Minimum Support Price: Really helpful or a Political gimmick

What is Minimum Support Price?

According to the website data.gov.in, Minimum Support Price is the price at which government purchases crops
from the farmers, to safeguard the interests of the farmers. In the year 1966-67, the Government of India announced
Minimum Support Prices for the first time for wheat, to save the farmers from diminishing profits. Since then, the
MSP has been expanded to many crops.

Key Facts
 The Government of India announces the MSPs at the beginning of the sowing season for certain crops on the basis
of the recommendations of the Commission for Agricultural Costs and Prices.
 The Cabinet Committee on Economic Affairs (CCEA), Government of India, determines the Minimum Support
Prices (MSP) of various agricultural commodities in India based on the recommendations of the Commission for
Agricultural Cost and Prices.
 Currently the MSP covers 24 crops that include seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi);
five pulses (gram, arhar/tur, moong, urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean,
sunflower seed, sesamum, safflower seed and nigerseed); copra, raw cotton, raw jute and virginia flu cured (VFC)
tobacco.

Why is it provided?
 The idea behind MSP is to give guaranteed prices and assured market to the farmers and save them from the price
fluctuations.
 It shields farmers from the unwarranted fluctuation in prices caused by the variation in supply (largely influenced by
the monsoon, drought), lack of market integration, information asymmetry and other elements of market
imperfection afflicting the agricultural markets.
 The guaranteed price and assured market are expected to encourage higher investment and in adoption of modern
technologies in agricultural activities.
 Further, with globalization resulting in freer trade in agricultural commodities, it is very important to protect farmers
from the unwarranted fluctuation in prices, manipulated by the international level price variations.
Recent happenings
 For the 2018-19 crop season, the Cabinet Committee on Economic Affairs recently announced an increase in
minimum support prices to 50% above the cost of production. The Committee approved the MSP of 14 Kharif
(summer grown) crops.
 The Modi government termed it as the “historic increase.”
 The announced MSPs also include a ₹200 per quintal increase in the MSP for paddy, which is likely to inflate the
food subsidy bill.
 In a press briefing Rajnath Singh, the Home Minister of India, said the hike would boost farmers’ income and
purchasing capacity, and have a positive impact on the wider economy, and played down fears of rising inflation due
to higher food prices.
Criticism
 This decision, taken by the Union Cabinet headed by Prime Minister Narendra Modi came just an year before the
next general election. So, more than a beneficiary measure it is being considered as a step to garner the votes of
farmers.
 There is a significant variance between what the government considers as the cost of production and what the
farmer incurs.
 According to the Government of India, Production Cost = Actual Expenses on seeds, fertilizers, irrigation
etc. (A2) + Unpaid Family labor (FL)
 Actual Production Cost (C2) = Actual Expenses on seeds, fertilizers, irrigation etc. (A2) + Unpaid Family
labor (FL) + Rentals or interest on Land
 The announcement of increase is being considered as the betrayal of the BJP’s 2014 poll promise. According to the
Bharatiya Kisan Union leader, “What has been announced by the Centre is an eyewash.” He mentions “If MSP had
been announced on C2 basis, then paddy price would have risen by at least Rs. 700 per quintal, but the government
has only increased it by Rs. 200 per quintal.”
 Agriculture Vs Manufacturing Industry in India - priorities for future

Agriculture and manufacturing industry are drivers of growth for any economy. To help the participants tackle this topic of
great significance in the context of Indian economy in GD round, MBAUniverse.com has prepared and shares the key
facts about the role of agriculture and manufacturing Industry in Indian economy, the constraints in these sectors & policy
suggestions to enhance their role.
Background
 The transition of any nation from developing to developed nation is marked by a move from traditional sector (agriculture)
to modern sector (services and manufacturing)
 Modernization was first initiated under the II Five Year Plan, famously known as the Nehru-Mahalanobis plan which
focused on pushing up the heavy and basic goods industry to build local capacity and reduce reliance on foreign goods.
This was thought to be a policy impetus to absorb the surplus laborers in agriculture and counter disguised unemployment
in the sector.
Key Facts about the state of Indian Economy
1. In India, agriculture contributes around 15% to the GDP and absorbs a little more than 49% of the labor force. The
manufacturing sector contributes around 19% to the GDP and absorbs around 27% of the labor force.
2. International comparisons with China, South Korea and Taiwan show the sluggish growth of Indian manufacturing sector
due to the rigid labor market
3. South East nations have grown and become the global manufacturing hubs despite being at comparable GDP levels to
India in 1970s and 1980s as they focused on building local manufacturing units through both public and private
investment.


Agriculture Backbone of Indian Economy and Manufacturing Industry
 Generates Trade Surplus: India’s share in global agriculture produce is 7.68%. India has maintained an overall trade
surplus in agriculture since 2000s. The overall trade (exports+ imports) has also grown. India’s relative comparative
advantage in agriculture is greater than that in manufacturing and commercial activities.
 Generates greater investible surplus & savings: The rise in agriculture output and income can expand the market for
manufacturing sector. The migration of surplus labor from agriculture to manufacturing. This supports urbanization and
industrialization as it did in England in 19th century.
 Provides raw materials and wage goods for manufacturing industry like textile, Sugar, packaged food among others
Constraints in Agriculture Sector
The low contribution of agriculture to GDP despite 49% of the labor force in the sector shows the inefficiencies in the
sector as seen by:
 Agriculture Bias: Farmers have not been able to fully exploit the comparative advantage in agriculture exports due to
overvalued exchange rate, tariffs and quota restrictions on trade of agriculture products.
 Decline in per capita availability: Despite an increase in yield, the per capita availability of agriculture output has fallen
due to excessive diversion of stock in silos and procurement and release was ill timed. It has also put inflationary pressure
during draughts.
Policy Suggestions to enhance the role of agriculture:
 Technological reforms to improve efficiency and to reduce dependence on monsoon as still around 53% agricultural land
is rain fed.
 Rationalize food and fertilizer subsidies to circumvent inefficient resource allocation towards certain crops like wheat and
rice.
Role of Manufacturing Industry in India:
 Manufacturing has the highest multiplier effect (backward linkage) on economic growth.
 Provides modern inputs and implements for other sectors like fertilizers for agriculture.
 Manufacturing has immense potential for job creation which can help in reducing poverty
 The GVA by Automobile Industry is around 6% as of 2017. India is among the leading automobile manufacturers and can
emerge as global market leader in other segments. Automobile sector’s employment multiplier value of five which is
indicative of its large employment generation capacity.
Constraints in Indian manufacturing sector:
1. Supply side bottlenecks like power supply and demand mismatch, infrastructural bottlenecks leading to capacity
underutilization;
2. Demand side constraints: India is a low income nation so large income inequalities skew the demand of capital intensive
goods
3. The growth of capital intensive industries due to more export demand has either taken down the labor intensive firms or
forced them to downsize to circumvent the stiff labor laws
Policy Suggestions to enhance the role of Manufacturing Industry:
1. The rising inequalities and unemployment can be tackled by absorbing labor in manufacturing sector especially in labor
intensive sectors like textile. It can act as a driving force in India’s growth trajectory through capital accumulation and
better capacity utilization which currently is at 70%.
2. Make in India needs both public and private investment to make India a manufacturing powerhouse which will increase its
export demand and GDP by creating new job opportunities.
3. The value added by MSMEs to manufacturing is more than 30%. They require more credit and better ease of doing
business to allow greater financial inclusion, encourage entrepreneurship and gender equality.
Conclude with a balanced approach:
 Agriculture and Industry are complementary and not competitive in nature due to demand, production and savings-
investment linkages.
 India needs to revamp its manufacturing sector and agriculture sector by using scientific methods of production which are
economically feasible and practical, environmentally sustainable and globally competitive to exploit the gains from trade,
increase output &s employment and reduce inequalities.
 Walmart and Flipkart Deal: Impact on Indian Economy

Recently, Walmart an international e-commerce giant has struck a deal to acquire Flipkart Pvt Ltd, an Indian e-commerce
company based in Bengaluru. The acquisition has become one of the major topics of Group Discussion (GD) round in B-
schools. To help the participants in GD round, MBAUniverse.com has prepared and shares the key facts about the
acquisition, pros and cons on how the deal will impact Indian economy and key tips how to improve your chances in GD
round.

Key Facts
 Walmart, the largest e-commerce giant acquired a controlling stake of 77% in Flipkart ( India’s largest e-commerce
company by market share) by investing $16 Billion.
 With the deal India will now have Walmart, Amazon and Paytm Mall as the key players to compete in the Indian e-
commerce market
 The deal will help Flipkart leverage Walmart’s omni-channel retail expertise and general supply chain knowledge.
Walmart aims to extend their B2B sales across India through this acquisition.
 Walmart has a strong global physical presence in retail space but lacks in e-commerce. This deal can spur their online
presence in Indian markets.
 Both Flipkart and Walmart shall maintain separate brands and operating structures.
Why did Walmart acquire Flipkart?
 As per Morgan Stanley, India’s online retail is set to grow by 1,200% to $200 billion ( 30% CAGR) by 2026 from $15
billion in 2016. Average wages are rising by 2% annually and internet penetration is also growing as data costs are
becoming more competitive. This makes Indian e-commerce space lucrative.
 Flipkart has the largest market share in e-commerce, so with this acquisition Walmart can achieve next leg of growth in
India with Flipkart’s 175 million registered user base.


