15 months)
o Long term (5 years +)
o Medium term (15 months to 5 years)
• Purpose of credit
o Development credit
▪ Purchase of land
▪ Assets such farm machinery and equipment
▪ Construction of farm structure and irrigation structure
▪ Development of dairy, fishery and portray
o Consumptions credit for personal use
Policy initiative by govt.

• PM – Kisan Scheme
• PM – Kisan Maandhan Yojana
• Kisan Credit Card (KCC) Scheme
• Interest Subvention Scheme
• Pashu Kisan Credit Card Scheme
• Rajiv Gandhi Kisan Nyay Yojana
• Joint Liability Group
• Scheme for promoting micro food processing activities
• Digitalization of land records
• Land leasing framework – the model land leasing act recommends that all these
agreements are to be made formal and the farmers cultivation on the lease land should be
given access to the farm credit.
Facts and figures of agricultural credit

• For the year 2020-21 target fixed for agriculture flow of Rs. 15,75,398 Crores and actual
credit flow was 15 Lakh Crore.
• NABARD has dispersed 25,500 Crores under special liquidity facility to the corporative
banks such as RRB and RBSC to enable unhindered flow of credit to farmers in wave of
covid.
• With the aim of doubling of farmers income, the finance minister announced the Rs.16.5
Lakhs Crores for the financial year 2022, during Union budget 2021.
• For the financial year 2021 credit flow from commercial banks is equal to Rs. 12 crores
for corporative banks it is 2.3 lakhs crores and for RRB it is 2.1 Lakh Crores.
21st, 22nd and 23rd February 2022
MODULE – 3 Industrial Development in India
Industry
Industry means any business, trade, manufacturing or calling employees where people are
engaged in industrial occupation either on land or water.
Industry also constitutes systematic activities organized by cooperation between employer and
employee for production of goods and services which satisfies human wants.
Objectives of policy
• To maintain sustained growth in productivity.
• To enhance gainful employment.
• To attain international competitiveness.
• To achieve maximum utilization of human and physical resources.
• To transform India into a major partner and player in the global area.
Industrial Policy, 1948
It defined the broad contours of the policy delineating the role of the State in industrial
development both as an entrepreneur and authority.
• It made clear that India is going to have a Mixed Economic Model.

• It classified industries into four broad areas:
• Strategic Industries (Public Sector): It included three industries in which Central
Government had monopoly. These included Arms and ammunition, atomic energy and
Rail transport.
• Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. coal, iron & steel,
aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless
apparatus, and mineral oil were designated as “Key Industries” or “Basic Industries”.
• These industries were to be set-up by the Central Government.
• However, the existing private sector enterprises were allowed to continue.
• Important Industries (Controlled Private Sector): It included 18 industries including
heavy chemicals, sugar, cotton textile & woolen industry, cement, paper, salt, machine
tools, fertilizer, rubber, air and sea transport, motor, tractor, electricity etc.
• These industries continue to remain under private sector however, the central
government, in consultation with the state government, had general control over them.
• Other Industries (Private and Cooperative Sector): All other industries which were not
included in the above mentioned three categories were left open for the private sector.
• The industries (Development and Regula-tion) Act was passed in 1951 to implement the
Industrial Policy Resolution, 1948.
Industrial Policy Revolution, 1956

On April 30, 1956, the Government revisited the IPR, 1948 and announced the Industrial Policy
Resolution, 1956 (IPR, 1956).
There were three reasons behind the revision:

1. The introduction of the Constitution of India
2. The adoption of a planning system
3. The Parliament ‘s declaration of adopting a socialist pattern of the society
According to the IPR, 1956, the industries were classified in the following categories:
• Schedule A – A list of 17 industries as the exclusive responsibility of the State. Of these,

four industries, namely arms and ammunition, atomic energy, railways, and also air
transport become Central Government monopolies and the rest under State Governments.
• Schedule B – A list of 12 industries open to both the public and private sectors.
However, these industries are progressively State-owned.
• Schedule C – All the remaining industries. The private sector had the primary initiative
of development. However, they needed to fit within the economic and social priorities
and policies of the Government. Further, they were subject to the provisions of the
industries (Development and Regulation) Act, 1951.
The IPR, 1956 also stressed the importance of small-scale and cottage industries for expanding
employment opportunities.

The long-awaited liberalized industrial policy was announced by the Government of India in
1991 in the midst of severe economic instability in the country. The objective of the policy was
to raise efficiency and accelerate economic growth.
Features of New Industrial Policy
• De-reservation of public sector: Sectors that were earlier exclusively reserved for
public sector were reduced. However, pre-eminent place of public sec-tor in 5 core areas
like arms and ammu-nition, atomic energy, mineral oils, rail transport and mining were
continued.
Presently, only two sectors- Atomic Energy and Railway operations- are reserved exclusively for
the public sector.
• De-licensing: Abolition of Industrial Licensing for all projects except for a short list of
indus-tries.
There are only 4 industries at present related to security, strategic and environmental
concerns, where an industrial license is currently required-
1. Electronic aerospace and defense equipment

2. Specified hazardous chemicals
3. Industrial explosives
4. Cigars and cigarettes of tobacco and manufactured tobacco substitutes
• Disinvestment of Public Sector: Government stakes in Public Sector Enterprises were
reduced to enhance their efficiency and competitiveness.
• Liberalization of Foreign Investment: This was the first Industrial policy in which
foreign companies were allowed to have majority stake in India. In 47 high priority
industries, up to 51% FDI was allowed. For export trading houses, FDI up to 74% was
allowed. Today, there are numerous sectors in the economy where government allows
100% FDI.
• Foreign Technology Agreement: Automatic approvals for technology related
agreements.
MRTP Act was amended to remove the threshold limits of assets in respect of MRTP
companies and dominant undertakings. MRTP Act was replaced by the Competition Act 2002.
Monopolies and Restrictive and Trade Practices (MRTP)
On July 24, 1991, the Government of India announced a new, liberalized industrial policy.
This policy scrapped the asset limit for Monopolies and Restrictive Trade Practice (MRTP)
companies.
Further, it abolished industrial licensing of all projects with a few exceptions. It also raised the
limit for foreign participation in the country’s industrial sector.
Here are the highlights:
• The policy abolished industrial licensing for all projects with the exception of a few
selected sectors. Further, the exemption from licensing applied to all substantial
expansions of existing and new units.
• It provided for the automatic clearance for import of capital goods.
• With respect to the Monopolies and Restrictive Trade Practice (MRTP) Act, the policy
stated that the pre-entry scrutiny of investment decisions by the MRTP companies was no
longer needed.
• The policy also scrapped the asset limit of the Monopolies and Restrictive Trade Practice
(MRTP) companies.
• It envisaged the divestment of government equity in public sector to mutual funds,
financial institutions, the general public, and also the workers. As of 2008, the reservation
for the public sector was very limited.
• There were only two sectors covering the manufacture of certain substances relevant to
atomic energy (along with the production of atomic energy) and also the provision of
railway transport.
• The policy provided approval for direct foreign investment of up to 51 percent in certain
high-priority industries. The government made these changes in order to increase foreign
investment in those sectors.
• There was an existing locational policy for industries. The IPR, 1991 provided that in
locations other than cities with a population of more than one million, the industries do
not require any approval.
• Further, the only exception is those industries which require compulsory licensing.
24th February 2022

Department of Industrial Industry and Promotion under Commerce and Industry Ministry
released new industrial policy, 2017 and the policy aims at making India, a manufacturing hub
by promoting Make in India. Focuses on encouraging Indian branded products with higher value
addition it also aims at retaining investments and accessing technology and ensured that the
policy will facilitate greater technology transfer strategic linkages and innovation.
Small-scale industries / MSME
Based on work based
In 1950, the Small-Scale Industries definition was based on power and employment criteria:
A unit as small-scale industrial unit employed is less than 50 persons with the industrial unit is
power in production process.
Industrial unit employing less than 100 persons and not using power.
Based on investment pattern
In 1957, the investment-based definition was introduced where an industrial unit is considered as
small-scale unit where the investment should not exceed Rs. 5 Lakhs.
Definition provided under 1980 industrial policy statement
An industrial undertaking can be considered as SSI – Fixed Capital Investment (FCI) less than
Rs. 20 Lakh.
Ancillary unit (FCI) less than 25 Lakhs and Tiny units (FCI) less than 2 Lakhs
1999 definition provided 7 categories in SSI
• SSI - should not exceed more than 1 crore

