Indian Economy - Pre Compass 2020 - Rau S IAS PDF

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CONTENTS
►GLOBAL PARTNERSHIP FOR FINANCIAL INCLUSION (GPFI)
Section-1 09
►FINANCIAL INCLUSION INDEX 09
Indian economy QUANTITATIVE INSTRUMENTS 10
►REPO RATE 10
01 ►REVERSE REPO RATE 10

►LIQUIDITY ADJUSTMENT FACILITY 10
INDIAN BANKING SYSTEM ►LONG TERM REPO OPERATIONS (LTRO) 10
►FUNCTIONS OF MONEY 01 ►MARGINAL STANDING FACILITY (MSF) 10
►MONEY CIRCULATION 01 ►BANK RATE 11
►BEHAVIOUR OF MONEY 01 ►CASH RESERVE RATIO (CRR) 11
►MONETARY AGGREGATES 02 ►STATUTORY LIQUIDITY RATIO (SLR) 11
►TYPES OF MONEY 02 ►OPEN MARKET OPERATIONS (OMO) 11
►ORGANISATION OF BANKING IN INDIA 02 ►LATEST RBI BANK RATES IN INDIAN BANKING – AS OF 6

FEBRUARY 2020 11
►SCHEDULED COMMERCIAL BANKS 02
►QUALITATIVE INSTRUMENTS 11
►SCHEDULED COOPERATIVE BANKS 03
►UNCONVENTIONAL MONETARY POLICY INSTRUMENTS 11
►NON-BANKING FINANCIAL COMPANY (NBFC) 03
►MONETARY POLICY TRANSMISSION 12
►DIFFERENTIATED BANKS 04
►EXTERNAL BENCHMARKING OF INTEREST RATES 12
►INDIA POST PAYMENTS BANK (IPPB) 04
►NON-PERFORMING ASSETS (NPA) 12
►SMALL FINANCE BANKS 04
►SPECIAL MENTION ACCOUNTS 13
►DEVELOPMENT BANKS IN INDIA 05
►NATIONAL BANK FOR AGRICULTURE AND RURAL STEPS UNDERTAKEN BY RBI FOR NPA RESOLUTION
DEVELOPMENT (NABARD) 05
13
►NATIONAL HOUSING BANK 05
► LAND DEVELOPMENT BANKS 05 ►INSOLVENCY AND BANKRUPTCY CODE (IBC), 2016 13
►MICRO UNITS DEVELOPMENT AND REFINANCE AGENCY ► CROSS-BORDER INSOLVENCY 14

(MUDRA) 05 ►PUBLIC CREDIT REGISTRY (PCR) 14
►RESERVE BANK OF INDIA (RBI) 06 ►PROMPT CORRECTIVE ACTION (PCA) 14
►PROJECT SASHAKT 15
CURRENT ISSUES RELATED TO RBI 07
►PRIVATE ASSET RECONSTRUCTION COMPANIES (ARC) 15
►TRANSFER OF FUNDS BY RBI TO CENTRAL GOVERNMENT
►BAD BANK 15
07
►RBI’S BANKING OMBUDSMAN SCHEME 07 BANKING REGULATION 15
►CENTRAL BOARD OF DIRECTORS, RBI 08
►BASEL-III NORMS 15
►RBI GOVERNOR 08
►CAPITAL ADEQUACY RATIO 15
►SECTION 7 OF RBI ACT, 1935 08
►LEVERAGE RATIO 16
►MONETARY POLICY 08
►LIQUIDITY COVERAGE RATIO (LCR) 16
►MONETARY POLICY COMMITTEE (MPC) 09
►BANK RECAPITALIZATION PACKAGE 16
►NATIONAL STRATEGY FOR FINANCIAL INCLUSION 09
►INDRADHANUSH ROADMAP 16 ►CONSUMER PRICE INDEX 25

►DIVERGENCE BETWEEN WPI AND CPI 26
CURRENT AFFAIRS RELATED TO BANKING 17
►HEADLINE V/S CORE INFLATION 26
►EMV CARDS (“EUROPAY,” “MASTERCARD,” AND “VISA”) 17
►PRODUCER PRICE INDEX 26
►PAISA PLATFORM (PORTAL FOR AFFORDABLE CREDIT AND
►HOUSING PRICE INDEX 26
INTEREST SUBVENTION ACCESS) 17
►PRODUCER PRICE INDEX (PPI) 25
►BANKING STABILITY INDEX 17
►GDP DEFLATOR 26
►FINANCIAL STABILITY BOARD: SOUND COMPENSATION
PRACTICES 17 ►EFFECTS OF INFLATION 26
►CLAWBACK AND MALUS 18 ►IMPORTANT COMMITTEES RELATED TO INFLATION 27
►NATIONAL SMALL SAVINGS FUND 18

►FOREIGN EXCHANGE BUY/SELL SWAP 18
►URBAN COOPERATIVE BANKS TO TRANSITION INTO SMALL
SECTION 3
FINANCE BANKS 18
►DOMESTIC-SYSTEMICALLY IMPORTANT BANKS (D-SIBs) 19 Taxation
►EASE REFORMS INDEX 19
►LIBOR 19 28
►MIBOR 19
►BASIC TERMS 28
►SWIFT 19
►LAFFER CURVE 28
►PROMOTER PLEDGING 19
►SURCHARGE 29
►WAYS AND MEANS ADVANCES 19
►CESS 29
►PAYMENT AND SETTLEMENT SYSTEM 20
►GOODS AND SERVICES TAX (GST) 29
►NATIONAL PAYMENT CORPORATION OF INDIA (NPCI) 20
►3-TIERS OF GST 29
►UPI 2.0 20
►POSSIBLE IMPACT OF GST 29
►MERCHANT DISCOUNT RATE 20
►GST COMPENSATION CESS 29
►HAIRCUTS 21
►GST INFRASTRUCTURE 29
►MERGER OF PUBLIC SECTOR BANKS 21
►INSTITUTIONAL MECHANISM: GST COUNCIL 30
►DEPOSIT INSURANCE 21
►GST NETWORK (GSTN) 30
►CORE INVESTMENT COMPANIES (CICs) 21
►GST APPELLATE TRIBUNAL 30
►BASIC SAVINGS BANK DEPOSIT ACCOUNT 21
►NATIONAL ANTI-PROFITEERING AUTHORITY 30
►LIBRA 22
►CAPITAL GAINS TAX 30
►UTKARSH 2022 22
►INVERTED DUTY STRUCTURE 30
►LETTERS OF UNDERTAKING (LOU) 22
►TAX HAVENS 30
►ABER 22
►TRANSFER PRICING 31
►TYPES OF ATMS IN INDIA 22
►ADVANCE PRICE AGREEMENT 31
►OPERATION TWIST 22
►DOUBLE TAXATION AVOIDANCE AGREEMENT 31
►TREATY SHOPPING AND ROUND TRIPPING 31
SECTION 2 ►PATENT BOX MISUSE 31

► OFF-BUDGET FINANCING 31
Inflation ►FISCAL COUNCIL 31

►ANGEL TAX 31
24 ►MULTILATERAL CONVENTION ON BEPS 32

►BEPS PROJECT 32
►BASIC TERMS 24 ►GAFA TAX 32
►WHOLESALE PRICE INDEX 25 ►EQUALISATION LEVY- INDIA’S VERSION OF GAFA TAX 32
ii
►DIVIDEND DISTRIBUTION TAX AND BUYBACK TAX 33 ►GOLD RELATED INVESTMENTS 38

►FRBM REVIEW COMMITTEE (2017) 33 ►SOVEREIGN GOLD BONDS 38
►NATIONAL E-ASSESSMENT SCHEME 33 ►BHARAT BOND ETF 38
►TAX INSPECTOR WITHOUT BORDERS 33 ►IMPACT BONDS 39
►SABKA VISHWAS LEGACY DISPUTE RESOLUTION 33 ►WOMEN LIVELIHOOD BONDS 39
►UTKRISHT IMPACT BOND 39
►GREEN BONDS 39
SECTION 4 ►STRATEGIC DISINVESTMENT 39
►NATIONAL INVESTMENT FUND 39
Financial Market ►REITS AND INVITS 39
►INVERTED YIELD CURVE 39
34 ►GOLDEN SHARE 40
►INVESTOR EDUCATION AND PROTECTION FUND 40
►MONEY MARKET 34
►INNOVATORS GROWTH PLATFORM 40
►CALL MONEY 34
►NOTICE MONEY 34
►TREASURY BILLS 34 SECTION 5
►CASH MANAGEMENT BILLS 34
►CERTIFICATE OF DEPOSITS 34 External Sector
►COMMERCIAL PAPER 35
►CAPITAL MARKET 35
41
►PRIMARY MARKET 35
►SECONDARY MARKET 35 ►BALANCE OF PAYMENT 41
►FINANCIAL INSTRUMENTS 35 ►BALANCE OF TRADE 41
►DEBENTURE 35 ►BALANCE OF INVISIBLES 41
►G-SECS 35 ►CURRENT ACCOUNT TRANSACTIONS 41
►NEGOTIATED DEALING SYSTEM 35 ►CURRENT ACCOUNT DEFICIT 41
►MUTUAL FUND 36 ►CAPITAL ACCOUNT TRANSACTIONS 41
►EXCHANGE TRADED FUND 36 ►CONVERTIBILITY 41
►ETF VS MUTUAL FUNDS 36 ►ECB, ADR/GDR AND FCCB 42
►DERIVATIVES 36 ►EXTERNAL COMMERCIAL BORROWINGS 42
►FUTURES 36 ►AMERICAN DEPOSITORY RECEIPTS 42
►OPTIONS 36 ►FOREIGN CURRENCY CONVERTIBLE BONDS 42
►COMMODITY MARKET 36 ►FOREIGN DIRECT INVESTMENT 42
►PARTICIPATORY NOTES 36 ►FOREIGN PORTFOLIO INVESTMENT 42
►SOVEREIGN WEALTH FUND 36 ►FOREX RESERVES 42
►NATIONAL INFRASTRUCTURE AND INVESTMENT FUND 37 ►APPRECIATION 42
►ALTERNATE INVESTMENT FUND 37 ►DEPRECIATION 42
►NATIONAL PENSION SCHEME 37 ►DEVALUATION 42

►STAGES OF TRADE INTEGRATION 42
CURRENT AFFAIRS 38
►COMPREHENSIVE ECONOMIC COOPERATION AGREEMENT
►UDAY BONDS 38 (CECA) 43
►PANDA BONDS 38 ►COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT
►URIDASHI MASALA BONDS 38 (CEPA) 43
►MASALA BONDS 38 ►NIRVIK SCHEME 43
iii
►INDIA AND RCEP 43 ►SUSTAINABLE ALTERNATIVE TOWARDS AFFORDABLE

TRANSPORTATION (SATAT) INITIATIVE 54
►CURRENCY WAR 43
►DEVALUATION 43 ►UNNATEE (UNLOCKING NATIONAL ENERGY EFFICIENCY
POTENTIAL) 55
►TIME RELEASE STUDY (TRS) 43
►NEW HYDROPOWER POLICY 56
►WORLD CUSTOMS ORGANISATION 44
►RENEWABLE PURCHASE OBLIGATION 56
►BONDED MANUFACTURING SCHEME 44
►OCEAN ENERGY AS RENEWABLE ENERGY 57
►TARIFF RATE QUOTA 44
►ADVANCED ULTRA SUPER CRITICAL (AUSC) THERMAL
►DOMESTIC CONTENT REQUIREMENTS 44 POWER PLANT 57
►FOREIGN SOVEREIGN BONDS 45 ►ULTRA MEGA RENEWABLE ENERGY POWER PARKS
►PARIS PACT INITIATIVE 46 (UMREPP) 58
►REMISSION OF DUTIES AND TAXES ON EXPORTED ►GREEN WINDOW INITIATIVE OF IREDA 58

PRODUCTS (RODTEP) SCHEME 46 ►RENEWABLE ENERGY PROMOTION AND FACILITATION
►PROJECT MONITORING GROUP 46 BOARD 58
►MERIT ORDER OPERATIONS 58
► PRAKASH PORTAL 59
SECTION 6
INDUSTRY RELATED 59
Infrastructure, Employment ►INTERNATIONAL FINANCIAL SERVICES CENTER AUTHORITY
ACT, 2019 59
and Energy ► IPRISM 59

►PATENT PROSECUTION HIGHWAY PROGRAM 60
47
►NATIONAL MINING POLICY 60
►MANDATORY GOLD HALLMARKING 61
►NATIONAL INVESTMENT AND MANUFACTURING ZONES
LABOUR RELATED 47
(NIMZS) 62
►ESIC 47 ►NATIONAL INDUSTRIAL CORRIDOR DEVELOPMENT AND
►MATERNITY BENEFIT (AMENDMENT) ACT, 2017 48 IMPLEMENTATION TRUST (NICDIT) 62
►SOCIAL SECURITY CODE BILL, 2019 48 ►RELAXED DEFINITION OF STARTUPS 62
►INDUSTRIAL RELATIONS CODE BILL 2019 49 ►NATIONAL STARTUP ADVISORY COUNCIL 63
►WAGE CODE BILL 49 ►MISSION PURVODAYA 63
►PLFS REPORT 50 ►STEEL SCRAPPING POLICY 64
►VISION ZERO 50 ►GLOBAL FORUM ON STEEL EXCESS CAPACITY 64
►DUAL SYSTEM OF TRAINING 51 ►ELEPHANT BONDS 64
►AMENDMENT IN APPRENTICESHIP RULES 51 ►DEFINITION OF MSMES 64
►NATIONAL COUNCIL FOR VOCATIONAL EDUCATION AND ►PUBLIC PROCUREMENT POLICY FOR MSME 64
TRAINING (NCVET) 51 ►NATIONAL SC ST HUB 65
ENERGY RELATED 52 ►TRADE RECEIVABLES DISCOUNTING SYSTEM (TREDS) 65

►7th ECONOMIC CENSUS 65
►STATUS OF RENEWABLE ENERGY IN INDIA 52
►AMENDMENTS TO DPCO IN 2019 65
►NATIONAL GAS GRID 52
►NATIONAL TECHNICAL TEXTILES MISSION 66
►RUCO INITIATIVE OF OMCS 52
►GEM-WOMANIYA 67
►GAS TRADING HUB 53
►INTERCONNECT USAGE CHARGES 67
►IRAQ BECOMES TOP CRUDE EXPORTER TO INDIA 53
►TELECOM SECTOR UNDER STRESS 67
►STRATEGIC PETROLEUM RESERVE (SPR) 53
► ZERO DEFECT ZERO EFFECT 68
►OPEN ACREAGE LICENSING POLICY (OALP) 54
►KABIL 68
►HYDROCARBON EXPLORATION AND LICENSING POLICY
(HELP) 54 ►CCI GREEN CHANNEL 69
iv
►NATIONAL FINANCIAL REPORTING AUTHORITY 69 ►PRICE STABILISATION FUND 83

►SCHEME FOR INCUBATION IN APPAREL MANUFACTURING ►KRISHI KISAN APP 84
(SIAM) 69 ►OILSEED PRODUCTION 84
►CONTRACT MANUFACTURING 69 ►NATIONAL MISSION ON EDIBLE OIL 84
►TRADITIONAL KNOWLEDGE DIGITAL LIBRARY (TKDL) 69
►NATIONAL COOPERATIVE DEVELOPMENT CORPORATION
85
INFRASTRUCTURE RELATED 70
►REFINED OIL PALM IN RESERVED CATEGORY OF IMPORTS
►NATIONAL INFRASTRUCTURE PIPELINE 70 85
►CENTRAL ROAD AND INFRASTRUCTURE FUND, 2000 70 ►KCC SCHEME 85
►REGIONAL AIR CONNECTIVITY- UDAN 70 ►NATIONAL RUBBER POLICY, 2019 86
►VADHAWAN PORT 70 ►BIS CERTIFICATION ON PASHMINA 86
►BALTIC DRY INDEX (BDI) 70 ►NATIONAL AGRICULTURAL HIGHER EDUCATION PROJECT
►NATIONAL COMMON MOBILITY CARD (NCMC) 72 (NAHEP) 86
►3rd GLOBAL MINISTERIAL CONFERENCE ON ROAD SAFETY ►SMALL FARMERS’ AGRI-BUSINESS CONSORTIUM (SFAC)
72 87
►NATIONAL ELECTRONIC TOLL COLLECTION PROGRAM – ►e-NAM 87

FASTAG 72 ►NATIONAL ANIMAL DISEASE CONTROL PROGRAMME
►TOLL OPERATE TRANSFER MODEL BY NHAI 73 (NADCP) 88
►HORTICULTURE 88
►AGMARK 88
SECTION 7
Agriculture SECTION 8
74 International Organisation
►RAINBOW REVOLUTION IN AGRICULTURE 74
►MINIMUM SUPPORT PRICE (MSP) 74
90
►MSP EXTENDED TO MINOR FOREST PRODUCE 75 ►SUSTAINABLE DEVELOPMENT GOALS 90
►FARMERS PRODUCER ORGANISATION (FPOS) 75 ►WORLD BANK 91
►BEEKEEPING DEVELOPMENT COMMITTEE REPORT 76 ►WTO AND ITS REFORMS 92
►NATIONAL BEE BOARD 76 ►SPECIAL AND DIFFERENTIAL PROVISIONS 93
►APIARY ON WHEELS 76 ►INFORMATION TECHNOLOGY AGREEMENT (ITA) 94
►HONEY MISSION 77 ►WTO’S AGREEMENT ON SUBSIDIES AND COUNTERVAILING

MEASURES (SCM AGREEMENT) 95
►HONEY AND NORTH EAST 77
►WTO CRITERIA FOR DEVELOPING COUNTRIES 96
►TRADEMARK PROTECTION OF KHADI 77
►GENERALISED SYSTEM OF PREFERENCES (GSP) 96
►PPVFR ACT, 2001 77
►INTERNATIONAL MONETARY FUND (IMF) 97
►SUGAR SECTOR 78
►IMF- QUOTA, SDR AND REFORMS 97
►AGRI EXPORT POLICY 78
►GEOGRAPHICAL INDICATION (GI) TAG 98
►COMPARISON OF INCOME SUPPORT SCHEMES- PM-KISAN
VS KALIA VS RYUTHUBANDHU 79 ►KIMBERLEY PROCESS 98
►ZERO BUDGET NATURAL FARMING 80 ►WORLD GOLD COUNCIL 98
►GREEN-AG PROJECT 80 ►WIPO 99
►LIVESTOCK CENSUS 81 ►WIPO TREATIES 99
►NABVENTURES 82
►MARKET INTERVENTION SCHEME 83
►INDIA INNOVATION INDEX 104

SECTION 9 ►WORLD INTELLECTUAL PROPERTY INDICATORS REPORT
104
Committees / Reports / Indices ►GLOBAL FOOD SECURITY INDEX 104
►GLOBAL UNICORN LIST 105
101 ►SARAL: STATE ROOFTOP SOLAR ATTRACTIVENESS INDEX

105
►HUMAN DEVELOPMENT INDEX (HDI) 101 ►TRAVEL AND TOURISM COMPETTIVENESS REPORT 105
►HUMAN CAPITAL INDEX 101 ►ENERGY TRANSITION INDEX 105
►PROGRAM FOR INTERNATIONAL STUDENT ASSESSMENT ►GLOBAL GENDER NORMS INDEX 105
(PISA) 102
►ASIA COMPETITIVENESS INSTITUTE’S (ACI) EDB INDEX 105
►FUTURE OF WORK REPORT 102
►MULTIDIMENSIONAL POVERTY INDEX (MPI) 106
►GLOBAL REPORT ON FOOD CRISIS 102
►LIST OF IMPORTANT REPORTS 106
►SPECIAL 301 REPORT 102
►COMMITTEES 107
►GROSS DOMESTIC KNOWLEDGE PRODUCT 102
►GLOBAL ECONOMIC POLICY UNCERTAINTY INDEX 103
►WORLD ECONOMIC SITUATION AND PROSPECT REPORT
103
SECTION 10
►SERVICE TRADE RESTRICTIVE INDEX 103
►DIGITAL SERVICES TRADE RESTRICTIVENESS INDEX 103
MCQ’S & answer key
►LOGISTICS EASE ACROSS DIFFERENT STATES (LEADS
INDEX) 104 108-120
►GLOBAL COMPETITIVENESS INDEX 104
►EASE OF LIVING INDEX 104
►MUNICIPAL PERFORMANCE INDEX 104
NOTE
PRELIMS COMPASS 2020 BOOKLET ON BUDGET AND ECONOMIC SURVEY
It will cover, besides the summary of budget and economic survey, topics like Fiscal Policy, Wealth Creation, Ease of
Doing Business Index, Recent Changes in Corporate Tax, Thalinomics, trends of Macroeconomic indicators, etc.
vi
SECTION 1
ANKING
LIQUIDITY
INDIAN BANKING • Assets which are universally acceptable and thus easily
SYSTEM
exchangeable. Eg: Cash
►FUNCTIONS OF MONEY ►BEHAVIOUR OF MONEY

• Medium of Exchange MONEY SUPPLY AND GENERAL PRICE LEVEL:
• Unit of Account: National incomes are usually Rise in money supply → increase in aggregate demand → prices
represented in terms of monetary value will increase
MONEY SUPPLY AND INTEREST RATES:
►MONEY CIRCULATION Increase in money supply → More money in circulation → People

are investing less in bonds → Decrease in bond price → interest
TOTAL STOCK OF MONEY
rates will increase.
• Total money with users and producers of money in an
economy
►MONETARY AGGREGATES
• Includes money with public and held in banks, central
bank and government. • Measures of money supply released by the RBI in
decreasing order of liquidity
CONSTITUENT OF TOTAL STOCK OF MONEY
• The measures of money supply based on the
I. Currency: printed by RBI
recommendations of YV Reddy’s Working Group on
II. Coins: issued by Government and
Money Supply (1998):
III. Demand Deposits: Demand deposits are balance in
o M0 (Reserve money/monetary base) = Currency in
savings or current account deposits as they are payable
circulation+ banker’s deposits with RBI+ other deposits
by the bank on demand.
with RBI
MONEY SUPPLY
o M1 = Currency with the public+ Demand deposits with
Total stock of money that is in circulation at a given point of the banking system+ Other deposits with RBI
time in the economy and thus is held with public and is in
o M2 = M1+ Saving deposits of Post Offices
usable form
o M3 = M1+Time deposits with the banking system
CURRENCY IN CIRCULATION
o M4 = M3+All deposits with Post Offices (excluding
Includes currency and coins with the public and cash in hand
National Saving Certificates)
with banks
RAU’S IAS FOCUS SPECIAL EDITIONS | PRELIMS COMPASS (C3 CURATION) for CSE 2020
1
BANKING
►TYPES OF MONEY • All banking activities in India are regulated under Banking
Regulation Act, 1949.
FIAT MONEY/LEGAL TENDER
• The banking structure in India is broadly organised as
• Currencies and coins that carry the guarantee of RBI and
scheduled and non-scheduled banks.
government respectively are called ‘fiat money’ or legal
SCHEDULED BANK
tender as they cannot be refused by anyone in
transactions. • Banks included in the second schedule of the Reserve
Bank of India Act, 1934.
NOTE: Cheques/Demand Drafts (Demand Deposits) are
not fiat money. • Must be financially and economically sound and satisfy the
following three conditions:
RESERVE MONEY/ CENTRAL BANK MONEY/ HIGH-
POWERED MONEY I. Paid-up capital and reserve of an aggregate value of not
less than Rs. 5 lakhs. (Currently Rs 500 Crore)
• Includes currency in circulation, deposits that banks keep
with RBI and other deposits with RBI. II. It should work in the interest of its depositors.
• Since it is mostly currency in circulation reserve money III. It must be a joint stock company and not a sole trader
determines the level of liquidity and the general price level or partnership firm.
in the economy. • Entitled to borrow from RBI for banking purposes.
• Also called high-powered money or monetary base or • It has to maintain cash reserves with RBI.
central bank money as it represents the total liability of the NON-SCHEDULED BANK
RBI.
• Banks not included in the second schedule of the RBI Act,
NARROW MONEY AND BROAD MONEY 1934.
Defined on the basis of level of their liquidity • It is subject to the statutory reserve requirements which it
• Narrow money is most liquid and includes currency with is required to keep with itself and not with RBI.
public and demand deposits in the banks and post offices. • Not entitled to concessional and borrowing facilities from
• Broad Money refers to the money supply whose liquidity the RBI.
extends from currency to time deposits with the banking Scheduled Banks are further divided into Scheduled
system. Commercial Banks and Scheduled Cooperative Banks.
HOT MONEY
Short-term cross border flows that enter the country to get a ►SCHEDULED COMMERCIAL BANKS
higher rate of return Eg: Foreign portfolio investment
• Bank that is formed with primary aim to earn profit from
MONEY MULTIPLIER the banking business.
• After keeping aside the reserve requirements, banks lend • They account for a major proportion of the business of the
the money received out of deposits. A part of this money is
scheduled banks in India.
further deposited in the banking system after changing
• Categorized into the five groups based on their ownership
multiple hands in the economy. A part of this deposit is
and their nature of operations.
further used for lending. https://t.me/UPSC_PDF
1. Public Sector Banks: Majority stake is held by the
• This cycle of lending and depositing creates additional
Government of India. https://t.me/UPSC_PDF
money in the economy. The additional money created is
calculated by a term called money multiplier. 2. Private Sector Banks: Majority of share capital of the
bank is held by private individuals.
• Thus money multiplier tells us by how many times an
initial loan will be “multiplied” as it is spent in the economy • New Licencing Norms for Private Sector Banks
and then re-deposited in other banks. • Minimum paid-Up capital: Rs. 500 cr, of which promoter
• Money multiplier = 1/r (where r = reserve ratio) should have at least 51% share.
• Eligibility: Indian residents with atleast 10 years of
experience in banking and finance at a senior level.
►ORGANISATION OF BANKING IN
• Large industrial houses are not eligible but are permitted
INDIA
to invest upto 10%.
• RBI is the regulatory authority for banking in India.
• Foreign shareholding: Currently, maximum foreign
• Established under the RBI, Act 1934. shareholding limit including (FDI, FII, and NRI) is 74% of
2
BANKING
paid-up capital in private sector banks. 49% foreign DIFFERENCE BETWEEN BANKS AND NBFCs
investment is allowed under the automatic route.
CHARACTERISTIC BANK NBFC
• At least 25% branches should be in unbanked rural areas Accepts all
Cannot accept
• Priority Sector Lending - 40% of total adjusted net bank Deposits types of
demand deposits
credit. deposits
3. Foreign Banks: Banks, registered and headquartered in a Applicable