Positive Impact of Acquisition on Indian Economy: Pros
 Low prices, more variety: With the e-commerce giants competing for the top spot, product differentiation and
localization will bring more variety and create a diverse product basket at low prices, this shall benefit the Indian
consumers.
 R&D: For greater market penetration across the country, efficiency is the key which comes with more R&D. Walmart is
known for its culture of innovation and service. This can help in scaling up Walmart’s business scale in India which can
generate more revenue and create technological spillovers and learning effect for domestic firms as well. The improved
sophisticated nature of the products will create external demand for Indian goods.
 Collateral Benefits: As the world’s largest retail giant pours funds, it will lead to more such investments in e-commerce.
The Indian e-commerce market space was drying up as funding ebbed following liquidity issues due to Demonetization
and GST bottlenecks. Walmart’s entry will usher fresh funds and rejuvenate e-commerce ecosystem as more foreign firms
and venture capitalists enter India .
 With e-commerce giants revamping their business models, Indian e-commerce market is expected to see broad based
growth with better productivity.
 Economic Growth: Walmart will expand across their verticals which will boost output growth and increase employment
opportunities. With positive business sentiments, it will be an impetus to economic growth and capitalism. The deal will
be subject to tax in India so revenue gains shall add to domestic revenue receipts
 Efficient Supply Chain: Expansion of e-commerce requires efficient supply chain and logistics which require
infrastructural development. This will give a fillip to Indian agriculture and infrastructure and benefit farmers as they
would be able to cater to more demand as Walmart shares its extensive experience in retailing, logistics and inventory and
supply chain management. This can especially help the perishable goods industry which is Walmart’s forte.
 JOB CREATION: With more investment flowing in Indian economy especially in retail space, capacity utilization shall
improve . Output and productivity growth can create new employment opportunities for both skilled and unskilled labor .
 ESOPS( Employee stock options): Many existing employees will make windfall gains through this deal from their stock
options. This will incentivize the entry of more workers in e-commerce who had earlier fled the sector due to the downturn
in the sector and can also absorb workers from old brick-and-mortar and traditional industries which can help in
formalization of more of Indian labor force.
 PREMJI INVEST is expected to gain up to 4 times from this deal as its share in Myntra (bought by Flipkart in 2014) is
also being acquired by Walmart. The gains are expected to be more than $130 million on the $25 million investment. This
will lead to inflow of more funds pouring in Indian economy as gains attract more investors from India and abroad.
 Mom and Pop stores: Walmart is looking to extend its supply chain arm through partnerships with around 60 lakhs
kiranas. This can increase the market presence of small stores.
Deal Against the Interests of Indian Economy: Cons
 Brick and Mortar Stores may shut down: Walmart is known for scrapping small businesses which are selling at ultra
low prices through Flipkart. Walmart may bring in its own labels with hyper-competitive prices and replace the domestic
MSMEs which can be a threat to brick and mortar stores as they fear shut down due to competitive pressures.
 Small Players (Mom and Pop stores) will be hurt by this as market spaces shrink due to cut throat competition which force
small firms to exit. In an attempt to survive in the market, firms practice excessive price cutting at the cost of viability and
profitability which leads to inefficiency.
 Threat of Pan India Protests:Tamil Nadu Vanigar Sangankalin Peramaippu federation of traders has already warned the
government of pan India protests. Many more trade unions may call for such protests which can hurt our economy, create
social chaos and cause infrastructural damages.
 Backdoor entry for Walmart: FDI in India allows 100% FDI in single brand retail. Walmart is a multi brand retail chain
where 100% FDI is not allowed, so it focused only on cash and carry business. Flipkart has already circumvented such
restrictions in direct selling which will be used by Walmart.
 Big Data Mining: Large data of Indian shoppers will be shared with the US retail giant which may give large controls to a
foreign firm can use it to control our domestic value chain in consumer goods space and buying patterns. Real time data
analysis can help in identifying the consumers & their needs better than domestic players. Therefore, there is a need to
keep a system of checks and balances to avoid any instance of data breach of Indian customers.
 Is MBA necessary to be Successful in
Business?
According to the Oxford Dictionary, a manager is a person who is responsible for controlling or administering an
organization or group of staff. Master of Business Administration (MBA) is an academic discipline which trains students
and professional, over duration of one or two year, for a career in management or business administration. However, it is
highly contested that management cannot be taught in classrooms as it is an art rather than science.
Arguments in Favor:
 According to a survey conducted by Harvard Business Review, in analysis and ranking of the performance of 2,000 CEOs
around the globe, the CEOs who had an MBA on average ranked 40 places higher than CEOs who didn’t have an MBA.
 To transit from a mid level position to a managerial position an MBA degree becomes critical as Business schools work
extremely hard at getting their students into the job market. They employ squads of recruiters. Harvard, for instance, has
17 full-time staff and 24 part-time counselors to help 900 students find suitable jobs.
 The rigorous curriculum of an MBA programme which includes case discussions, group exercises, internships, quizzes
and various other competitions prepare students to become effective managers.
 In the course of the programme a slew of real business cases are discussed in an MBA curriculum which impart students
the prudence to deal with such situations in their career.
 The objective of an MBA education is not only limited to accelerate career growth of enrolled individuals but also to
develop competent professional managers who could prove their excellence in any sector while contributing to the welfare
of the larger society. A survey of 1,500 MBA students in 2015 by Bain & Company found 66% of women and 59% of
men planned to put positive social impact ahead of financial gains.
 Tim Cook (CEO of Apple), Mary T. Barra (CEO of General Motors Company) and C. Douglas McMillon (CEO of
Walmart) are some of top global managers of fortune 500 companies who hold an MBA degree.
 Mrs. Chanda Kochhar (CEO of ICICI Bank), Indra Nooyi (chairperson and CEO of PepsiCo), Sanjeev Bhikchandani
(founder of naukri.com) and Shikha Sharma (MD, CEO, Axis Bank) are some of the successful Indian business leaders
who are MBA graduates from premier B-schools.

Arguments Against
 Though MBA curriculum provides a closer to reality assessment of business world but nothing teaches better than a real
life experience. Prominent leaders attribute their success to experience, business acumen and prudence rather than to a
degree.
 Business schools now find themselves criticized from several directions: for paying too much attention to the return on
their students' investment, for example, and yet for not giving value for money; for being too academic, and for being too
concerned with teaching basic practical skills.
 Henry Mintzberg, a professor at Canada's McGill University, in his new book “Managers Not MBAs”, argues that
conventional MBA courses offer “specialised training in the functions of business, not general educating in the practice of
management”. The students are often too young and inexperienced to learn skills that, in any case, are often easier to
acquire in the workplace than sitting in a classroom.
 Many prominent global business leaders namely Warren Buffett, Herb Kelleher, Michael Dell, Bill Gates, ,Oprah Winfrey
and many more, who are considered to be the paragons of leadership do not possess an MBA degree.
 In the classroom, students often spend a lot of time working out projects to the tiniest detail. But in the real world, the
situation is different as it calls for a quick decision to stay ahead in the race of fierce competition.
 With a spur in the number of B-schools, MBA is becoming a fad among masses. The quality of education imparted is in
constant decline as the major focus is towards the fat pay check, on the basis of which B-schools lure candidates.
 Cashless Economy: Is Society ready for
transformation?
According to the website of cashless India, the Digital India programme is a flagship programme of the Government of
India with a vision to transform India into a digitally empowered society and knowledge economy. “Faceless, Paperless,
Cashless” is one of professed roles of Digital India.

The ambitious mission of government of India to drive India towards a cashless economy was boosted with the
announcement of demonetization on November 8, 2016.

What is a cashless economy?

A system where no physical cash is in circulation is a cashless system. Payments are made through credit and debit cards,
bank electronic fund transfers or virtual wallets.

Benefits:
 Cost Reduction: cashless system brings down the cost associated with printing, storing and transporting of cash.
 Risk Reduction: The risk of money getting stolen or lost is minimal. Even if the card is stolen or lost it is easy to block a
credit/debit card or a mobile wallet remotely. It is also a safer and easier spending option while travelling.
 Convenient: The ease of conducting financial transactions is probably the biggest motivator to go digital. With the advent
of digital modes, one can avoid queue for ATMs, transact 24*7 and save time. Additionally for service providers, with the
emergence of e-KYC, it is no longer necessary to know your customer physically as the payments model has overcome
limitations related to physical presence.
 Tracking spends: Spending done via mobile or computer applications can be easily tracked with a simple click. This
allows users to keep a track of all their spending and manage their budget effectively.
 Increase in tax base: Traders, small businesses, shopkeepers, and consumers regularly use cash as a means to avoid
paying service tax, sales tax, etc. However, in a cashless economy where all transactions will be done through organized
channel, through banks and financial institutions, they can be monitored by the government and proper actions could be
taken against the evaders. This will result in more transparent transactions which in turn lead to fall in corruption in the
economy of the country.
 Containment of parallel economy: In a cashless economy it is easier to track the black money and illicit transactions
unlike cash based economy in which money does not come into the banking system. In case of digital transactions it is
easy to track and monitor suspicious transactions as all the records are available with the banks.
 Financial Inclusion: At present, India’s low-income households access credit through informal systems, through relatives
or private lenders. Forcing them to shift to cashless payment platforms instantly formalizes this world of informality and
include them in formal economy.
 Discounts: A lot of ecommerce websites offer huge incentives in terms of discounts, cash back, loyalty points to the
customers for making digital transactions for shopping online.

Yes, India is ready for a cashless economy.

 According to TRAI, as on 30 September 2016, 82 out of 100 citizens in India owned a mobile phone. The evolution of the
telecom ecosystem, with significant reduction in call and data rates, along with the prices of smart phones, is propelling
the shift to a cashless economy.
 The government of India is working dedicatedly to push India towards a cashless economy. With major initiatives such as
demonetization, Direct Benefit Transfers, BHIM and many more. The intent is to streamline the economy and curb
corruption.
 The government approved for a proposal, under which there would be no charge for BHIM, UPI, and debit card
transactions up to ₹2000.
 Government also ran a DigiDhan campaign where 16 lakh lucky winners (users and merchants) were rewarded with prizes
ranging from Rs 1000 to 1 crore.
 Further to incentivize behavior change and bring down the cost of digital payments, referral and cash back schemes have
also been launched for BHIM where users and merchants receive cash back. Also, initiatives like USSD and the *99#
service have ensured that non-Smartphone users are also on board the cashless wave.
 Demonetization has given an impetus to e-wallet services. According to a report “Securing the cashless economy”, by
Pwc, India witnessed
 3X increase in the download of a leading mobile wallet app within 2 days of the demonetization announcement.
 1 million: Number of newly saved credit and debit cards within two days of demonetization announcement.
 100%: Day-on-day growth in customer enrolment with leading mobile wallets after demonetization.
 30%: Increase in app usage and 50% increase in the download of wallets backed by leading banks.
The above mentioned data clearly represent a shift towards a cashless economy.
 The smart phone revolution has led to the emergence of e-commerce, m-commerce and other services, including app-
based cab aggregators, who encourage digital payments for use of various services. The value added services such as cash
back, bill payment facilities, loyalty points, rewards and ease of use have resulted in surge of such digital platforms. These
developments have given rise to a modern payment model.
Hurdles in making India a cashless economy
 More than 60% of Indian population belongs to rural region. Almost a quarter of the rural populace doesn’t have mobile
phones and a large percentage of them are computer illiterate. They are not comfortable using computers or mobile
phones for transactions and rely on other people for help. This sometimes leads to misuse of the accounts and siphoning of
funds, so majority of rural mass prefer cash over digital modes.
 About 90% of the Indian labor market is informal. Majority being employed in agriculture and manufacturing sector where
daily wage is prevalent. Under such circumstances the informal labor market is heavily cash dependant.
 India is a country where 90% of transactions are paid for in cash because cash facilitates making transactions anonymous,
helping conceal activities from the government in a way that might help agents avoid laws, regulations and taxes.
Transition from a 90% cash based economy to a
 Security is another big concern regarding cashless transactions. The Indian Computer Emergency Response Team (CERT-
In) has reported a surge in the number of incidents till October 2016 with close to 39,730 security incidents. Indians are
wary of digital modes due to cyber security incidents such as phishing, scanning, website intrusions, defacements and
virus code.
 Though several companies have come up with inexpensive smart phones still they are not affordable for most of the
people in the country. Unless Indian government provides necessary subsidy or affordable solutions cashless economy
would be a farfetched dream.
 Digital India suffers from the threat of thefts and hacking of digital money instruments. The ATM cards, Debit/Credit
cards, Net Banking solutions and even the transaction websites of the financial institutions and banks are hacked by the
mischievous people who withdraw money by making clones and changing the passwords. This has to be taken care of
before proceeding on digital India mission..
 Impact of Technology on Jobs: Will
Automation & Artificial Intelligence reduce
or increase Jobs?
Buzzwords such as Industry 4.0, Artificial Intelligence, Automation, Machine Learning etc. are buzzing around industries
and across geographies for some time. While these technological advancements promise a surreal future, prediction of loss
of jobs due to human replacement is also expected. Proponents of technological advancements argue that while technology
will replace semi and unskilled jobs but in turn it will herald a new era of innovative jobs. Being a Business Management
aspirant, the talk of future and futuristic jobs becomes an important subject. Hence, this is a burning topic which is likely
to be a part of group discussions of B-Schools.

