Trends

1. Declining Govt. spending(expenditure) as a share of GDP . 15.9% in 2009-10 to 12.6% in

2016-17
2. Share of subsidies as proportion of total expenditure has decreased from 2012 onwards from
18% to 12.6% in 2016
3. Final consumption was the major component of global growth accounting for nearly 72%
growth between 1991-2013. Recent growth revival in India is predominantly consumption
driven.
4. Growth in advanced countries has increased modestly while that in emerging economies has
seen a consistently declining trend.
5. Private consumption has of late been a major driver of growth in India. Both developed and
developing countries including India have witnessed a fall in exports.
6. Since 1993-94 India has been a net importer.

Economy
1.Plan and non-Plan classification to be done away with from 2017-18. This is to improve the link
between spending and outcomes, currently due to the classification absurd situations arise such as
hospitals with no doctors or schools without enough teachers as they come under different heads.
Current practice will be replaced by a more globally relevant system of classifying spending as
revenue expenditure and capital expenditure.
2.Indias contribution to global growth in PPP terms increased from an average of 8.3 per cent
during the period 2001 to 2007 to 14.4 per cent in 2014. In 2014 Indias contribution was higher
than that of the US.
Statistics : Share of Manufacturing 17.4% , Services 53%, Agriculture 17% | Export+Imports in
merchandise trade share of GDP 42% | Gross tax revenue ( central) 10.2% , DirectTaxes > Indirect
taxes, largest single chunk from Corporate tax| Subsidy bill : Food>Fertilizer>Petroleum | Top
export sectors: Petroleum, Gems&Jewellery, Textiles, Chemicals| Highest FDI in last 15 years into
Services>Construction>Computer HW&SW>Telecom|
3. Weak State Capacity( Indicators of fiscal capacity: tax to GDP, direct tax to GDP, individual
income tax to GDP, overall expenditure to GDP, and human capital expenditure to GDP) of India,
reasons :
Independent India has not experienced shocks of such large magnitudes as WW or Great depresion
that created pressures to enhance state capacity. Western democracies have had a much longer
period of political evolution allowing them to build state capacity.

Changes in Plan expenditure

1. In the Budget for 2014-15, the centrally sponsored schemes were restructured and

reclassified into 66 programmes for greater synergy and effective implementation. CSS
funds are released as central assistance to state plans and also routed through the states
budgets.
2. Readjustment in the manner of allocation of plan funds to the states in the Budget for 201516 following the acceptance of major recommendations of FFC. Increasing the states
share in the divisible pool of taxes from 32 per cent to 42 per cent, and counterbalancing
this increase in devolution by curtailing the resources transferred under central plan
assistance to the states and by changing the expenditure-sharing pattern.

WTO
The Tenth Ministerial Conference of the
World Trade Organization (WTO) was held
in Nairobi, Kenya, from 15 to 19 December
2015.
The outcomes of the conference,
referred to as the Nairobi Package include
Ministerial Decisions on agriculture, cotton
and issues related to Least Developed
Countries (LDCs).
These cover public
stockholding for food security purposes, a
Special Safeguard Mechanism (SSM) for
developing countries, a commitment to
abolish export subsidies for farm exports,
particularly from the developed countries, and
measures related to cotton. Decisions were
also taken regarding preferential treatment to
LDCs in the area of services and the criteria
for determining whether exports from LDCs
may benefit from trade preferences.

Types of Trade agreements:

Free Trade Agreement (FTA): A free trade agreement is a preferential arrangement in which
members reduce tariffs on trade among themselves, while maintaining their own tariff rates for
trade with nonmembers.
Customs Union (CU): A customs union (CU) is a free-trade agreement in which members apply a
common external tariff (CET) schedule to imports from non- members.
Common Market (CM): A common market is a customs union where movement of factors of
production(land -Land represents all natural resources, such as timber and gold, used in the
production of a good -, labour,capital) is relatively free amongst member countries.
Economic Union (EU): An economic union is a common market where member countries
coordinate macro-economic and exchange rate policies.

Impact of FTA
Indias FTAs have worked exactly as might be expected. They have increased trade with FTA
countries more than would have happened otherwise. Increased trade has been more on the import
than export side, most likely because India maintains relatively high tariffs and hence had larger
tariff reductions than its FTA partners.

Strengthening external competitiveness

First, the most effective instrument to respond to threats to overall competitiveness is the exchange
rate. The rupees value must be fair, avoiding strengthening. This can be achieved through some
combination of monetary relaxation, allowing gradual declines in the rupee if capital flows are
weak, intervention in foreign exchange markets if inflows are robust, and being cautious about any
further opening to inflow that could strengthen .
Second, India should strengthen procedures that allow WTO-consistent and hence legitimate
actions against dumping (anti-dumping), subsidization (countervailing duties), and surges in
imports (safeguard measures) to be taken expeditiously and effectively. Ineffective domestic
procedures risk becoming the excuse for broad-based protectionist actions.
(Antidumping is company specific whereas countervailing duties are country specific.)
Third, India should eliminate all the policies that currently provide negative protection for Indian
manufacturing and favor foreign manufacturing. This could be achieved by quick implementation
of the GST as recommended by the recent report of the GST Committee. If delays are envisaged, a
similar result could be achieved by eliminating the countervailing duty exemptions.