Deposit insurance
(upto Rs.5 Non Applicable
foreign country, and operate their branches in India. Eg: of DICGC
lakh)
HSBC, Citibank, Standard Chartered Bank.
Payment and Supports
4. Regional Rural Banks Settlement RTGS, NEFT Not supported
• Established under RRB Act, 1976 to ensure institutional system of the RBI etc.,
credit for agriculture and other rural sectors. Foreign
Upto 74% Upto 100%
• The area of operation of RRBs is limited to the area as investment
notified by GoI covering one or more districts in the State. Cash Reserve
Applicable Not Applicable
Requirement
• Jointly owned by Central government (50%) , the respective
Applicable only to
state government (15%) and sponsor bank (35%)
Deposit-taking NBFCs
Capital Adequacy
Applicable and Systematically
Norms
►SCHEDULED COOPERATIVE BANKS Important NBFCs
(CRAR - 15%)
• Financial institutions are owned and run by their
Applicable only to
customers.
SLR Applicable Deposit-taking NBFCs
• Operate on the principle of one person one vote. (SLR - 15%)
• Dual Regulation: Governed by both banking and Incorporated under
cooperative legislation, as they are registered under the Companies Act and
Cooperative Society Act, 1965 and regulated by NABARD & Banking regulated by various
Incorporated
RBI. Regulation bodies depending on
under
Act category (Refer
• The members are the owners and customers of the bank
regulation of various
at the same time. NBFCs on page 4)
• They work on no-profit no-loss basis.
TYPES OF NBFC
• Services offered: Accept deposits, granting loans to
On the basis of deposits
members and non-members, savings and current account,
NBFC-D
safe keeping of valuables (locker facility), mortgage facility
to the customers. • Deposit accepting NBFC
• Co-operative banks in India are categorised into following • Incorporated under Companies act, 2013
main 5 categories: • Allowed to accept/renew public deposits for a minimum
o Primary Urban Co-op Banks period of 12 months and maximum period of 60 months.
o Primary Agricultural Credit Societies • Examples: Loan companies, Investment companies, Asset
Finance Companies
o District Central Co-op Banks
NBFC-ND
o State Co-operative Banks
• Non-Deposit taking NBFC’s
o Land Development Banks
• Permitted only to lend and not take any public deposits.
• Eg: NBFC-MFI: NBFC Micro Finance Institutions
►NON-BANKING FINANCIAL COMPANY
CATEGORIES OF NBFCS
(NBFC)
Asset Finance Company
• Financial institutions engaged in non-banking activities like
• Principal business is financing physical assets such as
leasing, microfinance, chit fund, gold loan etc.
automobiles, tractors, housing etc.
• Besides company whose principal business is receiving
Investment Company
deposits also constitute NBFC.
• Principal business is acquisition of securities.
3
BANKING
Loan Company • Can offer payments and remittance services, issue prepaid
• Principal business of providing loans payment instruments, internet banking etc.
Infrastructure Finance Company • Cannot issue loans or credit cards.
• NBFC that deploys at least 75% of its total assets in STATUTORY REQUIREMENTS FOR PAYMENTS BANK
infrastructure loans • Capital requirement: The minimum paid-up equity capital
Infrastructure Debt Fund for payments banks is Rs. 100 crores.
• NBFC to facilitate the flow of long term debt into • Leverage ratio: The payments bank should have a
infrastructure projects leverage ratio of not less than 3%, i.e., its outside liabilities
should not exceed 33.33 times its net worth (paid-up
NBFC-MFI
capital and reserves).
• Provides Microfinance
• Promoter’s contribution: The promoter’s minimum initial
REGULATION OF NBFCS
contribution to the paid-up equity capital of such
• Different categories of NBFCs are regulated by different payments bank shall at least be 40% for the first five years
regulators from the commencement of its business.
• Most NBFCs are regulated by RBI, however not all. • Foreign shareholding: As per the Foreign Direct
• Venture Capital Fund/Merchant Banking companies/Stock Investment (FDI) policy for private sector banks (74%
broking companies are registered with SEBI. maximum and 49% under automatic route)
• The Insurance Companies are regulated by IRDA • Reserve Requirements
• Chit Fund Companies are regulated by the respective State ο Cash Reserve Ratio (CRR) as per RBI rate
Governments ο Required to invest minimum 75% of its “demand
• Nidhi Companies are regulated by Ministry of Corporate deposit balances” in Statutory Liquidity Ratio(SLR)
Affairs, Government of India eligible Government securities/treasury bills with
maturity up to one year and hold maximum 25% in
current and time/fixed deposits with other scheduled
►DIFFERENTIATED BANKS
commercial banks for operational purposes and
• Banking institutions licensed by the RBI to provide specific liquidity management.
banking services and products.
• A differentiated license will allow a bank to offer products ►INDIA POST PAYMENTS BANK (IPPB)
only in select areas.
• Public sector company under the department of posts,
• Main aim is to promote financial inclusion and payments.
Ministry of communication with 100% equity of the
• Differentiated banks licensing was launched in 2015. government of India, and regulated by the Reserve Bank of
• The differentiated banks are of two types namely payment India (RBI).
banks and small finance banks. • Instead of Debit cards, IPPB issues Quick Response (QR)
PAYMENT BANKS cards.
Introduction: • It provides a unique, secure and convenient way to access
• Primarily for facilitating payments and remittance flows. one’s account without the need to remember
PIN/Password.
• Set up based on the recommendation of NachiketMor
Committee. • A transaction can be initiated by scanning the QR code
followed by OTP authentication and verification by an OVD
SERVICES
(Officially Valid Document).
• It can accept demand deposits only, savings and current
accounts, and not time deposits like Fixed Deposit.
►SMALL FINANCE BANKS
• Maximum balance an individual customer can have in
Payment Bank is Rs. 1,00,000 Differentiated banks aimed at providing basic banking
services to unserved and underserved sections including
• Cannot accept Non-Resident Indian (NRI) deposits.
unorganised sector, small business units, small and marginal
• Cannot set up subsidiaries to undertake non-banking
farmers, micro and small industries and unorganised sector
financial services activities.
entities.
4
BANKING
SERVICES • Development banks for agriculture include National Bank
• Accept small deposits for Agriculture and Rural Development (NABARD), Land
development banks at district level.
• Disburse loans
• Maximum loan size would be 10% of capital funds to single
borrower, 15% to a group. ►NATIONAL BANK FOR AGRICULTURE
• Minimum 50% of loans should be up to 25 lakhs. AND RURAL DEVELOPMENT (NABARD)
• Priority Sector Lending - 75% of total adjusted net bank • NABARD is an apex development bank which provides
credit. help for agricultural and rural development.
• Distribute mutual funds, insurance products • Functions
WHAT THEY CANNOT DO? • Centre of the rural credit system
• Cannot lend to big corporates and groups. • Provider of supplemental funding to rural credit
• Cannot open branches with prior RBI approval for first five institutions
years. • Provides refinance facilities to SLDBs, SCBs, RRBs and
• Cannot set up subsidiaries to undertake non-banking commercial banks for developmental purposes
financial services activities. • Arranges investment credit to small industries, village and
• Cannot be a business correspondent of any bank. cottage industries, handicrafts, and other rural crafts,
artisans, and farmers.
CRITERIA
• RBI has divested its share in NABARD in two phases, one in
• Minimum paid-up capital would be Rs 200 cr.(earlier
2010 and one recently in April 2019. With this the central
Rs.100 Cr)
government now holds 100% stake in NABARD.
• Promoter should hold a minimum of 40% of the paid-up
voting equity capital for five years and should be brought
down to 30% within 10 years and 15% in 15 years. ►NATIONAL HOUSING BANK
• SFBs should be listed within three years of reaching a net • Established under National Housing Policy, 1987
worth of ₹500 crore. • Apex financial institution in the housing sector.
• Capital adequacy ratio should be 15% of risk weighted • Previously, it was a wholly owned subsidiary of RBI
assets, Tier-I should be 7.5%. • In 2019, RBI divested its stake in NHB and thus currently
• Foreign shareholding capped at 74% of paid capital. central government holds 100% stake in NHB.
• Existing Urban co-operative banks and Payment Banks can • It aims at extending financial assistance to housing sector
convert into small finance banks if they meet the criteria. by way of both refinance and direct finance.
►DEVELOPMENT BANKS IN INDIA ► LAND DEVELOPMENT BANKS

• Financial institutions that provide medium term and long- • Meant to provide long term agriculture needs of
term credit at low interest rates. agriculturists for a period ranging from 5 to 25 years, for
• Aimed at promoting long-term investments with social the following purposes:
benefits such as infrastructure, irrigation, mining, heavy i. to make improvements on the land;
industry, agriculture etc. ii. to repay old debts;
• Unlike commercial banks, they do not seek or accept iii. to free the mortaged land; and
deposits.
iv. to buy new land.
• Eg: Development banks for industry include the Industrial
Development Bank of India (IDBI), Industrial Finance
Corporation of India (IFCI), Small Industries Development
►MICRO UNITS DEVELOPMENT AND
Bank of India (SIDBI) for small-scale industries, MUDRA for REFINANCE AGENCY (MUDRA)
refinancing the micro-finance institutions and non-
• Set up as a refinance agency for developing and
banking financial institutions that provide credit to MSMEs.
refinancing all micro-enterprises engaged in
manufacturing, trading and service activities.
5
BANKING
• Aims to provide financial support to those banks and o promote development and
micro finance institutions which are engaged in lending to maintenance of foreign exchange
the micro-enterprises. market in India.
• The lending target under the scheme was Rs 2.44 lakh • RBI has the sole right to issue
crore as per Union Budget 2017-18 with priority being currency notes in India.
assigned to dalits, tribals, backward classes and women. • Besides exchanges and destroys
Issuer of currency and coins not fit for
• It has been set up as a subsidiary of SIDBI.
currency circulation.
• Gives loans up to Rs 10 lakh while loans of higher amount
• Objective: to give the public
is given by SIDBI.
adequate quantity of supplies of
• Mudra Loans are available for non-agricultural activities currency notes and coins and in
upto Rs. 10 lakh and activities allied to agriculture such as good quality.
Dairy, Poultry, Bee Keeping etc, are also covered.
Developmental • Financial literacy and financial
• Mudra issues a Mudra Card which permits access to
role inclusion
Working Capital through ATMs and Card Machines.
THERE ARE THREE TYPES OF LOANS UNDER PM MUDRA • The Payment and Settlement
Systems Act, 2007 and the Payment
YOJANA:
and Settlement Systems Regulations,
1. Shishu (up to Rs.50,000) 2008 entrust the responsibility of
2. Kishore (from Rs.50,001 to Rs.5 lakh) oversight of payment and settlement
Oversight of
system to RBI.
3. Tarun (from Rs.500,001 to Rs.10,00,000) Payment and
• The Board for Regulation and
Settlement
Supervision of Payment and
System
►RESERVE BANK OF INDIA (RBI) AND Settlement Systems , a sub-
committee of the Central Board of
FUNCTIONS
the Reserve Bank of India is the
Established as per the provisions of Reserve Bank of India Act highest policy making body on
1934. payment systems in India.
MAIN FUNCTIONS OF RBI • Banker to the Government:
performs merchant banking function
ROLE DESCRIPTION
for the central and the state
• Formulates implements and governments; also manages public
monitors the monetary policy. Other functions debt under Government Securities
Monetary
• Objective: Maintaining price stability Act, 2006.
Authority
while keeping in mind the objective • Banker to banks: maintains
of growth. banking accounts of all scheduled
banks.
• Prescribes broad parameters of
banking operations within which the SOURCES OF INCOME AND EXPENDITURE OF RBI
country's banking and financial
system functions. INCOME EXPENDITURE
Regulator and • Functions Returns from foreign currency Printing of currency
supervisor of
o Regulation and supervision of assets
the financial
banks under Banking Regulation
system Interest on rupee-denominated Staff expenditure
Act 1949.
government bonds
o Regulation and supervision of
non-banking financial companies. Interest on overnight lending to Commission given to
o Protecting depositors' interest commercial banks commercial banks
• Manages the Foreign Exchange Management commission on Commission to

Manager of Management Act, 1999. handling the borrowings of central primary dealers
Foreign • Functions: and state governments
Exchange o facilitate external trade and
payment
6
BANKING
capital over what is actually required to face contingency
CURRENT ISSUES situations.
RELATED TO RBI • While the central banks across the world have a surplus
capital to the tune of 10-14% of their total assets, RBI
26.8% of its total assets as reserves.
►TRANSFER OF FUNDS BY RBI TO
• Accordingly a number of committees have recommended
CENTRAL GOVERNMENT appropriate level of reserves to be maintained by RBI.
• Section 47 of the RBI Act 1934 requires RBI to transfer the • Usha Thorat Committee: (2004): RBI should maintain 18%
profit it earns to the Central Government every year. of its total assets as reserves.
• However a part of RBI’s profit every year is used to make • Malegam Committee (2014): Should transfer all entire
provisioning for unforeseen circumstances. net profits annually to RBI.
• Accordingly RBI maintains reserves in the form of capital to BIMAL JALAN COMMITTEE ON ECF
cover various risks including market risk, operational risk,
• Appointed to review the ECF and decide on the optimum
credit risk and contingency risk.
surplus capital to be maintained by RBI
• 5 components of RBI’s capital reserve include
MAIN RECOMMENDATIONS
1. Contingency Fund: set apart for meeting the
• Level of Reserves: The surplus capital should be in the
unforeseen contingencies.
range of 20.8% to 25.4% of the total assets of the RBI. Thus
2. Asset Development Fund: To fund investments in the RBI transferred about 50000 crore of excess surplus
subsidiaries. capital this year in addition to its annual net profits of
3. Currency and Gold Revaluation Account: To cover about 1.2 Lakh Crore to the central government this year.
fluctuations in gold and currency assets that RBI holds. • Financial Stability Risk: Risk buffer of 5.5-6.5% should be
4. Investment Revaluation Account (IRA): To cover risks dedicated to situations like Global Financial Crisis of 2008.
associated with fluctuations of interest rates of • New Risk Framework: It recommended a new risk
government securities. framework including
5. Foreign Exchange Forward Contracts Valuation o Currency risks (since the RBI keeps huge volume of
Account: To cover risks related to foreign exchange foreign currency assets)
related forward contracts.
o Gold Price Risk (RBI has gold reserves)
ECONOMIC CAPITAL FRAMEWORK
o Interest rate risk (RBI holds government securities)
• Capital that the RBI requires to hold as a counter against
o Credit risk (bonds and loans to the commercial banks),
unforeseen risks or events or losses in the future is called
Operational risks (due to any potential operational
as the Economic Capital and is defined under Economic
problems)
Capital Framework.
o Monetary and Financial stability risks (due to
• Economic Capital Framework is a methodology for
weaknesses of the financial institutions like banks,
determining the appropriate level of risk provisions to
liquidity problems)
capital that is to be made under Section 47 of the Reserve
Bank of India Act.
RBI V/S GOVERNMENT: HOW MUCH RESERVE SHOULD BE
►RBI’S BANKING OMBUDSMAN
MAINTAINED?
• The surplus maintained by RBI has 2 components
SCHEME
1. Part of net profits every year • Introduced under the Banking Regulation Act in 1995.
2. Surplus already accumulated over the years • Quasi-judicial authority created to resolve customer
complaints against banks.
• While RBI has been keeping a substantial part of its net
profits as reserves till 2013, since 2014 RBI has been • Covers all types of banks.
transferring 100% of its net profit to the government since • The Ombudsman is a senior official appointed by RBI.
2014. • Customers can approach Banking Ombudsman for
REVIEW OF ECONOMIC CAPITAL FRAMEWORK grievance redressal in the following areas:
• It is argued that RBI has become the most capitalized o Non-payment/ delay in the payment or collection of
central bank in the world and has been stocking surplus cheques, drafts, bills etc.
7
BANKING
o Non-payment/delay in payment of inward remittances MEMBERS
o Failure/delay to issue drafts, pay orders or bankers’ Governor and not more
cheques Official Directors - Full time
than four Deputy
(not more than 5 years)
o Non-adherence to prescribed working hours Governors.
o Refusal to open deposit accounts without any valid Nominated directors: 10
reason directors from various
Non-Official directors (not
o Levying of charges without adequate prior notice to the fields and two
more than 4 years)
customer government officials
o Refusal/delay in closing the accounts (hold office indefinitely)
o Non-observance of RBI guidelines on engagement of Four directors, one each

Others
recovery agents by banks from four local boards
o In 2018, mis-selling of 3rd party products like insurance
was added under the purview of Banking Ombudsman
►RBI GOVERNOR
OMBUDSMAN SCHEME FOR NON-BANKING FINANCIAL
• APPOINTMENT: Appointed after the proposal made by the
COMPANIES, 2018
Financial Sector Regulatory Appointments Search
Extended to redressal of complaints against NBFCs in 2018.
Committee (FSRASC), headed by the Cabinet Secretary.
NEW GUIDELINES: INTERNAL OMBUDSMAN
• TERM: According to Section 8 (4) of the RBI Act the
• RBI has tightened the banking ombudsman scheme with Governor and Deputy Governors shall hold office for such
the objective to strengthen the grievance redressal term not exceeding five years as the Central Government
mechanism for customers. may fix when appointing them.
• Internal Ombudsman: Commercial banks having 10 or • They are eligible for re-appointment.
more banking outlets should have an independent internal
• QUALIFICATION: The RBI Act does not provide for any
ombudsman (IO).
specific qualification for the governor.
FIXED TERM: 3-5 YEARS,
• REMOVAL: The governor can be removed by the central
• Removal: The IO can be removed only with prior approval government.
from RBI.
• Compensation limit: ►SECTION 7 OF RBI ACT, 1935
• Ombudsman redressal is allowed for complaints where
Section 7 of the RBI Act 1934 empowers the central
the compensation amount for any loss suffered by the
government to supersede the RBI Board and issue directions
complainant is limited to Rs 20 lakh.
to the RBI, after consulting the governor, if they are
• Additionally, maximum compensation of Rs 1 lakh for loss considered to be “necessary in public interest”.
of time and money, harassment and mental anguish
suffered by the complainant.
►MONETARY POLICY
• Refers to policy instruments under RBI aimed at regulating
►CENTRAL BOARD OF DIRECTORS,
interest rates, money supply and availability of credit in an
RBI economy.
• It is the highest decision making body inside the RBI. • RBI is vested with the responsibility of conducting
• The power of general superintendence and direction of the monetary policy under the RBI Act, 1934.
affairs and business of the RBI is entrusted to the Central MONETARY POLICY FRAMEWORK
Board under the RBI Act 1934. • About: Currently the monetary policy in India is
• The board is appointed by the Government of India in undertaken in accordance with the Monetary Policy
keeping with RBI, Act. Framework Agreement signed between GoI and the RBI in
• It consists of a maximum of 21 members who are 2015.
appointed/ nominated for a period of four years. • Objective: Accordingly the primary objective of monetary
policy is to maintain price stability while keeping in mind
the objective of growth.
8
BANKING
• Statutory status: In 2016, the RBI Act, 1934 was amended governor will have the second or casting vote. The decision
to give a statutory backing to Monetary Policy Framework of the committee would be binding on the RBI.
and to set up Monetary Policy Committee. MONETARY POLICY INSTRUMENTS
INFLATION TARGETING RBI has various quantitative as well as qualitative instruments
• The Monetary Policy Framework provides for inflation to execute the monetary policy targets set by the monetary
targeting to be set by GoI every 5 years. policy framework.
• GoI uses CPI for the purpose of inflation targeting in India.
• Flexible Inflation Targeting: In 2016, the RBI Act was ►NATIONAL STRATEGY FOR
amended to adopt flexible inflation targeting in India. FINANCIAL INCLUSION
• Accordingly the inflation target under Monetary Policy
• This strategy has been released by RBI. Financial Inclusion
Framework is Consumer Price Index (CPI) inflation of 4%
Advisory Committee of the RBI has drafted it. It will be
(+/- 2%) for the period from August 5, 2016 to March 31,
operational from 2019 to 2024.
2021.
• Strategic Pillars of National Strategy for Financial Inclusion:
1) Universal Access to Financial Services
►MONETARY POLICY COMMITTEE
2) Providing Basic Bouquet of Financial Services
(MPC)
3) Access to Livelihood and Skill Development
• Monetary Policy Committee was constituted in 2016 as a
4) Financial Literacy and Education
statutory body under the RBI Act in order to formulate
monetary policy in India 5) Customer Protection and Grievance Redressal
6) Effective Co-ordination
• MPC is entrusted with the responsibility of fixing the
benchmark policy rate (repo rate) required to contain • Ministry of finance is preparing an index of financial
inflation as defined in the Monetary Policy Framework inclusion.
Agreement.
COMPOSITION ►FINANCIAL INCLUSION INDEX
• Monetary Policy Committe is 6-member body including 3 It was launched by the Minister of Finance. The single
members from RBI and 3 members to be appointed by the composite index gives a snap shot of level of financial
Central Government. inclusion that would guide Macro Policy perspective.
• The members include DETAILS
o RBI Governor - ex-officio chairperson • It will measure access and usage of a basket of formal
o RBI Deputy Governor financial products and services that includes savings,
o One more member from RBI to be nominated by the remittances, credit, insurance and pension products.
Central Board of Directors. • It would rate states on their performance on last-mile
o 3 other members are be appointed by the Central banking services availability.
Government. • The index will have three measurement dimensions, viz. (i)
TERM access to financial services; (ii) usage of financial
services; and (iii) the quality of the products and the
• Members of MPC hold office for a period of four years and
service delivery.
are not eligible for re-appointment.
• These are also the G20 Financial Inclusion Indicators.
• Central Government has the power to remove any of its
nominated members from MPC.
FUNCTIONS
►GLOBAL PARTNERSHIP FOR
• The MPC is required to meet at least four times in a year. FINANCIAL INCLUSION (GPFI)
• The quorum for the meeting of the MPC is 4 members. It is an inclusive platform for all G20 countries, interested
• The MPC determines the policy repo rate required to non-G20 countries and relevant stakeholders to carry
achieve the inflation target. forward work on financial inclusion, including
implementation of G20 Financial Inclusion Action Plan,
• The MPC takes decision based on majority vote (by those
endorsed at the G20 Summit in Seoul (2010).
who are present and voting. In case of a tie, the RBI
9
BANKING
QUANTITATIVE INSTRUMENTS repo rates decided through auctions. This instrument can
be overnight or for a term.
►REPO RATE • If variable rate repo auction is undertaken for one day it is
• Repo rate (rate of repurchase) refers to the interest rate at called overnight repo auction.
which the RBI provides short-term liquidity to banks • If it is undertaken for a term it is called term repo.
against the collateral of government securities. • Term Repos: There are different types of term repos
• Increase in repo rate → borrowing from RBI expensive → depending upon the maturity period. Some of the term
banks will borrow less from RBI → less credit will be provided repos include 7-day, 14-day, 21 day, 28-day, 56-day.
by banks to households → money supply will decrease. • Interest rate on the Term repos is determined through
• Decrease in Repo Rate→Borrowing from RBI is auction and hence is usually higher than the Repo rate.
cheaper→Banks will borrow more→More credit is OBJECTIVE
available→Money supply will increase
• Developing the inter-bank term money market and
influence market based benchmarks for pricing of loans
►REVERSE REPO RATE and deposits.
• Reverse repo rate is the rate at which the RBI borrows • Thus term repo helps in improving monetary policy
money from commercial banks against collateral of eligible transmission.
government securities.
• An increase in reverse repo rate means that commercial banks ►LONG TERM REPO OPERATIONS
will get more incentives to park their funds with the RBI,
(LTRO)
thereby decreasing the supply of money in the market.
• New policy tool used by the RBI to inject more liquidity into
• A decrease in reverse repo rate means that commercial banks
the Economy.
will get less incentive to park their funds with RBI and thus
• Similar to the term repos, but with a longer maturity
more moneyis available in the market increasing the money
period of 1 year and 3 years.
supply.
• Through the LTRO, the RBI seeks to inject long term
liquidity into the economy at a lower interest rate.
►LIQUIDITY ADJUSTMENT FACILITY
BASIC FEATURES
• Monetary policy instrument that the RBI uses in order to
• Total Funds to be injected: Up to Rs 1 Lakh crores.
influence the liquidity conditions in the market in the short
• Interest Rate: Repo Rate.
term.
• Method of Operations: The LTROs would be carried out
• Under the LAF window, the RBI uses various instruments
through e-Kuber
to inject or absorb liquidity to or from the market
• Note: e-Kuber is the Core Banking Solution of the RBI
respectively.
which enables each bank to connect their single current
• Repo and reverse repo rates are a part of RBI’s “Liquidity account across the country.
Adjustment Facility (LAF)”.
OBJECTIVE
• Depending upon the maturity period of the loans, there
• To inject liquidity into the economy.
are different types of Repos in India. These are:
• Reduce rate of Interest on the long-term loans.
OVERNIGHT REPO AUCTIONS
• Incentivise the Banks to reduce their overall lending rates
• Under overnight fixed repo operations the banks can and improve the monetary policy transmission
borrow/park liquidity for one day from RBI at interest rate
NOTE: Repo Rate is always higher than Reverse Repo Rate.
equal to repo rate/reverse repo rate pledging the
government security that the banks have over and above
the SLR (Statutory Liquidity Ratio) requirement. If the ►MARGINAL STANDING FACILITY
banks do not possess government securities beyond the
(MSF)
SLR requirement, it cannot borrow money under the LAF
window. • Liquidity management window under which banks can
borrow additional overnight liquidity over and above LAF
VARIABLE REPO AUCTIONS:
window.
• In 2013, RBI has introduced variable rate repo auctions
under which banks can borrow/park money at variable
10
BANKING
• Introduced to deal with unforeseen liquidity crunch RESERVE RATIOS
because under LAF banks can borrow overnight liquidity
Cash Reserve Ratio 4%
only by pledging securities over and above the securities
held under SLR requirement. Statutory liquidity ratio 18.5%
• Under MSF, on the other hand, banks can pledge securities
held for SLR purposes. However the rate of interest is
►QUALITATIVE INSTRUMENTS
higher than the repo rate. (penal rate)
• Margin requirements
• Qualitative tool used by the RBI in order to regulate the
►BANK RATE
credit flow to a particular sector.
• Rate at which RBI provides long-term borrowings to its
• When a bank advances credit to its customers it does so
clients. Its clients include GoI, state governments, banks,
against collateral. However there is a difference between
financial institutions, cooperative banks etc.
the value of the security and the loan offered. This
• An increase in bank rate will make borrowing from RBI difference is called ‘Margin’.
expensive→money supply will tend to decrease.
• The margin requirements against specific securities are
determined by the Central Bank which will in turn
►CASH RESERVE RATIO (CRR) influence the flow of credit.
• CRR refers to the percentage of total deposits of a bank to • Consumer Credit Regulation
be kept with RBI in the form of cash. • RBI can issue rules to set the minimum/maximum level of
• An increase in CRR→higher proportion of deposits to be kept down-payments and periods of payments for purchase of
with RBI by banks→less funds are available to be provided as certain goods.
credit to the economy→money supply will decrease. • Guidelines: RBI issues oral, written statements, appeals,
guidelines, and warnings to the banks.
►STATUTORY LIQUIDITY RATIO (SLR) • Rationing of credit: Rationing of credit is a method by
• SLR refers to the percentage of total deposits of a bank to which the RBI seeks to limit the maximum amount of loans
be kept with itself in the form of liquid assets such as cash, and advances and, also in certain cases, fix ceiling for
gold and select government securities. specific categories of loans and advances.
• An increase in SLR→higher proportion of funds to be kept • Moral Suasion: Is a milder form of credit control in which
aside by banks in liquid form→less funds available to be the RBI can pursuade the the commercial banks to co-
provided as credit to the economy→money supply will operate with the general monetary policy. Since it involves
decrease. no administrative compulsion or threats of punitive action
it is a psychological and informal means of selective credit
control.
►OPEN MARKET OPERATIONS (OMO)
• Direct Action: This step is taken by the RBI against banks
• OMO refers to sale and purchase of government securities that don’t fulfill conditions and requirements. RBI may
by RBI in the open market with the aim of influencing refuse to rediscount their papers or may give excess
liquidity in the economy in the medium term. credits or charge a penal rate of interest over and above
• Open market purchase by RBI→RBI will release liquidity in the the Bank rate, for credit demanded beyond a limit.
economy→ money supply will increase.
►UNCONVENTIONAL MONETARY
►LATEST RBI BANK RATES IN INDIAN POLICY INSTRUMENTS
BANKING – AS OF 6 FEBRUARY 2020 • In the backdrop of recent economic slowdown, various
POLICY RATES central banks across the world are adopting
unconventional monetary policies to revive growth in their
Repo Rate 5.15% respective countries.
Reverse Repo Rate 4.9% • Different types of unconventional monetary policies
include
MSF 5.4%
ZERO INTEREST RATE POLICY (ZIRP)
Bank Rate 5.4%
• Popularly called as ‘Quantitative Easing’.
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BANKING
• This policy was adopted by USA from 2008 in the wake of • In 2016 RBI introduced the concept of MCLR in order to
financial crisis to inject money into the economy. ensure monetary policy transmission.
• Under this policy, the Fed Bank provids loans to the banks • Under MCLR the banks use the marginal cost for obtaining
at low interest rates (0.25%) to spur investment level in the funds to set their lending rates.
economy. • Marginal cost includes cost that the banks incur to obtain
NEGATIVE INTEREST RATE POLICY (NIRP) fund like in case of deposit from customers or at repo rate
• Under the NIRP, the banks would be required to pay from RBI.
interest to the central bank if they park their surplus • MCLR has replaced base rate system of fixing interest
reserves. rates.
• This encourages the banks to provide loans to the • The main reasons for implementing the MCLR system are
borrowers at cheaper rates instead of parking their ο to improve the transmission of monetary policy
surplus reserves with the Central Bank.
ο to bring transparency in the methodology of banks to
• This policy is usually followed in developed economies fix interest rates
such as Japan, Denmark, Sweden, Switzerland etc
ο to ensure that bank credit is available at interest rates
HELICOPTER MONEY which are fair to both borrowers and lenders.
• It is a hypothetical concept put forward by the economist, • Currently it is an internal benchmark or reference rate for
Milton Friedman. the bank.
• This involves the central bank of the country printing
currency notes and distributing it to the people free of
►EXTERNAL BENCHMARKING OF
cost. The idea here is to promote demand in the economy
during recession. INTEREST RATES
• Under the new system which will come into effect from
►MONETARY POLICY TRANSMISSION April 1, 2019, banks will have to link their lending rates
with an external benchmark instead of MCLR.
Monetary policy transmission is said to have occurred when
• The RBI has given these options to banks: RBI repo rate,
the changes in the policy rates (repo, reverse repo) will lead
the 91-day T-bill yield; the 182-day T-bill yield; or any
to corresponding change in the interest rates in retail sector.
other benchmark market interest rate produced by
(Housing, auto loans etc.)
the Financial Benchmarks India Pvt. Ltd.
INTEREST RATES AND MONETARY POLICY TRANSMISSION
PROBLEM WITH MCLR-BASED SYSTEM
• Subject to norms of the RBI, Banks in India are free to
• Due to internal benchmarking of loan, policy rate cuts
determine interest rates on the loans/deposits they extend
often don't reach the borrowers.
to their customers.
• It is opaque since it’s an internal benchmark that depends
• However banks publish the minimum interest rates they
on the way a bank does its business.
charge their best clientale.
BENEFITS
• The transparency of this minimum interest rate is
important in order to avoid problems of sub-prime • Better transmission of policy rate cuts.
lending, NPA and consequent instability of financial • It will make interest rate fixing more transparent
system. • Better benchmark for borrowers to compare loans offered
• This minimum interest rate is commonly called as prime by different banks
lending rate. However the problem with prime lending rate
was that it was not transparent. Hence the RBI introduced
►NON-PERFORMING ASSETS (NPA)
base rate in 2010 in order to effect interest rate
transmission and bring in uniformity in interest rates • A loan whose interest and/or instalment of principal has
among banks. remained 'overdue ' for a period of 90 days is considered
as NPA.
• Further in 2016, the RBI introduced Marginal cost of funds
based lending rate (MCLR) for setting of base rate by the • Banks are required to classify NPAs further into the three
banks. categories based on the period for which the asset has
remained non-performing:
• MCLR refers to the minimum interest rate of a bank below
which it cannot lend, except in some cases allowed by the (a) Sub-standard asset: Remained NPA for a period less
RBI. than or equal to 12 months.
12
BANKING
(b) Doubtful asset: If it has remained in the substandard FEATURES
category for a period of 12 months. • Deals with all aspects of insolvency and bankruptcy of all
(c) Loss assets: NPA identified by the bank or the RBI but kinds of companies, LLPs, Partnerships and Individuals;
the amount has not been written off. however it does not deal with insolvency of banks.
 Stressed assets = NPAs + restructured loans + written • Separation of commercial aspects from judicial aspects of
off assets insolvency and bankruptcy proceedings
 Restructured loans: those assets which got an extended • Moving away from the ‘debtor-in-possession’ regime to a
repayment period, reduced interest rate, converting a part ‘creditors-in-control’ regime
of the loan into equity, providing additional financing, or • Collective mechanism to resolve insolvency rather than
some combination of these measures. recovery of loan by a creditor;
 Written off assets: When the lender does not count that • Insolvency resolution in a time bound manner.
money, borrower owes to him, then the asset is called
PILLARS OF IBC
written off assets. However, it does not mean that the
• Insolvency professionals - who assist the stakeholders in
borrower is pardoned or exempted.
the insolvency process;
• Information utilities - who store and make valuable
►SPECIAL MENTION ACCOUNTS
information available required to carry out various
• It is a tool for early stress discovery of bank loans. transactions under the code;
• Introduced as a corrective action plan. • Adjudicating authorities - National Company Law
• Accordingly banks should identify potential stress in the Tribunal and Debt Recovery Tribunal; and
account by creating a new sub-asset category viz. ‘Special • Insolvency and Bankruptcy Board of India (for
Mention Accounts’ regulatory oversight).
In March 2016, RBI had notified a mechanism for resolving INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT)
stressed MSME loans of up to Rs 25 crore. ORDINANCE 2018
According to the stress level such loans are categorised into MAJOR CHANGES
three categories
1. Homebuyers as financial creditors
• SMA 0 ( Delay up to 30 Days)
• Homebuyers would be treated as financial creditors on
• SMA 1 ( Delay up to 31-60 Days) par with banks with the power to initiate insolvency
• SMA 2 ( Delay up to 61-90 Days) proceedings against errant builders.
NOTE: The loans still remain standard even in these • Homebuyers can be represented in the committee of
categories and turn bad only after a delay in payment of creditors (CoC).
more than 90 days. 2. Definition of a related party
The amendment now defines related party in relation to
an individual running the firm and they would be barred
STEPS UNDERTAKEN BY RBI from bidding for the firm under the resolution process.
FOR NPA RESOLUTION 3. Changes in voting share of committee of CoC