Technology intervention is inevitable in any sphere. It does raise the bar of productivity, efficiency and safety to a level
which is not achievable by humans. Adoption of technology, global reach and faster communication has overhauled
manufacturing, servicing, product delivery and also employment associated with these sectors. But, this is not the first
time the world has experienced significant shifts in employment due to new technology.History states that technology has
been a creator of jobs and has augmented new avenues. The course this time will be same or not is a debatable issue. The
prominent technologies that are likely to bring disruption are:

Artificial Intelligence: Artificial intelligence (AI) or Machine Intelligence (MI) is an area of computer science that
emphasizes the creation of intelligent machines that work and reacts like humans. Artificial intelligence includes
programming computers/Robots for certain traits such as: Knowledge, Reasoning, Problem solving, Perception, Learning,
Planning, Ability to manipulate and move objects etc.

Autonomous and near-autonomous vehicles: Vehicles that can navigate and operate with reduced or no human
intervention. These vehiclesare becoming a concrete reality and may pave the way for future systems where computers
take over the art of driving.

3D printing: 3D printing or additive manufacturing is a process of making three dimensional solid objects from a digital
file.

Industrial Automation:Industrialautomationcan be defined as the use ofset technologies and automatic control devices
that results the automatic operation and control of industrial processes without significant human intervention and
achieving superior performance than manual control.

Next-generation genomics: Themassively parallel sequencing technology known as next-generation sequencing (NGS)
has revolutionized the biological sciences. With its ultra-high throughput, scalability, and speed, NGS enables researchers
to perform a wide variety of applications and study biological systems at a level never before possible.

Advanced materials: - Materials that are designed to have superior characteristics such as strength, weight, conductivity
or functionality.

Arguments supporting that technologicaladvancements will lead to Job loss

 Industries across the globe are adopting new technologies for higher efficiency and performance, lower manufacturing.
Machines can reduce risk and increase effectiveness. This could lead to elimination of a vast number of semi or unskilled
jobs, who make a substantial portion of the workforce in manufacturing and agriculture sector.
 Automation isn’t just for blue-collar workers anymore. Computers are now taking over tasks performed by professional
workers, raising fears of massive unemployment.
 Researchers at MIT foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly
adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education,
and medicine.
 “Jobs Lost, Jobs Gained: workforce transition in a time of automation”; a research report by Mckinsey Global Institute,
provides states that: By 2030, 75 million to 375 million workers (3 to 14 percent of the global workforce) will need to
 switch occupational categories. Moreover, all workers will need to adapt, as their occupations evolve alongside
increasingly capable machines.
 The pace of modern technological change is so rapid that many workers, unable to adjust, will simply become obsolete.
 According to Joel Mokyr, a leading economic historian at Northwestern University,“The current disruptions are faster and
more intensive.” Mokyr says “It is nothing like what we have seen in the past, and the issue is whether the system can
adapt as it did in the past.”
Arguments that Jobs will not be lost due totechnological advancements
 According to research firm Gartner, more jobs will be created than lost by automation. The firm stated thatthough 1.8
million jobs will be eliminated by 2020, but 2.3 million new jobs will be created by then.
 It is widely suggested that that workers will have greater employment opportunities if their occupation undergoes some
degree of computer automation. As long as they can learn to use the new tools, automation will be their friend. For
example; when ATMs automated the tasks of bank tellers and when barcode scanners automated the work of cashiers:
Rather than contributing to unemployment, the number of workers in these occupations grew.
 With advent of new technologies industry experts see the need for skilled workers increasing in the short run and
persisting for at least another decade.The experts call for training programs with a new curriculum and certifications to
standardize emerging job classifications.
Enabling more people to harness the benefits from technological advancements is in the best interest of any business or
country. Continuous investment in technology without considering the impact on existing workforce could result in a host
of other problems. For a smooth transition from current skepticism towards new technology to skilled workforce initiatives
like improved retraining for workers who have lost their jobs to automation, and increased financial protections for those
seeking new careers, are the recommended steps
 What is Globalization?
According to International Monetary Fund, Globalization refers to the increasing integration of economies around the
world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor)
and knowledge (technology) across international borders. In addition, there are also broader cultural, political and
environmental dimensions of globalization.
The four basic aspects of globalization identified by the International Monetary Fund are
 Trade and transactions,
 Capital and investment movements,
 Migration and movement of people and the
 Dissemination of knowledge
Further, environmental challenges such as climate change, global warming, cross-boundary water, air pollution, and over-
fishing of the ocean are also linked with globalization.

Driving Factors
 The creation of the World Trade Organization, World Bank and other major trade organizations their rules and regulations
in part, facilitated broad 'global' changes, lowering trade barriers and deregulation of economies.
 In the aftermath of financial instability, the Government of many developing and poor countries liberalized economies
internationally to boost development and attract investment.
 It is considered that open economies are all better off from trading, as they make use of their resources in most optimal
way and offers variety of products at competitive prices.
 After I970s, Business Corporations and banks based in the most highly industrialized countries were driven by their
intrinsic and incessant pursuit of wider markets, further and more profitable investment fields and access to essential
resources elsewhere in the world. All these aims of these Organizations, supported by their governments in 'the national
interest' pushed for Globalization.
 Industrial and Financial corporations sought internationalization of their respective products, and investment operations to
evade economic, social and political 'impediments' at home as well as to take advantage of more favorable opportunities
abroad.
 The main forces that have driven global integration are technological innovations, broader political changes and economic
policies.

Globalization as an Opportunity
 Greater Opportunity: Global markets offer greater opportunity for people to tap into more and larger markets around the
world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets.
 Cross-cultural Integration: Liberalized nations offer multiple avenues for higher education, tourism and jobs to the
immigrants of different countries resulting in cross culture Integration.
 Prosperity: Globalization has helped lift hundreds of millions to escape poverty over the past decades. Populous countries
like China and India have enjoyed phenomenal growth, improved standards of living, life expectancy, literacy and
employment rates.
 Outward-oriented policies brought dynamism and greater prosperity to much of East Asia, transforming it from one of the
poorest areas of the world 40 years ago.
 According to International Monetary Fund, 20th century saw unparalleled economic growth, with global per capita GDP
increasing almost five-fold.
 Competition: One of the most visible positive effects of globalization is the improved quality of products at competitive
price. As the domestic companies have to fight out foreign competition, they are compelled to raise their standards and
customer satisfaction levels in order to survive in the market.
 Foreign investment: Multinational corporations are a result of globalization. They occupy a central role within the
process of globalization as evidenced through global foreign direct investment inflows.
 Technological Innovation. Increased competition from globalization helps stimulate new technology development,
particularly with the growth in FDI, which helps improve economic output by making processes more efficient.
 Global Challenges: Globalization helped attenuate the major environmental challenges we are experiencing today. Some
national and international agreements such as UN Framework Convention on Climate Change, The Kyoto Protocol etc.
aim to attenuate the negative effects of globalization on the environment.
Threats that globalization offers:
 Unemployment: Due to globalization immigration of labor from developing countries to developed countries has become
much prominent and easier. This has resulted in unemployment for the native citizens.
 The historic withdrawal of United Kingdom from the integrated market of European Union fearing job loss due to
immigration and protectionism towards national sovereignty is a case in point.
 Inequality: The story of the 20th century was of remarkable average income growth, but it is also worth noting that the
progress was not evenly dispersed. The gaps between rich and poor countries, and rich and poor people within countries,
have grown.
 According to the World Inequality Report by the World Inequality Lab, because of high and rising inequality within
countries, the top 1% richest individuals in the world captured twice as much growth as the bottom 50% individuals since
1980.
 Trade wars: The US is running large trade deficits with the EU as well as China. In addition to significant trade deficits in
goods with Mexico, Japan, and Canada, Mr. Trump believes the trade deficit of US is proof that all its trading partners are
unfair to America. As a protectionist measure, Donald Trump, pushed through a metal tariff plan that puts 25% tariff on
imports of steel and 10% tariff on import of aluminium.
 The international atmosphere is full of threats of retaliation and it appears likely that major trading partners with the US
like the EU and China will hit back by setting their own import barriers against US.
 Tax heavens: With different taxation norms in different countries citizens park their illicit or unaccounted money in tax
heavens and avoid taxation from their home countries. The revelations made by Panama offshore leaks and Swiss bank
case are case in point.
 Crypto Currency: A bright future or just a
fad?
A crypto currency is a digital or virtual currency that uses cryptography to secure, create and control its transactions.
Unlike traditional currencies, which are issued by central banks, crypto currency has no central monetary authority.
Bitcoin is the first crypto currency which came to public notice in 2009. Following this a number of other crypto
currencies, such as Ethereum, Ripple, Litecoin, Cardano etc. exist in the market. Crypto currency can be exchanged for
other currencies, products, and services. In recent months, Economists, Central Bankers and Monetary Experts have
expressed their reservations on the future of this currency. Investors and Enthusiasts of this currency are however bullish.

Key facts and figures:

According to “Global Crypto Currency Benchmarking Study” conducted by Judge Business School, University of
Cambridge, these are key facts about the size and usage of this currency:
 The total crypto currency market capitalization increased more than 3x since early 2016, reaching nearly USD 25 billion in
March 2017.
 The current number of unique active users of crypto currency wallets is estimated to be between 2.9 million and 5.8
million.
 At least 1,876 people are working full-time in the crypto currency industry, and the actual total figure is likely well above
two thousand as large mining organizations and other organizations that did not provide headcount figures are added.
 Bitcoin is the most widely supported crypto currency among exchanges, wallets and payment companies. The leading
crypto currencies are Ethereum, Bitcoin Cash, Litecoin, Ripple and Iota.
 Vanuatu, a Pacific Island Nation, located in the South Pacific Ocean became the first nation to accept Bitcoin in Exchange
for as payment for its citizenship program.
 While countries such as the United States, Canada, Australia, Japan etc. allow trade and investments in crypto currencies;
there are countries such as Iceland, Vietnam, Kyrgyzstan and Bolivia where crypto currencies are totally banned.

