Topic: General Studies 3:
- Government Budgeting.
- Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Key Highlights of the Economic Survey 2019-20 – Part 2
TARGETING EASE OF DOING BUSINESS IN INDIA
- A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings.
- India still trails in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts.
- Electronics exports and imports through Bengaluru airport illustrate how Indian logistical processes can be world class.
- The turnaround time of ships in India has almost halved to 2.48 days in 2018-19 from 4.67 days in 2010-11.
Suggestions for further Ease of Doing Business:
- Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.
- Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.
2019 GOLDEN JUBILEE OF BANK NATIONALISATION: TAKING STOCK
- Since 1969, India’s Banking sector has not developed proportionately to the growth in the size of the economy.
- India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.
- The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking:
- In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs (New Private Banks) it led to the gain of 9.6 paise.
Solutions to make PSBs more efficient:
- Employee Stock Ownership Plan (ESOP) for PSBs’ employees
- Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
- Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.
FINANCIAL FRAGILITY IN THE NBFC SECTOR
- Survey investigates the key drivers of Rollover Risk of the shadow banking system in India in light of the current liquidity crunch in the sector.
- Key drivers of Rollover Risk:
- Asset Liability Management (ALM) Risk.
- Interconnectedness Risk.
- Financial and Operating Resilience of an NBFC.
- Over-dependence on short-term wholesale funding.
- Analysis of a diagnostic (Health Score) by quantifying the Rollover risk provides an early warning signal of impending liquidity problems.
- The Survey prescribes to efficiently allocate liquidity enhancements across firms (with different Health Scores) in the NBFC sector, thereby arresting financial fragility in a capital-efficient manner.
Privatization and Wealth Creation
- Survey examines the realized efficiency gains from privatization in the Indian context and bolsters the case for aggressive disinvestment of CPSEs.
- Strategic disinvestment of Government’s shareholding of 53.29 per cent in HPCL led to an increase of around Rs. 33,000 crore in national wealth.
- Likewise an analysis of the before-after performance of 11 CPSEs which underwent strategic disinvestment from 1999-2000 to 2003-04 show Privatized CPSEs have been able to generate more wealth from the same resources
THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA
- An attempt to quantify what a common person pays for a Thali across India.
- A shift in the dynamics of Thali prices since 2015-16.
- Absolute prices of a vegetarian Thali have decreased significantly since 2015-16 across India; though the price has increased during 2019-20.
- Average household gained close to Rs. 11, 000 on average per year from the moderation in prices in the case of vegetarian Thali.
- Average household that consumes two non-vegetarian Thalis gained close to Rs. 12, 000 on average per year during the same period.
From 2006-07 to 2019-20:
- Affordability of vegetarian Thalis improved 29 %.
- Affordability of non-vegetarian Thalis improved by 18 %.
INDIA’S ECONOMIC PERFORMANCE IN 2019-20
GDP growth pegged at 6-6.5% in fiscal year starting April 1, up from 5% in current fiscal
To achieve GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure
Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19
India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 461.2 bn as on 10th January, 2020.
Net FDI inflows was US$ 24.4 bn in the first eight months and Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn.
External Debt Rremains low at 20.1% of GDP as at end September, 2019.
The Gross Non performing Advance Ratio:
- Remained unchanged for Scheduled Commercial banks at 9.3% between March and September 2019
- Increased slightly for the Non-Banking Financial Corporations (NBFCs) from 6.1% in March 2019 to 6.3% in September 2019.
Bank Credit growth (YoY) moderated from 12.9% in April 2019 to 7.1% as on December 20, 2019.
Total formal employment in the economy increased from 8 % in 2011-12 to 9.98 % in 2017-18.
About 76.7 % of the households in the rural and about 96 % in the urban areas had houses of pucca structure