• The amendment has changed the voting share required
►INSOLVENCY AND BANKRUPTCY in CoC meetings.
CODE (IBC), 2016 • For extending the insolvency process beyond 180 days
• Set of laws for the resolution of failed t bankrupt till 270 days and for appointment of the resolution
entities/individuals. professional (who oversees the process), now a voting
share of 66% is sufficient, compared with earlier
• It provides clear, coherent and speedy process for early
requirement of 75%.
identification of financial distress and resolution of entities
if the underlying business is found to be viable. • All other decisions of the CoC can be taken with 51%
voting share against the earlier norm of 75%.
• It suggests two options – a restructuring if the firm is viable
and liquidation if it is not financially viable. • Withdrawal from the insolvency process is permitted
with the approval of 90% of voting share of the CoC.
13
BANKING
4. If a financial creditor is a related party • It will also include data from entities like market regulator
If a financial creditor is a related party it shall not have any SEBI, the Corporate Affairs Ministry, GSTN and the
participation or voting in CoC. Insolvency and Bankruptcy Board of India to enable
banks and financial institutions to get a 360-degree profile
5. Tenure of an insolvency resolution professional
of existing and prospective borrowers on a real-time basis.
As per the amendment, the tenure of the IRP would
BENEFITS
continue till the appointment of the resolution
professional (RP), compared with the earlier 30-day fixed • Credit assessment and credit pricing: Will help banks
tenure. distinguish between a bad and a good borrower and
accordingly offer attractive interest rates to good
borrowers and higher interest rates to bad borrowers.
► CROSS-BORDER INSOLVENCY
• It can also enable RBI in understanding whether monetary
The Insolvency Law Committee (ILC) constituted to transmission is working fully or not.
recommend amendments to Insolvency and Bankruptcy
• It can help banks and regulators in early intervention and
Code of India, 2016 recommended the adoption of the
effective restructuring of stressed bank credits.
UNCITRAL Model Law of Cross Border Insolvency, 1997.
• Current Existing Credit registries in India is highly
PRINCIPLES OF UNCITRAL MODEL LAW
fragmented
1. Direct access to foreign insolvency professionals and
1. Credit Information Companies
foreign creditors to participate in or commence domestic
insolvency proceedings against a defaulting debtor. • Regulated by RBI under the Credit Information
Companies (Regulation) Act, 2005
2. Recognition of foreign proceedings & provision of
remedies. • Eg: Trans Union CIBIL, Equifax, Experian, CRIF High Mark
Credit Information Services
3. Cooperation between domestic and foreign courts &
domestic and foreign insolvency practitioners. 2. Central Repository of Information on Large Credits
(CRILC)
4. Coordination between two or more concurrent insolvency
proceedings in different countries. The main proceeding is • Database on all borrowers’ entities with aggregate
determined by the concept of Centre of Main Interest exposure of Rs 5 crore and above
(COMI). • Set up by RBI in 2014-15.
ABOUT UNCITRAL • Captures about 60% of the entire bank credit and
• UN Commission on International Trade Law was around 80% of the non-performing loans of SCBs
established in 1966 as a subsidiary of the UN General 3. Information Utility
Assembly. • Stores financial information that helps to establish
• Activities of UNCITRAL: defaults as well as verify claims.
o Technical Legislative Assistance for modernization of • National e-Governance Services limited is India’s first
trade laws and commercial practices. Information Utility.
o CLOUT: Case law on UNCITRAL Tests is a collection of
court decisions and arbitral awards interpreting ►PROMPT CORRECTIVE ACTION (PCA)
UNCITRAL texts.
• Framework under which banks with weak financial metrics
o Focus areas: Dispute Resolution, Electronic Commerce, are put under watch by the RBI.
Insolvency, International Payments, Public procurement
• Under PCA RBI can place certain restrictions on banks such
and infrastructure development, Sale of goods,
as a cap on lending limit, halting branch expansion etc.
Transport of goods.
WHEN IS PCA INVOKED?
• RBI invokes PCA on those banks when three risk
►PUBLIC CREDIT REGISTRY (PCR)
thresholds are breached. These are based on:
• An extensive database of credit information that will
1. Asset quality (NNPA – net non-performing assets to
capture information pertaining to borrowers
advances ratio),
(individuals and corporate) including data about willful
2. Capital (CRAR – regulatory capital to risk weighted
defaulters and pending legal suits against them.
assets ratio and leverage ratio) and
3. Profitability (ROA – return on assets).
14
BANKING
• The PCA framework is applicable only to commercial • It would be largely based on the principles of an asset
banks. restructuring company (ARC).
►PROJECT SASHAKT
• 5-pronged strategy to resolve bad loans
BANKING REGULATION
• Project Sashakt was proposed by a panel led by PNB ►BASEL-III NORMS
chairman Sunil Mehta.
• Broad supervisory standards formulated by a group of
1. Small and Medium Enterprise (SME) resolution central banks known as the Basel Committee on banking
approach supervision (BCBS).
• Bad loans of up to ₹50 crore will be managed at the • The set of agreement by BCBS to manage risks of banks
bank level, with a deadline of 90 days. and financial system are called as the Basel Accord.
2. Bank-led resolution approach • Basel Accords primarily aims to ensure banks have
enough capital to meet their obligation to depositors
• For bad loans of ₹50-500 crore, banks will enter an inter-
and absorb unexpected losses.
creditor agreement, authorizing the lead bank to
implement a resolution plan in 180 days, or refer the asset • India has accepted Basel accords for the banking system.
to National Company Law Tribunal (NCLT). • Till now, the BCBS has announced 3 set of norms under
Basel Accord. The latest norms, Basel III were announced
3. AMC/AIF led resolution approach
in 2010.
• For bad loans above Rs.500 crores would be resolved
PILLARS OF BASEL III
through an independent asset management company
(AMC) which would be funded by alternative investment 1. Risks
fund (AIF). 2. Enhancing the role of banking regulators
4. NCLT/IBC approach 3. Disclosure norms for banks on a number of aspects
including capital adequacy, asset quality etc.
5. Asset-trading platform
RISKS UNDER BASES III
NOTE: Inter-creditor Agreement
Credit Risk, Market Risk and Operational Risks
• Banks, NBFCs and other lenders can join ICA.
• Lending parties will jointly appoint a lead lender, who will
act on behalf for entire group.
►CAPITAL ADEQUACY RATIO
• Capital Adequacy Ratio or Capital to Risky Asset Ratio is the
• Lead bank will take the proposal for resolution.
ratio of total capital to total risk weighted assets (factoring
• Applicable for all loans above Rs 50 crore.
in the risks given above)
• If 66% of the lenders in terms of aggregate exposure • It is the capital needed for a bank measured in terms of
approve, then the pact in binding on all the lenders. the assets (mostly loans) disbursed by the banks.
• Higher the assets, higher should be the capital by the
►PRIVATE ASSET RECONSTRUCTION bank.
COMPANIES (ARC) • According to BASEL III norms, the minimum total capital
requirement as a percentage of risk weighted assets fixed
• Private ARCs were introduced under the SARFAESI Act,
at 8%+2.5% (buffer) =10.5%.
2002 with the aim of reconstruction of stressed assets by
NOTE: Capital conservation buffer (CCB)
specialists in this field thus relieving banks of this task and
allowing them to focus on their core operations. • CCB is designed to ensure that banks build up capital
buffers during normal times (i.e. outside periods of stress)
• SARFAESI Act, 2002: The Securitisation and Reconstruction
which can be drawn down as losses are incurred during a
of Financial Assets and Enforcement of Security Interest
stressed period.
Act was framed to address the problems of NPAs by
• A CCB of 2.5% of risk weighted assets is also required to be
defining the procedures for transfer of assets to ARCs.
maintained
TYPES OF CAPITAL
►BAD BANK
For the purposes of CRAR, the capital of the banks is
• A specialised bank set up to buy bad loans of another bank classified as Tier 1 Capital and Tier 2 capital.
with significant non-performing assets at market price.
15
BANKING
TIER 1 CAPITAL • The main aims include
• Also called ‘Core Capital’ it majorly constitutes the o strengthen the banks’ balance sheets
investment by the owners of the bank. (Shareholders) o meet the provisioning requirements under Basel III
• Thus it majorly represents equity and disclosed reserves norms
TIER 2 CAPITAL o resolve NPAs
It represents “supplementary capital” such as undisclosed o revive the credit momentum of the economy
reserves, revaluation reserves, general loan-loss reserves,
• In 2017-18, the government announced a large bank
hybrid (debt/equity) capital instruments, and subordinated
recapitalization program under which Rs 2.1 lakh crores
debt of the financial institution. etc.
were to be infused into banks through 3 sources:
(a) Rs 18,000 crores from the budget;
►LEVERAGE RATIO
(b) Rs 58,000 crores that banks would raise from the
• Leverage ratio is the ratio of total core capital (Tier 1) to
market and
the total consolidated assets (loans) of the bank.
(c) issue of recapitalization bonds worth Rs 1.35 lakh
• It is primarily a measure of total indebtedness of a bank.
crores by the central government to PSBs against
• The ratio uses tier 1 capital to judge how leveraged a bank
equity shares.
is as Tier 1 capital are ones that can be easily liquidated if a
bank needs capital in the event of a financial crisis. • In December 2018, government announced additional Rs
41000 cores recaptialisation bond issue in the context of
• Thus it is a better measure of a bank's financial health.
shortfall in bank’s market borrowing and the rising need to
• According to Basel III, the LR is fixed at 3%. save banks from RBI’s PCA framework.
RECAPITALIZATION BONDS
►LIQUIDITY COVERAGE RATIO (LCR)
• Dedicated bonds to be issued at the behest of the
• It is the minimum required high-quality liquid assets government for recapitalizing the trouble hit PSBs.
(HQLA) that the banks must hold to allow them to survive a
• How do these work?
liquidity stress for 30 days.
o Government will issue bonds, which banks will
• It was introduced under Basel III to improve a bank’s short-
subscribe and enter it as investment in their books.
term resilience to liquidity shocks.
o The banks will lend money to the government for
• HQLA are assets that can be converted into cash quickly
with no significant loss of value. subscribing the bonds.
• Thus HQLAs include o This money raised by the government through these
bonds will go back to banks as capital.
o Cash outside the Cash Reserve Ratio requirement
o This will immediately strengthen the balance-sheet of
o Gold
the banks and show capital-adequacy.
o G-sec outside SLR requirement
o Since the government is always solvent, the money lent
o High-rated corporate bonds
to the government for subscribing recap bonds is free
FALLCR from becoming a bad loan.
• Facility to Avail Liquidity for LCR
• Impact on Fiscal deficit: Since the government is not
• If is the percentage of G-secs held under SLR that can be spending any money from its accounts, it does not have an
considered HQLA for LCR. immediate impact on fiscal deficit.
• Currently SLR is 18.25% out of which if 17% is kept as G-
Sec it can be considered HQLA for calculating LCR.
►INDRADHANUSH ROADMAP
• Under Indradhanush roadmap announced in 2015, the
government had announced to infuse Rs70,000 crore in
state-run banks over four years to clean up their balance
sheets and ensure they fully comply with Basel-III capital
►BANK RECAPITALIZATION PACKAGE adequacy norms.
• Involves fresh infusion of capital into the banks through • The seven pronged strategy under Indradhanush is as
various sources such as budgetary sources, issue of bonds, follows:
raising capital through market sources etc.
16
BANKING
1. Appointment - A new approach to top-level • Nodal ministry: Urban Component implemented by the
appointments (allowing entry of talent from outside) Ministry of Housing and Urban Poverty Alleviation
2. Bank Board Bureau- Constitution of BBB for FEATURES
appointment of whole-time Directors as well as non-
• Employment through Skill Training and Placement
Executive Chairman of PSBs.
• Social Mobilization and Institution Development through
3. Capitalization- Providing additional capital to 12 PSBs
focus on SHGs
including State Bank of India to keep a safe buffer over
and above the minimum norms of Basel III. • Interest Subsidy to urban poor for setting up enterprises
(PaiSA Platform)
4. De-stressing PSBs - Effective management of NPAs
• Shelters for urban homeless
5. Empowerment -More flexibility in hiring staff
6. Framework of accountability -ESOPs and higher • Development of vendor markets and the promotion of
performance bonus skills for street vendors
7. Governance reforms - Focused efforts in the areas of NOTE: DeenDayal Upadhyaya Grameen Kaushalya
optimizing capital, digitizing processes, strengthening Yojana: Rural Component implemented by the Ministry of
risk management, improving managerial performance Rural Development
and financial inclusion.
►BANKING STABILITY INDEX
CURRENT AFFAIRS • It is a measure of the level of interdependence of financial

institutions mainly banks.
RELATED TO BANKING • It is “the expected number of banks that could become

distressed given that at least one bank has become
►EMV CARDS (“EUROPAY,” distressed”.
“MASTERCARD,” AND “VISA”) • If more banks are expected to become distressed if one
• Debit card security standard that includes a small bank in the system is distressed, then the BSI is higher
microchip in the debit card. • Parameters: Efficiency of the Banks, Profitability,
• The microprocessor chip embedded in the card prevent Soundness, Liquidity, Asset Quality.
card skimming or cloning that is possible in magnetic
stripe cards ►FINANCIAL STABILITY BOARD:
ADVANTAGE OVER MAGNETIC STRIPE CARDS
SOUND COMPENSATION PRACTICES
• The magnetic stripe credit and debit cards store the data
• RBI has issued guidelines for all private sector and foreign
on the magnetic stripe found on the reverse side of the
card. Fraudsters place a skimmer device inside the card banks for sound compensation practices to senior
swipe slot in ATMs or PoS terminals to read the customer executives to enhance compensation governance and
data stored in the magnetic stripe. discourage excessive risk taking.
• EMV chip cards prevent such skimming because they do • The recent surge in NPA’s is attributed to weaker
not reveal the user data to the terminal at the time of governance bringing compensation of senior executives to
swiping the card. the center stage of regulatory reforms.
• The guidelines apply to private sector banks, including
►PAISA PLATFORM (PORTAL FOR Local Area Banks, Small Finance Banks and Payments
Banks, along with the Foreign banks operating in India
AFFORDABLE CREDIT AND INTEREST
• Important Guidelines
SUBVENTION ACCESS)
• Maximum Variable Pay to senior executives should be 3
It is a centralized electronic platform for processing
times the fixed pay
interest subvention on bank loans to beneficiaries under
Deendayal Antyodaya Yojana – National Urban • Malus and clawback provisions: Banks should incorporate
Livelihoods Mission (DAY-NULM). malus and clawback mechanisms.
DEENDAYAL ANTYODAYA YOJANA (DAY-NULM) FINANICIAL STABILITY BOARD
• Livelihood scheme for urban poor through skill • It is an international body that monitors and makes
development recommendations about the global financial system.
17
BANKING
• It was established in 2009 in the wake of global financial • Earlier, there was obligation on the states to compulsory
crisis. G20 countries at the Pittsburg Summit endorsed the borrow money from the NSSF and usually the interest
charter of FSB. It was successor of Financial Stability charged to the states on such loans was higher than the
Forum. market rates. Subsequently, based upon the
• Members of FSB are: All G20 Countries plus 4 others, recommendations of 14th Finance Commission, this
International Financial Institutions (World Bank, IMF, OECD obligation on the states to borrow money from the NSSF
and BIS) and International Standard-setting institutions. was removed in 2016-17.
FUNCTIONS
• Preparing annual reports on the implementation of ►FOREIGN EXCHANGE BUY/SELL
reforms and their effects SWAP
• Coordinating financial sector policies • Under the swap RBI buys dollars from the financial
• Conducting outreach activities institutions such as banks in order to inject rupees into the
• Building resilient financial institutions economy.
• Addressing SIFIs • At a later date, the RBI would be selling the same amount
of dollars to the financial institutions in order to suck out
• Supervising the global financial market
the rupee which was earlier injected.
• Making the derivates market safer
• Thus it essentially works as a swap mechanism wherein
• Enhancing the resilience of non-bank financial the dollars with the banks would be swapped with Indian
intermediation rupees for a specified duration.
• Formulating additional policies on specific areas of the IMPACT
global financial market
• Increase in the Forex reserves held by the RBI.
• Preparing progress reports to the G20
• Increase in the rupee liquidity in the economy.
• Conducting peer reviews
• Decrease in the rate of interest and consequently higher
• Analyzing the effects of reforms credit creation.
• Increase in the fund availability with the cash starved
►CLAWBACK AND MALUS NBFCs.
• A claw back is a contract signed between employee and • May lead to Rupee Appreciation.
employer where the variable pay including incentives and REGULATORY SANDBOX POLICY
bonus is taken back by the company if the employee is
• A regulatory sandbox (RS) generally refers to live testing of
found to be involved in gross negligence, misconduct,
new products or services in a controlled/test regulatory
breach of integrity, corruption etc.
environment for which regulators may extend certain
• The terms of such an agreement may be provided for in regulatory relaxations for the limited purpose of the
the employment contract. testing.
• It could also apply retrospectively. • RBI’s sandbox policy to develop testing platform to test
• On the other hand, Malus is an arrangement which innovation by the Fintech companies.
empowers banks to prevent vesting of deferred • As part of this policy, the regulator provides the
remuneration (usually variable pay). appropriate regulatory support by relaxing specific legal
• The difference is that the arrangement does not reverse and regulatory requirements for specified time duration.
vesting after it has already occurred.(unlike claw back) • The idea behind the Sandbox policy is to enable them to
test their new products without any regulatory hassles
►NATIONAL SMALL SAVINGS FUND
• Established in 1999 within the Public Account of India for ►URBAN COOPERATIVE BANKS TO
pooling the money from different small saving schemes TRANSITION INTO SMALL FINANCE
such as Post office deposits, Kisan Vikas Patra etc.
BANKS
• Since NSSF is part of Public account of India, its
transactions do not impact the fiscal deficit of the Centre • The Reserve Bank of India has decided to allow urban co-
directly. operative banks (UCB) to convert into small finance banks
18
BANKING
(SFB), a move aimed at bringing these entities into ►LIBOR
mainstream banking. It has been decided to allow
• London Interbank Offered Rate
voluntary transition of UCBs meeting the prescribed
criteria into SFBs. • It is a benchmark interest rate at which the global banks
lend to each other.
• UCBs currently face regulation by both the RBI and the
respective State governments. By turning into SFBs, they • LIBOR is also linked to interest rates at which Indian
will be regulated only by the RBI. corporate sector borrows money under external
commercial borrowings.
SMALL FINANCE BANKS
• In the aftermath of LIBOR scandal of 2011, some countries
The small finance bank will primarily undertake basic banking
have decided to adopt alternatives to LIBOR by the end of
activities of acceptance of deposits and lending to unserved
2021.
and underserved sections including small business units,
small and marginal farmers, micro and small industries and
unorganised sector entities. ►MIBOR
They can: • Mumbai Interbank Offered Rate (MIBOR)
• Take small deposits and disburse loans. • It is India’s domestic reference rate for inter-bank lending.
• Distribute mutual funds, insurance products and other • Note: The MIBOR is calculated every day by National Stock
simple third-party financial products. Exchange of India (NSEIL)
• Lend 75% of their total adjusted net bank credit to priority
sector. ►SWIFT
• Maximum loan size would be 10% of capital funds to single
• Society for Worldwide Interbank Financial
borrower, 15% to a group.
Telecommunication (SWIFT)
• Minimum 50% of loans should be up to 25 lakhs.
• The SWIFT is a secure financial message carrier that
transports messages from one bank to its intended bank
►DOMESTIC-SYSTEMICALLY recipient to facilitate cross-border payments.
IMPORTANT BANKS (D-SIBS) • It does not facilitate funds transfer: rather, it sends only
payment orders.
• SIBs are banks that are perceived as ‘Too Big To Fail’.
• Headquartered in Brussels, Belgium.
• The Basel Committee on Banking Supervision came out
with a framework in 2011 for identifying the Global
Systemically Important Banks (G-SIBs). ►PROMOTER PLEDGING
• Similarly, the RBI has been mandated to identify the • It refers to pledging of shares by promoters of a company
Domestic systemically Important banks (D-SIBs). in order to avail loans from the Banks.
• This is primarily done in order to stronger regulatory • RBI has set a cap on the maximum loan amount that can
requirements to prevent their failure. be availed at 50% of the value of pledged shares.
• Criteria:
o Banks whose size is equal to or more than 2% of GDP ►WAYS AND MEANS ADVANCES
o Lack of readily available substitutes • Ways and Means advances is the loan facility of the RBI to
o Interconnectedness and the central and state governments to meet their cash
requirements.
o Complexity
• This facility is availed by the Government due to the
• RBI has classified SBI, ICICI Bank, and HDFC as D-SIBs
temporary mismatches in their receipts and expenditure.
• The loan taken by the government through ways and
►EASE REFORMS INDEX means advances need to be paid back in 90 days.
• Enhance Access & Service Excellence (EASE) reforms index. • The interest rate of WMA currently is the repo rate.
• It measures the performance of Public Sector Banks on • When the WMA limit is crossed the government takes
140 objective metrics across 6 themes. recourse to overdrafts, which are not allowed beyond 10
• It is published by Indian Banks’ Association. consecutive working days.
19
BANKING
• The interest rate on overdrafts would be 2 percent more Payment Method Interoperability Factor of
than the repo rate. authentication
ATM cards Interoperable with 2-factor