• Ancillary – an industrial undertaking which is engaged in management and production of
parts, components, assemblies, tolling and rendering services. The investment should not
exceed more than Rs. 1 crore.
• Tiny work – engaged in production of goods and services and investment in plant and
machinery and investment should not exceed Rs. 25 Lakhs.
• Artesian of village and cottage industry – investment should not exceed Rs. 1 crore
• Women enterprises – the investment varies from Rs. 15 Lakh to Rs. 1 Crore. These are
small units where one or more women entrepreneurs would not have less than 51% of the
financial holding.
• Small-scale enterprises (business based) – should not exceed Rs. 25 Lakh
• Export oriented units – investment should not be more than Rs. 1 Crore but 30% of the
goods should be exported.
Manufacturing enterprises is defined in terms of plant and machinery and engaged in
manufacturing and production of goods. Moreover, it can be an intermediate goods or a final
goods with a different type and name.
Service enterprises engaged in providing and rendering services.

Product group of MSME [350 items and 8 items reserved for handy-craft]
Number of MSME in India as per the data of 2021 Udyam Registration Portal registered
57,67,734 MSMEs. Most of them is micro in nature,
micro – 94.3% medium – 0.57% and small – 5.13%

Top 5 states with highest number of registrations
1. Maharashtra
2. Tamil Nadu
3. Gujarat
4. Rajasthan
5. Uttar Pradesh
The ministry of MSMEs runs numerous schemes targeted at credit and financial assistance,
skill development training, infrastructure development, marketing assistance, technical and
quality upgradation and other services to MSMEs for their growth and development.
Total registration – 73,34,580 | Micro – 69,36,216 | Small – 3,36,262 | Medium – 35,102
Schemes for MSMEs

1. Under PM Employment Generation Programme and other credit support schemes
a. Prime Minister Employment Generation Programme (PMEGP) – Setup with
an aim to create employment opportunities for MSMEs in the country, the
PMEGP is implemented by Khadi and Village Industries Commission (KVIC) at
the national level while at the state and districts level.
b. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) –
Established by M/o MSME and Small Industries Development Bank of India
(SIDBI) to provide collateral free loans (up to INR 1 Crore) to individual Micro
and Small Enterprises (MSEs).
2. Development of khadi, village and coir industries
a. Market Promotion & Development Scheme (MPDA)
b. Coir Vikas Yojana (CVY)
3. Technology upgradation and quality certification
a. Financial Support to MSMEs in ZED Certification Scheme – Supporting the
‘Make in India’ initiative, the aim of the scheme is to inculcate Zero Defect &
Zero Effect (ZED) practices in manufacturing done by Indian MSMEs. Under the
scheme, the Government of India (GoI) provides up to 80% subsidy to MSMEs.
b. A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE) – the main objectives of the scheme are to:
i. Create new jobs
ii. Promote entrepreneurship
iii. Boost economic development at grass root level
iv. Facilitate innovative business solutions
v. Promote innovation
BUDGET ALLOCATED
The Union Budget 2020-21 has earmarked an all-time high allocation of Rs 7,572.20 Crore for
the Ministry of Micro, Small and Medium Enterprises while announcing a string of initiatives for
the sector including raising the turnover threshold for audit of their accounts to Rs 5 Crore and a
scheme to provide subordinate debt to MSME entrepreneurs.
25th February 2022
Public Sector Enterprises

It is defined as any commercial or industrial undertaking owned, controlled and managed by the
govt. in which the govt. owns a majority of more 50% of the equity and the undertaking works
with the objective of maximizing social welfare and upholding public interest.
Objectives of Public Sector Enterprises

1. Increase capital formation
2. Check evils of monopoly
3. Perform welfare activities
4. Achieve economic equality
5. Set-up defense industry
6. Promote regional equality
7. Increase income of govt.
8. Set-up heavy industry
9. Increase employment
10. Promote self-reliance
Forms of public sector enterprises

1. Departmental undertaking –This is the oldest form of public sector enterprises. The
departmental undertaking is considered as one of the departments of government. It has
no separate existence than the government. It functions under the overall control of one
ministry or department of government.
For example: Railways, post & telegraph, broadcasting, telephone service etc.
2. Public corporations/ statutory corporations – A statutory corporation is a body
corporate formed by a special act of parliament or by the central or state legislature. It is
fully financed by the government. Its powers, objects, limitations etc. are also decided by
the act of the legislature.
For example: Indian airlines, air India, state bank of India, life insurance corporation of
India, food corporation of India, oil & natural gas corporation, etc.
3. Government company – The company in which at least 51% of the paid-up share
capital is held by the central or state government or partly by central or state government
is Government Company. The government companies are governed & ruled by the
provisions of the companies act, 2013 like any other registered companies. For example:
steel authority of India, state trading corporation, Hindustan machine tools.
GDP contribution of public sector enterprises

As per ministry of finance the public sector enterprises contributes to 15 to 16 (%) of GDP.
Employment contribution of Public Sector Enterprises is 6.6% of the total labor force.
28th February 2022
Industrial sickness
Industrial sickness can be defined as a steady imbalance in the debt-equity ratio and distortion in
the financial position of the unit. A sick unit is one which is unable to support itself through the
operation of internal resources.
Once the sick units continue to operate below the break-even point (at which total revenue =
total cost), industries are forced to depend on the exter-nal sources for funds of their long-term
survival.
According to the criteria accepted by the Reserve Bank of India, “a sick unit is one which has
reported cash loss for the year of its operation and in the judgment of the financing bank is likely
to incur cash loss for the current year as also in the following year.”
SICA
The Sick Industrial Companies Act of 1985 (SICA) was a key piece of legislation dealing with
the issue of rampant industrial sickness in India. The Sick Industrial Companies Act (SICA)
was enacted in India to detect unviable ("sick") or potentially sick companies and to help with
their revival, if possible, or their closure, if not. This measure was taken to release investment
locked up in unviable companies for productive use elsewhere.
The Sick Industrial Companies Act (SICA) was enacted in 1985 to address a chronic problem
in the Indian economy: industrial sickness. The act defined a sick industrial unit as one that had
existed for at least five years and had incurred accumulated losses equal to or exceeding its entire
net worth at the end of any financial year.
BIFR
The Board for Industrial and
Financial Reconstruction (BIFR)
was established by central govt.
under section 3 of SICA 1985 but
BIFR became fully operational for
1987.
Role of BIFR
• Securing timely decisions

and detection of sick units.
• Speedy determination of
measures either for rehabilitation or
closure and enforcement of
measures.
3rd and 4th March 2022
MODULE – 4 Foreign/International Trade

Foreign trade consists of transactions between residents of different countries.
- Halt Man
Role of international trade

• Boost economic development – International trade has been an important factor in
promoting economic growth. This growth has led to a reduction in absolute poverty
levels
• Enhance competitiveness – Foreign trade helps in providing a better choice to the
consumers. It helps in making available new varieties to consumers all over the world.
Thus, increase competitiveness among MNCs.
• Make use of abundant raw material – Some countries are naturally abundant in raw
materials – oil (Qatar), metals, fish (Iceland), Congo (diamonds) Butter (New
Zealand). Without trade, these countries would not benefit from the natural endowments
of raw materials.
• Act as a catalyst for inclusive and sustainable development
• Income channel for national income – Foreign trade helps in generating employment
opportunities by increasing the mobility of labor and resources. It generates direct
employment in the import sector and indirect employment in other sectors of the
economy.
• Raises standard of living – Imports can facilitate the standard of living of the people.
This is because people can have a choice of new and better varieties of goods and
services. By consuming new and better varieties of goods, people can improve their
standard of living.
• Greater employment opportunities – Foreign trade helps in generating employment
opportunities by increasing the mobility of labor and resources. It generates direct
employment in the import sector and indirect employment in other sectors of the
economy.
• Promotes world peace – Foreign trade brings countries closer. It facilitates the transfer
of technology and other assistance from developed countries to developing countries. It
brings different countries closer due to economic relations arising out of trade
agreements. Thus, foreign trade creates a friendly atmosphere for avoiding wars and
conflicts. It promotes world peace as such countries try to maintain friendly relations
among themselves.
Cons of international trade