How does a Crypto Currency work?

The technology behind Crypto functioning is Blockchain. A blockchain is a public ledger that keeps records of all prior
bitcoin transactions. These data units or blocks use cryptographic validation to link themselves together. The entire
network is used to monitor and verify both the creation of native tokens through mining, and the transfer of tokens/coins
between users.

Miners are individuals or organizations who, with the use of powerful computers carry out mining process. Mining is the
process by which transactions are verified and added to the public ledger, block chain, and also the means through which
new coin are released. The mining process involves compilation of recent transactions into blocks and finding solution of a
computationally difficult puzzle. The successful miners who solve the puzzle get to place the next block on the block chain
and are rewarded. The reward is twofold. The newly minted tokens/coins and the fees paid by users sending transactions
are rewarded to the miners for their efforts.
Advantages:
 As a decentralized currency, Crypto currency cannot be manipulated by governments and central authorities of any
country. Also because of its decentralized nature it is inflation averse.
 Unlike bank transactions, Crypto transactions are completely anonymous. A person can only know the addresses of crypto
on which the payment has been sent and received. But to whom these addresses belong cannot be identified. This
anonymity feature offers security against fraud and identity theft.
 Due to dramatic rise in its popularity among the masses it is gaining wide acceptance as a payment method.
 The fee for crypto transactions is relatively low as compared to other digital transactions such as credit cards and other
modes.
 The mechanism behind crypto generation is highly complex which prevents duplication or creation of fake currency.
Disadvantages
 A highly volatile nature, huge price change over a short period, of crypto poses a serious question to consider it as a future
currency.
 With government of different countries having different attitudes towards considering crypto currency as a legal tender,
people unaware of its mechanism consider it to be a risky investment.
 The anonymous nature of crypto transaction attracts its usage for illegal and illicit activities such as tax evasion, weapons
procurement, gambling etc.
 Crypto transactions are irreversible in nature. Funds sent to a wrong address cannot be traced back and result in loss of all
the transferred money.
 If the storage device in which crypto currencies are stored gets damaged or lost. Then the lost Bitcoins cannot be
recovered by any means.
 Cases of online hacking of crypto exchanges such as Mt. Gox in Japan, Bitfloormake etc. make it more risky
 Startup India: Boosting Entrepreneurship
 Government of India launched Startup India campaign to encourage entrepreneurship in India’s young generation who
despite being skilled and able to launch their own ventures become dependent upon various types of jobs and remain under
employed.
Start-up Key facts
 A startup is an entity that is headquartered in India which was opened less than seven years ago and has an annual turnover
less than ₹25 crore (US$3.9 million).
 Ministry of HRD, Department of Science and Technology have partnered in an initiative to set up 75 Startup support hubs
in the National Institutes of Technology (NITs), IITs, IISERs and NIPERs.
 The Reserve Bank of India has assured to take steps to help improve the ‘ease of doing business’ in the country and
contribute to an ecosystem that is conducive for the growth of start-up businesses.
Startup is great idea…needs encouragement
India’s demographic dividend is conducive to Startps with high potential. India as the youngest nation in the world and
huge overall population has one of the largest consumer base in the world. For every unique need of every segment of
population there is opportunity for new venture. Our infrastructure, healthcare, education systems are in dire need of up
gradation where startups can make huge difference.

Challenges and hurdles
Startups are facing many challenges and hurdles despite commitment by the Government to provide all the support and
finance. The biggest challenge before success of campaign is parameters of Ease of doing business, corruption, availability
of skilled labor among others.

Startups find it difficult to have access to credit. Attracting investors to fund ventures or getting loans from banks are
perennial problems for startups. Despite all the commitment, Banks are not giving loans to startups without prior credit
history. Many times despite raising sufficient initial capital, startups find it difficult to survive as they can’t match revenue
and burn rate mostly because of changed economic factors. Finding right skilled human power is another biggest challenge
before startups. India’s need of skilled labour is so huge that National Skill Development Corporation (NSDC) has been
mandated to skill 150 million Indians by 2022. For a startup, it is difficult to attract and hire talent and skilled workers,
since they cannot match salary level given by large, established companies and also cannot offer job security on long term
basis. Startup failures are looked down upon. Failures are not met with encouraging advices in most of the cases. People
are sensitive towards risks and rewards and Indian economy which is highly price sensitive, worsens the situation. Right
kind of mentorship is not available. Available mentorship and skill enhancement may not be accessible in all the cases. So
though someone has potential to start something and may be that idea is really revolutionary but if that doesn’t meet right
guidance to turn it into a successful business then that idea remain irrelevant. Huge, diverse demographics makes it really
hard to capture consumer’s mindset in Indian Market. Literally after every 30-40 km region, one can find change in taste,
traditions and habits. If a firm is able to capture consumer mindset, it cannot cater to all of their needs. Most startups get
stagnant in figuring out strategies and they eventually shut down. Location is another hurdle. Location depends on
investment activities also. Startup India has also formed a relationship with TAVtech Ventures, a nonprofit educational
organization that is establishing a platform for collaborative innovation between US, Israeli, and Indian students to launch
start-ups.

Reputed Educational institutes in Startup

Under the scheme, a group of start-ups will acknowledge an MOU with the prestigious institutions and will also establish
the start-up centers in the campus.
NIT-Silchar is one of the institutions of the country to have joined the program. IIT Madras is also linked with Startup
India campaign. The institution has been successfully managing the IITM Research Park which has incubated many start-
ups.

Success of Startup India campaign

In last 2-3 years, there has been increase in startups in versatile areas like retail, food delivery, consulting, e-commerce,
medical services, delivery services, fitness among others. On an average 800 startups are born every year. Startups are
evolving in terms of product capabilities, networking, taking calculated risks venturing into new spaces.
Delhi NCR and Bangalore has highest number of startups predominantly because of economic activities of population of
both cities. Cities like Jaipur, Chandigarh, Chennai, and Jodhpur are witnessing increasing startup activities. Successful
startup like Zo rooms was conceived in small city like Jodhpur. Southern States like Karnataka, Kerala, Andhra Pradesh
and Telangana have shown better results than the rest of the country in terms of their policies implementations for
supporting startups. These states have focused on improving infrastructure, especially in the Tier-II cities. Launch of
"Kerala IT Mission", which focus on fetching ₹50 billion (US$780 million) in investments for the State's startup
ecosystem is a great example Kerala has made India's first telecom incubator Startup village in 2012. The state also
matches the funding raised by its incubator from Central government in 1:1 ratio. Telangana has launched the largest
incubation center in India as "T-Hub". Andhra Pradesh has allocated a 17,000-sq.ft. Technological Research and
Innovation Park as a Research and Development laboratory. It has also created a fund called "Initial Innovation Fund"
of ₹100 crore (US$16 million) for entrepreneurs. Madhya Pradesh has collaborated with the Small Industries Development
Bank of India ISIDBI) to create a fund of Rs. 200 crore (US$31 million) for Startup India campaign. Rajasthan has
launched "Start-up Oasis" scheme. Government of Odisha organised a two-day Start-up Conclave in Bhubaneswar in
November 2016. The main objectives of the event was to motivate youth towards entrepreneurship, showcase the start-up
ecosystem in Odisha and attract more start-ups to the state.

Investments and set ups

SoftBank, with its headquarters in Japan has already invested US$2 billion into Indian startups. Total investment from
Softbank is expected at US$10 billion. Google has declared to launch a startup on the basis of the highest votes in which
the top three startups will be allowed to join the next Google Launchpad Week, and the final winner could win an amount
of US$100,000 in Google cloud credits. Oracle has announced to set up nine incubation centres in Bangalore, Chennai,
Gurgaon, Hyderabad, Mumbai, Noida, Pune, Trivandrum and Vijaywada

Objectives of Startup India

Startup India is focused to restrict role of States in policy domain. It proposes to abolish the ‘Licence Raj’ along with other
obstacles like in land permissions, foreign investment proposal, environmental clearances among others. The government
has already launched iMADE, an app development platform aimed at producing 1,000,000 apps and PMMY, the MUDRA
Bank - a new financial institution set up for development and refinancing activities relating to micro units with a refinance
Fund of ₹200 billion (US$3.1 billion). Applications for Startup India will have Single Window Clearance even if they are
submitted with the help of a mobile application Rs. 10,000 crore fund earmarked for Startups Patent registration will be at
a reduced fee Bankruptsy code modified and made more friendly to ensure 3 months exit window No inspections for 3
years No Capital Gain Tax for 3 years No tax on profits for 3 years Startups are Self-certification compliant Innovation
hub under Atal Innovation Mission The campaign aims to Start with 5 lakh schools to target 10 lakh children for
innovation programme New schemes to provide IPR protection to start-ups and new firms Encouraging entrepreneurship
at every stage. Stand India across the world as a start-up hub

Background
Startup India aims to promote bank financing for start-up ventures to boost entrepreneurship and encourage start ups with
jobs creation. Startup India campaign was first announced by Prime Minister Narendra Modi from the Red Fort in his
August 15, 2015 address to the Nationa Startup India was inaugurated on January 16, 2016 by the Union Finance Minister,
Mr. Arun Jaitley. Around 40 top CEOs and startup founders and investors attended the event. Startup India campaign was
organized by Department of Industrial Policy and Promotion.
 FDI in retail: Good for India?
One of the key policy decisions at the apex level and now in the process of approval in the retail business sector, is the
foreign direct investment (FDI). Since a lot will open up for MBAs in this area, the topic has become one of the favourites
in GD round in B-schools for admission to MBA courses.

Shared below is the real GD round on the topic in a top B-school. The GD round had a time duration of 20 minutes for 8
participants. The shortlisted candidates who participated in the GD round had scored between 85 to 91 percentile in CAT
2016. The names of the candidates participating in the GD round have been changed to protect their identity.

Moderator - Good morning friends. The topic for today’s Group Discussion is “Is FDI in retail good or bad for India”. You
have one minute to think before starting the discussion. The observers will neither interfere nor participate in the
discussion.

( Immediately after the moderator stops speaking, murmurings begin for a few seconds and before the completion of one
minute A candidate’s voice brings about silence all round)

Prashant – (Appears as if shouting) Friends, I am up against the FDI in retail. This FDI is nothing but entry of multiple
East India Companies in our country. They aim to kill our small farmers, traders and retailers. In fact, Foreign capital will
penetrate in the country and will seek ways to multiply itself with unthinkable application for profit. In long run, given out
socio-economic structure, may cast doom and widen the gap between the rich and the poor.
 .
Akhshay-(Smiles and begins to speak in a clear but firm voice) – Friends, in my view it is always imperative to
understand the topic before placing my views on it. FDI or Foreign Direct Investment refers to capital inflows from abroad
that is invested to enhance the production capacity of the economy. However, FDI in retail is different from the investment
in corporate, manufacturing, or infrastructure sectors. Retail can be single or multi brand and may be described as a sale to
the ultimate consumer at a margin of profit. In a nutshell it is a retail store with a foreign direct Investment
selling multiple brands under one roof. So it is the link between the producer/manufacturer and the individual consumer.