►PAYMENT AND SETTLEMENT Debit/Credit Cards charges
SYSTEM Online payment Interoperable 2-facor
• System that facilitates transfer of money from a payer to Mobile wallet Not interoperable 3-factor
the beneficiary.
UPI Interoperable 3-factor
• It includes both paper based payments such as cheques,
drafts as well as electronic payments such as Real Time Aadhar-enabled Interoperable 3-factor
payment system
Gross Settlement (RTGS), National Electronic Funds
Transfer (NEFT), Immediate payment Service (IMPS), UPI
etc.
SN CATEGORY PAYMENT OPERATOR
SYSTEM
►NATIONAL PAYMENT CORPORATION 1. ATM NFS NPCI
OF INDIA (NPCI) Networks
• Umbrella organization for operating retail payments and 2. Funds IMPS NPCI
settlement systems to promote financial inclusion. Transfer
• It is an initiative of RBI and Indian Banks’ Association. 3. Cards Card Networks RuPay by NPCI
• NPCI’s National Financial Switch links all the ATMs in India. (operated by
VISA
non-banks)
• Different products of NPCI include
MasterCard
• RuPay cards: Indigenous domestic card network created
American Express
as an alternative to Visa and Mastercard.
• BHIM App: Allows money transfer to UPI-enabled bank Diners
accounts via Aadhar Enabled Payment system. The BHIM 4 Aadhaar Aadhar Payment NPCI
apps has 3 levels of authentication. based Bridge System
• Aadhar Enabled Payments System: bank led model Payments
AePS NPCI
which allows online interoperable financial inclusion
5 - TReDS Platform 3 non-banks
transactions at Point of Sale through the business
correspondent of any bank using Aadhaar authentication. (Mynd Solutions,
Receivables
• Bharat QR code: is a person to merchant mobile payment
Exchange of India
solution. and A. TREDS)
6 - UPI NPCI
►UPI 2.0
7 Bill BHARAT BILL NPCI
• NPCI has upgraded the UPI with enhanced features. Payments PAYMENT
• Linking of overdraft account – Apart from the savings CENTRAL UNIT
and current accounts, the UPI users can now link their
overdraft account to it.
►MERCHANT DISCOUNT RATE
• One-time Mandate (account blocking) – It allows
• User-fee charged by the banks to merchants for facilitating
customers or merchants to pre-authorize a transaction
card-based or digital transactions.
and pay at a later date.
• It is charged as a percentage of the transaction amount.
• Security Layer in QR – The app allows the users to scan
the QR code and check the authenticity of the merchants • Recently the government has done away with MDR
through notification to the user to ascertain the altogether for large-retails clearing the way for adoption of
information. low-cost digital payments like BHIM UPI, UPI-QR Code,
Aadhaar Pay etc.
• Increased Transaction Limit From 1 lakh/day to 2
lakh/day.
20
BANKING
►HAIRCUTS RATIONALE
• Consolidation of banking structure in India (recommended
• It refers to the difference between the loan amount and
by Narasimhan Committee of 1991)
actual amount recovered by the Bank from their defaulting
customer. • To meet credit demand
• Under the RBI's provisioning norms, the banks are • Reduction in the net NPA ratio of the merged bank and
required to set aside certain percentage of their profits in kick start credit creation.
order to cover risk arising from NPAs. It is referred to as • The merger of weak banks (higher NPAs and low profits)
"Provisioning Coverage ratio" (PCR). It is defined in terms with the strong Banks would prevent the collapse of the
of percentage of loan amount and depends upon the asset weak banks and protect the customers and financial
quality. system.
• As the asset quality deteriorates, the PCR increases. The • Would reduce the financial burden on the Government on
PCR for different categories of assets are undertaking frequent recapitalisation of the Public Sector
• Standard Assets (No Default) : 0.40% Banks.
• Sub-standard Assets (> 90 days and less than 1 year) : 15% • Meeting the stringent capital requirements stipulated
under the BASEL III Norms.
• Doubtful Assets (greater than 1 year): 25%-40%
• Better monitoring
• Loss Assets (Identified by Bank or RBI) : 100%
• More the delay in recovery of bad loans higher the
provisioning the banks need to do. Thus the banks instead ►DEPOSIT INSURANCE
choose to resort to haircuts. • The bank deposits in India are provided with a deposit
insurance upto Rs.1 Lakh per depositor.
►MERGER OF PUBLIC SECTOR BANKS • The Deposit Insurance and Credit Guarantee Corporation
(DICGC) provides for insurance cover of Rs 1 lakh per
• The Government of India has proposed to merge 10 Public
depositor for deposits in commercial banks, regional rural
sector Banks into 4 large banks by April 1 2020.
banks, local area banks (LABs) and cooperative banks.
CHRONOLOGY
• The premium for insurance is paid by the banks.
• PJ Nayak Committee (2014) recommended for merger of
• The Union Budget 2020-21 has increased the deposit
PSBs
insurance cover in scheduled commercial banks to Rs 5
• 2017: Union Cabinet gave in-principle approval for
lakh per depositor from the current Rs 1 lakh
amalgamation of Public Sector Banks
• 2017: State Bank of India merged with 5 of its
associate banks and Bharatiya Mahila Bank -- State Bank of
►CORE INVESTMENT COMPANIES
Bikaner and Jaipur, State Bank of Mysore, State Bank of (CICS)
Travancore, State Bank of Hyderabad, and State Bank of • Non-banking financial companies (NBFCs) holding not less
Patiala. than 90% of their net assets in the form of investment in
• 2018: Vijaya Bank, Dena Bank and Bank of Baroda (Anchor equity shares, preference shares, bonds, debentures, debt
bank - BoB) or loans in group companies.
CURRENT DECISION • The corporate governance guidelines are currently not
• This move would bring down the number of Public Sector applicable to CICs.
Banks to 12. • Context: Infrastructure Leasing and Financial Services Ltd
• Allahabad Bank and Indian Bank (anchor bank - Indian (IL&FS) was a core investment company.
Bank)
• PNB, OBC and United Bank (anchor bank - PNB) ►BASIC SAVINGS BANK DEPOSIT
• Union Bank of India, Andhra Bank and Corporation Bank ACCOUNT
(anchor bank - Union Bank of India)
• Introduced in 2012 as a replacement to ‘No Frills’ account
• Canara Bank and Syndicate Bank (anchor bank - Canara or ’Zero balance Account’
Bank)
• It is essentially a ‘Small Account’ aimed at financial
inclusion.
21
BANKING
• It can be started and maintained with zero balance with a • An Indian importer seeking to source supplies from a
simplified KYC norm. foreign country avails ‘buyer’s credit’ (in foreign currency)
• It provides free basic banking services. from a foreign bank in the source country.
FEATURES • In order to do so the importer approaches a bank in

his/her country to issue guarantee. Accordingly in case the
• Deposit and withdrawal of cash
importer defaults on the buyer’s credit the bank that
• Basic ATM card with restricted number of withdrawals issues guarantee is liable to pay back the bank issuing
• Electronic transfer credit.
• They are subject to restrictions on credit, maximum • One such guarantee issued by an Indian bank is Letter of
balance cash withdrawals etc. However there are no Undertaking/Letter of Credit.
restrictions on age and income criteria. • Accordingly LoU is a bank guarantee under which a bank
• An individual is eligible to have only one ‘Basic Savings allows its customer to raise money from an Indian bank’s
Bank Deposit Account’ in one bank. foreign branch in the form of short-term credit to source
• Applicable to all scheduled commercial banks (domestic his imports.
and foreign) • If the Indian bank in the foreign country that issues buyer’s
NOTE: The accounts opened under Jan Dhan Yojana belong credit and the Indian bank issue LoU are the same, the
to this category. guarantee is called as Letter of Comfort.
• Post-PNB fraud case (Nirav Modi), RBI has barred the
►LIBRA Indian banks from issuing Letter of Undertaking and Letter
of Comfort.
• Global digital currency to be launched by Facebook.
• It is an attempt to find an alternative to Bitcoin and other
►ABER
crypto-currencies.
Pilot digital currency of Saudi Arabia and UAE based on block-
• It is based on open source block-chain technology.
chain and distributed ledger technologies.
ADVANTAGE
• While the present cryptocurrencies lack intrinsic value,
Libra is linked to assets made of bank deposits and short-
►TYPES OF ATMS IN INDIA
term government securities. ►BANK ►BROWN LABEL ►WHITE LABEL
• Besides while the cryptocurrencies lack accountability, OWNED ATMS ATMS ATMS
Libra is backed by founding members inlcuding • Set up and • Work on cost- • ATMs set up
Mastercard, PayPal, Visa, Uber, etc. who will be investing in owned by the sharing between and managed
the company and thus accountable. bank itself. Bank and non- by Non-
• Bank is Bank service Banking entity.
provider
►UTKARSH 2022 responsible • The entire
for their • The Bank needs gamut of
• 3-year roadmap of the RBI to improve the regulation and overall to take care of operations
supervision of the Banks. operation and cash including ATM
• Mission maintenance. management hardware, Cash
• Banks are and network Management,
• To promote
given connectivity Network
o economic and financial well-being while a service Connectivity,
responsibility
o financial stability of Cash provider (Non- Security etc. is
Management, Banking Entity) looked after by
o fair and universal access to financial services
Network provides for the the non-
o robust, dynamic and responsive financial ATM machine. banking entity.
Connectivity,
intermediation infrastructure. Security etc.
►LETTERS OF UNDERTAKING (LOU) ►OPERATION TWIST

• They are instruments of trade finance in order for an
• It is a special Open Market Operation employed by RBI for
importer to avail credit.
the 1st time.
22
BANKING
• It involves simultaneous buying and selling of long-term HOW DOES IT WORK?
and short-term government securities primarily done to • Long Term Bonds: Buying of long term G-Sec Decreased
influence the yields (interest rates) which results in ‘twist’ supply and increased demand for long term G-Secs 
in the yield curve and hence the name. Increase in the Bond prices  Decrease in bond yields.
• Note: Generally Open Market Operations involve buying • Short-term Bonds: Selling of short term G-SecIncreased
or selling of government securities in order to manage the supply and lower demand for short term G-Secs
liquidity in the economy. Decrease in the Bond prices  Increase in their yields.
• In the Operation Twist undertaken, RBI bought 4 long-term • Thus operation twist would bring down the rates of
government securities (10-year bond) worth Rs.10000 Cr interest on long term loans and increases the rate of
and selling 4 short-term securities (1-year bond) worth the interest on short term loans.
same amount.
PURPOSE
• To moderate the interest rates of long-term securities
• Bring in monetary policy transmission
23
SECTION 2
NFLATION
►BASIC TERMS ο Accordingly as levels of unemployment decrease,
inflation increases
• Inflation refers to a sustained rise in general level of
prices over a period of time in the economy. This results in
fall in the value of money i.e., purchasing power of money
over a period of time.
• Deflation: Refers to a fall in the general level of prices over
a period of time. (negative rate of inflation)
• Disinflation: slowing down of rate of inflation
• Skewflation: General price rise over a sustained period of
time is skewed to one or a small group of commodities
• Galloping inflation: Very high inflation running in the
range of double-digit or triple–digit (20%, 200% per year). It
is also known as hopping inflation, jumping inflation, and
running or runaway inflation. • Stagflation
• Hyperinflation: Hyperinflation is large and accelerating ο It is a situation characterised by slow economic

inflation, when prices rise by more than 50% a month. It is growth and high unemployment (stagnation)
very rare. Examples of hyperinflation include Germany in accompanied by inflation.
the 1920s, Zimbabwe in the 2000s, and Venezuela in the TYPES OF INFLATION
2010s. • Based on its origin, inflation is categorised into demand-
• Creeping Inflation: Also called mild inflation, it refers to pull and cost-push inflation.
gradual rise in price levels along time. (good for the • While cost-push inflation is related to supply-side,
economy) demand-pull is related to demand side.
• Bottleneck Inflation: Also called as structural inflation, it COST-PUSH INFLATION
occurs when supply falls drastically and the demand
• Caused by rise in prices of factors of production such as
remains at the same level.
increased cost of raw materials, electricity, rent, labour etc.
• Inflation Tax: It refers to the penalty for holding cash at a
• Eg: Rise in international crude oil prices leads to overall
time of high inflation due to erosion of value of money.
rise in general price level in the economy, Failure of
• Philips Curve monsoon and resultant increase in agricultural
ο Establishes the inverse relation between inflation and commodities etc.
unemployment
24
INFLATION
• Usually tackled by fiscal policy like subsidies, price control • It is combination of the food articles from the Primary
etc. Articles basket, and the food products from the
DEMAND-PULL INFLATION Manufactured Products basket
• It occurs in a situation where demand increases due to

excess money supply with people without increase in ►CONSUMER PRICE INDEX
supply level.
• Tracks the changes in the price level at the consumer level
• In other words it occurs when too much money chasing (Retail Inflation)
too few goods.
• The index is constituted of those goods that are sensitive
CAUSES to the consumer
• Increase in population and therefore rise in demand
• Consists of both goods and services
• Increase in income levels and therefore purchasing power
• Different indices used to measure price level at multiple
• Consumerist culture consumer levels include
• Increase in money supply 1. CPI for industrial labourers (CPI-IL) – Dearness Allowance is
• Usually tackled by monetary policy under inflation linked to CPI-IL
targeting.
2. CPI for agricultural labourers (CPI-AL) – Revision in
MEASURES OF INFLATION MGNREGA wage is linked to CPI-AL
• The rate of inflation is measured on the basis of price 3. CPI for rural labourers (CPI-RL)
indices. https://t.me/UPSC_PDF
4. CPI-Rural, CPI-Urban and CPI-Combined
• Price index measures the average level of prices and not
• CPI-IL, AL and RL are published by Labour Bureau, Ministry
that of a single good.
of Labour and Employment
• CPI-Rural, CPI-Urban and CPI-Combined are published by
►WHOLESALE PRICE INDEX
National Statistical Office
• It is the weighted average-price index of a basket of goods
COMPONENTS OF CPI
(697 items).
ITEM WEIGHT
• It captures price changes in the prices of goods in bulk at
the wholesale level. (at the factory gate) Food, beverages and tobacco 45.86
• It includes price changes in goods only.
Pan, tobacco and intoxicants 2.38
• Published by the office of Economic Advisor, Department
Clothing, bedding and footwear 6.53
for Promotion of Industry and Internal Trade, Ministry of
Commerce and Industry. Housing 10.07
• Base year - 2011-12
Fuel and light 6.84
• Currently WPI does not include indirect taxes making it
Miscellaneous 28.32
conceptually closer to Producer Price Index
COMPONENTS OF WPI CPI V/S WPI: A COMPARISON
1. Primary articles (Weight: 22.6%) CHARACTERISTI
WPI CPI
ο Food and Non-Food CS
ο Food: Cereals, Paddy, Wheat, Pulses, Vegetables, Fruits, • Maximum weight

Milk, Eggs, Meat & Fish, etc. for
• Maximum
ο Non-Food: Oil Seeds, Minerals and Crude Petroleum manufactured
weight for
goods
2. Fuel & Power (Weight: 13.15%) primary
Nature of • Food has lesser articles
3. Manufactured Products (64.23%) Commodities weight (24%
• Food has
ο Food and Non-Food including both
larger weight
WPI FOOD INDEX primary food
(39%)
articles and
• Sub-index of WPI
manufactured
25
INFLATION
food products) CORE INFLATION
Captures • Also called underlying inflation it excludes transitory

Less sensitive to seasonal inflation elements such as food and fuel.
consumer level
Sensitivity consumer
data and thus • Thus it measures inflation due to structural factors in an
experience
more sensitive economy and thus relatively less volatile.
Services Not Covered Covered NOTE: CPI-Combined which reflects the headline inflation is
used as anchor for inflation targeting under Monetary Policy
More
Fluctuation Less fluctuating Framework
Fluctuating
Policy anchor
►PRODUCER PRICE INDEX
Inflation targeting for Inflation
Monetary Policy does not take into targeting under • Measures price changes that a producer experiences while
account WPI Monetary Policy selling his/her goods and services
Framework • It includes only basic prices from factors of production.
Measures • Thus it excludes taxes, trade margins, transport costs etc.
Measures Inflation
Level Inflation at
at Wholesale level
Retail Level
►HOUSING PRICE INDEX
Base year 2011-12 2012
• Measures the price changes in residential real estate.
Note: CPI is always higher than WPI • Developed by National Housing Bank and is named
Residex in India
►DIVERGENCE BETWEEN WPI AND CPI

►PRODUCER PRICE INDEX (PPI)
• Recently there a growing divergence between CPI and WPI.
• It is a system for measuring Wholesale prices from the
• While the CPI inflation had increased to 3.99 per cent in
point of view of the Producers or the sellers of goods and
September 2019 the WPI Inflation rate has fallen to 0.33% services. A committee was set up under the Chairmanship
in September 2019. of B N Goldar for developing PPI for the Indian context.
REASONS
• The main reason for divergence is on account of difference ►GDP DEFLATOR

in the weightage under WPI (highest: manf goods) and CPI Measure of inflation calculated as the ratio of GDP at current
(highest: food articles). prices to GDP at constant prices.
• The recent increase in prices of food Commodities and fall

in the prices of manufactured products and fuel and ►EFFECTS OF INFLATION
power mainly due to lower demand in the Indian Economy • Creditors and debtors
has led drastic fall in WPI and rise in CPI. ο Inflation represents degradation of value of money.
ο Thus it adversely impacts those who lend money

(creditors) and benefits those who borrow money
►HEADLINE V/S CORE INFLATION
(debtors)
HEADLINE INFLATION • Rate of interest
• It is a measure of the total inflation in an economy as ο Real rate of interest (nominal rate of interest minus
reflected in the CPI and WPI. inflation) decreases due to rise in inflation.
• It includes all commodities including those that are subject ο E.g.: Suppose bank A gives loan at 10% interest. Now,
to seasonality such as food and fuel prices and those that inflation in the economy is 5%. The actual rate of
interest to be paid by borrowers will be only 5% (10%-
are structural in nature.
5%).
• In other words it includes both core and non-core inflation.
26
INFLATION
• Aggregate demand REVISION IN INFLATION INDEX LINKED TO MGNREGA
ο Rising inflation indicates rising aggregate demand. • Government is planning to link the MGNREGA Wages to
• On investment an updated inflation Index based on the recommendation
of Mahendra Dev Verman Committee.
ο Higher inflation indicates higher aggregate demand and
thus leads to an increase in investment in the economy. • Currently, MGNREGA wages are linked to CPI-AL
• On income • Now the Government is planning to link the MGNREGA

wages either to CPI-AL or CPI-Rural, whichever is higher in
ο Inflation increases the nominal value of income.
a particular state
ο As prices increase, nominal income will also rise.
• On savings
►IMPORTANT COMMITTEES RELATED
ο An increase in inflation would mean that holding money
as savings is not a good option.
TO INFLATION
• On expenditure COMMITTEE RECOMMENDATION
ο Increase in inflation would lead to increase in B N Goldar Committee • Developing PPI for India
consumption expenditure.
Ramesh Chand • Roadmap for switch over
• On tax
Committee (Niti Aayog) from WPI to PPI
ο Increase in inflation increases the direct tax liability of
the individuals Urjit Patel Committee Recommended Monetary Policy
Committee
ο Indirect tax liability also increases due to inflation.
• On exchange rate Mahendra Dev Verman Linking MGNERGA to CPI-RL

Committee
ο Inflation leads to depreciation of rupee
27
SECTION 3
AXATION
►BASIC TERMS ο High Tax-GDP ratio  High government exchequer 
High government spending  High Consumption 
• Direct tax:
High demand  High investment  High Growth
ο Subject on whom the tax is levied is identifiable.
ο India has a low tax-gdp ratio at 10.9% in 2018-19
ο The burden of paying the tax falls on the same person
ο Ways to increase tax-GDP ratio
or entity and cannot be shifted.
ο Increase tax rates progressively (direct taxes)
ο Eg: Income tax, Corporate tax, Wealth tax etc.
ο Increase tax base
• Indirect tax:
ο Ensure tax compliance
ο Subject on whom the tax is levied is not identifiable
ο Rationalisation of indirect tax (GST)
ο Thus the burden can be shifted.
• Tax buoyancy:
ο E.g.: Excise duty, custom duty, Service tax etc.
ο It refers to the responsiveness of tax revenue to GDP
ο India follows an ad valorem indirect tax structure.
growth.
ο Ad valorem mean the base on which the tax is levied is
ο A tax is said to be buoyant if an increase in GDP results
the value of a particular good.
in increase in tax revenue without increasing the tax
• Progressive taxation: rate.
ο System of taxation based of the ability to pay ο Direct taxes are more responsive to GDP growth than
ο Higher the income more is the tax rate leading to more indirect taxes
revenue. • Tax elasticity: Refers to change in tax revenue with
ο Direct taxes are by nature progressive change in tax rate
• Regressive taxation: System of taxation where there is
inverse relation between level of income and rate of ►LAFFER CURVE
taxation. • Illustrates the relationship between tax rates and tax
• Fiscal Drag: revenue
ο High inflation and high tax rates. • Initially an increase in tax rates results in increased tax
ο High inflation  High Salaries  high tax burden  revenue. But beyond a point increased tax rates acts as a
reduced spending  Fiscal Drag disincentive to tax-generating activities and thus results in
decreased tax revenue
• Tax-GDP ratio:
• Indian economy is on Laffer curve which means any
ο Proportion of tax revenue in GDP
increase in tax rates would lower the tax revenue.
28
TAXATION
• This is because high tax rates lead to tax evasion, non- • Thereby reducing the general price levels
disclosure of income and black money. • To create a unified economic market
►3-TIERS OF GST
CGST OR CENTRAL GST
• Levied and collected by the central government on sale of
goods and services within a state.
SGST OF STATE GST
• Levied and collected by the state governments on sale of
goods and services within a state.
IGST OR INTEGRATED GST
• Levied and collected by the central government on
interstate sale of goods and services.
• This additional tax allows claim of input tax credit in inter-
state sale of goods and services, which was hitherto
►SURCHARGE unavailable under Central Sales tax or State Sales taxes.
• Levied as a tax on tax
►POSSIBLE IMPACT OF GST
• Permanent in nature
• Increases tax revenue as it improves tax compliance
• Not limited to a specific purpose.
• Will bring out-of-book transactions under the book due to
• Surcharge is retained by the Centre and not shared with
input tax credit
States.
• Will increase income tax compliance
• Lower the cost and hence improve export
►CESS
competitiveness
• Levied over and above the base tax liability of a taxpayer
►GST COMPENSATION CESS
• Temporary in nature
• Cess levied to compensate states for revenue losses on
• Raised for specific purpose
account of switching to GST for the first five years of GST
• Cess levied is accrued to Consolidated Fund of India implementation.
initially and thereafter a dedicated fund is set up for the
• According to the GST Act, States and UTs with Assemblies
purpose.
are guaranteed compensation if the GST revenue growth is
• It is non-lapsable in nature less than 14 per cent.
• It is retained by the Centre and not shared with States. ►GST INFRASTRUCTURE
LEGAL: 101ST CONSTITUTIONAL AMENDMENT ACT
►GOODS AND SERVICES TAX (GST) • Insertion of Article 279 A: Creation of GST Council
• Comprehensive, multistage, destination-based indirect tax. • Insertion of Article 246 (A):
• Comprehensive as it has subsumed almost all the indirect ο Both Union and States in India now have “concurrent
taxes powers” to make law with respect to goods & services.
ο Multi-staged as GST is imposed at every step in the ο The intra-state trade is under the jurisdiction of both
production process, but is meant to be refunded to all centre and state
parties other than the final consumer
ο Inter-state trade and commerce is “exclusively” under
ο Destination based tax as it is collected from point of centre’s jurisdiction.
consumption and not point of origin like previous taxes.
• Insertion of Article 269A: Tax under inter-state trade:
WHY WAS GST INTRODUCED? Levied and collected by centre, distributed between Centre
• Idea is to have “One India, One Market, One Tax” and State
• To remove cascading effect of taxes

• Simplification of indirect tax structure
29
TAXATION
►INSTITUTIONAL MECHANISM: GST ►NATIONAL ANTI-PROFITEERING

COUNCIL AUTHORITY
• Created under Article 279A • Headed by an officer of the rank of Secretary to the
• Highest decision making body under GST Government of India
COMPOSITION • 4 technical members from the Centre and the States.
• Representatives of both centre and states ANTI-PROFITEERING
• Chairperson: Union finance minister • GST Act mandates that the benefit of cost reduction due to
GST introduction (due to input tax credit) should be passed
• Deputy Chairman: Finance Minister of State
on to consumers by way of commensurate reduction in
• The Union Minister of State, in-charge of Revenue of prices.
finance
• However, it is seen that the firms do not pass on this
• The Minister In-charge of finance or taxation benefit to the consumers by reducing the prices and
• State Finance Ministers instead continue to make higher profits (profiteering).
• Two representatives from UTs • Anti-profiteering is an institutional mechanism to ensure
VOTING UNDER THE GST COUNCIL that the firms do not earn such profits illegally and
• Every decision is taken by a majority of not less than 3/4th benefits of the GST get passed on to the consumers.
of the weighted votes of the members present and voting

• Votes of Central Government have a weightage of 1/3rd of ►CAPITAL GAINS TAX
the total votes. • Tax levied on gains made by buying and selling of assets.
• Votes of State Governments have a weightage of 2/3rd of • Long-term capital gains tax: Tax on gains made in assets
the total votes. held for over 3 years. For shares and mutual funds it is 1
• Thus, Central Government has an effective veto on all years.
decisions of the GST Council. • Short-term capital gains tax: Tax on gains made in assets
held for 3 years or less.
• Quorum: ½ of the total members
►GST NETWORK (GSTN)

►INVERTED DUTY STRUCTURE
• Digital infrastructure to administer GST transactions
• Refers to the tariff structure where the customs duty on
• Itis a non-profit fully-owned Government company with finished goods is lower than the customs duty on raw
50% equity of the company to be held by the Central materials.
Government and the balance 50% to be held by various
• It promotes import of cheaper finished goods and
States and Union Territories.
discourages domestic manufacturing.
MAIN FUNCTIONS
• facilitating registration ►TAX HAVENS
• filing of returns BASE EROSION AND PROFIT SHIFTING (BEPS)
• computation and settlement of IGST • Tax avoidance strategies adopted by MNCs that exploit
• Verifying tax payment details with banking network gaps and mismatches in tax rules to artificially shift profits
to low or no-tax locations where there is little or no
• Management Information System reports
economic activity.
• Analysis of tax payers’ profile
• Different strategies adopted base erosion and profit
• Verification of input tax credits shifting include
►GST APPELLATE TRIBUNAL ο Transfer Mispricing
• The Union Cabinet has approved the setting up of National ο Misuse of Double Taxation Avoidance Agreements
Bench of the Goods and Services Tax Appellate Tribunal (DTAA)
(GSTAT). ο Treaty Shopping
• It would be a forum of second appeal in GST laws and the ο Round Tripping
first common forum of dispute resolution between Centre ο Inflated invoices
and States.
ο Shell companies
30
TAXATION
ο Patent Box ►PATENT BOX MISUSE
ο Double Irish (Adopted by tech companies)
• Paten Box is a special tax regime for Intellectual Property
revenues.
►TRANSFER PRICING • Under this a lower rate of tax is applicable for the income
• Pricing of goods and services between two related generated from patents.
companies is called transfer pricing. • It is adopted to encourage R&D. However, MNCs structure
their operations in such a way that they set up a shell
• If the price paid intra-firm is artificially set to avoid taxes it
company in low-tax jurisdiction and register the patent
is called transfer mispricing.
there.
• This registration of patent in low-tax jurisdiction may take
►ADVANCE PRICE AGREEMENT place even when the technology may have been developed
• Price arrangement signed between tax department and an in some other country.
MNC to determine the transfer pricing in advance.
• It is aimed at tackling transfer mispricing and hence tax ►OFF-BUDGET FINANCING
avoidance and potential transfer pricing disputes in a • Refers to the expenditure undertaken by the PSUs through
proactive manner. the market borrowings based upon guarantee of
repayment of loans given by Government.
►DOUBLE TAXATION AVOIDANCE • It is used by the government to meet revenue and capital
requirements outside budgetary allocation.
AGREEMENT
• Thus it remains outside the parliamentary control.
• Agreement signed between 2 countries to avoid taxing the
• It is also not counted under fiscal deficit targets under
same income twice.
FRBM
• It is applied in cases where a tax-payer resides in one
country and earns income in another.
►FISCAL COUNCIL
• DTAAs are intended to make a country an attractive
• An independent agency to review the government’s
investment destination by providing relief on dual
adherence to fiscal rules.
taxation.
• It was recommended by a number of committees including
• India has signed DTAA with more than 80 countries.
N K Singh Committee (2017), D.K. Srivastava committee on
MISUSE OF DTAA th th
fiscal statistics (2018), 13 and 14 Finance Commissions.
• India has signed DTAA with the tax havens such as MAIN FUNCTIONS
Mauritius, Singapore, Cayman Islands etc.
• Independent assessments of budget proposals
• These DTAAs have been misused by the MNCs in order to • Independent forecast of key macro variables like real and
reduce their tax liability in India. nominal GDP growth, tax buoyancy, commodity price,
HOW? inflation etc.
A company is registered in tax haven and carries out the • Advisory role with respect to FRBM targets
operations through its subsidiary based in India. Under the • Review the government’s forecasts related to tax
provisions of DTAA, the company would be liable to pay tax collections, Fiscal Deficit, GDP Growth etc.
only in the tax haven country, even for the profits which it
makes in India. This causes significant revenue loss for India.
►ANGEL TAX
►TREATY SHOPPING AND ROUND • Tax on capital raised by unlisted companies via issue of
TRIPPING shares if the share price is sold in excess of the fair market
value of the shares
• Foreign nationals channelizing their investment in India
through a tax haven to avoid taxes by taking advantage of • It is applicable on excess capital (the difference) and is
DTAA is called Treaty Shopping. treated as income and taxed accordingly.
• Indian national channelizing their investment in India • This tax predominantly affects start-ups and the angel
through a tax haven to avoid taxes by taking advantage of investments they attract.
DTAA is called Round Tripping.
31
TAXATION
• It was introduced in the 2012 budget to arrest laundering avoidance strategies to shift profits to another country
of funds. typically a tax haven. (This is called Double Irish)
PROBLEM • In order to align the tax laws to changing digital business
• The valuation principles used for finding the ‘fair market scenario, a digital service tax is conceived of.
value’ vary for start ups and conventional companies.
• Startups may be valued high because of future growth ►EQUALISATION LEVY- INDIA’S
potential. VERSION OF GAFA TAX
• Thus taxing Angel investment (excess) is seen as a
• Tax on digital transactions in the digital advertising space.
dampener for investments in startups.
• It is a direct tax levied on the income accruing to foreign
• Note: Now the government has withdrawn the Angel Tax
ecommerce companies from within India.
on the entities registered with the Department of Industry
and Internal Trade (DPIIT), Ministry of Commerce. • It is a withholding tax levied at 6% of the transaction
amount.
• It is applicable for B2B (Business to Business) transactions
►MULTILATERAL CONVENTION ON
only
BEPS • Currently it is applicable only on online advertising services
• India will soon ratify the Multilateral Convention to • For payments exceeding Rs 1 lakh in a year
Implement Tax Treaty Related Measures to Prevent Base
Erosion and Profit Shifting.
►DIVIDEND DISTRIBUTION TAX AND
• It is an outcome of the OECD / G20 BEPS Project.
BUYBACK TAX
►BEPS PROJECT • 2 ways companies reward their shareholders
• Dividends: Companies distribute after-tax profits to their
• It is an international framework to combat tax avoidance
shareholders in proportion of their share-holding
by OECD
• Buy-Back: Company repurchases certain amount of its
• It seeks to update tax rules in various countries in a
outstanding shares from the shareholders at a price higher
coordinated way.
than market price
FOCUS AREAS
• When a company buys back its shares the share value
• Coherence — removing gaps, black holes
increases which is beneficial to continuing shareholders
• Substance — aligning taxing rights with value added
DIFFERENCE BETWEEN DIVIDEND DISTRIBUTION AND
activity
BUYBACK
• Transparency — tax reporting and disclosure
• Dividend distribution forms a part of taxable income in the
• Digital economy same year
• A multilateral treaty to implement BEPS Project • Buyback leads to increased share value which attracts
taxes but only when it is sold
►GAFA TAX DIVIDEND DISTRIBUTION TAX
• Digital service tax introduced by France • Tax on dividend that is distributed by the company to its
shareholders
• Named after Google, Apple, Facebook, Amazon
• It was paid by the companies before distributing dividends
• Imposed on large technology and internet companies with
worldwide revenues of more than 750 million euros • In Budget 2020 DDT was abolished
providing services to French consumers • Now dividend will become a part of investor’s income
• 3% of the total revenues is levied in the form of GAFA tax which may be taxed in accordance income tax slabs.
RATIONALE BUYBACK TAX