• Imposes pressure on natural resources – Excessive exports may exhaust the natural
resources of a country in a shorter span of time than it would have been otherwise. This
will cause economic downfall of the country in the long run.
• Threat to domestic market and national security – International trade has an adverse
effect on the development of home industries. It poses a threat to the survival of infant
industries at home. Due to foreign competition and unrestricted imports, the upcoming
industries in the country may collapse. And import of spurious drugs, luxury articles, etc.
adversely affects the economy and well-being of the people.
Composition of international trade in India

The goods which we are exporting and the goods which we are importing. India’s ranking in the
top merchandize is 18th (2019) for exports and 10th for imports as per WTO – World Trade
Organization.
Composition of export
Export composition means the total number of commodities which is sold by India to rest of the
world. It includes merchandize and services which is sold by India in the global market in given
period of time and helps in earning foreign exchange in the form of receipts. India’s export
composition for the major selected commodities is – tea, coffee, rice, miscellaneous.
The changing nature of India’s global trade manifested in term of sliding export of gems and
jewelry, engineering goods, textile and allied products. Improving export of drug and pharma,
software and agriculture and allied products. Pharma export in particular used this opportunity to
enhance the share in India’s total export. The export contribution of positive growth was
supported by software service export and hence, India is expected to witness a current account
surplus during the current financial year after a gap of 17 years. Computer service export
continued to be largest export service constituting 49% of total service export. This is due to the
total of digital support clout services and infrastructure and modernize services. The export of
business services stands at the second major segment which includes professional, management
and consultancy services. Transportation services also grew due to the increase of cross border
trade even though COVID-19 pandemic had triggered and the neighboring countries. India
witnessed fall in POL exports which was largely driven by softening of crude oil prices. Non –
POL exports which contributed significantly helped in improving the export performance of
India. Within non – POL exports agriculture and allied products, drugs and pharmaceuticals,
ores and minerals recorded an expansion. Commodities such as – organic and inorganic
chemicals, electronic goods, textile and allied products, gems and jewelries pulled export down
however, iron and steel, drug formulation registered positive growth. The pandemic also led
sharp fall in export of motor vehicles.
Composition of import
Composition of import shows the various commodities which are purchased by India from the
global market and it accounts to the payment side of BoP – Balance of Payment.
Sharp decline in POL import have been recorded in the current year which pull down the overall
import of India. The recovery of import was contributed by accelerating positive growth in gold
and silver import and narrowing the contraction in non- POL and non-gold and silver imports.
Fertilizers and vegetable oils, drugs and pharmaceuticals, computer hardware and peripherals
have contributed positively to the growth of non – POL and non-gold and silver imports.
Computer hardware and peripherals became a new addition to the list of import commodities due
to the increase demand because more people are working from home.
7th March 2022
Direction of Indi a’s International Trade

It refers to countries from which the exports and imports of goods and services are taking place.
It helps in knowing trade relation of a country with rest of the world. India’s trade relation has a
varied structure which includes major trading blocks of the world. For example – OECD
countries, Opaque countries, various European and African countries, SARK etc.
India’s export destination

USA remained the top export destination followed by UAE and China, Belgium has replaced
Malaysia with more than 1 billion dollars of pearls, precious stone, semi-precious stone and iron
and steel shipped to the country. India has diversified its export destination yet, more than 40%
of India’s export is accounted by only 7 countries India has entered into pre trade agreement with
several partners to diversify its export both in terms of product and destination.
Among top import origin China, UAE and USA remains the top import sources. Indonesia the
second biggest source of crude palm oil remains one of the top 10 suppliers for India with share
of 2.9% in total area.
Surge in service import have also been witness from various sources mainly on account for
payment for business and travel. But this import has comparatively slowed down relative to
export of services due to pandemic induced lock-down.
Figure 1: Share of leading destinations for Indian exports in financial year 2021, by country or region
9th March 2022
Balance of Payment (BoP)

It comprises all of a country’s current transaction of exporting and importing goods and services
as well as financial transactions, such as – sale and purchase of foreign assets, foreign direct and
portfolio investment and borrowing and lending transactions of the country with the rest of the
world for a specific period of time. It is quantitative summary of country’s international
transactions.
Balance of payment shows the country’s trading position as foreign lender or borrower and
change in its official reserve holding.
Features
• It is a systematic record of all economic transactions between residents of one country
and rest of the world.
• It includes all transactions in goods (visible items), services (invisible) and assets (flow of
capital) during a period of time.
• It is constructed on double entry system of accounting. Thus, every international
transaction will result in credit entry and debit entry of equal size.
• All economic transactions that are carried out with the rest of world are either credited or
debited.
• -In accounting sense total debit will always be equal to total credits, i.e., balance of
payments will always be in equilibrium. But in economic sense, if receipts are larger than
payments, there is surplus in BOR Similarly, if payments are larger than receipts, there is
deficit in BOP.
Components of BoP
1. Current account
a. Visible trade
b. Invisible trade
c. Unilateral transfer from and to abroad
d. Income receipts and payments
2. Capital account
a. Loans and borrowings from abroad
b. Investments to/from abroad
c. Changes in foreign exchange reserve
3. Errors & omissions
4. Reserve account
10th March 2022
About BoP investment and borrowings

• The short-term loan has a maturity period of less than 1year.
• The medium-term loan has a maturity period between 1 to 2 years.
• The long-term loan has a maturity period of more than 2 years.
Investment includes portfolio investment, which a passive investment in which investor is no
particularly in the management but only in the financial gains it is only concerned with the share
in ownership and earning profit percentage in the company.
Foreign Direct Investment relates to those statistical transaction where the investor is outside the
domestic border it involves a long-term relationship, where the investor exerts a significant
degree of influence of management and profit of the enterprise in the other economy.
FDIs and FPIs depicts the international investment possessions of an economy for a given period
of time.
External debt or external commercial borrowing act as aid to Indian firm and org. to raise funds
beyond India's domestic border. the borrowings are done solely for commercial purpose by any
entity recognized outside India.
Change in reserve
Holding for convertible foreign currency and special drawing rights of IMF and reserve positions
with IMF.
Measures to check deficit in BoP
• Controlling inflation
• Depreciation of currency
• Devaluation
• Direct control by govt.
• Stimulation of export and import institution
• Attracting NRI deposits and foreign investment
14th March 2022
Foreign Direct Investment

FDI maybe be referred as the capital invested in an enterprise or asset by a non-resident which
gives the investor a significant influence over the key policies of the enterprise or over the use of
assets. FDI may involve the acquisition of an existing enterprise and the establishment of new
enterprise, reinvestment of earning – purchase of lands and buildings or other fixed assets.
By IMF – defines as cross border investment made by a non-resident individual or entity with the
objective of establishing a lasting interest in the enterprise with respect to management control
and security.
Indian Economy receives FDI under two roots
1. Automatic root – it means entry root through which……… does not require prior
approval from govt. of India or RBI for investment. The activities and sectors have been
specified in consolidated FDI policy and is revised time to time…
2. Govt. root – prior to investment approval from govt. is required i.e., from secretariat for
industrial assistance and FIPB – Foreign Investment Promotion Board or from other
competitive authority of other respective and authoritative body.
Top investors of FDI in India and top FDI services and products in India
1. Singapore
2. US
3. Mauritius
4. UAE
5. Saudi Arabia
6. Cayman Islands
a. Computer services
b. Transport
c. Manufacturing
d. Retail & wholesale trade
e. Financial services
f. Communication services
Prohibition of FDI in India