(clears his throat and begins again – no one interferes) As we all know that Indian retail sector is highly fragmented
with around 97 percent of its business being run by the unorganized retailers. The organized retail is in its infancy. With
the entry of FDI the retail sector will become organized. Foreign investment in food based retailing would ensure
adequate flow of capital into the country and its productive use, multiplying the same. I visualize that It will promote the
welfare of farmers by agriculture growth and thereby increasing their income level instead of any harm caused to them.

Shilpi ( Flashes a sign that she would like to speak) – Well, It is immature to remain confined to the local area during the
era of globalization. We are talking about the world economy but wish to oppose the FDI. It is irony of the situation. In
fact, Foreign Direct Investment in retail sector will spur competition as the current scenario is of low competition and poor
productivity. India will flourish in terms of quality standards and consumer expectations.

SriKant – ( has a sort of rough voice) – I do not agree and oppose the FDI. Country like America wants its citizens to be
American and buy American, the President of USA Mr. Barack Obama has made his policy clear that he doesn’t favour
outsourcing and would make all out efforts to stop outsourcing. When such developed countries are afraid of slowdown in
their economy, why shouldn’t we? Are we more developed than America? Do we have higher GDP growth, higher per
capita income or have abolished poverty from the country? None of it. Why then – are we thinking on such lines that we
can’t afford? The foreign big guns like WalMart coming with huge investment, may not procure material from the
domestic producers and might import the same from international market. This will add to the woes of already crumbling
Indian producers.

Rachna - I agree with Srikant. FDI is not the solution to all the problems. The fear is rampant on the existence of small
Enterprises with the introduction of FDI in India. They will lose their existence. India needs more time for such ventures.
Those sitting in the Government do not understand the plight of common people.

Vikram – (grabbing the opportunity) - India lives in villages. The rural India is the true reflection of its diversity. Low
Income group and Rural people depend on Public Distribution system for their foodgrain needs. The present PDS (Public
Distribution System) on which a larger urban and rural population depends will receive a set back and it will be difficult to
procure and redistribute the material, once the dependence on FDI increases. I do not favour it.

Akshay - (Making second entry) – Friends if we go by the experience, whichever sector got competition, it improved not
only in quality but also in prices whether it is in Airline services, banks, Insurance, automobiles etc. On the contrary, role
of Intermediariaris, known with different names in different parts of the country, will be minimized. They flout the
business ethics. Prices lack transparency, due share of farmer is not paid to him. Despite the development of Regulated
markets in key areas like Delhi Vegetable, fruit growers have to face the monopolistic character of such markets. Indian
farmers at present realize only 1/3rd of the final price paid by the consumer as against the 2/3rd price realized by the farmers
in the countries with a greater share of organized retail. FDI will assist in reducing the dominance of value chain by the
intermediaries.

Shilpi - (also catching the clue) FDI will improve the investment in logistics of the retail chain leading to an efficient
market mechanism. India is one of the biggest producers of fruits and vegetables (More than 180 million MT), it does not
have a strong integrated cold-chain infrastructure with only around 5400 cold storages which have total capacity of about
24 million MT. The irony is that 80% of the capacity is used only for preservation of potatoes. The perishable horticultural
commodities find it difficult to link to distant markets, including overseas market. FDI will become catalyst in avoiding
this distress sale and erosion & wastage in quality and quantity of the produce.

Manoj – (Making a hurried entry) Yes Shilpi, I have read that in accordance to the provisions made, any company going
for 51% partnership in retail, shall have to tie up with a local partner. This will improve the income levels of all concerned
and will make economy flourish with quality branded products at a lower price.

Vikas – FDI will improve the overall economic scenario. It will serve as an antidote to inflation. The producer will get
direct payment from the retailer and the same will be higher than what he was getting earlier due to the foul play by the
intermediaries.

Srikant (making second entry) – It is a myth. In fact, The unorganized retail sector, which is being criticized so much
over here, is the largest source of employment after agriculture and has deep penetration in rural India. It generates more
than 10% GDP of India. There is all probability that there will be a great job loss in this sector. The worst affected would
be the rural youth.

Akshay – (Making third entry despite knowing very less time is left) – We have to view it in the light of one fact and that
is which is more beneficial. Since the FDI in retail will make the consumer happy as well as the small manufacurer. In the
absence of intermediaries the consumer will end up paying less price for a better product and the farmer/manufacturer will
also get better value for his product. Besides in the organized sector, consumer has to argue and fight a lot in case he has to
return some faulty product to the retailer. This process will be standardized.

So friends, allowing FDI in multi brand retail would bring about supply chain improvement, investment in technology,
manpower and skill development, upgradation in agriculture sector, benefits to government through greater GDP, tax
income. The organized sector would also emphasise to produce more and thus shall generate more employment in
production as well as retail industry.
(Stops and takes a long breath with a smile – a reflection of achievement)
 Make in India: The idea will make India a
manufacturing hub
“Make in India” – the idea will make India a manufacturing hub The debate on the success of Make in India campaign
attracted not only the economists, bureaucrats and politicians to weigh its pros and cons, but the top MBA colleges in
India have also been fascinated with the project. Many MBA colleges have included ‘Make in India’ as one of the hot
topics in their GD round in different forms in final admission round to test the ability of prospective students to analyse it
from different perspective.

MBAUniverse.com shares below the key points on the topic

Topic background
With a vision and mission to put Indian Economy on the wheel of high growth, Indian Prime Minister Narendra Modi’s
Government launched the “Make in India” campaign. The project aims to attract businesses from around the world to
invest and manufacture in India.
The vision of the campaign is to make India a global hub for the manufacturing of goods ranging from cars to software,
satellites to submarines, paper to power and a lot more.
 .
Make in India-key facts
 “Make in India” is a realistic project which aims to increase the contribution of manufacturing in GDP to 25% from 16%
as of now.
 With the launch of ‘Make in India’ campaign, India has already marked its presence as one of the fastest growing
economies of the world.
 India is having the favourable demographic dividends for the next 2-3 decades and the cost of the manpower is less as
compared to the other developed countries.
 India is a house of strong and responsible business houses operating with credibility and professionalism. These business
houses have big contribution into the development of the Indian economy.
 India has a strong consumer market and is going to expand in the coming years.
 The strong technical and engineering capabilities backed by top-notch scientific and technical institutes are an added
advantage to boost this campaign.
Comparison with China
 China is far ahead in manufacturing but it is projected that India is going to give a straight fight to China in the
manufacturing sector.
 The labour cost in China is increasing continuously and this may lead to the increased cost of the goods manufactured.
 This will open a way to India to increase the manufacturing capabilities to serve the cheap manufactured goods to world.
 China may lose its dominant position as the 'factory of the world' in near future because of its diluting quality of goods
despite good manufacturing facilities.
 RBI Governor Raghuram Rajan made statement that world cannot accommodate two Chinas but cannot stop India from
becoming a successful exporter.
 Although China exports 12 per cent of the World’s merchandise while India is having less than 2 per cent but given its
massive labour force and considerably lower wages, India can snatch another two percentage points from China in the next
4 years. That alone could give a huge boost to the 'Make in India’ for the global economy' campaign.
 Till 1978 China remained a closed door economy and way behind India. China marched on the path of steep economic
growth only after it opened its doors to world market.
 Indian Economy has been on the path of consistent growth but earlier couldn’t take off well as it focused on exporting
more of raw material and less of finished goods.
 India can become a manufacturing hub with growth in exports.
 Since “Make in India” is focused on attracting the foreign investors to set up their units in India, manufacture here and
export to rest of the world “Make in India” is going to be realistic to a great extent although it will take time to surpass the
growth of China.
‘Make in India’ to awaken India
 India is the 3rd largest growing economy of the world.
 India has an immense pool of opportunities with cheap labour and abundant resources.
 The export led manufacturing is definitely going to raise the economy of India and will benefit the country by exploring
more job opportunities.
 “Make in India” campaign is a strong campaign that favours the growth of India if continued on the right track with the
strong and transparent system.
Concerns
 Poor infrastructure, roads, electricity are deferring the foreign investors to invest in India.
 India should focus more on development of energy resources and development of infrastructure. To fulfil the vision of
Make in India the investment could be invited in these sectors.
 The necessity will be to do away with red-tapism and operational glitches to make the ‘Make in India’ campaign
successful one.
 US Trade Policy: Is Trump creating World
Trade War?
Donald Trump, the 45th president of the United States came to power in 2017 and his term goes upto 2021. During his
election campaign, Trump advocated the policy of Protectionism and ‘Making America Great Again.’ His economic
policies follow American Economic Nationalism based on the theory of high tariffs to reduce imports, creating more jobs
for Americans, reducing the inflow of immigrants, substantially increasing the exports.

The economic policies of Donald Trump therefore, include trade protectionism, immigration reduction, individual and
corporate tax reform, the dismantling of the Wall Street Reform, Consumer Protection Act and the repeal of ‘Obamacare’
– the Patient protection and Affordable Care Act.

Key Highlights
 Using the phrase ‘Smart Trade Not Stupid Trade’ Trump's trade policies promote mercantilism.
 The prime focus of Trump in Trade Policy planning is Protectionism which he uses to defend U.S. industries from foreign
competition.
 His goal is to reduce the U.S. Trade Deficit with other countries especially China and European Union countries.
 In view of Trump, with the American companies becoming wealthier, they can generate higher taxes to fund the military
growth of America.