• Search engines, social media platforms, online marketing • In order to reduce the tax burden imposed through
platforms etc make profits by harnessing huge data dividend distribution, more companies started offering
generated for digital advertisements. buybacks rather than distributing dividends.
• While the profits are earned because of customer base in a • To discourage this, Budget has introduced tax on buybacks
source country, these companies adopt aggressive tax for listed companies as well.
32
TAXATION
• The 20% tax will be levied on the difference between the BENEFITS
issue price and the buyback price of the share. • Decrease the cost of compliance
• Eliminates human interface between Assessing Officer and
►FRBM REVIEW COMMITTEE (2017) Assesse, thereby reducing corruption.
• Headed by NK Singh • Brings transparency and efficiency
• A Debt and Fiscal Framework for 21st Century India • Expeditious disposal of cases and thus promotes ease of
doing business.
IMPORTANT RECOMMENDATIONS
1. Public debt to GDP ratio should act as the medium-term
anchor for fiscal policy ►TAX INSPECTOR WITHOUT BORDERS
• Combined debt-to-GDP ratio of the centre and states • It is jointly launched by UNDP and OECD.
should be brought down to 60% by 2023 (comprising of 40 • It is intended to support developing countries to
per cent for the Centre and 20% for states) as against the strengthen national tax administrations through
existing 49.4 per cent, and 21per cent respectively. building audit capacity and to share this knowledge with
2. Fiscal deficit as the operating target other countries.
• Fiscal deficit should be reduced from 3.5% (2017) to 2.5% • It is an example of South-South Cooperation.
by 2023. • India has entered into agreement with Swaziland (now
• This will help achieve the public debt target of 40% for the known as Eswatini) under the Tax Inspectors without
centre by 2023. Borders Program.
3. Revenue deficit target
• Reduction in revenue deficit by 0.25% of GDP each year, to ►SABKA VISHWAS LEGACY DISPUTE
reach 0.8% by 2023 RESOLUTION
4. Formation of Fiscal Council Sabka Vishwas is a legacy dispute resolution
5. Escape Clause to accommodate counter cyclical issues: scheme notified by Government for closing pending
• Flexibility in fiscal deficit target (0.5%) to deal with disputes relating to legacy Service Tax and Central Excise
economic instabilities. cases. It is to be operationalized from 1st September 2019.
• Escape clause can be invoked only during following DETAILS
circumstances: • It is a dispute resolution and amnesty scheme to reduce
• Consideration of national security, acts of war, national legacy service tax and central excise cases. It will become
calamity, collapse of agriculture operational from September 1, 2019 four months till
• Decline in growth by at least 3% December 31, 2019. It can be availed by taxpayers for
6. Fiscal consolidation responsibility for states closing their pending disputes relating to legacy Service
Tax and Central Excise cases that are now subsumed
• Fiscal consolidation by the states bringing down their debt
under Goods and Services Tax (GST) so they can focus on
target to 20% of GDP.
GST.
7. Congruence of Fiscal and Monetary Policy
• Its objective is to free large number of small taxpayers of
their pending disputes with the tax administration.
►NATIONAL E-ASSESSMENT SCHEME • Two main components of Scheme:
• To facilitate faceless and jurisdiction-less assessment and • Dispute resolution: It is aimed at liquidating legacy cases
scrutiny of income tax. of Central Excise and Service Tax that have been
• New assessment process: Assessment of income tax of the subsumed in GST and are pending in litigation at various
tax payer is assigned to an Assessing Officer randomly by forums.
an automated system at the National e-assessment • Amnesty component: It provides opportunity to taxpayers
Centre. to pay outstanding tax and be free of any other
• It also facilitates all communication between the tax payer consequence under law.
and assessing office.
33
SECTION 4
INANCIAL ARKET
►MONEY MARKET ►TREASURY BILLS
• Financial market that fills the demand-supply gap in short- • Instruments that government use to raise short-term
term funds with maturity period less than 1 year money from the financial market. (for long-term:
• Raises short-term funds mostly towards working capital, government bonds)
loan repayments, maintenance etc • Maturity period: 91-days, 182-day, 364-day
• T-bills are ‘zero-coupon securities’ i.e. no interest. Instead
 INSTRUMENTS OF MONEY MARKET they are issued at a discount rate and redeemed at the
face value on maturity.
►CALL MONEY
• T-bills are issued only by Central government.
• Also called inter-bank money
• Eligible under SLR requirements
• Overnight loans availed by banks to meet liquidity
• Usually availed for 1 day
►CASH MANAGEMENT BILLS
• Mainly to meet reserve requirements (CRR/SLR) or to cover
daily shortfall in cash • Short-term instruments similar to T-bills.
• No collateral is required to borrow • Issued by the government to meet temporary cash flow
• Interest rates (Call Rate) are decided based on auction mismatches.
• MIBOR (Mumbai Inter-Bank Offer Rate) is the benchmark • Maturity period: less than 90 days. (more than 90 days – T-
rate for call money market. Bills)
• Issued at a discount and redeemed at face value on
►NOTICE MONEY
maturity.
Short-term loans provided for 2-14 days in the call money
• Eligible under SLR requirements
market.
PARTICIPANTS
►CERTIFICATE OF DEPOSITS
• Mainly banks: Scheduled commercial banks, co-operative
banks, Payment banks (recently included) etc. • Money market instruments issued by banks and FIs to
individuals, companies, corporations, funds etc.
• LIC, GIC, UTI, IDBI and NABARD operate as lenders only
• Issued in dematerialised form a only
• Exceptions: Regional Rural banks, Land Development
• Issued in multiples of Rs.1 Lakh
Bank.
34
FINANCIAL MARKET
• Issued at a discount rate ►FINANCIAL INSTRUMENTS
• It is transferrable
EQUITY
• NRIs are also eligible to invest
• Also called shares it represents ownership of a company.
• Cannot be used as collateral to avail loans
• Issued in primary market as IPOS and traded in secondary
MATURITY PERIOD
market in the form of shares
• CoD of Scheduled commercial banks: 7 days to 1 year
• In addition a shareholder get a share in distributed profit
• CoD of FIs: 1-3 years also called dividend.
►COMMERCIAL PAPER ►DEBENTURE

• Debt instruments issued by companies to raise short-term • Debt capital raised by the company
funds.
• Earns an interest
• Unsecured loans (not backed by collateral) issued in the
• Has a fixed maturity period
form of a promissory note.
• No sharing of profits
• High-rated listed corporate, banks use it to source short-
DIFFERENCE BETWEEN BOND AND DEBENTURE
term funds. (minimum working capital Rs. 5 crores)
• An unsecured bond is a debenture.
• For the purposes of CP, corporates needs to obtain the
credit rating from rating agencies such as CRISIL, ICRA, • Thus all debentures are bonds, but not all bonds are
CARE, FITCH etc. as specified by RBI. debentures.
• Maturity period: 7 days – 1 year

• Individuals, banks, Corporate, NRIs and FPIs can invest in
►G-SECS
CPs. • Instruments for deficit financing of the government
BENEFITS • Long-term tradable instruments issued by both Central
Cheaper source of funds, sometimes lesser than benchmark and State governments. (Maturity: more than 1 year)
lending rates of the banks. • Short-term: T-Bills

ο Issued only by Central Government
►CAPITAL MARKET • Long-term: Dated Securities
• Financial market that fills the demand-supply gap in ο Issued both by Central and State governments
medium and long-term funds with maturity period more • Dated Securities
than 1 year • 2 types: fixed or floating rate
• Financial instruments under capital market include G-Secs • Interest paid at regular intervals (usually half-yearly).
(Gilt-edged Securities), mutual funds, equity investments,
• Maturity Period: 1-30 years
venture capital, Development Finance Institutions, Hedge
• RBI issues dated securities through Negotiated Dealing
funds, REITs, InVits etc.
System (NDS).
• Institutions that buy directly from RBI are called as primary
►PRIMARY MARKET dealers (Eg: commercial banks, insurance companies,
• New issues market where a company gets registered to mutual funds etc)
raise capital. • Mostly banks hold their SLR requirements in dated
• Investors directly buy securities from the issuing company securities
as initial public offerings (IPOs).
►NEGOTIATED DEALING SYSTEM

►SECONDARY MARKET • Electronic platform created by RBI to deal in government
• Also known as stock market securities
• Financial market where securities issued in the primary • Acts as both primary and secondary market for
market are traded. government securities
• Both central and state government securities participate
35
FINANCIAL MARKET
• In primary market G-Secs are auctioned by RBI ►FUTURES
• In secondary market G-Secs are traded on NDS which
• Financial instruments based on an agreement between 2
facilitates settlements of transactions.
parties to buy and sell an asset at a time in the future at a
certain price.
►MUTUAL FUND • Futures are traded on exchanges. (Note: Forwards are
• It is a fund that is created when a large number of merely contracts between parties and are not tradable on
investors put in their money, and then invests that sum in exchanges)
financial instruments.
• Managed by professional fund manager. ►OPTIONS
• Registered with SEBI • A financial contract sold by one party to another
transferring the right to buy/sell the underlying asset at a
stated date and at a stated price.
►EXCHANGE TRADED FUND
• While in the futures there is an obligation to sell the asset
• Fund created by pooling together assets and then dividing
at a future date, under options the investor is given an
this cumulated asset into individual units
option to sell or not sell.(no obligation)
• The value of the each unit comes from the value of the
underlying assets (shares of stock, bonds, foreign
currency, etc.) similar to mutual fund.
►COMMODITY MARKET
• The units are listed in the stock exchanges similar to • Facilitates trading in commodity futures
shares and can be traded like ordinary shares. • It may be a spot or a derivatives market.
• They are index funds meaning that they comprise of • In spot market, commodities are bought and sold for
shares of different companies. immediate delivery, whereas in derivatives market, various
financial instruments based on commodities are traded.
►ETF VS MUTUAL FUNDS • Regulated by SEBI since 2015.
• Both ETF and MF comprise of equities of different

companies. ►PARTICIPATORY NOTES
• They differ with respect to the tradability on the stock • Instruments used by foreign investors not registered as
exchange. FPIs to invest in Indian stock market.
• While buying and selling of mutual fund means you are • They are not issued in India rather these are issued by an
transacting directly with the fund, the ETF is basically FPI registered in India to foreign investors.
traded on a secondary market just like shares. • Due to the anonymity of the investor, FPIs are considered
• While Mutual Fund is managed by a fund managers and unsafe
ETF is managed by the investor himself. • Regulated by SEBI.
• While mutual fund is bought and sold at the price of • In 2017, SEBI banned P-Notes in derivatives
shares at the close of the day, shares of ETF are traded
throughout the day
►SOVEREIGN WEALTH FUND
• Thus ETFs have more liquidity and marketability than MFs
• It is a fund set up by government to invest its surplus in
financial instruments like bonds, stocks, gold etc.
►DERIVATIVES
• The main objective is to earn a return on surplus funds
• Is a financial asset whose value is derived from the with the government.
underlying asset
• The fund could be maintained either in domestic or
• The underlying asset can be another financial asset like
reserve currency.
currency, shares, stock, bonds etc or physical asset like
• Commonly they are foreign currency funds of the
gold, agricultural commodity etc.
sovereign governments set up in order to invest in global
• Two classes of derivates are futures and options.
equities, real estate, infrastructure (oil), corporate debt etc.
36
FINANCIAL MARKET
►NATIONAL INFRASTRUCTURE AND requirements of distressed projects falls

assets. under this
INVESTMENT FUND category.
Any fund that does not
• Only sovereign wealth fund set up by India. fall in the other two
• It is a quasi-Sovereign Wealth Fund in the sense that 49% is categories.
owned by the Indian Government and the remaining is III Those funds primarily Hedge funds,
owned by domestic and foreign investors. created for complex trading Fund of Funds
• Foreign sovereign wealth funds such as Abu Dhabi strategies with view of etc.
Investment Authority have invested in NIIF. making short term gains
• It is primarily set up to support infrastructure financing and thus carry high-risk are
categorized in Category III.
• Set up an Alternative Investment Fund Category II.
►ALTERNATE INVESTMENT FUND ►NATIONAL PENSION SCHEME

• Any privately-pooled financial investment vehicle which is • Launched in 2004 with the objective of providing
not regulated under the conventional regulation rules of retirement income to all the citizens except armed forces
SEBI, RBI, IRDA or PFRDA. (one rank one pension).
• SEBI guidelines 2012 regulate Alternative Investment • Since 2009 it is applicable to all citizens from 18-60 years of
Funds in India. age.
• Accordingly • NPS-Lite also called ‘Swavalamban’ was launched in 2010
ο They tailor-made private investment vehicles for unorganized sector which is now replaced with Atal
established in accordance with a pre-defined purpose. Pension Yojana.
ο Shall not be utilised for giving loans. • PFRDA is responsible for administration of the NPS.
ο Generally created in the form of a trust, a company, a
• 2 accounts under NPS
body corporate or an LLP.
• Tier I account
CATEGORIES OF AIF
• Focuses on retirement savings as the goal
• 3 categories based on the purpose for which these funds
are instituted. • Non-withdrawable and provides tax benefits under 80C
Category Purpose Source • Tier II Account
• Meant for investment purposes.

I These funds are generally Venture capital
instituted to initiate a pre- funds including • Voluntary market-linked investment vehicle.
defined project or invest Angel Fund, SME
• No tax benefits under 80C
in early stages of the Funds, Social
project. venture funds, • The subscriber is free to withdraw savings from this
Infrastructure account.
Eg: Start-up, social ventures,
SMEs, infrastructure etc funds etc. • Tier II account is flexible with range of products including
where the project is equity, mutual funds, government bonds etc.
considered to be socially or
• Can be allocated into four asset classes including
economically desirable.
1. Equity (E) – double digit return but high risk
II These funds are generally Debt Funds, Real
instituted for the purposes Estate Funds, PE 2. Corporate bonds (C) – high return with risk of default
of meeting the operational Funds, 3. Government Bonds (G) – moderate return with low risk
requirements of an Distressed Asset
4. Alternative Investment Funds such as private equity
already running project. Funds etc.
funds, REITs, Invits (A) – High risk high return
Besides these funds may Therefore the AIF
also be instituted for the announced for
purpose of fulfilling stalled housing
37
FINANCIAL MARKET
• It involves investors (individuals, corporate, mutual fund s)
CURRENT AFFAIRS depositing gold with a bank which is inturn lent to
borrowers (jewellers) in the form of gold bars.
►UDAY BONDS
• In addition banks can use gold for mandatory reserve
• Bonds issued by the state discoms to finance the debt
requirements (CRR, SLR), buy forex.
accrued on account of distribution losses and low tariffs of
electricity. • For the purpose,
• They are issued to finance 25% of the debt and 75% of ο The investors open a gold-denominated savings bank
which will be taken up by the state governments under the account where the deposits earn an interest
UDAY scheme.
ο The borrowers of gold have a ‘gold loan account’ similar
to a loan upon which they pay interest.
►PANDA BONDS MAIN OBJECTIVES
• Yuan-denominated bond issued in the Chinese mainland • To mobilize the gold held by households and institutions.
market by an overseas entity.
• To facilitate the gems and jewellery sector to avail gold
• Usually issued by foreign companies and Chinese
domestically
companies operating overseas to raise capital.
• To reduce gold imports and thus Current Account Deficit
• International Finance Corporation and Asian Development
Bank have issued Panda Bonds in 2005. Note: From February 2019, charitable institutions and
• Besides countries like Philippines and most recently government entities are allowed to invest under gold
Pakistan have issued Panda bonds. monetization scheme
SIMILAR BONDS
• Dim Sum Bonds: Yuan denominated bonds issued in ►SOVEREIGN GOLD BONDS
Hong Kong. • Government securities denominated in grams of gold.
• Samurai Bonds: Yen-denominated bonds issued in Japan
• Investors pay the issue price in cash and the bonds will be
by a foreign company.
redeemed in cash on maturity.
• Yankee Bonds: Dollar denominated bonds issued in the
• Superior alternative to holding gold in physical form due to
U.S. by a foreign entity
the elimination of risks and costs holding gold
• Introduced to reduce gold imports
►URIDASHI MASALA BONDS
• Eligibility: Only resident Indian entities, including
• Special type of Masala Bonds issued in Japan bought by
individuals, HUFs, trusts, universities and charitable
the Japanese retail investors.
institutions.
• They are used raise private sector capital in India.
• The minimum permissible investment limit will be 1 gram
• Offer higher interest rates to Japanese investors compared
to low interest rates due to negative interest rate policy in of gold, while the maximum limit will be 4 kg for individual,
Japanese economy 4 kg for HUF and 20 kg for trusts.
• Can be used as collateral for loans.
►MASALA BONDS
• Rupee-denominated bonds issued by Indian entities (both ►BHARAT BOND ETF
public and private) in overseas market. • Debt-based ETF made by pooling bonds issued by central
• Thus the investor is shielded from exchange rate public sector enterprises
fluctuations because interest and principal are paid at the
• 1st corporate bond ETF of India
rates prevailing at the time of buying the bonds
• Primarily a debt fund (Bharat 22 ETF was equity fund)
►GOLD RELATED INVESTMENTS • It will invest in AAA-rated PSE bonds

• Minimum investment: Rs.1000
GOLD MONETIZATION SCHEME
• Maximum investment for retail investors: Rs. 2 Lakh
• Scheme is to mobilize the gold that is kept dormant with
the households in the economy • Maturity Period: 3-year and 10-year
38
FINANCIAL MARKET
►IMPACT BONDS 2. Transfer of management control to a strategic partner

(mostly private sector)
• Innovative way of financing development
• Government identifies a ‘strategic partner’ (mostly private
• Way to attract private capital to social projects
sector) and transfers the management control and sheds
• Unsecured bonds to raise funds towards a project with a 51% of its ownership
social impact or development impact
EXAMPLES
• The investors agree to pay on the condition that the
1. Strategic partner: 51 %; Government: 49%
money raised has led to pre-determined verifiable
outcomes. 2. Strategic partner: 26%; Government: 26%; Shares with
public: 48%
• While Department of Investment and Public Asset
►WOMEN LIVELIHOOD BONDS
Management (DIPAM) is the nodal agency for the
• Unsecured, unlisted bonds jointly issued by World Bank, Disinvestment in India, decisions on strategic sale is taken
UN Women and SIDBI by an inter-ministerial body called Alternative Mechanism.
• To enable individual women entrepreneurs in
agriculture, food processing, services, and
►NATIONAL INVESTMENT FUND
manufacturing to borrow.
• Aimed at graduating SHG women from group borrowing to • Fund set up to channelize the proceeds from
individual borrowing. disinvestment of Central Public Sector Enterprises.
• Limit: Rs.1 lakh to Rs. 1.5 lakh at 13% per annum • It is a permanent fund as it is classified under Public
Accounts of India
• Purpose
►UTKRISHT IMPACT BOND
• Recapitalization of public sector banks and public sector
• Worlds 1st health impact bond
insurance companies.
• Launched to reduce number of maternal, neo-natal deaths
• Investment in RRBs/IIFCL/ NABARD/Exim Bank
in Rajasthan
• Equity infusion in various Metro projects
• Outcome payers are USAID and Merck for Mothers.
• Investment in Indian Railways towards capital expenditure.
• Outcome payers are intermediaries between investor and
implementing agency
►REITS AND INVITS
►GREEN BONDS REITS
• Real Estate investment Trust
• Proceeds of such Bonds are exclusively used for financing
green projects such as renewable energy projects, climate • Similar to mutual fund, investors hold units of ReITs that
change, reducing fossil fuel emissions etc. are traded in the bourses
• The Indian Railway Finance Corporation Ltd (IRFC) has • Invests mostly real estate projects, both completed and
established a Green Bond Framework for fund raising to unfinished projects.
finance the Dedicated Freight Corridor project and • Certain percentage of investments can also be made in
electrification of the railways. equity of real estate companies and G-Secs.
• Regulated by SEBI
►STRATEGIC DISINVESTMENT INVITS
• Disinvestment is a mechanism by which the government • Infrastructure counterpart of ReITs
sheds its ownership in a company. • Similar to mutual fund to invest in infrastructure sector
• This can be by way of sale of shares (Eg: LIC IPO issue), • Regulated by SEBI
cross-holding, golden share (26% retained by the
• 2 types: One which invests in completed projects and
government) and strategic sale.
another which invests in unfinished projects
STRATEGIC SALE
• It necessarily involves
►INVERTED YIELD CURVE
1. Shedding of ownership by the government below 51%
• Yield curve is a graph that depicts interest rates on bonds
39
FINANCIAL MARKET
• It is an important indicator of present and future economic ►GOLDEN SHARE
conditions in a country.
• Type of share that gives the shareholder (mostly
• Normally, the yield on short term maturity bonds is lower
government) the veto power in decision making
than that of long term maturity bonds and thus the yield
• Mostly used to accelerate disinvestment without
curve is upwards sloping.
government losing control over decision making.
• Inverted yield curve is an indicator that the economy is
slowing down.
►INVESTOR EDUCATION AND
PROTECTION FUND
• Set-up under the Companies Act, 1956 to support the
activities relating to investor education, awareness and
protection
• The fund is set up out of the following funds if they are
unclaimed and unpaid for a period of seven years
ο Unpaid dividend
ο Application money due for refund
ο Matured deposits
• Recommendations on how to spend the money so accrued

is made by Investor Education and Protection Fund
DIFFERENTIAL VOTING RIGHTS AND GOLDEN SHARE
Authority set up under Ministry of Corporate Affairs.
• Shares that have special voting rights disproportionate to
their economic holding
• 2 types
►INNOVATORS GROWTH PLATFORM
ο Shares with superior voting rights
• Platform on stock exchanges where start-ups can list and
trade on their shares.
ο Shares with lower voting rights
• It is a platform where listing norms such as IPO norms,
• The Companies (Share Capital and Debentures) Rules 2014
pre-issue capital etc are eased for start ups
allows the issue of shares with differential voting rights.
• The capital raised through shares with differential voting
rights must not exceed 74% of the total capital raised
through the issuance of shares.
40
SECTION 5
XTERNAL ECTOR
►BALANCE OF PAYMENT • Crisis on current account is called BOP Crisis.
• Record of all transactions being done in foreign currencies

in a country ►CAPITAL ACCOUNT TRANSACTIONS
• RBI maintains the BoP account in India. • Transactions in foreign currency other than current
account transactions.
• It is divided into balance of trade and balance of invisibles
• It includes
►BALANCE OF TRADE ο Foreign investments (FDI and FPI)
ο Borrowings
Transactions in foreign currencies on account of exports and
imports if ‘goods’ only. ο Deposits (NRI deposits)
ο External assistance and grants
►BALANCE OF INVISIBLES
• Transactions in foreign currencies on account of import ►CONVERTIBILITY
and export of services such as banking, IT, shipping, • Treating a foreign currency same as domestic currency
consultancy etc. In addition it also includes foreign both in domestic and overseas market.
currency transactions on account of • It means absence of restrictions from government on
ο inward and outward tourism conversion of currency and also on its end use.
ο inward and outward remittances • It means freedom for residents to
ο inward and outward education ο maintain both home currency and foreign currency in
bank accounts
►CURRENT ACCOUNT TRANSACTIONS ο remit outside the country
Balance of Trade and Balance of Invisibles transactions ο invest in global stock markets
constitute what is called Current Account transactions ο domestic companies can borrow funds from both
international and domestic markets
ο exchange currency like commodities
►CURRENT ACCOUNT DEFICIT
ο domestic companies can raise capital by way of issue of
• Inflows of foreign currencies are less than outflows of bonds, shares etc.
foreign currency.
41
EXTERNAL SECTOR
• Currently India has full convertibility in current account but • Direct Investment • Indirect investment
partial convertibility in capital account
• Long term capital • Short Term capital
• Tarapore Committee – Roadmap for fuller convertibility
• Invests in financial & non- • Invests only in financial
►ECB, ADR/GDR AND FCCB financial assets assets
Ways in which private sector can access international market • Ownership and managerial • Only ownership
for raising capital. control
• Stable • Volatile
►EXTERNAL COMMERCIAL
• Entry & exit barriers exist • Entry & exit very easy
BORROWINGS
CURRENT FPI INVESTMENT LIMITS
• Foreign currency borrowings of Indian private sector from
the overseas market Type of Bonds Investment Limit
• Interest rates for ECB are linked to LIBOR
Central Government securities (G- 6%
• RBI sets the limit for ECB (automatic route) under FEMA. secs)
Currently it is $750 million
State Development Loans (SDLs) 2%
►AMERICAN DEPOSITORY RECEIPTS Corporate bonds 9%
• Mechanism to enable Indian corporate to offload shares to

raise capital from international market (Indian corporate ►FOREX RESERVES
cannot directly be listed due to lack of capital account
• Comprises of country’s foreign currency assets, gold
convertibility)
reserves, contributions made to IMF in the form of SDR,
• Shares in depository are similar to shares but with no
contributions under Financial Transaction Plan, etc.
voting rights
• RBI is the custodian of forex reserves in India
►FOREIGN CURRENCY CONVERTIBLE