Foreign investment in any form is prohibited in the activities and sectors such as business of
cheat funds, NIDHI companies, agriculture and plantation activities [restricted to tea plantation],
manufacture of cigars, cheroots, tobacco and tobacco substitutes, atomic energy lottery business
gambling and betting lastly, real estate business.
FDI norms liberalized by govt. of India
• 100% FDI has been allowed under govt. approval root for food product, manufactured or
produced in India.
• In broadcasting services FDI has been opened up to 100% through govt. root
• GOI allowed 100% FDI in contract manufacturing and coal mining and other related
activities.
• Via automatic route and 26% FDI for digital media has been approved.
• As per latest policy issued by DIPP, 100% FDI allowed in case of single brand retail
through automatic route.
Recent developments in the foreign sector in India
• In January 2022, India extended a US$ 500 million line of credit to Sri Lanka with the
aim to help the country meet its fuel purchases.
• In January 2022, Mr. Pravind Kumar Jugnauth, Prime Minister of Mauritius, and Prime
Minister of India Mr. Narendra Modi jointly unveil India-assisted projects in Mauritius
which included the US$ 527 million line of credit.
• In January 2022, India and the United Kingdom conducted their first round of Free trade
agreement negotiations both the countries reflected their shared ambitions to boost trade.
• In November 2021, India and the United States had their 12th Ministerial-level meeting
of the India-United States Trade Policy Forum (TPF) both the countries expect a boost in
economic relations with the bilateral merchandise trade crossing the US$ 100 billion
mark between January- September 2021.
• In October 2021, the Government of Dubai and the Government of Jammu and Kashmir
signed a Memorandum of Understanding (MoU) towards the development of the real
estate, industrial parks, and super-specialty hospitals worth Rs. 28,400 crores (US$ 3.80
billion).
• In September 2021, India and the US introduced the ‘Climate Action and Finance
Mobilization Dialogue (CAFMD)’ to strengthen bilateral ties and boost climate initiatives
and economic development.
• In September 2021, Defense Minister, Mr. Rajnath Singh, announced that India and
Australia plan to explore new areas in the fields of artificial intelligence (AI) and
unmanned vehicles.
• In September 2021, India and the US signed a project agreement for an air-launched
unmanned aerial vehicle.
• In September 2021, the Union Cabinet approved a Memorandum of Understanding
(MoU) between the Geological Survey of India (GSI), India, and the Joint Stock
Company Rosgeologia, Russia, for collaboration in the field of geoscience.
• In September 2021, India and Germany had discussions to strengthen their cooperation in
handling the circular economy, waste management and issues related to climate change.
• In August 2021, the Union Cabinet approved an MoU between the Institute of
Professional Accountants of Russia (IPAR) and the Institute of Chartered Accountants of
India (ICAI) to strengthen bilateral alliance for advancements in accounting knowledge,
professional accountancy training, technical research, professional ethics and professional
& intellectual development.
• In July 2021, the Union Cabinet approved a Memorandum on Cooperation (MoC),
between the Japan Fair Trade Commission (JFTC) and Competition Commission of India
(CCI), to encourage and strengthen alliance in the area of competition law & policy.
• In June 2021, India and Bhutan signed an MoU for developing alliances in the area of the
environment.
• In June 2021, the Export-Import Bank of India (Exim Bank) announced that it extended a
line of credit (LOC) worth US$ 100 million to the Sri Lankan government to fund solar
energy sector-related projects.
• In June 2021, India and Australia announced a collaboration in cyber-enabled critical
technologies, emphasizing the need to boost critical information security infrastructure
such as 5G telecom networks.
• In May 2021, Shahi Litchi, the season’s first consignment from Bihar was exported to the
UK, boosting exports of GI-certified products.
• In May 2021, India and Israel signed a three-year work program (2021-2023) for
cooperation in agriculture and to strengthen bilateral alliances.
• In May 2021, India and Oman renewed memoranda of understanding (MoUs) in areas of
military and maritime collaboration.
• In May 2021, Alankit Imaginations Ltd. collaborated with Digital Swiss Gold (DSG) to
allow users to trade in gold digitally in Switzerland.
MODULE – 5 Banking Sector

A bank is a type of financial institution that primarily deals with deposit collection and loan
distribution. Deposits and loans are very different in nature. Banks are regulated by the country's
central bank—in India, the RBI (Reserve Bank of India). Banking sector in India truly reflects a
mixed economy, with public, private, and foreign banks.
In accordance with the liberalization policy, reforms in the banking sector were launched
concurrently in 1991, based on the recommendations of the Narasimham Committee. Prior to
1991, banking, like the industrial sector, was heavily regulated and sheltered by the RBI. It
became critical to reform the banking sector in order to support the liberalization policy and
allow for the growth of the private sector.
India’s Baking Structure
• The Indian banking system is divided into "Scheduled Banks" and "Non-scheduled
Banks."
• Schedule banks are those that are listed in the Second Schedule of the RBI Act, 1934 and
thus meet the following requirements:
• a bank must have a paid-up capital and reserve of at least Rs. 5 lakh and
• a bank must satisfy the Reserve Bank of India (RBI) that its affairs are not conducted in a
manner that is detrimental to the interest of its deposits.
• Non-scheduled banks are those that are not listed in the second schedule of the RBI Act,
1934 and thus do not meet the requirements outlined in that schedule.
• The term "scheduled banks" refers to both "scheduled commercial banks" and "scheduled
cooperative banks."
• The Scheduled commercial banks are further subdivided into four groups:
o Public sector banks (also known as "nationalized banks" and "State Bank of India
(SBI) banks");
o Private sector banks (divided into "Old Private Sector Banks" and "New Private
Sector Banks" that emerged after 1991);
o Foreign banks in India; and
o Regional Rural Banks (that operate exclusively in rural areas to provide credit and
other facilities to small and marginal farmers, agricultural workers, and small
entrepreneurs).
• Foreign banks are present in the country either through full branch/subsidiary presence or
through representative offices.
• Except for foreign banks, these scheduled commercial banks are registered in India under
the Companies Act.
Reserve Bank of India
Reserve Bank of India (RBI) is India’s central bank. It controls the monetary policy concerning
the national currency, the Indian rupee. The basic functions of the RBI are the issuance of
currency, to sustain monetary stability in India, to operate the currency, and maintain the
country’s credit system.
RBI is an institution of national importance and the pillar of the surging Indian economy. It is a
member of the International Monetary Fund (IMF).
• The concept of Reserve Bank of India was based on the strategies formulated by Dr.
Ambedkar in his book named “The Problem of the Rupee – Its origin and its solution”.
• This central banking institution was established based on the suggestions of the “Royal
Commission on Indian Currency & Finance” in 1926. This commission was also known
as Hilton Young Commission.
• In 1949, the Reserve Bank of India was nationalized and became a member bank of the
Asian Clearing Union.
• RBI regulates the credit and currency system in India.
• The chief objectives of the RBI are to sustain the confidence of the public in the system,
protect the interests of the depositors, and offer cost-effective banking services like
cooperative banking and commercial banking to the people.
Functions of RBI
Monetary authority
• Implementation of monetary policies.
• Monitoring the monetary policies
• Ensuring price stability in the country considering the economic growth of the country
Regulator and Administrator of the Financial System
• The RBI determines the comprehensive parameters of banking operations.
• These methods are responsible for the functioning of the country’s banking and financial
system. Methods such as:
• License issuing
• Liquidity of assets
• Bank mergers
• Branch expansion, etc.
Managing Foreign Exchange
• RBI manages the FOREX Reserves of India.
• It is responsible for maintaining the value of the Rupee outside the country.
• It aids foreign trade payment.
Issuer of currency
• The Reserve Bank of India is responsible for providing the public with a sufficient supply
of currency notes and coins.
• The quality of currency notes and coins is also taken care of by the RBI.
• RBI is in charge of issuing and exchanging of currency and coins.
• Also, the destruction of currency and coins that are not fit for circulation.
RBI’s Developmental role
• Promotional functions that support national objectives are organized by RBI that
encourage rural and agricultural economic development.
• The RBI will regularly issue directives to the commercial banks to lend loans to small-
scale industrial units.
Composition of RBI
• Reserve Bank of India is controlled by a central board of directors. The directors are
appointed for a 4-year term by the Government of India in keeping with the Reserve
Bank of India Act.
• The Central Board consists of:
• Governor
• 4 Deputy Governors
• 2 Finance Ministry representatives
• 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai, and
New Delhi
• The executive head of RBI is Governor.
• The Governor is accompanied by 4 deputy governors.
• The First Governor of RBI was Sir Osborne Smith and the First Indian Governor of RBI
was C D Deshmukh.
• The First woman Deputy Governor of RBI was K J Udeshi.
• The only Prime Minister who had been the Governor of RBI was Manmohan Singh.
Commercial Banks
A commercial bank is a kind of financial institution that carries all the operations related to
deposit and withdrawal of money for the general public, providing loans for investment, and
other such activities. These banks are profit-making institutions and do business only to make a
profit.
The two primary characteristics of a commercial bank are lending and borrowing. The bank
receives the deposits and gives money to various projects to earn interest (profit). The rate of
interest that a bank offers to the depositors is known as the borrowing rate, while the rate at
which a bank lends money is known as the lending rate.
Functions of commercial banks
The functions of commercial banks are classified into two main divisions.
Primary functions
Accepts deposit: The bank takes deposits in the form of saving, current, and fixed deposits. The
surplus balances collected from the firm and individuals are lent to the temporary requirements
of the commercial transactions.
Provides loan and advances: Another critical function of this bank is to offer loans and advances
to the entrepreneurs and business people, and collect interest. For every bank, it is the primary
source of making profits. In this process, a bank retains a small number of deposits as a reserve
and offers (lends) the remaining amount to the borrowers in demand loans, overdraft, cash credit,
short-run loans, and more such banks.
Credit cash: When a customer is provided with credit or loan, they are not provided with liquid
cash. First, a bank account is opened for the customer and then the money is transferred to the
account. This process allows the bank to create money.
Secondary functions
Discounting bills of exchange: It is a written agreement acknowledging the amount of money
to be paid against the goods purchased at a given point of time in the future. The amount can also
be cleared before the quoted time through a discounting method of a commercial bank.
Overdraft facility: It is an advance given to a customer by keeping the current account to
overdraw up to the given limit.
Purchasing and selling of the securities: The bank offers you with the facility of selling and
buying the securities.
Locker facilities: A bank provides locker facilities to the customers to keep their valuables or
documents safely. The banks charge a minimum of an annual fee for this service.
Paying and gathering the credit: It uses different instruments like a promissory note, cheques,
and bill of exchange.
Types of commercial banks
Private bank –: It is a type of commercial banks where private individuals and businesses own a
majority of the share capital. All private banks are recorded as companies with limited liability.
Such as Housing Development Finance Corporation (HDFC) Bank, Industrial Credit and
Investment Corporation of India (ICICI) Bank, Yes Bank, and more such banks.
Public bank –: It is a type of bank that is nationalized, and the government holds a significant
stake. For example, Bank of Baroda, State Bank of India (SBI), Dena Bank, Corporation Bank,
and Punjab National Bank.
Foreign bank –: These banks are established in foreign countries and have branches in other
countries. For instance, American Express Bank, Hong Kong and Shanghai Banking Corporation
(HSBC), Standard & Chartered Bank, Citibank, and more such banks.
Capital Market
It is a market for regulating long-term financial instruments. It is a complex of institutions of
investments and practices with established linked between the demand and supply of different
types of instruments of capital gain.
According to W. H. Husband capital market is used to design activities in long-term credit which
characterizes mainly by securities of investment types.
Role of capital market