How America started to Change the Trade Policy: Steps by Trump
 On September 2, 2017, Trump announced to withdraw from the U.S. Trade Agreement with South Korea. Trump wants
South Korea to import more U.S. goods.
 Trump withdrew from further negotiations on the Trans pacific Partnership by signing an order on January 23, 2017, he
promised to replace it with number of bilateral agreements. Responding to this step, Japan and the European Union
announced their own trade deal.On July 6, 2017, they agreed to increase Japanese auto exports to the EU and European
food exports to Japan.
 Heavy Tariffs and Quotas were imposed by Trump administration on imported solar panels and washing machines on
January 22, 2018. China is the biggest exporter of Solar panels and washing machines to U.S. Then on March 1,
2018, Trump announced 25 percent tariff on steel imports and a 10 percent tariff on aluminum. It may be noted that China
and European Union countries are the biggest exporter of these items to USA.
 The Steel users, like automakers, will see higher costs. They'll pass on this cost to consumers. With the tremendous fall in
stock market, analysts felt that Trump's actions might start a trade war.
 On August 16, 2017, U.S began renegotiating North American Free Trade Agreement (NAFTA) with Canada and Mexico.
NAFTA is the world's largest Trade Agreement. Trump had threatened to withdraw from NAFTA and hit Mexican
imports with a 35 percent tariff.
 Further moving on his plan, Trump announced on May 8, 2018 that he would withdraw the United States from the Iran
nuclear deal
U.S. Vs China Trade Policy: War of Tariffs
While U.S. started it, China retaliated the Trade War. The China–United States trade war refers to the ongoing
introduction of tariffs on goods traded between the United States and China.
 On January 23, 2018, President Trump placed a 30% tariff on foreign Solar panels which was to be reduced to 15% after
four years. China, the world leader in solar panel manufacture, decried the tariffs. Again, on the same day tariffs of 20%
were placed on washing machines for the first 1.2 million units imported during the year in United States. In 2016, China
exported $425 million worth of washers to the United States.
 On April 3, 2018, Trump announced 25% tariffs on the Chinese imported goods worth $50 billion. The Chinese products
consisted of electronics, aerospace, and machinery. The Trump administration wants China to stop requiring U.S.
companies to transfer their proprietary technology to Chinese firms. The companies must do this if they want to gain
access to China's market. China immediately retaliated hours later. It announced 25 percent tariffs on $50 billion of U.S.
exports to China.
 Again on April 6, 2018, Trump announced tariffs on $100 billion more of Chinese imports. Interestingly, it covers only
one-third of U.S. imports from China. If China retaliates, it could impose tariffs on all U.S. exports to China.
 The Trade Negotiations to sort out the issue were going on. However, on April 10, 2018, China said that trade negotiations
had broken down. The United States demanded that China should stop subsidizing the 10 industries prioritized in its
"Made in China 2025”plan. On the same day, Xi Jinping, President of China said that he would reduce tariffs on imported
vehicles. But it made little impact on trade. Regardless of tariffs, the automakers find it is cheaper to build their products
in China.
 China agreed to remove tariffs on May 15, 2018 on U.S. pork imports. In exchange, the United States will remove tariffs
on Chinese telecom company ZTE. The move is seen as a weakness of Trump. This has led many European countries
asking U.S. to avoid sanctions on companies that do business with Iran.They may threaten tariffs on U.S. imports as a
bargaining tool.
 Liu He, the Economic Advisor to Chinese President Xi Jinping, visited USA from May 15 to May 19, 2018 for Trade
talks. On May 20, it was reported that Chinese officials had agreed to substantially reduce America's trade deficit with
China by committing to increase its purchases of American goods.
 On July 6, 2018, the United States imposed 25% tariffs on $34 billion worth of Chinese goods which led China to respond
with similar sized tariffs on U.S. products. Again, on July 10, following an order from U.S. President Donald Trump, the
U.S. Trade Representative (USTR) Office published a list of $200 billion in Chinese products to be subject to a newly
proposed 10% tariff. China blasted the proposed tariffs as irrational and unacceptable.
 The Trump administration said the tariffs were necessary to protect national security and the intellectual property of U.S.
businesses, and to help reduce the U.S. trade deficit with China.
 In August 2017, Trump had already opened a formal investigation into attacks on the intellectual property of America and
its allies, the theft of which had been costing America alone an estimated $225 billion to $600 billion a year.
U.S. Vs European Union Trade Policy
It is not China alone, Trump Trade Policy is creating Trade War with European Union (EU) Counties also. Although,
Trump Administration had announced earlier that it would delay the imposition of tariffs on EU countries, Canada,
Mexico by another 30 days to renegotiate the trade terms, there was no assurance that more time will yield any
breakthroughs.
 Trump has imposed 25% Import Tariff on steel and 10% on aluminum. This would apply to all of America’s trading
partners, including close allies such as EU countries and Canada.
 Rather than focussing on Chinese producers alone, the White House announced blanket import levies
 The Secretaries and other trade experts in Trump Administration like Robert Lighthizer, the U.S Trade Representative, and
Wilbur Ross, the Commerce Secretary, argue that this blanket approach was necessary to prevent China from shipping
steel and aluminum to the United States via third countries. But to the Europeans, in particular, the White House’s move
looks like the beginning of a campaign to eliminate the U.S. trade deficit by targeting a broad range of U.S. imports and
promoting U.S. exports. In fact, this was the aim that Donald Trump had set out in speeches ever since the start of his
Presidential campaign.
 After meeting with Angela Merkel, the German Chancellor, at the White House, Trump brought up the U.S. steel industry,
saying its success was vital to national security. He also talked about the U.S. trade deficit in goods with the E.U., which
was $151.4 billion last year. Trump said that he was committed to “remedy these trade balances.”
 Trump has singled out the auto industry, oblivious to the fact that General Motors and Ford have for many decades
maintained extensive manufacturing operations in Europe, and, since the nineteen-nineties, BMW and Mercedes-Benz
have had plants in the United States.
 To protect their interest and to counter the Trump Trade Policies, Angela Merkel, the German Chancellor, French
President Emmanuel Macron, and British Prime Minister Theresa May spoke over telephone. Later, Merkel issued a
statement saying that Europe was “resolved to defend its interests.” This was a signal that they wouldn’t be pushed around
by Trump.
 The E.U. has already drawn up a list of retaliatory tariffs—targeted at iconic U.S. goods, such as bourbon and Harley-
Davidson motorcycles—that it would put in place if the White House goes ahead with its steel and aluminum tariff hike
plans.
 The Trump Administration reportedly wants the Europeans to agree to a numerical cap on their steel exports, as South
Korea has done, as well as other measures designed to enhance access to the European market for American firms.
 Europeans are resisting the proposals from United States. The European Commission has issued a statement that says, “as
a longstanding partner and friend of the U.S., we will not negotiate under threat. Any future transatlantic work program
has to be balanced and mutually beneficial.”
United States Vs India Trade Policy
India’s Trade with U.S. has been on the rise. However, with the imposition of tariffs by United States, India has to rethink
on some measures to protect its interests. Responding to a question on Indo-US bilateral trade, Deputy US Trade
Representative Jeffrey Gerrish said that the progress made in bilateral relationship has been truly historic over the last
several years.
 The two-way trade in 2017 reached $126 billion and that was a landmark.
 After imposing tariffs on Chinese imports, Washington filed a complaint at the World Trade Organization (WTO)—the
first WTO action of this administration—over several export subsidy programmes in India. These include the Merchandise
Exports from India Scheme, the Export Oriented Units Scheme, the Electronics Hardware Technology Parks Scheme,
Special Economic Zones, and the Export Promotion Capital Goods Scheme. These actions may worry India.
 India and U.S. have a trade imbalance of US$30 billion and given the current trends, it is yet to be decided how to reduce
it.
 Trump has made it clear that he wanted India to reduce the import tariff on its Harley-Davidson Motorcycles from 100%.
He has threatened to impose tariff otherwise on the Motorcycles exported from India to the United States.
 India-U.S. Trade has been on the rise and at present Trump also wants to flourish it further. The process is to be decided.
 Trump proposes to make Immigration rules even more strict for Indians also. However, many concessions are under
discussion.
 US Trade Representative Jeffrey Gerrish said "We are two of the biggest economies in the world. US biggest economy,
India is the sixth largest economy in the world. Given how larger economies are, we think we can grow our trade
significantly, we think that it should be much larger than it is.”
Rationales by U.S. for Tariffs - Pros
President Trump during his Presidential campaign spoke to follow the Policy of America First and cancel international
trade deals creating deficit for the USA.
 U.S. Trade deficit is of $500 billion a year and with intellectual property (IP) theft of another $300 billion. Trump wants to
eliminate it
 In January 2018, Trump said he wanted the United States to have a good relationship with China, but insisted that it should
treat the United States fairly.
 In his view, America has also finally turned the page on decades of unfair trade deals that sacrificed its prosperity and
shipped away its companies, its jobs, and Nation’s wealth. The era of economic surrender is over. From now on, America
expects trading relationships to be fair and to be reciprocal.
 John Ferriola, the CEO and President of Nucor, America's largest steel producer and its largest metal recycler, claimed that
tariffs were not unfair, but were "simply leveling the playing field." He explained that not only the "European Union, but
most countries in the world, have a 25 percent or greater VAT, value-added tax, on products going into their countries
from the United States. So if we impose a 25 percent tariff, all we are doing is treating them exactly as they treat us.
 Richard Trumka, president of the AFL-CIO, which represents over 12 million active and retired workers, said that China
has stolen U.S. intellectual property and "bullied its way into acquiring critical U.S. advances in technology." According to
him, "Tariffs aren’t an end goal, but an important tool to end trade practices that kill American jobs and drive down
American pay."
 A number of experts have focused on China's theft of Intellectual Property, and that it forces U.S. firms that want to do
business there into transferring its confidential technology and trade secrets before having access to their market.
Trump Trade Policy: May Turn Ineffective - Cons
 A July 2018 study indicated Trump's policies have had little impact on the U.S. economy in terms of GDP or
employment. For example, more jobs were created in President Obama's last 19 months (3.89 million) than in President
Trump's first 19 months (3.69 million), till July 2018.
 The debt additions projected by CBO for the 2018-2027 period have increased from the $9.4 trillion that Trump inherited
from Obama (January 2017 CBO baseline) to $13.7 trillion (CBO current policy baseline), a $4.3 trillion or 46% increase.
 Trump's trade policy is a rerun of a terrible 1980s policy where 'American consumers were the biggest losers'
 President Donald Trump's trade policies are similar to protectionist trade policies of the 1980s.
 The US's trade policies in the 1980s did little to reduce the trade deficit and ended up costing American consumers more
than they helped the protected industries.
 In the 1980s, President Ronald Reagan and US lawmakers were concerned about the rising US trade deficit with Japan, as
well as the country's strong entry into areas where the US typically dominated.
 Much like Trump's focus on autos, steel, and emerging technologies, Reagan focused on autos, steel, and new
semiconductor technology. The 1980s policy also employed a series of tariffs, quotas, and other import restrictions to give
a leg up to US companies in the fields.
 The end result of the 1980s-era policy was an inability to slow the growth in the US trade deficit. According to the BAML
economists, the deficit widened from $36 billion, or 1.3% of GDP, in 1980 to $170 billion, or 3.7% of GDP, in 1989.
 Erecting trade barriers do not necessarily decrease the trade deficit. One of the biggest problems with a focus on trade
deficits is that they have as much to do with domestic policies as trade policy. Large government spending programs, such
as Reagan's and Trump's tax cuts, and deficit spending can help fuel a trade imbalance.
 The industries that are supposed to be protected may receive little help. It happened in eighties too. The restrictions on cars
did shrink the total market share of Japanese autos in the US, but by less than three percentage points. At the same time,
the total dollar value of Japanese autos coming into the US rose due to large price increases. Similar experiences occurred
in the steel and semiconductor industries, with some small wins that came at substantial cost to the US consumer and
American economy.
 The moves can therefore do little to achieve their goal of reducing the US trade deficit.
 China has announced retaliatory tariffs on US goods. Even the US's supposed allies - Mexico, Canada, and the EU -
have imposed the tariffs of their own.
 This risk of substantial escalation makes the threats of Trump's potential trade war even greater than the experience three
decades ago.
 GD Topic: Union Budget India 2018
.
Union Budget India 2018
On 1 February 2018, Mr. Arun Jaitely, the Finance Minister of India announced the Union Budget for the session 2018-
2019. The budget this time was presented with a focus to strengthen agriculture, rural development, health, education,
employment, MSME and infrastructure sectors