►APPRECIATION
BONDS
Increase in the value of one currency with respect to other
Quasi-debt instruments issued by Indian companies issued in foreign currencies.
foreign currency with the option of converting to equity at
pre-determined rates.
►DEPRECIATION
Fall in the value of a currency in comparison to a foreign
►FOREIGN DIRECT INVESTMENT
currency
• Long-term investment in India with the intention of
managing business in India
►DEVALUATION
• Both the ownership and control of the firm is with the
investor. • Occurs when a country makes a conscious decision to
lower its exchange rate in a fixed or semi-fixed exchange
rate.
►FOREIGN PORTFOLIO INVESTMENT
• Done in order to make exports cheaper
• Also called ‘hot money’
• Primary reason for currency war
• Represent short-term inflows such as investment in
shares, bonds, debentures, etc.
►STAGES OF TRADE INTEGRATION
NOTE: As per SEBI regulations equity investment not
exceeding 10% of the total paid up capital of the company is • Trade integration refers to free movement of goods,
FPI and any investment above 10% is FDI. services, investment and people across the countries.
MOST FAVOURED NATION
FDI FPI
• Non-discrimination in terms of tariffs on goods coming
• Active Investment • Passive Investment from a country as compared to that from rest of the world.
42
EXTERNAL SECTOR
For example under WTO all member countries are given • Implemented by Export Credit Guarantee Corporation
MFN Status. • Extends insurance cover to the banks which give loans to
• Preferential Trade Agreement the exporter
• Members agree to give preference in terms of lower tariffs • Provides insurance cover of up to 90% of the principal and
to select list of goods coming from a partner as compared interest.
to those coming from rest of the world. For Example CEPA
• Thus enhances bank’s ability to extend more loans to the
and CECA of India.
exporters to meet their capital requirements
• Free Trade Agreement
• Members agree to reduce or eliminate tariffs on all goods
►INDIA AND RCEP
coming from a partner as compared to those coming from
rest of the world. For example RCEP. • Mega trade deal among 16 countries – the 10 ASEAN
• Custom Union countries and 6 countries with which the ASEAN bloc has
free trade agreements (FTA).including India, Australia,
ο Goods coming from member countries are treated the
China, South Korea, Japan and New Zealand.
same way as domestic goods in terms of tariffs. For
example Customs union of Russia, Belarus and • India has decided to call-off signing of the deal on account
Kazakhstan. of following issues.
• Common Market ο Domestic dairy industry may take a hit due to cheaper
alternatives from countries Australia and New Zealand.
ο Customs Union with provisions to facilitate free
movements of labour and capital. For example ο Fearing an influx of cheap Chinese imports (particularly
Mercosur. steel) into India
• Economic Union ο India is not favouring the signing of data protection

regime of RCEP
• Common fiscal/monetary policies, currency, shared
executive, judicial and legislative institutions. For example
EU (European Union). ►CURRENCY WAR
• Triggered when nations either allow their currencies to
►COMPREHENSIVE ECONOMIC weaken appreciably or devalue them to gain a competitive
COOPERATION AGREEMENT (CECA) advantage over trade rivals.
• Such competitive lowering of currency values using
• CECA involves only “tariff reduction/elimination in a
phased manner on listed / all items except the monetary and exchange rate instruments is described as
negative list and tariff rate quota (TRQ) items. “international currency wars”.
• In a comparable economic standing, CECA is considered as

the first step or a stepping stone to accomplish CEPA. ►DEVALUATION
• Monetary policy tool to reduce the value of a currency,
►COMPREHENSIVE ECONOMIC relative to other currencies, in a fixed exchange rate or
‘pegged currencies’
PARTNERSHIP AGREEMENT (CEPA)
• On the other hand, a currency is said to have depreciated
• It has the same components of CECA with an additional
if the market forces reduces the value of a currency.
focus and options in the terms of trade investments and
services. It is a wider term than CECA and has the widest REASONS TO DEVALUE CURRENCIES
coverage. 1. To boost exports
• The India Japan CEPA is one such example and it covers a 2. To shrink a trade deficit
broad range of other areas like trade facilitation and 3. To reduce the debt servicing burden
customs cooperation, investment, competition, IPR etc.
►TIME RELEASE STUDY (TRS)
►NIRVIK SCHEME • Internationally recognized tool advocated by World
• New export credit insurance scheme Customs Organization to measure the efficiency and
effectiveness of international trade flows.
43
EXTERNAL SECTOR
• It measures rule based and procedural bottlenecks from number of TRQs are operated each year by WTO members
the time of arrival until the physical release of cargo. such as EU, Japan, Canada and the US.
• The aim is to identify and address bottlenecks in the trade • They are made applicable on a wide range of products,
flow process and take the corresponding policy and particularly the agricultural commodities. TRQs have
operational measures required to improve the now become a way of reaching a consensus with trading
effectiveness and efficiency of border procedures, without partners.
compromising efficient trade control. • This is because, on one hand, the TRQs protect the
• The initiative is on ground is led by the Central Board of domestic manufacturers by reducing the import of
Indirect Tax and Customs. cheaper products and on the other hand, it ensures that
the consumers in the importing country are able to get a
limited number of imported goods at cheaper prices.
►WORLD CUSTOMS ORGANISATION
IMPORTANCE OF TRQS FOR INDIA
• Only inter-governmental organisation engaged in setting
up and implementation of principles and standards for • Presently, India has a trade deficit of around $110 billion
cross border procedures and customs. with the RCEP member countries. Hence, if India decides
to reduce the customs duty as part of RCEP negotiations,
• Headquartered in Brussels and has 180 countries as its
there could be further increase in the trade deficit. This
members.
can have adverse impact on the domestic
manufacturing and may go against the government's
►BONDED MANUFACTURING SCHEME stated objective of "Make in India".
• Scheme to promote Make in India under bond scheme, • Hence, India can protect its interests by insisting on TRQs
under Customs Act, 1962. as part of RCEP negotiations. Inclusion of TRQs in the RCEP
• It will be implemented by Central Board of Indirect Taxes would enable India to fulfil its dual objective of trade
and Customs, under Ministry of Finance. integration and protection of domestic manufacturing.
SALIENT FEATURES
• Deferred duty on capital goods ►DOMESTIC CONTENT
• Deferred duty on imported raw materials REQUIREMENTS
• Seamless warehouse to warehouse transfer Recently, a WTO dispute resolution panel has ruled in favour
of India in a case against the U.S. saying that America’s
• No fixed export obligation
domestic content requirements and subsidies provided by
eight of its states in the renewable energy sector are violative
►TARIFF RATE QUOTA of global trade norms.
In order to fulfil the dual objective of protecting domestic THE ISSUE BETWEEN USA AND INDIA
manufacturing and to promote trade integration, there is
• Certain states in the U.S. provided tax incentives to local
need for India to insist on Tariff rate Quota in the trade
producers on producing solar energy by using locally
negotiations.
manufactured solar module cells. Such tax incentives were
WHAT IS TARIFF RATE QUOTA (TRQ)? not available to the producers when they used imported
• A country imposes two types of trade barriers- Tariff solar cell modules.
(Customs Duty) and Non-Tariff barriers (Quota). Quota • The US imports almost 44% of the India's overall exports of
refers to the quantitative restriction imposed by a country solar module cells. Hence, imposition of domestic content
on its imports. requirement in USA would have adversely impacted Indian
• Tariff rate Quota is a combination of Tariff and Non- exports.
Tariff barrier. Under this mechanism, a country may
• Accordingly, in September 2016, India dragged the U.S. to
import goods at lower or nil rate of customs duty only up
WTO’s dispute settlement mechanism over America’s
to a certain limit (Quota). However, once the quota is
domestic content requirements.
breached, the country imports the goods at higher
customs duty. GLOBAL TRADE NORMS ON DOMESTIC CONTENT
REQUIREMENTS
USE OF TRQS IN GLOBAL TRADE
• Article III of the WTO’s General Agreement on Tariffs and
• The TRQ is provided under various trade agreements
Trade (GATT) requires that countries should not provide
signed between the countries. It is estimated that a large
44
EXTERNAL SECTOR
less favourable treatment to ‘like products’ originating investors and participants in sovereign debt markets of
from other nations. For instance, a solar photovoltaic cell India.
manufactured in the U.S. should be liable to the same • Create space for private sector investment: Quantum
amount of tax as one made anywhere else in the world. of government borrowing domestically is crowding out the
• The "Like Product" is distinguished based upon the private sector investment since Government borrowing
product’s end use, composition, substitutability, consumer accounts for about 80-85% of domestic savings. Hence,
preferences etc. issuance of such overseas bonds would enable the private
sector to raise money in the domestic market.
ARGUMENT OF THE US GOVERNMENT
• Positive Image of Indian Economy: Appetite of the
• The U.S. conceded that the import from India was a ‘like
international market for Indian bonds and their price will
product’. However, it highlighted that the positive
also say a lot about how India is viewed globally on the risk
incentives given by the states in US would have no impact factor. India is not likely to be viewed as a risky proposition
on the import of solar module cells from India. by the international market and so is likely to fetch an
DECISION OF THE WTO DISPUTE RESOLUTION PANEL attractive rate for the bonds.
• The WTO panel highlighted that positive incentives • Underdeveloped Bond Market in India: The Bond
provided by the states in USA does not create a level Market is underdeveloped in India and it is not able to
playing field between the solar module cells manufactured cater to investment needs of the Government and private
in India and those manufactured in USA. sector.
• The domestic content requirement discriminates against PROBLEMS AND CHALLENGES

the imported Indian Solar Module cells. Accordingly, the • Precedents from other developing economies:
WTO dispute panel ruled in favour of India. Economists have cautioned that India might follow the
path of some Central and South American countries such
as Mexico and Brazil. In the 1970s, these countries
►FOREIGN SOVEREIGN BONDS
borrowed heavily overseas. However, when their
Government plans to raise a portion of its gross borrowing currencies depreciated sharply a decade later, these
from overseas markets. The governme and the RBI will countries could not repay their debt.
reportedly finalize the plans for the overseas issue of • Can lead to Rupee appreciation curbing exports:
sovereign bonds. Overseas borrowing can lead to quicker increase in India's
WHAT ARE FOREIGN SOVEREIGN BONDS? foreign exchange reserve, which would lead to a stronger
rupee. A stronger rupee would encourage imports and
• A government bond or sovereign bond is a form of debt
disincentives exports leading to adverse current account
that the government undertakes wherein it issues bonds
deficit.
with the promise to pay periodic interest payments and
also repay the entire face value of the bond on the • Difficult to handle future risk: If the debt of the
maturity debt. government is in domestic currency, then in case of a
crisis, the government can simply print more money to
• So far, the government has only issued bonds in the
fulfill its debt obligations. This option will not be available
domestic market (G-Sec). The Government now plans to
in case of overseas bond issue as Indian government
issue overseas bond which would be denominated in cannot print foreign currency to repay its debt.
foreign currency.
• Low interest rates may be offset by depreciation of
BENEFITS FOR ISSUING BOND Rupee: The lower dollar interest rate in foreign markets
• Low exposure to External Debt: Currently, India's may be offset in the long run by higher principal
sovereign external debt to GDP is among the lowest repayments as the rupee depreciates against the dollar.
globally at less than 5%. So, if external borrowing is done • Can lead to overdependence in future and cause
moderately it will not be of much concern. Government trouble: A small issuance will likely not be problematic.
has planned to borrow about $10 billion, which works However, if the government keeps issuing such bonds, it
out to about 10% of its gross market borrowing. may cause financial trouble in future.
• Cheaper Loans: Foreign borrowing can be cheaper • Negative Impact on prospects of Rupee
because dollar or yen interest rates are lower than Internationalization: In the past, India has stated its
rupee interest rates. This will bring a whole new set of desire to internationalize the rupee. However, the
Government’s proposal to issue sovereign bonds would
45
EXTERNAL SECTOR
encourage the investors to invest in Government bonds in ►REMISSION OF DUTIES AND TAXES
terms of foreign currency and hence would have negative
impact on Rupee Internationalization.
ON EXPORTED PRODUCTS (RODTEP)
SCHEME
►PARIS PACT INITIATIVE • Under the scheme, a mechanism would be created for re-
• Paris Pact is a group of 58 countries and 23 International imbursement of taxes/duties/levies, which are currently
Organisations affected with drug trafficking of Afghan not being refunded under any other mechanism, at the
Opiates. It functions under the UN Office on Drugs and central, state and local level. But these duties are incurred
Crime. in the process of manufacture and distribution of exported
products.
• It has provided the platform for the Member Countries
and International Organizations to coordinate and combat • The scheme is conceptualised keeping in view the WTO
the trafficking and consumption of opiates on the principle provisions, particularly the Agreement of Subsidies and
of common and shared responsibility. Countervailing Measures (ASCM).
• India is a member country of the organisation.

• The concept of the Paris Pact centers around ►PROJECT MONITORING GROUP
developments along major opiate trafficking routes. For • It is an institutional mechanism of DPIIT to expedite
this reason, the “priority countries” identified by Paris Pact resolution of issues and removal of regulatory bottlenecks
partners are primarily located in West and Central Asia and in projects, with investment upward of Rs 500 crore in
South Eastern Europe to shed light on how countries India.
situated along the northern and Balkan routes are affected • Invest India provides institutional support to it.
by the menace of opiates. In response to shifts in opiate
trafficking, more recently focus is also placed on certain
trajectories of the southern route.
46
SECTION 6
NFRASTRUCTURE,
MPLOYMENT AND
NERGY
sickness, maternity, disablement and death due to
LABOUR RELATED employment injury and to provide medical care to the
insured employees and their families.
►ESIC
• Administered by a statutory corporate body called the
Ministry of Labour has decided to reduce the contribution of Employees' State Insurance Corporation (ESIC).
the employees and employers under the Employees State
• It is a self-financing scheme. The ESI funds are primarily
Insurance Scheme. The reduced rates have come into effect
built out of contribution from employers and employees
on July 1, 2019.
payable monthly at a fixed percentage of wages paid.
ABOUT EMPLOYEES’ STATE INSURANCE SCHEME (ESIC)
• It extends to all the factories employing 10 or more
• ESIC is a multi-dimensional Social Security Scheme employees. Further, it covers all the employees with
tailored to provide Socio-economic protection to the wages up to Rs 21,000.
'employees' in the organized sector against the events of
47
INFRASTRUCTURE, EMPLOYMENT AND ENERGY

NEW CHANGES IN THE RATES OF CONTRIBUTION • It has also proposed several new initiatives including
universal social security for unorganized sector workers
EARLIER NORMS NEW NORMS
and insurance and health benefits for gig workers.
Total Contribution 6.5% 4% • NEED FOR THE SOCIAL SECURITY CODE
The Second National Commission on Labour (2002) had
Employer Contribution 4.75% 3.25%
recommended that the existing set of labour laws relating to
Employee Contribution 1.75% 0.75% social security should be grouped into a single Social Security
Code.
HOW IS IT GOING TO BENEFIT?
AIM OF THE CODE
• Reduce the contribution of the workers.
a) Provide a legislative back-up and an Administrative
• Facilitate more enrolment of workers under the ESI
Structure for a rights based, Universal basic Social Security
scheme.
to the entire workforce in the Country.
• Reduction in the share of the employers would reduce the
financial liability of establishments. b) Provide universal social security including Pension,
Sickness Benefit, Maternity Benefit, Disablement Benefit
and various other kinds of benefit to the workers.
►MATERNITY BENEFIT (AMENDMENT)
c) Cover all kinds of employment including part-time
ACT, 2017 workers, casual workers, fixed term workers, domestic
• Provisions of Maternity Benefit have been extended to workers etc.
'commissioning mother' ie a biological mother who uses d) Merge, simplify, rationalize and consolidate the
her egg to create an embryo implanted in any other
fragmented labour legislations and Schemes on social
woman.
security to make them less complex, easier to implement,
• Duration of maternity leave has been increased to 26 comprehensive and effectively enforceable.
weeks from 12 weeks previously. Maternity benefit can be
IMPORTANT PROVISIONS OF THE SOCIAL SECURITY CODE
availed before 8 weeks from the date of expected delivery.
• Rationalisation and Amalgamation of Laws: Merge
• However, for a woman who has two or more than two
eight existing labour laws including Employees’
children, maternity benefit will be available for only 12
weeks and from 6 weeks before the date of delivery. Compensation Act, 1923; Employees‘ State Insurance Act,
1948; Employees‘ Provident Funds and Miscellaneous
• A woman who adopts a child below the age of three
Provisions Act, 1952; Maternity Benefit Act, 1961; Payment
months or a commissioning mother shall be entitled for 12
of Gratuity Act, 1972; Cine Workers Welfare Fund Act, 1981;
weeks of maternity benefit from the date the child is
Building and Other Construction Workers Cess Act, 1996
handed over to the adopting mother.
and Unorganized Workers‘ Social Security Act, 2008.
• If the woman can work from home, the employer may
allow her to work from home after the period of work of • Social Security Board for unorganised workers: Set up
maternity benefit for such period on which the woman and the National level and state level Social Security Board for
employer mutually agree. the benefit of the unorganised workers.
• Mandatory creche facility for every establishment having • Advisory Committees: Set up the National level and state
more than 50 employees. The employer to allow the level Advisory Committee for Unorganised Workers for the
mother to visit her child for 4 times a day, with a provision benefit of the unorganised workers. Its mandate would be
of time for rest. to advise the Central and State Governments upon such
• Every establishment to intimate a woman employee in matters arising out of the administration of this Code
writing and electronically at the time of appointment relating to unorganised workers.
regarding benefit available to her under the Act. • Corporatization of EPFO and ESIC: Pension, insurance
and retirement saving bodies including EPFO and ESIC will
►SOCIAL SECURITY CODE BILL, 2019 be body corporate.
ABOUT SOCIAL SECURITY CODE • Social Security Cover for unorganized sector
employees: Central Government shall formulate suitable
• The code has been formulated in order to merge eight
welfare schemes for unorganised workers on matter
existing laws related to the social security of the
relating to life and disability cover; health and maternity
workers.
benefits; old age protection; and any other benefit as may
be determined by the central government.
48

• Benefits for Gig workers: The Central Government may service rendered by him. Further, no notice of
formulate suitable social security schemes for the benefit termination of employment is required at the expiry of the
of Gig Economy workers. fixed term.
• Maternity Benefit: No employer shall knowingly employ a • The objective of Fixed Term Employment is to provide
woman in any establishment during the six weeks flexibility to the Industries in hiring the human
immediately following the day of her delivery, miscarriage resources according to their demands. It also seeks to
or medical termination of pregnancy. Further, every protect the workers from exploitation by the firms. The IR
woman shall be entitled to the payment of maternity Code bill 2019 provides that the fixed term employment
benefit at the rate of the average daily wage for the period workmen would not be paid compensation on their
of her actual absence. retrenchment.
• Employee Compensation: If personal injury is caused to • Speedier Resolution of Disputes: Two-member tribunal
an employee by accident or an occupational disease (in place of one member) introducing a concept that some
arising out of and in the course of his employment, his of the important cases will be adjudicated jointly and the
employer shall be liable to pay compensation. rest by a single member resulting speedier disposal of
• Imposition of Building and Other Construction cases.
Workers Welfare Cess: There shall be levied and collected
a cess for the purposes of social security and welfare of ►WAGE CODE BILL
building workers at such rate not exceeding two per cent
OBJECTIVE
but not less than one per cent of the cost of construction
incurred by an employer. • It seeks to regulate wage and bonus payments in all
employments where any industry, trade, business, or
manufacture is carried out.
►INDUSTRIAL RELATIONS CODE BILL
• The Code replaces the following four laws:
2019 (i) the Payment of Wages Act, 1936,
HIGHLIGHTS OF THE INDUSTRIAL RELATIONS CODE BILL (ii) the Minimum Wages Act, 1948,
2019
(iii) the Payment of Bonus Act, 1965, and
• Amalgamation of Central Laws: three Central Labour
(iv) the Equal Remuneration Act, 1976.
Acts- The Trade Unions Act, 1926; The Industrial
Employment (Standing Orders) Act, 1946; and IMPORTANT PROVISIONS OF THE CODE ON WAGES
Industrial Disputes Act, 1947 have been amalgamated. • Coverage: Will apply to all employees. Central
• Retrenchment of Workers: Industrial Disputes Act (IDA) government will make wage-related decisions for
requires firms employing more than 100 workers to seek employments such as railways, mines, and oil fields,
permission from their respective state governments to among others. State governments will make decisions for
retrench or lay off workers. In the bill, threshold for prior all other employments.
approval of state Government has been kept unchanged at • Floor wage: Central government will fix a floor wage,
100 employees, but IR code 2019 has added a provision for taking into account living standards of workers. Further, it
changing ‘such number of employees’ through notification. may set different floor wages for different geographical
• Fixed Term Employment: The Ministry of Labour and areas. The minimum wages decided by the central or state
Employment had included the category of 'Fixed Term governments must be higher than the floor wage. In case
Employment Workman' for all sectors in the Industrial the existing minimum wages fixed by the central or state
Employment (Standing Orders) Act, 1946. A fixed term governments are higher than the floor wage, they cannot
employment workman is a workman who has been reduce the minimum wages.
engaged on the basis of a written contract of employment • Fixing the minimum wage: Prohibits employers from
for a fixed period. paying wages less than the minimum wages. Minimum
• The standing orders provided that the fixed term wages will be notified by the central or state governments.
employment workman's service conditions as to hours of While fixing minimum wages, the central or state
work, wages, allowances and other benefits shall not be governments may take into account factors such as: (i) skill
less than that of a permanent workman and he will be of workers, and (ii) difficulty of work.
eligible for all statutory benefits available to a permanent • Overtime: Central or state government may fix the
workman proportionately according to the period of number of hours that constitute a normal working day. In
49

case employees work in excess of a normal working day, ABOUT PERIODIC LABOUR FORCE SURVEY (PLFS)
they will be entitled to overtime wage, which must be at • Earlier, the NSSO used to conduct quinquennial (5-year)
least twice the normal rate of wages. Employment-Unemployment Surveys (EUS) surveys in
• Payment of wages: Wages will be paid in (i) coins, (ii) India. The last such survey was conducted in 2012. These
currency notes, (iii) by cheque, (iv) by crediting to the bank surveys are the prime source for statistics about
account, or (v) through electronic mode. The wage period employment and unemployment situation in the country.
will be fixed by the employer as either: (i) daily, (ii) weekly, • Amitabh Kundu Committee recommended advised for
(iii) fortnightly, or (iv) monthly. adoption of PLFS to capture labour force related data on
• Deductions: An employee’s wages may be deducted on more frequent intervals.
certain grounds including: (i) fines, (ii) absence from duty, • The PLFS has been launched with an objective of
(iii) accommodation given by the employer, or (iv) recovery measuring quarterly changes of various labour market
of advances given to the employee, among others. These statistical indicators in urban areas as well as generating
deductions should not exceed 50% of the employee’s total annual estimates of these indicators both for rural and
wage. urban areas, which can be used for policy making.
• Determination of bonus: All employees whose wages do CHANGES IN THE NEW SURVEY
not exceed a specific monthly amount, notified by the
• The change in methodology was undertaken to assess the
central or state government, will be entitled to an annual
impact of changes in policy intervention in education
bonus. The bonus will be at least: (i) 8.33% of his wages, or
sector on employment.
(ii) Rs 100, whichever is higher. In addition, the employer
• As per the new criterion, the sampling design of PLFS was
will distribute a part of the gross profits amongst the
employees. This will be distributed in proportion to the formed in a way where out of 8 households selected in the
annual wages of an employee. An employee can receive a sample, 75 per cent had at least one member with 10th
standard education or above
maximum bonus of 20% of his annual wages.
• Gender discrimination: Prohibits gender discrimination in FINDINGS OF THE REPORT
matters related to wages and recruitment of employees • The overall labour force participation rate (LFPR) has
for the same work or work of similar nature. declined from 55.9% in 2011-12 to 49.8% in 2017-18.This
• Advisory boards: Central and state governments will highlights that almost half of India’s working age
constitute advisory boards. The Central Advisory Board population is not part of labour force.
will consist of: (i) employers, (ii) employees (in equal • The unemployment rate was 6.1 per cent in 2017-18
number as employers), (iii) independent persons, and (iv) which is considered to be highest in the last 45 years.
five representatives of state governments. State Advisory Further, the unemployment was higher in urban areas
Boards will consist of employers, employees, and (7.8 per cent) as compared to 5.3 per cent in rural areas of
independent persons. Further, one-third of the total the country.
members on both the central and state Boards will be • Further, a cause of concern is the low LFPR of the
women. The Boards will advise the respective females which stands at 23% in 2017-18.
governments on various issues including: (i) fixation of
• However, good news is that the share of workforce who
minimum wages, and (ii) increasing employment are receiving regular salary has increased to 47 per cent
opportunities for women.
from 43 per cent in 2011-12.This highlights that Indian
Offences: Penalties for offences committed by an work force is presently undergoing formalization.
employer, such as (i) paying less than the due wages, or (ii)
for contravening any provision of the Code. Penalties vary
►VISION ZERO
depending on the nature of offence, with the maximum
penalty being imprisonment for three months along with a • Concept of 'Vision Zero' is fast gaining international
fine of up to one lakh rupees. acceptance. It aims promote and improve occupational
health and safety standards in the country.
►PLFS REPORT • It has been developed by International Social Security

Association, world's leading international organisation for
National Statistical Office (NSO) under the Ministry of
social security institutions, government departments and
Statistics & Programme Implementation has released a agencies.
new regular employment-unemployment survey, namely,
Periodic Labour Force Survey (PLFS) during April, 2017.
50

• A conference on the VISION ZERO was organised by apprentices by establishment having 30 or more
Directorate General Factory Advice and Labour Institutes, workers will be mandatory.
Ministry of Labour and Employment. 3. Each establishment shall engage apprentices in a band
It based on four fundamental principles: of 2.5-15% of the total strength of the establishment
1. Life is non-negotiable including contractual staff, subject to a minimum of 5%
2. Humans are fallible of the total to be reserved for fresher apprentices and
skill certificate holder apprentices.
3. Tolerable limits are defined by human physical resistance
4. Minimum rate of stipend payable to apprentices per
4. People are entitled to safe transport and safe workplaces
month has been notified for different educational
It is based on principles of Controlling risks, Ensuring Safety
qualification of apprentices. During the 2nd year of
and Health in Machines, Equipment and Workplaces and Skill
apprenticeship, 10% increase in minimum stipend and
Upgradation of Workforce.
during third year 15% increase in the minimum stipend
will have to take place. Earlier payments were linked to
►DUAL SYSTEM OF TRAINING minimum wages.
• It enables industries and establishments to partner with 5. An establishment can engage apprentices of age
government and private ITIs for conducting training eighteen and above in normal working hours of the
programs under high employability courses so as to fulfil establishment. Apprentices under the age of eighteen
their skilled manpower requirements. It adds the shall be engaged in such training between the hours of
theoretical training imparted through it is and practical 8.00 am and 6.00 pm. Any relaxation in the same shall
training given by industry. be approved by the Apprenticeship Adviser, on case to
• It is a Program under the Ministry of Skill Development case basis.
and Entrepreneurship.
• Courses are conducted to meet the skilled workforce ►NATIONAL COUNCIL FOR
demand of industry. Trainees who complete the course
VOCATIONAL EDUCATION AND
are awarded National Trade Certificate who has an edge
over regular ITI pass outs. TRAINING (NCVET)
• All affiliated ITIs are eligible Merger of existing regulatory institutions in the skills space -
• It has been expanded to all the trades including service National Council for Vocational Training (NCVT) and National
sector trades, and trades in new and emerging sectors. All Skill Development Agency (NSDA) into the National Council
these courses will be NSQF aligned. for Vocational Education and Training
• Criteria for industries who can participate in the DST FUNCTIONS OF NCVET
scheme has been eased. • Regulate the functioning of entities engaged in vocational
education and training, both long term and short term
Minimum no of employees in • For Engineering: 40
industry • Establish minimum standards for the functioning of such
• For Non-engineering: 6
entities
• Recognition and regulation of awarding bodies,