• Promotes capital formation
• Promotes economic growth promotes industrial growth
• Provides an excellent investment opportunity platform
• Provides a bridge between investors and the companies
About financial institutions
Refer to the website for the in-depth study on this broad topic of capital market
https://www.jatinverma.org/capital-markets-in-india
Instruments in capital market
• Shares – The ownership capital of a company is divided into a number of indivisible
units of a fixed amount. These units are known as shares as per Section 43 of the
Companies A 2013, the share capital of a company limited by shares shall be of two
kinds, namely Equity share capital and Preference share capital.
o Equity shares – The purpose of equity instruments issued by corporations is to
raise funds for the firms.
o Preference shares – Preference shares are also a type of shares issued by a
company that provides a predetermined dividend to the holder unlike dividend to
equity share holder where shareholder gets dividend as per the profit earned.
• Debenture – A debenture is a long-term debt instrument used by governments and large
companies to obtain funds. It is a certificate of agreement of loans which is given under
the company's stamp and carries an undertaking that the debenture holder will get a fixed
return (fixed on the basis of interest rates) and the principal amount whenever the
debenture matures. In contrast to equity capital, which is a variable income security, the
debentures are fixed income (i.e., in respect of interest) security with no voting rights.
Debentures are generally freely transferrable by the debenture holder.
• Bonds – Bonds are debt instrument, that are issued by companies and government. Major
issuers of bonds are governments (Treasury bonds in US, gilts in the UK, Bunds in
Germany) and firms, which issue corporate bonds. Some corporate bonds are secured
against assets of the company that issued them, whereas other bonds are unsecured. By
purchasing a bond, an investor lends money for a fixed period of time at a predetermined
interest rate. During this period of time, investor receive a regular payment of interest
semi-annually or annually. Issuing a bond increase the debt burden of the bond issuer
because contractual interest payments must be paid to the borrowers.
o Interest yield or running yield – he returns on a bond taking account only of the
coupon payments.
o Yield to maturity – The return on a bond taking account of the coupon cash
flows and the capital gain or loss at redemption.
• Mutual funds – A Mutual Fund is a trust that collects money from investors who share a
common financial goal, and invest the proceeds in different asset classes, as defined by
the investment objective. Simply put, mutual fund is a financial intermediary, set up with
an objective to professionally manage the money pooled from the investors at large. By
pooling money together in a mutual fund, investors can enjoy economies of scale and can
purchase stocks or bonds at a much lower trading costs compared to direct investing in
capital markets. The other advantages are diversification, stock and bond selection by
experts, low costs, convenience and flexibility.
Share market history in India
In 1874 the native share and stock brokers association was established in Bombay in 1928 the
plot of land on which BSE building stands now was acquired and building was constructed and
occupied in 1930. And in the later years India recognized BSE as first stock change of the
country.
State level financial institutions
To facilitate growth and development at the regional level, government allowed states to set up
their own financial institutions (after the states demanded so).
State financial corporations (SFCs) State Financial Corporations have been established under
the Financial Corporation Act, 1951. At present there are 18 SFCs operating providing long‑term
finance for setting up of the smaller projects within their region. The SFCs provide financial
assistance by way of term loan, subscription to equity/debentures, guarantees, discounting of
bills of and seed/special capital.
Resources of State level Financial Institutions SFCs/SIDCs do not generally have large
resources to meet the growing demand of industry within their regions. They raise resources by
issue of share capital, issue of bonds and debenture guaranteed by State Governments.
Additional resources are raised by accepting deposits from public and by borrowings from State
Governments Other main resource available to these state level institutions is refinance from
Industrial Development Bank of India/Small Industries Development Bank of India.
Security Market Securities are financial instruments issued to raise funds. The primary
function of the securities markets is to enable the flow of capital from those that have it to those
that need it. Securities market help in transfer of resources from those with idle resources to
others who have a productive need for them.
The gilt-edged market refers to the market for government and semi-government securities,
backed by the RBI. The securities traded in this market are stable in value and are much sought
after by banks and other institutions. The industrial securities market refers to the market for
shares and debentures of old and new companies. This market is further divided into the new
issues market and old capital market meaning the stock exchange. Securities market are divided
into Government securities market and Industrial securities market. Government securities
market for both ‘old’ and ‘new’ issues has been on ‘over-the- counter market’ where securities of
the Un-ion Government and State Governments are issued.
Merchant Banking As per SEBI rules, a merchant banker refers to, “any person who is engaged
in the business of issue management either by making arrangement regarding buying, selling or
subscribing to securities or acting as manager, consultant or rendering corporate advisory
services in relation to such issue management”. Merchant banks may be subsidiaries of
commercial banks or may have been set up by private financial service companies or may have
been set up by firms and individuals engaged in financial up by firms and individuals engaged in
financial advisory business.
Legislation governing the capital market
• The SEBI Act, 1992 which establishes the SEBI with four-fold objectives of protection
of the interests of investors in securities, development of the securities market, regulation
of the securities market and matter connected therewith and incidental thereto.
• The Companies Act, 1956 which deals with issue, allotment and transfer of transfer of
securities, disclosures to be made in public issues, underwriting, rights and bonus issues
and payment of interest and dividends.
• The Securities Contracts Regulation Act, 1956 which provides for regulations of
securities trading and the management of stock exchanges.
• The Depositories Act, 1996 which provides for establishment of depositories for
electronic maintenance and transfer of ownership of de-mat securities.
Primary market
When a company publicly sells new stocks and bonds for the first time, it does so in the primary
capital market. This market is also called the new issues market. In this market, instruments of
security market are traded (procured) directly between the capital raiser and the instrument
purchaser. It facilitates the transfer of investible funds from savers to entrepreneurs seeking to
establish new enterprises or to expand existing ones through the issue of securities for the first
time. The investors in this market are banks, financial institutions, insurance companies, mutual
funds and individuals.
Secondary market
The secondary market is also known as the stock market or stock exchange. It is a market for the
purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors
to enter the market. It also provides liquidity and marketability to existing securities. It also
contributes to economic growth by channelizing funds towards the most productive investments
through the process of disinvestment and reinvestment.
Stock exchanges in India