Budget Highlights
Agriculture and Rural Development:
 MSP for all unannounced kharif crops will be one and half times of their production cost like majority of rabi crops.
 Institutional Farm Credit raised to 11 lakh crore in 2018-19 from 8.5 lakh crore in 2014-15.
 22,000 rural haats to be developed and upgraded into Gramin Agricultural Markets to protect the interests of 86% small
and marginal farmers.
 “Operation Greens” launched to address price fluctuations in potato, tomato and onionØ for benefit of farmers and
consumers.
 Two New Funds of Rs10, 000 crore announced for Fisheries and Animal Husbandary sectors; Re-structured National
Bamboo Mission gets Rs.1290 crore.
 Rs 16,730 crore allocated for rural sanitation.
Healthcare:
 World‟s largest Health Protection Scheme covering over 10 crore poor and vulnerable families launched with a family
limit upto 5 lakh rupees for secondary and tertiary treatment.
Education:
 Tribal students to get Ekalavya Residential School in each tribal block by 2022.
 Education Cess and Secondary and Higher Education Cess to be replaced by Health and Education Cess at the rate of 4%
of tax and surcharge.
 Outlay on health, education and social protection will be 1.38 lakh crore.
 Setting up 24 new Government medical colleges.
 Proposal for setting up of one medical college for every three parliamentary constituencies, with 24 new government
medical colleges also being envisioned. Government also will work on upgrading hospitals to medical colleges.
Infrastructure:
 Rs. 5.97 lakh crore allocation for infrastructure.
 10 prominent sites to be developed as Iconic tourist destinations.
Social Schemes and Women Empowerment
 Higher targets for Ujjwala (LPG distribution), Saubhagya (Household Electrification) and Swachh Mission to cater to
lower and middle class in providing free LPG connections, electricity and toilets.
 Loans to Women Self Help Groups will increase to Rs.75, 000 crore in 2019 from 42,500 crore last year.
MSME
 Rs 3,794 crore allocated to the MSME sector in the form of capital support and interest subsidy By 2022.
 Rs 3 lakh crore target has been set for the Mudra Yojana .
 Rs 4.6 lakh cr sanctioned under MUDRA Scheme .
Technology
 NITI Aayog to initiate a national programme on Artificial Intelligence(AI)
 Centers of excellence to be set up on robotics, AI, Internet of things etc.
 Allocation to Digital India scheme doubled to Rs 3073 cr
Direct taxes
Personal tax
 No change in tax slabs or rates for individual taxpayers.
 Standard Deduction of Rs. 40,000 in place of present exemption for transport allowance and reimbursement of
miscellaneous medical expenses. 2.5 crore salaried employees and pensioners to benefit from this initiative.
Corporate tax
 Corporate tax 100 percent deduction proposed to companies registered as Farmer Producer Companies with an annual
turnover upto Rs. 100 crore on profit derived from such activities, for five years from 2018-19.
 Deduction of 30 percent on emoluments paid to new employees Under Section 80-JJAAØ to be relaxed to 150 days for
footwear and leather industry, to create more employment.
 Proposal to extend reduced rate of 25 percent currently available for companies with turnover of less than 50 crore (in
Financial Year 2015-16), to companies reporting turnover up to Rs. 250 crore in Financial Year 2016-17, to benefit micro,
small and medium enterprises.
Proposed Relief to Senior Citizens:
 Exemption of interest income on deposits with banks and post offices to be increased from Rs. 10,000 to Rs. 50,000.
 TDS not required to be deducted under section 194A. Benefit also available for interest from all fixed deposit schemes and
recurring deposit schemes.
 Hike in deduction limit for health insurance premium and/ or medical expenditure from Rs. 30,000 to Rs. 50,000 under
section 80D.
 Increase in deduction limit for medical expenditure for certain critical illness from Rs. 60,000 (in case of senior citizens)
and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens, under section 80DDB.
 Proposed to extend Pradhan Mantri Vaya Vandana Yojana up to March, 2020. Current investment limit proposed to be
increased to Rs. 15 lakhs from the existing limit of Rs. 7.5 lakhs per senior citizen.
Opinions/ Reactions to the Budget
 The impact of 2018 budget is positive for Agriculture and Food Processing sector, affordable housing sector, health
insurance industry.
 Due to major focus on agriculture sector and rural economy Demand for agriculture-related products such as fertilisers,
crop protection chemicals, micro irrigation equipment will go up. Since the focus will be on technology and
modernisation, warehousing and logistics industry will also get benefitted.
 The affordable housing sector will continue to grow in the coming years. Consequently, the related industries such as
Steel, Iron, Cement, Construction Materials, and Transportation, will witness growth.
 The announcement of National Health Protection Scheme will boost the health insurance sector, health service providers,
and also the pharmaceutical sector in general. This would also augment Public-Private partnership between the
government and the Insurance companies.
 Is India ready for Electric Vehicles?
What are Electric Vehicles?
Electric vehicles, unlike conventional petrol and diesel vehicles, use one or more electric motors for propulsion. Electric
vehicles have a battery that is charged through an electricity supply. The electric energy is then stored and used to power
the electric motor.

There are many types of electric vehicles such as electric cars, electric trucks, electric buses, electric bikes, electric trains,
electric scooters etc. however, amongst all, manufacturing and putting the electric cars on road is the vision to make India
pollution free alongwith saving the precious petroleum.

Tesla, BMW, Nissan, Chevrolet, Ford, Volkswagen, Kia are the 7 leading manufacturer of Electric Vehicles.

Benefits of Electric Vehicles:

Cost Effective: With advent of advance technology and dedicated R&D, both cost and maintenance of electric vehicles
has gone down. Government is incentivizing the use of Electric Vehicles by providing subsidies and lower motor taxes on
EVs.

Environment Friendly: Electric Vehicles are 100 percent eco-friendly. They do not emit toxic gases or smoke in the
environment which leads to global warming and helps to reduce pollution.

Energy Security: As electricity is majorly produced from either renewable sources or from sources that emit no
greenhouse gases thus EVs help in maintain energy security by shifting dependence from non- renewable resources to
renewable resources.

Less Maintenance: Electric vehicles require less maintenance than conventional vehicles as there are fewer fluids (like oil
and transmission fluid) to change and fewer moving parts.

Reduction in Noise pollution: Electric vehicles are quieter to operate than gasoline-powered vehicles, leading to
reduction in noise pollution.

While the global EV market is rapidly gaining momentum towards the target set by Electric Vehicle initiative (EVI) of
global deployment of 20 million electric vehicles by 2020, Electric vehicles in India are still at a nascent stage.
Yes, India is ready:
 India has been manufacturing indigenously and successfully using Electric Locomotives that pull train coaches with
thousands of tons of load. This has not only saved conventional fuel like coal, diesel but has also saved the environment
from getting polluted further. Accordingly, manufacturing and using the electric cars is not a big hurdle.
 According to a report by NITI Aayog,
 India can save 64% of anticipated passenger road-based mobility-related energy demand and 37% of carbon emissions in
2030 by pursuing a shared, electric, and connected mobility future.
 This would result in a reduction of 156 mega toe in diesel and petrol consumption for that year. At USD 52/bbl of crude,
this would imply a net savings of roughly Rs 3.9 lakh crore (approximately 60 billion USD) in 2030. These figures clearly
indicate an urgent requirement for replacement of conventional vehicles with electric vehicles.
 While prominent manufacturers such as Maruti Suzuki India, Hero Electric Vehicles, Mahindra and Mahindra are already
registered electric manufacturers in India, latest collaborations such as Suzuki and Toyota, are planning to launch electric
vehicles in India.
 On the same lines India’s first EV manufacturer Mahindra and Mahindra has forged a partnership with Ford to develop
electric mobility solutions that are affordable for the Indian consumers.
 Among the world’s 20 most polluted cities in the world, 13 are in India. Vehicular pollution is one of the major
contributors to air pollution. India is in the group of countries that has the highest particulate matter (PM) levels. Its cities
have the highest levels of PM10 and PM2.5 (particles with diameter of 10 microns and 2.5 microns). These figures are six
times more than the WHO “safe” limit of 25 micrograms and represent the exigency for Electrical Vehicles.
 As a signatory to the Paris climate agreement, India is obligated to bring down its share of global emissions by 2030. Thus
the government of India is making key initiatives such as launch of National E-Mobility Programme, planning guidelines
to encourage the use of such vehicles by NITI Aayog etc. to promote EVs in India.
No, India is not ready:
 More Indians prefer petrol, diesel or gas driven cars. They do not seem to be ready to buy and use the electric cars due to
their slow pick up, slow speed and non-availability of electric charging centres in the vicinity of their area.
 As per the data of Society of Manufacturers of Electric Vehicles, only 22,000 units of EVs were sold in India by March
2016, of which 2,000 were four wheelers. At the same time, sales of electric cars grew at a staggering rate of 94% from
2011 to 2015 worldwide, led by China, US, and Europe.
 Just after nine months of the launch of Ola’s ambitious Electric Vehicle project in Nagpur, it faced major roadblock with
Ola drivers wanting to return their electric cars and switch back to petrol or diesel variants. The reason being high
operating expenses and long wait times at charging stations.
 In 2015, the government had launched Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), a
scheme that offered incentives for clean fuel technology cars with the long-term objective of boosting their sales.
However, despite incentives as high as INR 140,000 on some cars, the scheme received a lukewarm response.
 Sales of electric and hybrid cars contributed to only a fraction of the 3 million passenger vehicles sold in India in 2016.
 India lacks significant infrastructure and necessary technology to support Electric Vehicle manufacturing. Efficient
components such as high-density batteries remain a key challenge.
 A robust supply ecosystem of charging stations is another challenge for Electric vehicles.
 though the market in India has given a tepid response to electric vehicles but there exists immense opportunity for the
growth of electric vehicles. The government of India is dedicated towards adoption of Electric Vehicles for a cleaner and
greener environment. Robust supporting infrastructure with lower tax on EVs could help to achieve the dream faster.
 Demonetisation: Success & failures
After one and a half year of Demonetization, Indian Economy seems to have done away with all the negative impacts of
Demonetization. The Economic Survey of India 2017-18, released just before the presentation of General Budget 2018 in
Parliament has emphasized that all the negative impact of Demonetization of Rs.500/- and Rs.1000/- currency notes has
ended. The Demonetization was announced as a surprise on November 8, 2016.