Reasons for widening gap between CPI & WPI in recent months
1. Weght of total food items in WPI is 24.3% , CPI 45.9%

2. Weight of fuel & power in WPI is 15% whereas CPI's is neglibile.

3. Tradable commodities have 55% weight in WPI.
Thus weakness in global commodity prices, in particular crude prices has been the cause of decline
of WPI

Centre-State investment agreement:

Proposed in the current budget it seeks to ensure effective implementation of BITs or bilateral
investment treaties. States signing onto this will be seen as being a more attractive destination for
foregin investors as it is aimed at providing stability to foreign investors. This will ensure fulfilment
of the obligations of the State governments under the BITs.If any State chooses not to sign, this will
be informed to Indias BIT partner.
Centre-State investment agreement

Reasons for slow growth in bank credit in recent months

(a) incomplete transmission of the monetary policy as banks have not passed on the entire benefit
to borrowers; (b) unwillingness of banks to lend credit on account of rising non-performing
assets(NPA); (c)worsening of corporate balance sheets, forcing them to put their investment
decisions on hold; (d) more attractive interest rates for borrowers in the bond market.

Reasons for High rural poverty:

1.Lower farm incomes due to subsistence agriculture 2. lack of sustainable livelihoods in rural
areas 3. impact of rise in prices of food products on rural incomes 4. lack of
skills,underemployment and unemployment.

Neem-coating of Urea
Recent reforms in the fertiliser sector, including neem-coating seeks to prevent diversion of urea to
industrial uses. Neem-coating makes it more difficult for black marketers to divert urea to industrial
consumers. Neem-coating also benefits farmers by reducing nitrogen losses from the soil by
providing greater nutrient to the crop. As a result, farmers need less urea to achieve the same effect.
Heavy subsidy of Urea to the tune of 70% incentivizes illegal transportation of Nepal & Bangladesh
and also reckless usage on farms

Reasons for low yields in Pulses

1.Most of the land dedicated to growing pulses in each state un-irrigated, the national output of
pulses comes predominantly from un-irrigated land. In contrast, a large share of output in wheat,
rice and sugarcane in Punjab, Haryana and UP is from irrigated land.

2.Agriculture policies continue to focus largely on cereals and sugarcane.

3.Lack of enough research output leading to development of high yield varities of pulses, need of
green revolution for pulses production.
4. Most fertile lands are prioritzed for cereal production over pulses which are grown on
relatively inferior lands.
5. Lack of remunerative prices for pulses & procurement system needs to be overhauled to
encourage farmers to grow pulses. Incentives should be aligned with rice & wheat

BharatMala programme
(i) Development of State Roads along Coastal areas / Border areas, including connectivity of
non-major ports (ii) Backward Areas, Religious, Tourist Places Connectivity programme,
(iii) Setubhratam Pariyojana which is for the construction of about 1500 major bridges and
200 ROBs / RUBs (iv) District Head Quarter Connectivity Scheme for development of
about 9000km newly declared NHs.

Rural Development:
> 100% FDI in marketing of food products manufactured & produced in India. This will help to
reduce wastage, aid farm diversification & encourage industry to produce locally.
>Setting up of NAM(National Agriculture market) to provide an e-platform for marketing of
agricultural produce that will help farmers get better price by being able to connect with buyers
nation-wide. This will be deployed in selected regulated wholesale market in states/UT desiring to
join e-platform. Integration of state APMC with NAM. NAM .
http://pib.nic.in/newsite/mbErel.aspx?relid=126115

Others :
>Shale oil & gas blocks Gujrat, AP, Assam, TN, RJ ( commercial production of shale yet to begin)
>National Mission on Coastal Areas To Prepare an integrated coastal resource management plan

and map vulnerabilites along the entire shore line. To be implemented & managed by MoEF&CC
>Two obstacles to formal sector job creation are regulation-induced taxes on formal workers and
spatial mismatch between workers and jobs.
>BAPUBiometrically Authenticated Physical Uptake. Beneficiaries verify their identities through
scanning their thumbprint on a POS machine while buying the subsidised productsay kerosene at
the PDS shop.
> Ujwal DISCOM Assurance Yojana (UDAY)
1.

States shall take over 75 per cent of discom debt outstanding as of September 2015.

2.

Reduction of Aggregate Technical & Commercial (AT&C) losses to 15 per cent by 2018-19.

3.
Reduction in difference between average cost of supply and average revenue realized
(ARR) by 2018-19.
4.

Increased supply of domestic coal to substitute for imported coal.

5.

States shall take over future losses of discoms in a phased manner.

6.

Banks/FIs not to advance short term debt to discoms for financing losses.

Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

1.

Electrification of all villages.

2.

Metering of unmetered connections for reducing losses.

3.
Separation of feeders to ensure sufficient electricity to agriculture and continuous supply to
other categories.
4.
Improvement of sub-transmission and distribution network to improve the quality and
reliability of supply.