The stock exchanges are the important player of the capital market. They are the citadel of
capital and fortress of finance. They are the platform of trading in securities and as such they
assist and control the buying and selling of securities. Thus, stocks exchanges constitute of a
market where securities issued by the central and state, governments, public bodies and joint
stock companies are traded.
Available stock exchanges in India

• Bombay Stock Exchange (BSE)
• National Stock Exchange (NSE)
• Over The Counter Exchange of India (OTCEI)
• Regional Stock Exchanges
Rural Banking
Rural finance covers the range of financial services offered and used in rural areas by people of
all income levels. Under-provision of financial services, inappropriate products and absence of
appropriate savings instruments in rural areas have cut into households’ limited capital resources
and weakened local growth prospects. Expansion of rural financial services can create a win-win
scenario that will promote growth and help reducing poverty. Building access to financial
services has long been considered as an effort for poverty reduction in various developing
countries.
Importance of rural finance

The study done by FAO (2007) observes that under-provision of financial services, inappropriate
products and absence of competitive savings instruments in rural areas cut further into
households’ scarce liquidity and dampen local growth prospects. Expansion of rural financial
services can create a win-win scenario that will promote growth while also helping reduce
poverty. As per World Bank report (2001), access to financial services is important for poor
people. Low-income households and micro-enterprises can benefit from credit, savings, and
insurance services. India has one of the world’s most extensive formal rural credit systems, with
nearly 1, 25,000 bank branches and more than 1,00,000 cooperative credit outlets in rural areas.
India’s roughly 45,000 rural bank branches (38.7% of total branches, Economic survey of India
2015) are severely constrained in serving around 6,50,000villages where more than 60% of
Indian population reside and who are mostly poor. Asper NAFSCOB (a journal of rural
cooperative credit and banking, 2014) report, the share of long-term credit in total agriculture
credit declined to 37.8% in 2012 from74.3% in 1991.Rural finance encompasses the range of
financial services offered and used in rural areas by people of all income levels and access to
financial services is important for poor people for their income enhancement and enabling them
to come out of poverty. This fact has been supplemented by various studies done by different
researchers and key players like Reserve Bank of India (RBI), the World Bank, Asian
Development Bank (ADB), Food and Agriculture Organization (FAO), etc. There has been
robust evidence that opening branches in rural unbanked locations in India was associated with
reduction in rural poverty. Robin and Rohini (2005) found that the reductions in rural poverty
were linked to increased savings mobilization and credit provision in rural areas.
Evolution
The post-independence era witnessed a gradual change in the banking sector. In the area of rural
finance two broad categories of banking gradually evolved in the Indian Financial System; a)
Social Banking and b) Priority Sector Banking (Lending). Each of these categories developed
gradually with some specific objectives to achieve. The broad objectives of these sectors are a)
increasing bank presence in rural areas and to equalizing population per bank branch across
Indian states, b) directed bank lending towards priority sectors which included agriculture and
small-scale industries and within these sectors to individuals belonging to “weaker sections” of
society, which included scheduled castes and scheduled tribes
For more information refer to this link
https://www.researchgate.net/publication/332151525_Evolution_of_Banking_System_Rural_Fin
ance_in_Indian_Economy_-_A_Review
22nd March 2022
MODULE 6 – Public Finance in India