Impact of Demonetization on Indian Economy in 2018

Economic Survey after careful review of Demonetization which was announced one and a half year back, has found that
the cash-to-GDP ratio has stabilized. It suggests a return to equilibrium:
 The Economic Survey says that India's GDP is set to grow at 7 to 7.5 percent in 2018-19. This is an increase from its
prediction of 6.75 percent growth this fiscal year.
 The Economic Survey has cited exports and imports data to claim that the demonetisation effect was now over. It claims
that re-acceleration of export growth to 13.6 percent in the third quarter of Financial Year 2018 and deceleration of import
growth to 13.1 percent is in line with global trends. This suggests that the demonetization and GST effects are receding.
Services export and private remittances are also rebounding
 According to the statistics released in the Survey, the Demonetization had led to Rs 2.8 lakh crores less cash (Equivalent
to 1.8% of GDP) and Rs 3.8 lakh crores less high denomination notes (Equivalent to 2.5% of GDP) in the Indian economy.
 The Economic Survey has also clarified that income tax collections have touched new high with demonetization and
introduction of GST, “From about 2 percent of GDP between 2013-14 and 2015-16, they are likely to rise to 2.3 percent of
GDP in 2017-18, a historic high.”

Demonetization: Back ground and key facts
 On November 8, 2016, the Prime Minister of India, Narendra Modi announced the Demonetization of all Rs.500 and
Rs. 1,000 denominationbanknotes of the Mahatma Gandhi Series.
 The demonetization announcement made the use of Rs.500 and Rs.1000 banknotes invalid past midnight of November 8.
 It was also announced that the new Rs.500 and Rs.2000 banknotes of the Mahatma Gandhi new series would be
introduced in exchange for the old banknotes.
 The objective of demonetization as claimed by Government of India was to curtail the black money running as shadow
economy and to stop the use of counterfeit cash to fund illegal activity and terrorism.
 The sudden nature of the announcement—and the prolonged cash shortages in the weeks that followed—created
significant disruption throughout the economy, threatening economic output.
 The demonetization move was heavily criticized as poorly planned and unfair, and was met with protests, litigation, and
strikes.
The announcement was sudden and unscheduled. It was a live television address at 8PM on November 8, 2016. In the
days following the demonetisation, the country faced severe cash shortages with severe detrimental effects across the
economy. People seeking to exchange their bank notes had to stand in lengthy queues, and several deaths were linked to
the inconveniences caused due to the rush to exchange cash. As the cash shortages grew in the weeks following the move,
the demonetization was heavily criticised by prominent economists and by world media.

Merits-Demonetization Favoured India’s Economic Growth

 Demonetization policy of the Government has been termed as the greatest financial reform that aimed to curb the black
money, corruption and counterfeit currency notes.
 All the people who are not involved in malpractices welcomed the demonetization as the right move.
 Demonetization was done to help India to become corruption-free as it will be difficult now to keep the unaccounted cash.
 Demonetization will help the government to track the black money and the unaccounted cash will now flow no more and
the amount collected by means of tax can be better utilized for the public welfare and development schemes.
 One of the biggest achievements of demonetization has been seen in the drastic curb of terrorist activities as it has stopped
the funding the terrorism which used to get a boost due to inflow of unaccounted cash and fake currency in large volume.
 Money laundering will eventually come to halt as the activity can easily be tracked and the money can be seized by the
authorities.
 Demonetization aimed to stop the running of parallel economy due to circulation of fake currency as the banning of
Rs.500 and Rs. 1000 notes will eliminate their circulation.
 The unaccounted cash could be deposited in the Pradhan Mantri Garib Kalyan Yojana after paying 50% tax. The money
will remain deposited for 4 years with the bank without incurring any interest. However, after 4 years the amount will be
returned. This amount can be utilized for social welfare schemes and making the life of low income groups better.
 The Public Sector Banks which were reeling under deposit crunch and were running short of funds have suddenly swelled
with lot of money which can be used for future finances and loans after keeping a certain amount of reserve as per RBI
guidelines.
 The people who opened the Jan Dhan accounts will now use their accounts and become familiar with banking activitiy.
The money deposited in these accounts can be used for the developmental activity of the country.
 The tax collected due to launch of demonetization policy will be put to developmental activities in the country.
 Demonetization has driven the country towards a cashless society. Lakhs of the people even in remote rural areas have
started resorting to use the cashless transactions. The move has promoted banking activities. Now even the small
transactions have started going through banking channels and the small savings have turned into a huge national asset.
 The high rising price pattern and inflationary trends which the Indian economy was facing are taking a down turn making
the living possible within low income group reach.
Demerits-Blow to economic growth and inconvenience all around
The very next day of announcing the demonetization, the BSE Sensex and NIFTY 50 stock indices fell over 6%. The
severe cash shortages brought detrimental impact on the economy. People trying to exchange their bank notes had to stand
in lengthy queues causing many deaths due to inconvenience and rush.
 The sudden announcement has made adverse impact on business and economy. Instead of a growing economy India has
become a standstill and no growth economy. It is fearedthat a fall of 2-3% in the GDP growth will be recorded coming
year.
 India is an agriculture based economy. Due to the cash crunch, the farmers especially small and marginal who largely
depend on cash to buy seeds, fertilizers and to pay for sowing, borrowing water for irrigation and for other related
agriculture equipments remained worst affected and could not complete the crop related activity.
 Since small branches of the banks were also not supplied with adequate cash within time of sowing season of the crop,
farmers could not get their crop loans disbursed. This added to the woes of the farmers leading to a weak agriculture
production the coming year.
 Real Estate sector came to a stand still and is still gasping for buyers of the constructed and half constructed inventory
without buyers. This has resulted in poor cash flow leading to a poor demand.
 Demonetization has made the situation become chaotic. Tempers are running high among the masses as there is a delay in
the circulation of new currency.
 Due to the inability to pay cash to poor daily wage workers, the small employers have stopped their business activity.
 The poor planning on the part of the government has also added to the woes of the common people with low incomes. The
Rs.2000 currency note does not find many takers as it is difficult to get the balance back when you are buying daily needs
like vegetables, milk, bread or paying for petty expenses like bus fare. While rs.100 currency notes were not available in
sufficient number, Rs.500 note arrived in the market very late.
 Demonetization is the 2 way sword in regard to incurring the public expenditure. On the one hand huge cost is to be
incurred on printing the new currency and on the other hand managing the lakhs of crores of old currency volume has also
become a big expenditure incurring item.
 Many Economists are of the view that Rs.2000 currency note will be much easier to hide and can be used to store black
money in shorter space.
 Entire opposition has stood against demonetization and has called this decision a draconian law.
Demonetisation: Success points
India has marched on the path of digital transactions at a much faster pace. Key points describing success of
demonetisation are:

Rate of Inflation goes down

Prices of commonly consumed commodities like Pulses, fruits, vegetables had gone down substantially post
demonetization. Accordingly it brought down the rate of inflation during the months that followed demonetization. The
chart below represents the impact of demonization on the commodities
India moves to cashless economy
One of the key effects of Demonetization 2016 has been that more people have made digital payments part of their lives
moving towards a cashless economy. The details of growth of such digital transactions since January 2016 to August 2017
reflect that NEFT transactions that involved Rs. 7086 bn increased to Rs.12500 bn; Debit cards transactions increased
from Rs.2328 bn to Rs. 2700 bn; credit cards from Rs. 214 bn to Rs.366bn and the IMPS transaction which was not used
by the people, got a share of Rs.651 bn. The Data shared by Reserve Bank of India reflect the trend:
Stock Market gets bullish
After demonetization stock market in India got bullish. While BSE index which was 27, 459 on November 7, 2016 rose to
33680.92 on November 6, 2017, the NSE rose from 8497 to 10,443. The data shared by Bloomberg reflect the trend.
Banks’ lending increases for small businesses
Banks’ finance to small business was going down in pre-demonetization period. There was a negative growth even in short
period of months. As on November 25, 2016, a negative growth of -7.71% was recorded in Banks’ lending to small
business. It went to -8.16% as on December 23, 2016. However, as on September 29, 2017 the Reserve Bank of India has
reported a positive growth of 1.65% in lending to small business by the Banks.
Automobile sales picked up
Sale of 2 wheelers and 4 wheelers was showing a negative growth in 2016. In 2017 it went up substantially and recovered
from the impact of negative growth to high positive growth as reflected in the report.
More people use Mobile wallets than cash
Instead of using cash, more people have started using Mobile wallets for making payments for their regular needs. Even
less educated people have learned and switched over to mobile transactions. The volume of transactions which was
Rs.22.14 bn in January 2016, had gone up to Rs. 83.53bn in January 2017.
Failures of Demonetization
Economic Growth slows down
Post demonetization growth of Indian Economy slowed down from 9.1% to 5.7% in less than one year. Month-wise GDP
growth chart for the period March 2016 to September 2017 as shared by Bloomberg emphasizes this fact as detailed
below:
Realty sector bears the brunt
The triple decisions of demonetisation, RERA and GST resulted in a deceleration of new property launches. The supply of
new housing units in the top-6 cities in India during the first three quarters of 2017 was down by around 60 per cent,
compared with the corresponding period of 2016.

With respect to property sales, the secondary market was obviously highly susceptible to demonetisation as compared to
the primary market. Property transactions in the secondary sales and luxury housing segments tended to have significant
cash components, and such sales have been hampered significantly due to demonetization.
However, the shadow of Demonetization now appears to be fading in reality sector. The prevailing attractive home loan
rates, flexible payment plans and other attractive offers by developers, coupled with restricted new supply addition, has led
to a steady decline in the unsold inventory.

As of Q3 2017, only 6,38,500 units remained unsold in the top-6 cities, registering a 9 per cent decline from Q4 2016
levels. The demand for affordable and mid-segment housing has been on a rise.

Initiatives such as interest waivers on home loans, the government’s push for affordable housing through Pradhan Mantri
Awas Yojana (PMAY) and the ‘Housing for all by 2022’ mission have come to the forefront over the past one year.
Various policy initiatives, amendments and reforms were all aimed at making the real estate sector more transparent,
organised and fundamentally stronger. Demonetisation played a significant role in this process.

In the long term, the real estate sector is likely to regain a faster growth trajectory and is estimated to contribute around 13
per cent to India’s gross domestic product by 2028. This optimistic forecast is very much attainable because the various
reforms now redefining the realty landscape in India will not only incrementally boost consumer sentiment but also
improve investment inflows from foreign and domestic institutional investors.
The Finance Minister Arun Jaitley on November 7, 2017 came out with a spirited defence of demonetisation
announcement on November 8, 2016 calling it a “watershed moment for the Indian economy”. According to him the
demonetization has not only changed the agenda but also made corruption difficult. Thus, in his opinion, it was not only a
“morally and ethically correct” step but also “politically correct”.

Which way to go?

You may get not more than 1 minute while speaking for or against or taking a balanced view on demonetization and its
impact on economy. The only thing is that you should be well aware about the topic and only this can lead you to speak
the way you think is right. Besides, once someone else is speaking you may carefully listen to him and later try to get in
and speak out your view point. Please remem