Public Revenue
Public Revenue is an important concept of Public Finance. It refers to the income of the
Government from different sources. Dalton in his “Principles of Public Finance” mentioned two
kinds of public revenue. Public revenue includes income from taxes and goods and services of
public enterprises, revenue from administrative activities such as fees, fines etc. and gifts and
grants. On the other hand, public receipts include all the incomes of the government received
from formal sources.
Sources of public revenue
• Tax revenue – Taxes are the first and foremost sources of public revenue. Taxes are
compulsory payments to government without expecting direct benefit or return by the
tax-payer. Taxes collected by Government are used to provide common benefits to all.
Taxes do not guarantee any direct benefit for person who pays the tax. It is not based on
“quid pro quo principle.” The Tax has been divided into two types such as Direct Taxes
and Indirect Taxes.
o Direct taxes – Direct taxes are those taxes which are paid by the same person on
whom it has been imposed. The impact and incidence of tax fall on the same
person, because the tax burden cannot be shifted to others.
▪ Personal income tax
▪ Corporate tax
▪ Capital gains tax
▪ Wealth tax
o Indirect taxes – Indirect taxes are those taxes which are imposed on one group of
people, but the ultimate burden will fall on another group of people. The impact
of tax and incidence of tax are on different people. In case of Indirect taxes tax
burden can be shifted.
▪ Excise duty
▪ Custom duty
▪ Value Added Tax (VAT)
▪ Sales tax
▪ Service tax
▪ Octro
• Non-tax revenue – These sources of revenue are classified as administrative revenues,
commercial revenues and grants and gifts.
o Grants
o Gifts
o Fees
o Fines and penalties
o Special assessment
o Surpluses of enterprise
o Borrowings
Characteristics of taxes
• A tax is a compulsory contribution to the State from the citizen (or even from alien
subject to its jurisdiction for reasons of residence or property and this contribution is for
general or common use. Seligman emphasizes that this contribution is enforced without
reference to special benefits conferred).
• Another characteristic of tax is that the tax imposes a personal obligation. It means that it
is the duty of tax payer to pay it and he should in no case think to evade it.
• The third characteristics is that the contribution, received from the tax payer, may not be
incurred for their benefit alone, but for the general and common benefit.
Cannons of taxation
• Canon of Equity – In the words of Adam Smith, “The subjects of every State ought to
contribute towards the support of the Government, as nearly as possible, in proportion to
their respective abilities, that is, in proportion to the revenue which they respectively
enjoy under the protection of the State”. According to the economists, Adam Smith was
an advocate of the system of progressive taxation. It implies that the rich should be taxed
more and the poor less.
• Canon of Certainty – According to Adam Smith, the tax which an individual has to pay
should be certain, not arbitrary. The tax-payer should know in advance how much tax he
has to pay, at what time he has to pay the tax, and in which form the tax is to be paid to
the government. In other words, every tax should satisfy the canon of certainty.
• Canon of Convenience – According to Canon, every tax should be levied in such a
manner and at a such a time that it affords the maximum convenience to the tax-payer.
The reason is that the taxpayer makes a sacrifice at the time of payment of the tax. Hence,
the government should see to it that the tax-payer suffers no inconvenience on account of
the payment of the tax.
• Canon of Economy – According to this Canon, the tax should be such as to bring the
maximum part of the collected revenue into the government treasury. In other words, the
cost of tax-collection should be the minimum. If a major portion of the tax proceeds is
spent on the collection of the tax itself then such a tax cannot be considered as a good tax.
Public Expenditure
It includes spending made by the country of collective and wants so as to promote welfare for the
common interest.
Cannons of public expenditure: (Adam Smit, J. L. Smith) contribution in economic literature
1. Cannon of economy – According to Findlay Shirras canon of economy should be
observed in public expenditure. Economy does not mean stinginess, but avoid-ance of
waste and extravagance. Limited revenue resources should be used in a productive
manner.
2. Cannon of elasticity – This canon requires that the rules governing the expenditure
policy of the government should not be rigid. It should be allowed to vary according to
needs and circumstances. The expenditure policy should be elastic, rather than rigid in
character.
3. Cannon of productivity – This canon implies that; expenditure policy of the government
should encourage production and productive efficiency of the economy. Public
expenditure should be always directed towards enhancing the pro-ductive capacity of the
economy.
4. Cannon of equality/equitable distribution – According to this canon, public
expenditure should be incurred in such a way that the glaring inequalities in the
distribution of income and Wealth are minimized. The expenditure pattern of the
govern-ment should be so designed to benefit the poorer sections of the community.
5. Cannon of benefit/maximum social benefit – the govt. should incur its expenditure in a
manner so as to promote the greatest good of the greatest number, the govt. should
distribute its expenditure in various heads in such a manner that the marginal utility
generating from all heads are equal.
6. Cannon sanction – Canon of sanction has considerable significance in a democratic
government. This canon requires that the public authorities should spend money, only
after obtaining prior sanction from the concerned authority for the specified purpose. This
is done as a safeguard against the possibility of unwise and reckless expenditure.
7. Cannon of surplus – The government should always aim at a surplus of income over
expenditure. Shirras observes “public authorities must earn their living and pave their
way like ordinary citizens”. Government must live within his means. It should not always
overspend and run into permanent deficits years after years.
8. Cannon of neutrality – Canon of neutrality implies that public expenditure should have
no adverse effect on production and distribution activities of the economy. Public
expenditure should only result in increased production, re-duced inequality of income and
wealth and increased economic activity.
Objectives
• Law & order
• Public admin.
• Development of industries and agriculture
• Development of infra.
• Creation of social and public goods
• Defense needs
Classification (modern & classical economist)
• According to Classic economist (Adam Smith)
• According to Modern economist (A. C. Pigou)
Capital expenditure
Expenditure which helps in formation of capital for the govt. for the long-term area will be
capital expenditure. It is the expenditure which is intended for creating concrete asset,
acquisition of asset, investments in shares and bonds.
Revenue expenditure
Expenditure incurred by the govt. which are of recurring nature for a given period of time is
known as revenue expenditure. They are of compulsive in nature. It is for the normal running of
the govt. all goods and services consume within the accounting year can be included in the
revenue expenditure.
Developmental expenditure
It covers both social and economic services. Expenditures incurred on such heads directly held in
resulting in improvement in the economic or social aspect of people.
Examples:
Non-developmental expenditure
Expenditure which are of consumptive type and do not involve any production of productive
activities and goods will be classified as non-developmental expenditure.
Growth of public expenditure in recent years
Theory of increasing public expenditure or Wagner’s Law of Public Expenditure. Professor
Adolf Wagner mentioned the activities of state for extensive and intensive development of the
economy. There is a functional relationship between the rate of economic growth and the govt.
expenditure. According to Wagner govt. spends on social and economic progress where social
and economic express where private entities do not participate. The coverage of govt.
expenditure increases gradually with expansion of administrative functions, welfare measures
and higher level of economic development.
Reasons for rise in govt. expenditure for recent years in India
• Population growth
• Urbanization
• Defense
• Expansion of administrative machinery
• Political reasons
o Election, policies and schemes
• Welfare state
24th March 2022

Public Debt
Charles Davenant in 1710 first analyzed the public debt.
Public borrowing refers to legal obligation of the state to payback the principal and interest to the
holder of the pre-determined rise in accordance with a certain schedule.
Phillipe E Taylor – the debt is the form of promise made by the treasury to pay the holders of
these promises a principal sum and in most instances interest on principle. Borrowing is resorted
to provide funds for financing a current deficit.
CD = CE>CR
Types of public debt
• Internal debt – according to Dalton a debt is internal if given by those people or org.
living in that area that is controlled by the local officer of taking debt.
o SOURCES – it comprises of market loans, bonds, 15-year annuity certificates,
non-negotiable securities, non-bearing securities and
▪ treasury bill (don’t carry interest but also issued at discounted price).
These are the short-term debt issued by the govt. with the maturity period
of less than 1 years. It is issued in tenors.
• 91 days
• 182 days
• 364 days
• External debt – according to Dalton a debt is external if it is given by those people and
org. living outside of that area. USA is the highest source of external borrowing for India
o SOURCES – foreign commercial banks, IMF, World Bank and govt. of foreign
nations.
• Redeemable debt
• Non-redeemable debt
• Funded (long-term +1Y) and Unfunded debt (short-term (-1) Y)
• Productive and unproductive debt
• Debt redemption (public debt) [process of repayment]
Ways to repay debt
• Repudiation of debt
• Budgetary surplus
• Terminal annuities
• Sinking fund
• Additional taxation
• Debt conversion
28th March 2022

Budget
Govt. budget is a statement of receipts and expenditure of the govt. in a financial year. It is also
known as annal financial statement of the nation that shows the revenue and the expenditure of
the country for the given financial year. According to Article 112 of the Indian Constitution, the
Union Budget of a year is referred as annual financial statement. Budget is the annual master
financial plan which indicates the revenue and expenditure of the last completed financial year,
the probable revenue and expenditure estimates of the current financial year and the estimates of
the revenue and proposed expenditure of the next financial year. Govt. Budget is synchronized
structure of fiscal policy which is package of economic measures of govt. regarding its public
expenditure, public revenue, and public debt. Independent India’s first govt. budget was
presented on November 26, 1947 by the finance minister R. K. Shannukham Shetty.
Objectives
• Evaluate the role of the govt. in making balance between available funds and estimated
expenditure of the state.
• To evaluate the status of the govt. sponsored schemes for the overall development and
success of meeting the objectives of the schemes.
• To analyze and evaluate the inflow and outflow the resources
• To facilitate efficient execution of public funds through proper functioning of the govt.
Types of budgets in India
• Revenue budget
• Capital budget
Balanced budget - In terms of magnitude of expenditure Govt. budget can be balanced budget
(Expenditure = Revenue)
Unbalanced budget –
As budget determines the estimated expenditure to perform welfare programs, govt. budgets are
generally expenditure oriented and are incremental in nature.
Zero Based Budgeting – Jimmy Carter applied ZBB technique in govt. budgeting in the State of
Georgia when he was the governor of the state. The technique was applied in the national level
when he became the president of USA.
In traditional budgeting ongoing projects or activities are automatically included for the budget
next year and additionally new projects and activities are added in the budget. But in ZBB a fresh
start is being given to the budget of the current year and no past activity is included into the
current budget unless there is a justification for inclusion.
Performance budget – it establishes a link between the amount of the cost incurred and the
output achieved. Under performance budgeting objectives of each program are established and it
becomes the responsibility of the govt. to attain the achievement level within the budgeted
expenditure. It focuses in the status of achievement of the objective of the program within the
budget constraints.
Union Budget of India 2021
• The central theme of the budget 2021 ease of living for all citizens is based on 3
prominent themes:
o Aspirational India – better standard of living with access to health, education and
better jobs for all the section of the society.
o Economic development for all – SABKA SATH SABKA VIKAS, SABKA
VISHVAS
o Caring society – in terms of being both human and compassionate, Antoyda is
article of faith.
• The 3 themes rest of 3 broad pillars
o Health and wellbeing – 137%
o Physical & financial capital and infrastructure – PLI Production Link Incentive
scheme has been started to create manufacturing global champions for an Atma
Nirbhar Bharat. The govt. has injected Rs. 1.97 Lakh Crores for the success of the
projects and to provides to the Indian Youth. PLI scheme focuses on boosting the
domestic manufacturing and attracting investments in mobile phone
manufacturing and specific electronic component including assembly, testing,
marking and packing.
o Inclusive development for aspirational India – this part focuses on the agriculture
and allied sector, farmers welfare, rural labors and migrant agricultural labors and
financial inclusion.
o Reinvigorating human capital – the finance minister has focused on opening a
15K additional schools, 100 new Sainik School [tied up with NGO, private school
or govt.] proposal had been made to setup a higher education commission,
regulation and funding. For making higher education accessible in Ladakh, the
govt. has proposed to setup a central university.
o Research and development innovation – for national research foundation Rs. 15K
Crores has been injected for research outlay.
o Minimum govt. maximum governance – for these steps has been taken for
rationalized the functioning of the tribunals. This year Census could be first
digital census and Rs. 9,768 Crores have been allotted for the Census purpose.
Finance commission
Finance Commission is a constitutional body for the purpose of allocation of certain revenue
resources between the Union and the State Governments. It was established under Article 280 of
the Indian Constitution by the Indian President. It was created to define the financial relations
between the Centre and the states. It was formed in 1951.
Functions
The Finance Commission makes recommendations to the president of India on the following
issues:
• The net tax proceeds distribution to be divided between the Centre and the states, and the
allocation of the same between states.
• The principles governing the grants-in-aid to the states by the Centre out of the
consolidated fund of India.
• The steps required to extend the consolidated fund of a state to boost the resources of the
panchayats and the municipalities of the state on the basis of the recommendations made
by the state Finance Commission.
• Any other matter referred to it by the president in the interests of sound finance.
• The Commission decides the basis for sharing the divisible taxes by the center and the
states and the principles that govern the grants-in-aid to the states every five years.
• Any matter in the interest of sound finance may be referred to the Commission by the
President.
• The Commission’s recommendations along with an explanatory memorandum with
regard to the actions done by the government on them are laid before the Houses of the
Parliament.
15th Finance Commission

The Finance Commission (FC) is a constitutional body, that determines the method and formula
for distributing the tax proceeds between the Centre and states, and among the states as per the
constitutional arrangement and present requirements.
Under Article 280 of the Constitution, the President of India is required to constitute a Finance
Commission at an interval of five years or earlier.
The 15th Finance Commission was constituted by the President of India in November 2017,
under the chairmanship of NK Singh. Its recommendations will cover a period of five years from
the year 2021-22 to 2025-26.
Key Points
Vertical Devolution (Devolution of Taxes of the Union to States)
• It has recommended maintaining the vertical devolution at 41% - the same as in its
interim report for 2020-21.
• It is at the same level of 42% of the divisible pool as recommended by the 14th Finance
Commission.
• It has made the required adjustment of about 1% due to the changed status of the
erstwhile State of Jammu and Kashmir into the new Union Territories of Ladakh and
Jammu and Kashmir.
Horizontal Devolution (Allocation Between the States)
• For horizontal devolution, it has suggested 12.5% weightage to demographic
performance, 45% to income, 15% each to population and area, 10% to forest and
ecology and 2.5% to tax and fiscal efforts.
Revenue Deficit Grants to States
• Revenue deficit grants emanate from the requirement to meet the fiscal needs of the
States on their revenue accounts that remain to be met, even after considering their own
tax and non-tax resources and tax devolution to them.
• Revenue Deficit is defined as the difference between revenue or current expenditure and
revenue receipts, that includes tax and non-tax.
• It has recommended post-devolution revenue deficit grants amounting to about Rs. 3
trillion over the five-year period ending FY26.
• The number of states qualifying for the revenue deficit grants decreases from 17 in FY22,
the first year of the award period to 6 in FY26, the last year.
Performance Based Incentives and Grants to States
These grants revolve around four main themes -
• The first is the social sector, where it has focused on health and education.
• Second is the rural economy, where it has focused on agriculture and the maintenance of
rural roads.
• The rural economy plays a significant role in the country as it encompasses two-thirds of
the country's population, 70% of the total workforce and 46% of national income.
• Third, governance and administrative reforms under which it has recommended grants for
judiciary, statistics and aspirational districts and blocks.
• Fourth, it has developed a performance-based incentive system for the power sector,
which is not linked to grants but provides an important, additional borrowing window for
States.
Flexible inflation targeting framework:
Current- 4%
2-6% range
More than that, stricter fiscal policies are employed.
Figures for monetary policy 2022-
Bank rate- 4.25%

CRR- 3%
SLR- 18%
Repo rate- 4.40% rate3e at which banks borrow from rbi
Rev repo rate- 3.35%
COMMERCIAL BANKS
PROVIDE regular banking facilities to public in order to earn profit.
Regulated by RBI
Definition:
Commercial banks are simple business oriented financial concerns which provide
various types of financial services to the customers in return of payment in the
form of interest, fees, commission etc.
They perform their functions with the principle of social welfare, social justice,
promotion of regional development, promotion of social development and regional
balance keeping in parity the principle of profit maximization.
Banking regulation act, 1949-
Commercial bank is a financial institution which performs the function of

accepting deposits from general public and giving loan for investment with the aim
of earning profit.
Primary functions:
• accepting deposits
• giving loans and advances.
Secondary functions
• Discounting bills of exchange- commercial banks provide this service to the
depositor. It represents a promise to pay a fixed amount of money at a
specific point of time in the future. It is a paper asset signed by the debtor for
a fixed amount payable on a fixed date.
• Financing foreign trade
• Overdraft facility
• Agency function of the bank- can act as merchant banker- selling purchasing
shares, distribution of dividends, letters of reference, income tax return filing
etc.
Classification of commercial banks:
Scheduled banks: included in sch. 2 of RBI ACT, 1934- public sector, private
sector, foreign bank.
Non-scheduled banks
RRB- 1975 to facilitate rural credit to rural vulnerable section of society under
ordinance of Regional Rural Banks Act, 1976.
Narsimhan Committee conceptualized creation of RRBs for the rural people to
form a large resource base for rural infrastructure funding.

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Contents

MODULE – 1 Structure of Indian Economy .................................................................................. 5

MODULE – 1 Structure of Indian Economy

It is an economic system which involves the system of production, distribution, consumption of

STRUCTURE OF ECONOMY can be defined as the inter-related process of demand and

On the basis of nature of activity

Why labor is considered as active factor of production?

20th January 2022

21st January 2022

Structural change in Indian Economy

25th January 2022

Salient Features of Indian Economy

• Capitalism – it is particular mode of the org. of production which is characterized

• Mixed – it is an economic system where the govt. intervent to prevent undue

27th January 2022

Other salient features of the Indian Economy

Country classification according to United Nations

Country classification according to World Bank (GNI$PPP)

Features of Indian Economy

• India is considered as low-middle income country where its GNI$PPP lies

28th January 2022

More salient features of the Indian Economy

31st January 2022

More features of Indian Economy

Human Development Index (HDI)

Concept of Human Development Index

1st February 2022

More on Human Development Index (HDI)

Mean Years of Schooling Index (MYSIS) it is a calculation of numbers of years of education

HDI is the geometric mean of the above three normalized indexes.

2nd February 2022

Gross National Happiness Index

Data of World Happiness Report

Features of natural resources

Food and agriculture org. UN

Land use pattern in India

4th February 2022

Forest policy, 1952

Forest policy, 1988

State forest cover in India

(i) Madhya Pradesh – 11%

It refers to supply of ground water and surface water in a given area.

National Water policy

National Water Policy, 2002

National Water Policy, 2012

Mineral resources distribution in

Three types of mineral resources

Mineral policy 1948, (1957), [1994], 2019

National Mineral Policy

National Mineral Policy 2019

Provisions of the national mineral policy

9th and 10th February 2022

It is broadly divided into 2 categories:

11th February 2022

Water and sanitation

14th February 2022

MODULE – 2 Indian Agriculture

Agriculture and Allied Sector Report

Types of cropping system

Factors affecting cropping pattern

15th February 2022

Irrigation system in India

Initiative by govt. and stats

16th February 2022