►AMENDMENT IN APPRENTICESHIP assessment bodies and skill related information providers
RULES • Approval of qualifications developed by awarding and

Sector Skill Councils
In consultation with Central Apprenticeship Council, Central
Government notified amendments to Apprenticeship rules, • Indirect regulation of vocational training institutes through
1992. awarding bodies and assessment agencies
1. Period of apprenticeship for optional trade shall be a • Research and information dissemination
minimum of 6 months to maximum of 3 years. • Grievance redressal
2. Employers having four or more workers shall only be
eligible to engage apprentices and engagement of
51
ENERGY RELATED
Sector Installed Under Implementation Tendered Total Installed/
capacity (GW) (GW) (GW) Pipeline (GW)
Solar Power 32.53 25.05 25.78 83.36
Wind Power 37.28 9.64 2.20 49.12
Bio Energy 9.94 0.00 0.00 9.94
Small Hydro 4.65 0.55 0.00 5.20
Wind Solar Hybrid 0 1.44 0.00 1.44
Round the Clock (RTC) 0 0.00 1.60 1.60

Power
Total 84.40 36.68 29.58 150.66
► STATUS OF RENEWABLE ENERGY IN SIGNIFICANCE OF NATIONAL GAS GRID
INDIA • India's energy mix is dominated by coal and oil which

account for 86% of the electricity generation. The share of
• India is all set to cross the 100GW renewable energy
cleaner fuel, Natural Gas is quite lower at 6%. In this
capacity mark in 2020 and can make rapid strides towards
regard, the Government has been promoting Gas Based
the ambitious 175GW clean energy target by 2022.
economy to increase the share of gas in the energy mix to
• India has pledged to achieve 450 MW of renewable energy 15% by 2025.
in the long run. (Announced by PM at UN Climate Action
• Most of the Gas Pipelines are spread across the Western
Summit)
and Northern parts of India. This has not only caused
• India’s installed renewable energy generation capacity regional imbalances in terms of access to Natural Gas
touched around 84 GW in 2019. Infrastructure but also led to underutilisation of existing
pipelines wherein presently, only 45% of the existing
► NATIONAL GAS GRID capacity of pipelines is utilised making them economically
National Gas Grid comprising of Gas Pipelines, R-LNG unviable. National Gas Grid would lead to balanced
terminals and City Gas Distribution (CGD) networks is being distribution of natural gas infrastructure and optimum
developed in India. utilisation of existing pipelines.
DETAILS ABOUT NATIONAL GAS GRID • Increase in the use of CNG and LNG in the household and
transportation sector leading to reduction in emissions.
• At present about 16,788 Km natural gas pipeline is
operational and about 14,239 Km gas pipelines are being • Complement the development of Cross National Pipelines
developed to increase the availability of natural gas across such as TAPI Pipeline.
the country. • Create new demand centres along the pipelines and
• These pipelines have been authorized by Petroleum and facilitate industrial growth and employment creation.
Natural Gas Regulatory Board (PNGRB) and are at • Achieve the UN Sustainable Development Goal 7: Ensure
various stages of execution. access to affordable, reliable and sustainable energy for
AIMS AND OBJECTIVES OF THE NATIONAL GAS GRID all.
• To remove regional imbalance within the country with

regard to access of natural gas and provide clean and ►RUCO INITIATIVE OF OMCS
green fuel throughout the country. • It is an initiaitive of Ministry of Petroleum and Natural Gas.
• To connect gas sources to major demand centres and • RUCO Stands for Repurpose Used Cooking Oil.
ensure availability of gas to consumers in various sectors. • Repurpose Used Cooking Oil will be converted to biodisel.
• Development of City Gas Distribution Networks in
various cities for supply of CNG and PNG.
52

• Ensures entrepreneurs setting up Biodiesel plants will get ►IRAQ BECOMES TOP CRUDE
remunerative price and assurance of complete offtake of
production by oil companies.
EXPORTER TO INDIA
• Rs 51 per liter to be paid for biodiesel for first year, Rs 52.7 According to Directorate General of Commercial
for 2nd year and Rs 54.5 for third year. Oil companies will Intelligence and Statistics, Iraq has become India’s top
also bear the cost of transportation and GST for the first crude oil supplier for the second year in a row.
year. DETAILS
• Top crude oil suppliers to India are Iraq, Saudi Arabia,
►GAS TRADING HUB Iran, UAE and Venezuela with Iraq meeting 20% of India
crude requirements.
India is likely to set up its ambitious gas trading hub by the
first quarter of 2020-21, after the bifurcation of GAIL. • Saudi Arabia has traditionally been India’s top oil source,
but since 2017-18 Iraq is top exporter.
WHAT IS A GAS TRADING HUB?
• USA, which began selling crude oil to India in 2017, is fast
• Natural gas hubs are at the heart of gas infrastructure
becoming a major source.
networks such as pipelines and liquefied natural gas (LNG)
terminals. INCREASE IN THE IMPORT BILL
• The hub is used as a central pricing point for the • India meets around 80% of its crude oil requirements
network’s natural gas i.e. the natural gas price is through imports.
completely market determined based on forces of • Every dollar increase in the price of oil raises the import
demand and supply. bill by around ₹10,700 crores on an annual basis. Further,
HOW IS THE NATURAL GAS PRICE FIXED IN INDIA? in the long run, the higher crude oil prices may lead to
higher rate of inflation, adverse Current Account
• Currently, the government fixes the prices of the
Deficit and affect macro-economic stability.
domestically produced natural gas. The rate is arrived at
using price prevalent in gas-surplus nations of US,
Canada, UK, and Russia. ►STRATEGIC PETROLEUM RESERVE
• This shows that the domestic prices of the natural gas (SPR)
does not reflect the demand and supply of the natural gas
1.33 MMT Visakhapatnam Strategic Petroleum Reserve (SPR)
within India, rather it is based on international facility of Indian Strategic Petroleum Reserve Limited (ISPRL)
benchmarks. to boost energy security. The Facility has the largest
BENEFITS OF GAS TRADING HUB? underground storage compartment in the country.
• Bring down the domestic price of natural gas through ABOUT INDIA’S STRATEGIC PETROLEUM RESERVE
greater transparent competition and as a result of the • It is India’s strategic plan to build an emergency stockpile
price discovery mechanism. with millions of barrels of crude oil.
• Help in increasing the share of natural gas in the • Under the first stage of the SPR project, underground rock
energy basket to 15% by 2030, up from 6% at present. caverns for total storage of 5.33 MMT of crude oil at three
OPERATOR locations — Visakhapatnam (1.33 MMT), Mangalore (1.5
MMT) and Padur (2.5 MMT) have been commissioned.
• Indian Energy Exchange will set up the national gas
• Two more SPRs with a combined capacity of 10 million
trading hub.
metric tonnes (MMT) — at Chandikhole in Odisha and at
• MAJOR GAS HUBS OF THE WORLD Bikaner in Rajasthan.
• The world’s biggest natural gas hub is the Henry Hub in • SPRs are administered by the Indian Strategic Petroleum
the U.S. state of Louisiana. Reserves Ltd, an SPV set up by the Oil Industry
• In Europe, Britain’s National Balancing Point (NBP) and Development Board, under the Ministry of Petroleum and
the Dutch Title Transfer Facility (TTF) have emerged as Natural Gas.
the main natural gas hubs. • The three Strategic Petroleum Reserves can help meet 10
• China has also planned to launch a natural gas trading hub days of crude requirement. The two new ones will stretch
in Chongqing. that supply to 12 more days.
• Indian refiners also maintain crude oil storage
(industrial stock) of 65 days. Thus, a total of 87 days (22
by ISPL + 65 by Indian refiners) of oil consumption will be
53

made available in India after completion of Phase II by • enhance transparency and
ISPR. This will be very close to 90 days mandate by the IEA. • reduce administrative discretion
3 BIGGEST 'GLOBAL STRATEGIC PETROLEUM RESERVES' FEATURES OF HELP
The United States> China>Japan Following are the main aspects of HELP:
• Uniform License: It provides for a uniform licensing
►OPEN ACREAGE LICENSING POLICY system to cover all hydrocarbons such as oil, gas, coal bed
(OALP) methane etc. under a single licensing framework, instead
of the present system of issuing separate licenses for each
Ministry of Petroleum and Natural Gas recently signed kind of hydrocarbons.
contracts for 7 blocks, awarded under OALP.
• Open Acreages: Option to a hydrocarbon company to
ABOUT OALP select the exploration blocks throughout the year without
• It is a critical part of the Hydrocarbon Exploration and waiting for the formal bid round from the Government.
Licensing Policy (HELP). It provides uniform licences for • Revenue Sharing Model: NELP’s production sharing
exploration and production of all forms of contract is replaced by an easy to administer “revenue
hydrocarbons, enabling contractors to explore sharing model”. The earlier contracts were based on the
conventional as well as unconventional oil and gas concept of profit sharing where profits are shared
resources. between Government and the contractor after recovery of
• Under the OALP, once an explorer selects areas after cost. Under the new regime, the Government will not be
evaluating the National Data Repository (NDR) and concerned with the cost incurred and will receive a share
submits the expression of interest (EoI), it is to be put up of the gross revenue from the sale of oil, gas etc. The
for competitive bidding and the entity offering the bidder giving the highest net present value of revenue
maximum share of oil and gas to the government is share to the Government will win.
awarded the block. • Marketing and Pricing Freedom has been granted,
WHY OALP? subject to a ceiling price limit, for new gas production from
• By placing greater discretion in the hands of explorers and Deepwater, Ultra Deepwater and High Pressure-High
operators, the Licensing Policy attempts to address a Temperature Areas.
major drawback in the New Exploration Licensing • National Data Repository (NDR): It is an integrated data
Policy, which forced energy explorers to bid for blocks repository of Exploration & Production data of the Indian
chosen by the government. sedimentary basins. A bidder (an Indian or a foreign
• Companies can now apply for particular areas they deem company) after studying the data through NDR can
to be attractive to invest in, and the Centre will put those propose an Expression of Interest (EOI), throughout the
areas up for bids. calendar year in two windows without waiting for
announcement of bids.
• This is more attractive for prospective operators
because in the past, the blocks chosen by the government • Exploration is allowed through-out the contract period.
often were large swathes of land or sea in which only a • Exploration Phase for onshore areas have been increased
small fraction had hydrocarbon reserves. from 7 years to 8 years and for offshore increased from 8
years to 10 years.
►HYDROCARBON EXPLORATION AND • A concessional royalty regime will be implemented for
deep water and ultra-deep water areas.
LICENSING POLICY (HELP)
• HELP is a policy adopted by Ministry of Petroleum and
Natural Gas indicating the new contractual and fiscal ►SUSTAINABLE ALTERNATIVE
model for award of hydrocarbon acreages towards TOWARDS AFFORDABLE
exploration and production (E&P). It is applicable for all TRANSPORTATION (SATAT)
future contracts to be awarded.
INITIATIVE
• It replaces the New Exploration Licensing Policy (NELP).
Ministry of Petroleum and Natural Gas has launched SATAT
OBJECTIVES OF HELP
initiative to promote Compressed Bio-Gas (CBG) as an
The major Guiding Principles behind HELP are to: alternative, green transport fuel for efficient management of
• enhance domestic oil and gas production biomass and organic waste.
• bring substantial investment
• generate sizable employment
54

WHAT IS SATAT? INITIATIVES PLANNED UNDER SATAT
• Indian Oil Corporation Limited, Bharat Petroleum • CBG plants are proposed to be set up mainly through
Corporation Limited, Hindustan Petroleum Corporation independent entrepreneurs. CBG produced at these plants
Limited, Gail (India) Limited and Indraprastha Gas Limited will be transported through cascades of cylinders to the
had launched an Expression of Interest (EoI) for fuel station networks of OMCs for marketing as a green
procurement of CBG from the entrepreneurs at an transport fuel alternative.
assured price.
• The entrepreneurs would be able to separately market the
• The CBG shall be sold to automobiles as clean fuel in a other by-products from these plants, including bio-
similar way to CNG and can also be sold to domestic,
manure, carbon-dioxide, etc., to enhance returns on
industrial and commercial consumers which are using LPG
investment.
and other fuels.
• It is planned to roll out 5,000 CBG plants across India in a
IMPORTANCE OF SATAT
phased manner, with 250 plants by the year 2020, 1,000
1. address environmental problems arising from stubble plants by 2022 and 5,000 plants by 2025.
burning, better use of agri-residue
• These plants are expected to produce 15 million tonnes
2. efficient municipal solid waste management
of CBG per annum, which is about 40% of current CNG
3. tackling the problem of polluted urban air consumption of 44 million tonnes per annum in the
4. Low crude oil imports country.
5. Additional revenue for farmers. • The Ministry of New and Renewable Energy has notified
WHAT IS COMPRESSED BIO-GAS (CBG)? Central Financial Assistance of Rs. 4 crore per 4,800 kg of
• Bio-gas is produced naturally through a process of CBG per day generated from 12,000 cubic metres of biogas
anaerobic decomposition from waste / bio-mass per day, with a maximum of Rs.10 crore per project.
sources like agriculture residue, cattle dung, sugarcane • CBG networks can be integrated with city gas distribution
press mud, municipal solid waste, sewage treatment plant (CGD) networks to boost supplies to domestic and retail
waste, etc. After purification, it is compressed and users in existing and upcoming markets. Besides retailing
called CBG, which has pure methane content of over 95%. from OMC fuel stations, CBG can at a later date be injected
• CBG is exactly similar to the commercially available natural into CGD pipelines too for efficient distribution and
gas in its composition and energy potential. optimised access of a cleaner and more affordable fuel.
• With calorific value (~52,000 KJ/kg) and other properties
similar to CNG, CBG can be used as an alternative,
renewable automotive fuel. Given the abundance of
►UNNATEE (UNLOCKING NATIONAL
biomass in the country, CBG has the potential to replace ENERGY EFFICIENCY POTENTIAL)
CNG in automotive, industrial and commercial uses in the Bureau of Energy Efficiency (BEE) has developed a national
coming years. strategy document for accelerating energy efficiency in India
titled UNNATEE. It describes a plain framework and
BENEFITS OF CBG
implementation strategy to establish a clear linkage between
• There are multiple benefits from converting agricultural
energy supply-demand scenarios and energy efficiency
residue, cattle dung and municipal solid waste into CBG on opportunities.
a commercial scale:
ABOUT THE DOCUMENT
ο Responsible waste management, reduction in carbon
• A comprehensive roadmap to address India’s
emissions and pollution
environmental and climate change mitigation action
ο Additional revenue source for farmers through energy efficiency measures.
ο Boost to entrepreneurship, rural economy and • This exercise is first of its kind, clearly delineating the
employment energy efficiency targets for the respective demand
ο Support to national commitments in achieving climate sectors upto the state levels.
change goals • Developing India’s blueprint of effective energy efficiency
ο Reduction in import of natural gas and crude oil
strategy is a leap towards stimulating energy efficiency
ecosystem and enabling reduction of the pressure on
ο Buffer against crude oil/gas price fluctuations
demand.
55

ABOUT BEE MAJOR IMPACT INCLUDING EMPLOYMENT GENERATION
• The BEE is a statutory body under the Ministry of Power, POTENTIAL
Government of India. It assists in developing policies and • As most of the hydro power potential is located in the
strategies with the primary objective of reducing the higher reaches of Himalayas and North- East Region, it will
energy intensity of the Indian economy. result in overall socio-economic development of these
• BEE coordinates with designated consumers, designated regions
agencies, and other organizations to identify and utilize • create indirect employment/ entrepreneurial
the existing resources and infrastructure, in performing opportunities
the functions assigned to it under the Energy Conservation • Having a stable grid considering 160 GW capacity addition
Act. by 2022 from infirm sources of power like solar and wind.
HYDROPOWER IN INDIA
►NEW HYDROPOWER POLICY • India is endowed with large hydropower potential of
Union Cabinet has approved new policy to promote Hydro 1,45,320 MW of which only about 45,400 MW has been
Power Sector. It includes Declaring Large Hydropower utilized so far. Only about 10,000 MW of hydropower has
Projects (HPO) as part of non-solar Renewable Purchase been added in the last 10 years.
Obligation (RPO). • The share of hydropower in the total capacity has
PROVISIONS declined from 50.36% in the 1960s to around 13% in
• Large Hydropower Projects to be declared 2018-19.
as Renewable Energy source (Earlier, only hydropower • India has committed that 40% of the total power capacity
projects less than 25MW are categorized as Renewable will be from non-fossil fuel sources by 2030. Hydropower
Energy). will help in this achievement.
• Hydro Purchase Obligation (HPO) as a separate entity • DISOMS are reluctant sign Power Purchase Agreements
within non-solar Renewable Purchase Obligation to (PPAs) Hydro Power due to higher tariff, particularly, in the
cover LHPs commissioned after notification of these initial years. One of the reasons for high tariff of
measures (SHPs are already covered under Non-Solar hydropower is the loading of cost of flood moderation and
Renewable Purchase Obligation). The trajectory of annual enabling infrastructure in the project cost.
HPO targets will be notified by Ministry of Power based on
the projected capacity addition plans in hydropower
sector. Necessary amendments will be introduced in the ►RENEWABLE PURCHASE
Tariff Policy and Tariff Regulations to operationalize HPO. OBLIGATION
• Tariff rationalization measures including providing • According to Electricity Act 2003, SERCs fix a minimum
flexibility to the developers to determine tariff by back percentage of the total consumption of electricity in the
loading of tariff after increasing project life to 40 years, area of distribution licensee for purchase of energy from
increasing debt repayment period to 18 years and renewable energy sources.
introducing escalating tariff of 2%;
• Ministry of Power has been given the powers in the Tariff
• Budgetary support for funding flood moderation Policy to notify Long Term growth trajectory of Renewable
component of hydropower projects on case to case basis; Purchase Obligations for Non solar as well solar, uniform
and for all States/UTs.
• Budgetary support for funding cost of enabling
Long Term RPO Trajectory 19-20 20-21 21-22
infrastructure i.e. roads and bridges on case to case basis
as per actual, limited to Rs. 1.5 crore per MW for upto 200 Non-solar 10.25% 10.25% 10.50%
MW projects and Rs. 1.0 crore per MW for above 200 MW
projects. Solar 7.25% 8.75% 10.50%
• Ministry of Power is the administrative ministry in charge Total 17.50% 19.00% 21%
of Large Hydropower projects.
• RPOs shall be on total consumption of electricity by an
• However, LHPs would not automatically be eligible for any
obligated entity, excluding consumption met from hydro
differential treatment for statutory clearances such as
sources of power.
Forest Clearance, Environment Clearance etc.
56

• On achievement of Solar RPO compliance to the extent of differences (thermal gradients) between ocean surface
85% and above, remaining shortfall if any, can be met by waters and deep ocean waters.
excess Non-Solar energy purchased beyond specified Non- POTENTIAL OCEAN ENERGY IN INDIA
solar RPO for that particular year.
• India has wave energy potential of 40,000 MW, tidal
• On achievement of Non-Solar RPO compliance to the energy potential of 9000 MW and Ocean thermal
extent of 85% and above, remaining shortfall if any, can be gradient energy potential of around 180,000 MW.
met by excess Solar energy purchased beyond specified
• Tidal Energy: To capture sufficient power from the tidal
Solar RPO for that particular year.
energy potential, the height of high tide must be at least
• Components of Non-Solar RPO: biomass, wind, biofuel, five meters more than the low tide. The Gulf of Cambay
cogeneration & small hydro, Ocean Energy (newly added). and the Gulf of Kutch in Gujarat with higher tidal ranges
RENEWABLE ENERGY CERTIFICATION (REC) are considered to be suitable places for harnessing tidal
• RECs are aimed at addressing the mismatch of renewable energy.
energy resources in the States and their RPO BENEFITS OF HARNESSING OCEAN ENERGY
requirements. • Optimum utilisation of Potential of long coastline.
• Obliged entities can fulfill their RPOs by purchasing RECs. • Reliable and Predictable Power as tides follow monthly
REC mechanism should also have a solar specific REC. cycle and are predictable in nature. Also wave energy is
• RECs are traded on the Indian Energy Exchange (IEX) and predictable.
the Power Exchange of India Ltd (PXIL). • Easier Grid Integration
• Seashore protection since offshore breakwaters
►OCEAN ENERGY AS RENEWABLE protect coasts against coastal erosion
ENERGY • Higher Energy Density: Water has higher energy density
than air i.e. it can store a larger amount of energy per unit
Central Government has recently approved a proposal to
volume as compared to other forms of renewable energy,
consider Ocean Energy as Renewable Energy. Ocean shall
such as the wind. Hence, for a given electricity output,
be eligible for meeting the non-solar Renewable Purchase
tidal turbines can be much smaller than equivalent wind
Obligations (RPO).
turbines. Further, it is possible to harness energy at low
WHAT ARE THE DIFFERENT FORMS OF OCEAN ENERGY? speeds from wave and tidal sources as compared to wind
Ocean renewable energy refers to all forms of renewable which require comparatively higher speeds.
energy derived from the sea including wave energy, tidal • Less Visual, Noise Impact and require less space
energy, ocean current energy, salinity gradient energy and
ocean thermal gradient energy.
►ADVANCED ULTRA SUPER CRITICAL
• Wave Energy: It is generated from the power of waves
near their surface. It can be captured through oscillating (AUSC) THERMAL POWER PLANT
water columns, which trap waves in a column and change • World's first AUSC will be constructed at NTPC's Sipat
the air pressure in the upper portion which drives a power plant in Chhattisgarh. (It is a JV of BHEL and NTPC).
turbine. • It will be 800 MW technology demonstration plant. Once
• Tidal Energy: The Tides in the oceans are caused by the operational it will be most efficient power plant in the
combined effects of gravitational forces exerted by the world.
Moon, the Sun, and the rotation of the Earth. Tidal Energy • Thermal Power Plants with steam temperatures above
converts the natural rise and fall of the tides into
7000C are referred as Advanced Ultra Supercritical
Electricity.
plants. AUSC technology in India is being developed by the
• Ocean Current Energy: It refers to harnessing the energy consortium of BHEL, IGCAR and NTPC with steam
of the ocean currents to generate electricity. parameters of 310 ata MS pressure and 710/720oC MS/RH
• Salinity gradient energy: Salinity gradient power is the temperature under Government funded program. The
energy created from the difference in salt concentration purpose of adopting higher parameters is to get very high
between fresh and salt water, e.g., when a river flows into level of efficiency in the range of 46- 50%, which results in
the sea. Hence, Salinity gradient power plants are based drastic reduction of emissions.
on the natural mixing of fresh and salt water. • Developed of AUSC power plant is part of National Action
• Ocean thermal gradient energy: It is a technology for Plan for Climate Change.
producing energy by harnessing the temperature
57

BENEFITS OF AUSC POWER PLANTS: investment in green energy and bring clean energy
1. Reduced fuel costs due to improved plant efficiency financing into the mainstream.
2. Significant reduction in CO2 emissions. (About 20%) INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY
(IREDA)
• It is India's leading financial institution dedicated to clean
►ULTRA MEGA RENEWABLE ENERGY
energy expansion. Ministry of New and Renewable Energy
POWER PARKS (UMREPP) is the administrative ministry for it.
Ministry of New and Renewable Energy has developed a • It has financed the largest share of renewable energy
scheme to develop UMREPP under the existing Solar Park projects in India.
Scheme.
SALIENT FEATURES
►RENEWABLE ENERGY PROMOTION
• Provide land upfront to the project developer and facilitate
AND FACILITATION BOARD
transmission infrastructure for developing renewable
power based Ultra Mega Power Plants with • To be set up along the lines of Foreign Investment
solar/wind/hybrid/floating and also with storage system, if Promotion Board.
required. • Would deal with challenges and issues being faced by
• Implementing agency may be a Special Purpose Vehicle in renewable energy sector
form of a Joint Venture Company to be set up between • Would liase between developers and state governments
Central PSU and any State PSU or State Utility or a SPV fully and authorities to ensure smooth implementation of
owned by a CPSU or a SPV fully owned by State renewable energy projects
government. • Coordinate with financial institutions to enhance access to
• Capacity of individual UMREPP are expected to be in the easy finance.
range of 2000 MW. Minimum capacity at a single location • Will be chaired by Joint Secretary (MNRE).
may be 600 MW, if it warrants construction of new power
• Challenges faced by Renewable Sector are:
transmission systems.
1. Renegotiation of Power Purchase Agreements (PPAs) by
• State governments to facilitate SPVs with land acquisition
State governments.
and receiving statutory clearances. Land may be offered by
2. Increasing land cost
the states as its equity in the SPV or on lease. Private land
are also allowed to be used on upfront charges or on lease 3. States not meeting Renewable Purchase Agreeemens
basis. • According to the provisions of Electricity Act 2003, State
• They will given Cenral Financial Assistance of Rs 20 Electricity Regulatory Commissions (SERCs) are required to
lakh/MW or 30% of cost of infrastructure development, reserve a minimum percentage for purchase
including the cost of building transmission lines to
substations. ►MERIT ORDER OPERATIONS
• Aims to reduce overall cost of generation of power. It gives
►GREEN WINDOW INITIATIVE OF
flexibility to generating company to supply power from any
IREDA of its generating station against schedule received for its
• It aims to attract private capital to serve the unserved stations.
segment of renewable energy and support scaling up of
• Ministry of Power has issued a scheme on Flexibility in
new clean energy technologies.
Generation and Scheduling of Thermal Power Stations.
• The seed capital provided from the facility will be used to
• Need for allowing flexibility:
leverage additional sources of capital from both private
domestic banks and international sources. 1. Often many stations having higher efficiency are not
fully utilised whereas costlier stations are utilised.
• An allocation of USD 20 million is being considered for
Green Window, with plans of leveraging USD 80 million 2. Will lead to optimum utilisation of railway infrastructure
from other agencies to establish a USD 100 million facility. as cheaper power is available from pit head power
stations. Coal transportation cost is less. Turnaround of
• Green windows, like green banks, are public entities
created to work with the private sector to increase railway rakes is faster and reliability of coal supply to
such power stations is also better.
58

• POSOCO is implementing a pilot scheme on Security • The Section 18 of the Special Economic Zones Act, 2005
Constrained Economic Dispatch (SCED) in Inter-State provides that the Central Government may approve the
Generating Stations Pan India to implement the Merit setting up of an International Financial Services Centre
Operations. (IFSC) in a Special Economic Zone and may prescribe the
requirements for setting up and operation of such Centre.
The first International Financial Services Centre in India has
► PRAKASH PORTAL been set up at GIFT City in Gandhinagar, Gujarat.
Ministry of Power has recently launched PRAKASH (Power • Currently, the banking, capital markets and insurance
Rail Koyla Availability through Supply Harmony) portal. It sectors in International Financial Services Centres are
has been developed by NTPC. regulated by multiple regulators such as RBI, the SEBI
AIM OF THE PORTAL and the IRDAI.
• Bringing better coordination for coal supplies among • The development of financial products and services in IFSC
all stakeholders - Ministry of Power, Ministry of Coal, Coal require focused and dedicated regulatory interventions
India, Railways and power utilities ensuring adequate and require a high level inter-regulatory coordination.
Thus, demand for Unified Financial Regular for IFSC.
availability and optimum utilization of coal at thermal
power plants. PROVISIONS OF THE BILL
• It is designed to help in mapping and monitoring entire (i) Coverage: Will apply to all IFSCs set up under the Special
coal supply chain for power plants. Economic Zones Act, 2005.
BENEFITS (ii) International Financial Services Centres Authority: Sets

up the International Financial Services Centres Authority.
The portal makes available following information on a single
It will consist of nine members, appointed by the central
platform -
government to be headed by a Chairman.
• Coal company will be able to track stocks and the coal (iii) Functions of the Authority:
requirement at power stations for effective production
Regulate financial products, financial services, and
planning
financial institutions which have been previously approved
• Indian Railways will plan to place the rakes as per actual by any appropriate regulator (such as RBI or SEBI), in an
coal available at siding and stock available at power IFSC.
stations. • Regulating any other financial products, financial services,
• Power stations can plan future schedule by knowing rakes or financial institutions in an IFSC, which may be notified
in pipe line and expected time to reach. by the central government, and
• Stock at power generating station • Recommending any other financial products, financial
• Ministry of Power /Ministry of Coal can review overall services, or financial institutions to the central
government, which may be permitted in an IFSC.
availability of coal at thermal power plants in different
regions. (iv) International Financial Services Centres Authority
Fund: The Bill sets up the International Financial Services
PRESENT MECHANISM
Centres Authority Fund. The following items will be
It consists of an inter-ministerial group which has officials credited to the Fund:
from Ministries of Power, Coal, Railways, CEA, power utilities
(i) all grants, fees and charges received by the
and coal companies. This group holds weekly meetings to
Authority, and
review coal supply situation as well as railway logistics.
(ii) all sums received by the Authority from various
sources.
INDUSTRY RELATED The Fund will be used for:

(i) salaries, allowances and other remuneration of
►INTERNATIONAL FINANCIAL members and employees of the Authority, and
SERVICES CENTER AUTHORITY ACT, (ii) expenses incurred by the Authority.
2019
► IPRISM
The act provides for the establishment of an authority to
develop and regulate the financial services market. The Cell for IPR Promotion and Management (CIPAM) under
the Department for Promotion of Industry and Internal Trade
NEED FOR THE BILL
has launched the second edition of ‘IPrism’.
59

WHAT IS IPRISM? granting decisions, and facilitates public access to wealth
• It is basically an Intellectual Property (IP) competition of technical information relating to those inventions.
for the students of schools, colleges and universities. It • By filing one international patent application under the
aims to foster creativity among the students. PCT, applicants can simultaneously seek protection for an
• This competition is organized by Cell for IPR Promotion invention in a large number of countries. India is a
and Management (CIPAM) which works under the member of PCT.
Department for Promotion of Industry and Internal Trade. GLOBAL PATENT PROSECUTION HIGHWAY
CELL FOR IPR PROMOTION AND MANAGEMENT (CIPAM) • Program under PCT treaty of WIPO
• The National IPR Policy was adopted in 2016 to create a • Under the Global Patent Prosecution Highway (Global PPH)
vibrant IP ecosystem in the country. One of the key pilot, a request for accelerated processing can be made at
objectives of this policy is to create IPR Awareness through any participating office based on work products, including
outreach and promotional activities. PCT work products, from any one of the other participating
• In pursuance of this objective, the CIPAM has been offices under unified criteria.
entrusted with the responsibility of carrying out IPR • Under Patent offices of 26 countries are participating.
awareness activities in India.
► NATIONAL MINING POLICY
►PATENT PROSECUTION HIGHWAY OBJECTIVE
PROGRAM • The National Mining Policy 2019 replaces the existing
• India launched the pilot Patent Prosecution Highway National Mineral Policy 2008.
program with Japan between Indian Patent Office and • The aim of this policy is to have a more effective,
Japan Patent Office for a period of three years only. Office meaningful and implementable policy that brings in
of Controller General of Patens, Designs and Trade Marks, further transparency, better regulation and enforcement,
under the Ministry of Commerce and Industry will be nodal balanced social and economic growth as well as
agency for India. sustainable mining practices.
• Indian Patent Office may receive patent applications under PROSPECTING AND EXPLORATION OF MINERALS
certain specified technical fields only, namely, Electrical,
• The Policy places special attention towards exploration
Electronics, Computer Science, Information Technology,
of energy critical minerals, fertilizer minerals, precious
Physics, Civil, Mechanical, Textiles, Automobiles and
metals and stones, strategic minerals and other deep
Metallurgy while JPO may receive applications in all fields
seated minerals which are otherwise difficult to access and
of technology.
for which the country is mainly dependent on imports.
BENEFITS
• Seeks to encourage private sector participation through
1. Reduction in time to dispose patent applications. the following tools:
2. Reduction in pendency of patent applications. ο Right of First Refusal at the time of auction
3. Improvement in quality of search and examination of ο Seamless transition from Reconnaissance permit (RP)
patent applications. to Prospecting Licence (PL) to Mining Leases (ML)
4. An opportunity for Indian inventors including MSMEs and ο Auctioning of composite Reconnaissance permit (RP)
Start ups of India to get accelerated examination of their cum Prospecting License (PL) cum Mining Lease (ML) in
patent applications in Japan virgin areas.
PCT-PPH (PCT-PATENT PROSECUTION HIGHWAY PILOT) FINANCIAL SUPPORT FOR MINING
• Program under PCT Treaty of WIPO. • Proposes to grant status of industry to mining activity to
• A number of bilateral agreements have been signed boost financing of mining for private sector.
between patent Offices to promote worksharing and • Getting ‘Industry’ status will help in easy sanction of loans
enable patent applicants to request accelerated processing for mining projects.
in the national phase, where patent examiners can make
PROTECTION OF ENVIRONMENT
use of the work products from the other Office(s).
• All mining related activities shall be undertaken within the
• Patent Cooperation Treaty under WIPO assists
parameters of a comprehensive Sustainable
applicants in seeking patent protection internationally for
Development Framework. The guiding principle shall be
their inventions, helps patents offices with their patent
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that a miner shall leave the mining area in an ecological ο BIS mark
shape which is as good as it was before the ο Purity in carat and fineness
commencement of mining or better with least impact on
ο Assaying and hallmarking centre’s identification
flora and fauna of the area.
mark/number
• Mining operations shall not ordinarily be taken up in
ο Jeweller’s identification mark/number
identified ecologically fragile and biologically rich areas.
The Government shall identify such areas that are critically • BIS Act, 2016 has enabling provisions for mandatory
fragile in terms of ecology and declare as ‘in-violate areas’ hallmarking of Gold jewellery and artefacts by the Central
Government.
or ‘no-go areas’ out of bounds for mining.
• In order to achieve balance between mineral based WHAT IS HALLMARKING?
development and environment, the policy seeks to create • Hallmarking is the accurate determination and official
Exclusive Mining Zone (EMZ) with prior in-principle recording of the proportionate content of precious
statutory clearances demarcated for the mineralized metal in precious metal articles.
belt/zone to avoid conflict of interest and to curtail delay in • Hallmarks are thus official marks used as a guarantee of
commencement of mining operation. purity of precious metal articles.
SMALL DEPOSITS • The principal objectives of the Hallmarking Scheme are to
• Small and isolated deposits of minerals are scattered all protect the public against adulteration and to obligate
over the country. However, they are not economically manufacturers to maintain legal standards of purity.
sustainable to extract due to lower economies of scale. WHO DOES HALLMARKING IN INDIA?
• In order to economically extract such minerals, the policy • The Indian government has identified the Bureau of
proposes a cluster approach for granting the deposits Indian Standards (BIS) as the sole agency to operate the
together as a single lease within a geographically defined Hallmarking Scheme.
boundary. • As per this scheme, the jewellery retailer/manufacturer
• Similarly, it encourages the establishment of common desirous of obtaining a licence has to apply to BIS for use
smelting and refining facilities. of Standard Mark (Hallmark).
INTER-MINISTERIAL MECHANISM • After grant of licence, the jeweller must follow a BIS-
• A unified authority in the form of an inter-ministerial approved Scheme for certification. A BIS-certified jeweller
body under Ministry of Mines with members like Ministry has right to approach any of the BIS-recognized Assaying
of Coal, Ministry of Earth Sciences, Ministry of Tribal and Hallmarking Centres to get his/her jewellery
Affairs, etc. hallmarked.
• It would provide for sustainable mining with adequate ABOUT BUREAU OF INDIAN STANDARDS
concerns for environment and socio-economic issues in • It is the National Standard Body of India and works
the mining areas. under the Ministry of Consumer Affairs. BIS is
responsible for the harmonious development of the
►MANDATORY GOLD HALLMARKING activities of standardization, marking and quality
certification of goods.
• Ministry of Consumer Affairs has notified mandatory
hallmarking of gold which will come into force from • It operates a Product Certification scheme for ensuring
January 15, 2021. (transition period of one year). compliance to Indian Standards. Presence of BIS standard
mark (popularly known as ISI mark) on a product indicates
• Only a registered jewelers will be allowed to sell the
conformity to the relevant Indian Standard.
hallmarked gold articles through certified sales outlets.
• BIS certification scheme is voluntary in nature. However
• Registered jewelers will be allowed to sell jewellery only in
for a number of products, compliance to Indian Standards
three grades of gold – 14, 18 and 22 carat.
made mandatory by the Central Government.
• Hallmarking will not apply on any article intended to be
VIENNA CONVENTION (1972)
used for medical, dental, veterinary, scientific or industrial
purposes, any article of gold thread and any manufactured • Also called precious metal convention or Hallmarking
article which is not substantially complete or which is Convention
intended for further manufacture. • India is not party to the convention
• Hallmarked gold jewellery will have four components:
61
►NATIONAL INVESTMENT AND 3. Industries with strategic significance - Aerospace, IT

hardware and electronics, telecom equipment, defence
MANUFACTURING ZONES (NIMZS)
equipment, shipping, solar energy
• National Manufacturing Policy released by the Union
4. Industries where India enjoys competitive advantage -
Ministry for Commerce and Industry proposes industrial
automobiles, pharmaceuticals, medical equipment.
growth in partnership with States. NIMZs is an important
pillar of the policy. 5. MSMEs
• NIMZs are envisaged as integrated industrial townships 6. Public Sector Entreprises.

with state of art infrastructure, land use on basis of zoning,
clean and energy efficient technology, necessary social ►NATIONAL INDUSTRIAL CORRIDOR
infrastructure, skill development facilities etc. to provide DEVELOPMENT AND IMPLEMENTATION
productive environment for manufacturing.
TRUST (NICDIT)
• Department for Promotion of Industry and Internal Trade
• It functions under the DIPP, Ministry of Commerce &
(DPIIT), under Ministry of Commerce and Industry assists
Industry.
state governments with Rs 3 crore for the funding the cost
of master planning of NIMZs. For development of • NICDIT has been made by expansion of the mandate of
infrastructure DPIIT's role is limited to coordination and no Delhi Mumbai Industrial Corridor Project
finances from DPIIT are given. Implementation Trust Fund (DMIC-PITF).
PROCEDURE FOR APPROVAL OF NIMZS: • NICDIT is an apex body for coordinated and unified
development of following industrial corridors:
1. State to make application for in-principle approval to the
DPIIT, which is the nodal department. ο Delhi Mumbai Industrial Corridor (DMIC)
2. After receipt of in-principle approval state government to ο Chennai Bengaluru Industrial Corridor (CBIC)
acquire substantial part of land. ο Amritsar Kolkata Industrial Corridor (AKIC)
3. Final application will be then made by State government to ο Bengaluru Mumbai Industrial Corridor (BMIC)
High Level Committee chaired by secretary, DPIIT to give ο Vizag Chennai Industrial Corridor (VCIC)
final approval to NIMZs.
• GoI’s contribution to NICDIT will be used as a revolving
FINAL APPROVAL HAVE BEEN GIVEN FOR THE FOLLOWING corpus.
THREE NIMZS
• Investments into the SPVs by GOI will be routed through
1. Kalinganagar, Odisha NICDIT so that all debt service payments by SPVs and
2. Prakasam district, Andhra Pradesh proceeds from equity disinvestment from SPVs including
3. Sangareddy district, Telangana SPVs developed by Delhi Mumbai Industrial Corridor
Development Corporation (DMICDC) by utilizing grants
SALIENT FEATURES OF NATIONAL MANUFACTURING
given by GoI can be ploughed back into the corpus
POLICY
enabling NICDIT to support the development of more
1. Aims to enhance share of manufacturing to 25% within a industrial cities in future.
decade and creating 100 million jobs by 2022.
2. Skill development among rural migrant and urban poor to
►RELAXED DEFINITION OF STARTUPS
make growth inclusive
DPIIT has relaxed the definition of startups to promote
3. Increase domestic value addition and technological depth
in manufacturing innovation and entrepreneurship in India.
4. Enhance global competitiveness of Indian manufacturing NEW DEFINITION
5. Ensure sustainability of growth - energy efficiency, optimal • An entity shall be considered a Startup, if:
utilisation of natural resources and restoration of ο If it is less than 10 years from the date of its
degraded ecosystems. incorporation;
FOLLOWING INDUSTRIES WILL BE FOCUSSED ο Turnover of the company for any of the financial years
1. Employment intensive industries - Textiles, garments, since incorporation has not exceeded 100 crores;
leather and footwear, gems and jewellery, food processing ο Entity is working towards innovation, development or
industries improvement of products or processes or services, or if
2. Capital goods sector
62

it is a scalable business model with a high potential of • Border Road and International Connectivity -
employment generation or wealth creation. Connecting the cities and remote areas, which are situated
in the border regions
• Provided that an entity formed by splitting up or
reconstruction of an existing business shall not be • Port Connectivity and Coastal Road - To connect the
areas that are dotted along the shorelines and important
considered a 'Startup'.
ports, the central government has ordered the
construction of 2000km of roads.
►NATIONAL STARTUP ADVISORY • Green Field Expressway - The main stress will be given on
COUNCIL the construction and development of Green Field
Expressway for better management of traffic and freight.
It will be chaired by Union Minister for Commerce and
Industry. Non-official members to the council will be • Balance NHDP Works - Under the last segment, the
nominated by Central Government for a period of two years. project will see a construction and maintenance of about
10,000kms of new roads.
FUNCTIONS
1. Suggest measures to foster a culture of innovation
amongst citizens and students in particular, ►MISSION PURVODAYA
2. Promote innovation including in semi-urban and rural • It aims at accelerated development of eastern India
areas. through integrated steel hub.
3. Support creative and innovative ideas through incubation • The mission aims to create an integrated steel hub in
and R&D to transform them into valuable products, Eastern India.
processes or solutions to improve productivity and • More than 75% of India's envisioned incremental steel
efficiency capacity will come from Eastern India, with Odisha alone
4. Create an environment of absorption of innovation in crossing 100 MTPA. It is expected that out of the 300 MT
industry. capacity by 2030-31, over 200 MT can come from this
5. Suggest measures to facilitate public organisations to region alone.
assimilate innovation with a view • Eastern states of India (Odisha, Jharkhand, Chhattisgarh,
6. Promote creation, protection and commercialization of West Bengal) and Northern part of Andhra Pradesh
intellectual property rights collectively hold ~80% of the country’s iron ore, ~100% of
coking coal and significant portion of chromite, bauxite
7. Make it easier to start, operate, grow and exit businesses
and dolomite reserves.
by reducing regulatory compliances
• There is presence of major ports such as Paradip, Haldia,
8. Costs, promote ease of access to capital for startups,
Vizag, Kolkata etc., with >30% of India’s major port
incentivize domestic capital for investments into startups
capacity.
9. Mobilize global capital for investments in Indian startups
• Proposed Integrated Steel Hub will encompass Odisha,
10. Keep control of startups with original promoters and Jharkhand, Chattisgarh, West Bengal and Norther Andhra
provide access to global markets for Indian startups Pradesh. It will enable swift capacity addition and improve
BHARATMALA overall competitiveness of steel producers both in terms of
It is a large project being organised by Ministry of Road cost and quality.
Transport for optimising the efficiency of the movement of • Kalinganagar (Odisha) and Bokaro (Jharkand) will be
goods and people across the country. It entails: developed as the epicentre of Mission Purvodaya. Steel
• Economic Corridor - The construction of 9000kms of Ministry aims to make Kalinganagar, vibrant hotspot of
Economic Corridors will be undertaken by the central global steel industry.
government. INTEGRATED STEEL HUB WOULD FOCUS ON 3 ELEMENTS:
• Feeder Route or Inter Corridor - The total length of the 1. Capacity addition through easing the setup of Greenfield
roads, which fall under the Feeder Route or Inter Corridor steel plants.
category, is a 6000kms. 2. Development of steel clusters near integrated steel plants
• National Corridor Efficiency Improvement – 5000 kms as well as demand centres.
of roads, constructed under the scheme will fall in the 3. Transformation of logistics and utilities infrastructure
category of National Corridor for the better connection which would change the socio-economic landscape in the
between roads. Eastern India.
63
►STEEL SCRAPPING POLICY These provide an avenue for people to bring their offshore
undisclosed wealth into India without fear of prosecution.
Steel scrapping policy has been released by Ministry of Steel.
WHY ELEPHANT BONDS?
AIMS
• It is an amnesty scheme for the people with black money.
1. Promote circular economy in the steel sector
Under this scheme, the people can invest a minimum of
2. Promote collection, dismantling and processing activities 50% of their undisclosed income in the bonds and will be
for end of life products that are sources of recyclable issued a fixed coupon security.
(ferrous, non-ferrous and other non-metallic) leading to
• Money collected via this mechanism to be used towards
resource conservation and environmentally sound
funding infrastructure projects in the country.
management system for handling ferrous scrap.
• India could recover up to $500 billion of black money
3. Produce high quality scrap for quality steel production,
stashed overseas if it implements its proposal to issue to
minimising dependence on imports.
those with undisclosed wealth.
SCRAP STEEL
Ferrous scrap is the primary raw material for Electric Arc ►DEFINITION OF MSMES
Furance based steel production. Indian steel industry has a
U.K. Sinha committee for MSME sector has recommended a
presence of large number of small steel producers who utilise
scrap with other inputs for steel making. new classification of MSMEs.
Scrap steel is also used in primary steel production CHANGES IN THE DEFINITION
• Environmentally conscious: Use of every ton of scrap shall MSMEs are presently defined based on investment in plant
save 1.1 ton of iron ore, 630 kg of coking coal and 55 kg of and machinery / equipment. To facilitate ease of doing
limestone. Also result in savings in energy cost by 16-17%. business, the Government has proposed turnover based
Reduced definition by replacing the current investment-based
• There is deficit in the availability of scrap in India which definition of MSMEs.
results into scrap imports amounting to 24,500 crores in
New Previous classification –
2017-18.
Classification Classification Ceiling on Investment
STEEL SECTOR IN INDIA of the MSME (annual in Plant and Machinery
• Steel capacity in India has grown to 142 MTPA. World's 2nd turnover) (in Rs.)
largest producer of crude steel.
Not exceeding
• Largest producer of Direct Reduced Iron or Sponge Iron Micro Below 25 lakhs
Rs 5 crores
• 3rd largest consumer of steel
• 4th largest iron ore producer Between Rs 5
Small crores to Rs 75 25 lakhs to 5 crores
crores
►GLOBAL FORUM ON STEEL EXCESS
Rs 75 to Rs 250
CAPACITY Medium 5 crores to 10 crores
crores
• It is body formed under the G20.
• OECD acts as the secretariat for the body. • The Committee found the revised definition of MSMEs
rational, transparent, progressive and easier to
• It has 33 member countries.
implement with the introduction of Goods and
• The body was formed to address the challenge of Services Tax (GST).
global glut in steel capacity.
• Further, in order to have flexibility in the definition of
• India is a member of this body. MSMEs, the committee has proposed that the Parliament
• In 2018, India was elected as co-chair of this body. may consider delegating the power of classifying MSMEs to
• It is not a permanent body. the Executive.
• It has been started with a three-year mandate.

►PUBLIC PROCUREMENT POLICY FOR
►ELEPHANT BONDS MSME
These are a type of long-term government bond proposed by • This order was first made in 2012 under the Micro, Small
‘The High Level Advisory Group on Trade Policy (HLAG)’. and Medium Enterprises Development Act, 2006. It was
amended in 2018.
64

• The objective of the policy is promotion and development trading and settlement of the invoices / bills of MSMEs as
of Micro and Small Enterprises by supporting them in following:
marketing of products and services rendered by them. (i) MSME Suppliers: Supplying goods or services to Buyers
• Provisions under the order are:-
(ii) Buyers: Corporates, Government Departments and
ο Percentage of procurement of goods and services by PSU & Others
Government departments/CPSEs to be at least 25% of
(iii) Financiers: Banks and NBFC Factors
their total procurement.
ο Minimum 3% reservation for women owned MSEs
within the 25% reserved for MSEs. ►7th ECONOMIC CENSUS
ο 4% reservation out of the 25% is reserved for SC/ST Economic Census will cover all establishments including
entrepreneurs. household enterprises, engaged in production or distribution
For the effective implementation and monitoring of the of goods/services (other than for the sole purpose of own
policy MSME-SAMBANDH portal has been developed. consumption) in non-farm agricultural and non-
agricultural sector will be counted.
►NATIONAL SC ST HUB • Provides disaggregated information on various operational

and structural variables of all establishments of the
• It has been set up to provide professional support to SC
country.
and ST entrepreneurs to fulfil the obligations under the
• Provides valuable insight into geographical spread/clusters
Central Government Public Procurement Policy for MSME
of economic activities, ownership pattern, persons
Enterprises.
engaged, etc. of all economic establishments in the
• It is being implemented by Ministry of MSME through
country.
National Small Industries Corporation, a PSU under the
• It is being implemented by Ministry of Statistics and
ministry of MSME.
Program Implementation (MOSPI)
• MOSPI has partnered with CSC e-Governance Services
►TRADE RECEIVABLES DISCOUNTING
India Limited, a SPV under the Ministry of Electronics and
SYSTEM (TREDS) Program Implementation as the implementing agency for
th
An electronic platform for facilitating the financing / 7 Economic Census.
discounting of trade receivables of MSMEs through multiple
financiers. These receivables can be due from corporates and ►AMENDMENTS TO DPCO IN 2019
other buyers, including Government Departments and Public
WHAT IS DPCO?
Sector Undertakings (PSUs).
• Drug Price Control Orders (DPCO) are issued by the
OBJECTIVE
Government in exercise of the powers conferred under the
• To address the critical needs of MSMEs i.e. the twin Essential Commodities Act, 1955, for enabling the
issues of promptly en-cashing receivables and eliminating Government to declare a ceiling price for lifesaving
credit risk. TReDS platform of RXIL is expected to be a medicines so as to ensure that these medicines are
catalyst in the growth of MSMEs by bringing in available at a reasonable price to the general public.
transparency in the business eco-system.
• Notified by the Ministry of Chemicals and Fertilisers.
• Enables discounting of invoices/bills of exchange of MSME
• Price controls are applicable to “Scheduled drugs” or
sellers against large corporates, including Government
“Scheduled formulations” i.e. those medicines which are
departments and public sector undertakings, through an
listed out in the Schedule I of DPCO, also referred to as
auction mechanism to ensure prompt realization of trade
National List of Essential Medicines (NLEM). NLEM is
receivables at competitive market rates.
published by the Ministry of Health and Family Welfare.
• It is the first attempt in India to introduce factoring without
• The National Pharmaceutical Pricing Authority (NPPA)
recourse to the seller and will help MSME Sellers, not only
fixes the prices of controlled drugs and formulations and
in quick realization of receivables but also efficient
enforces prices and availability of the medicines in the
price discovery.
country.
THE ELIGIBLE ENTITIES WHO CAN PARTICIPATE IN TReDS
AMENDMENTS TO DPCO
• It will provide the platform to bring different participants
• New drugs patented under the Indian law will be
together for facilitating uploading, accepting, discounting,
exempted from price control for five years from the
65

date of commencement of its commercial marketing in • Fundamental research at fibre level to create innovative
India. Earlier, the exemption was applicable to products technological products in Carbon fibre, Aramid Fibre,
developed ‘through indigenous research and Nylon fibre and composites
development’.
• Application based research in geo-textiles, agro-textiles,
• Even the drugs for treating rare or “orphan” diseases as
medical textiles, mobile textiles and development of
decided by Ministry of Health and Family Welfare too
biodegradable technical textiles.
would be exempted from price control.
• Focus on development of bio-degradable technical textiles
• The amendments were made on the basis of the NITI
materials, particularly for agro-textiles, geo-textiles and
Aayog’s recommendations to the Department of
Pharmaceuticals (DoP) for promoting research and medical textiles.
development of new life saving drugs. • Develop suitable equipment for environmentally
PROBLEMS WITH THE RECENT AMENDMENT sustainable disposal of used technical textiles, with
• The medicines account for over half the costs of inpatient emphasis on safe disposal of medical and hygiene wastes.
care and 80 per cent in the case of out-patient care. Hence, • Development of indigenous machineries and process
it goes against the interests of the patients. equipment for technical textiles to promote 'Make In India'
• It has also not explicitly provided that the government may and enable competitiveness of industry by reducing capital
issue compulsory licensing in order to ensure lifesaving costs.
medicines at affordable cost. https://t.me/UPSC_PDF
2. Component II (Promotion and Market Development)
COMPULSORY LICENSING
Market development, market promotion, international
• Compulsory licenses are authorizations given to a third-
technical collaborations, investment promotions and
party by the Government to make, use or sell a particular
'Make in India' initiatives.
patented product without the need of the permission of
the patent owner. 3. Component III (Export Promotion)
• The provisions regarding compulsory licenses are given in • Export promotion Council for Technical Textiles will be set
the Indian Patents Act, 1970 and in the TRIPS (Trade- up.
Related Aspects of Intellectual Property Rights) Agreement. 4. Component IV (Education, Training, Skill Development)
WHAT ARE ORPHAN DRUGS?
• Promote technical education at higher engineering and
• “Orphan drugs” are medicines which are intended for technology levels related to technical textiles and its
treatment of life-threatening rare diseases which may
application areas.
affect only a small percentage of population. For example,
Rituximab is an orphan drug which is used to treat certain TECHNICAL TEXTILES
autoimmune diseases and cancer. • They are textile materials and products manufactured
• These drugs are called “orphan” because usually the primarily for technical performance and functional
pharmaceutical industry has little incentive in properties rather than aesthetic characteristics.
developing and marketing products intended for only a • Technical textiles are divided into 12 broad categories:
small number of patients.
Agrotech, Buidtech, Clothtech, Geotech, Hometech,
Indutech, Mobiltech, Meditech, Protech, Sportstech,
►NATIONAL TECHNICAL TEXTILES Oekotech, Packtech
MISSION • India shares nearly 6% of world market size of 250 billion
1. Enhance export of technical textiles from current Rs 14,000 USD. Annual average growth of the segment is 12% as
crore to Rs 20000 crore by 2021-22. Ensuring 10% average compared to 4% world average growth.
growth in exports upto 2023-24.
• Penetration level of technical textiles is low in India at 5-
2. Focus on usage of technical textiles in various flagship
10% against 30-70% in advanced countries.
mission and in strategic sectors.
• They are used for various applications ranging from
3. A Mission Directorate in the Ministry of Textiles headed
agriculture, roads, railway tracks, sportswear, health to
by an eminent expert will be made operational.
bullet proof jackets, fire proof jackets, high altitude combat
FOUR COMPONENTS OF THE MISSION ARE
gear and space applications.
1. Component 1 (research, innovation and development)
66

• Use of technical textile in agriculture sector will lead to ►TELECOM SECTOR UNDER STRESS
overall improvement in cost economy, water and soil
Supreme Court verdict on what constitutes the Adjusted
conservation, better agricultural productivity and higher
Gross Revenue (AGR) of the Telecom Companies in India has
incomes to farmers per acre of land holding in promotion
adversely affected the health of Telecom companies.
of manufacturing and export activities in India.
ADJUSTED GROSS REVENUE (AGR)
• Use of Geotextiles in highways, railways and ports will
result in robust infrastructure, reduced maintenance cost • Refers to the total revenue earned by the Telecom
and higher life cycle of infrastructure assets. companies in India.

• The calculation of the AGR is considered to be significant
►GEM-WOMANIYA because the AGR is in turn used to calculate the license

fee and Spectrum Usage Charges (SUC) which the
Government e Marketplace [GeM] has launched “Womaniya
telecom operators are required to pay to the Government.
on GeM”.
• For instance, the license fee is calculated as 3% of the AGR
• An initiative to enable women entrepreneurs and
and the SUC is calculated as 3% of the AGR.
women self-help groups [WSHGs] to sell handicrafts
and handloom, accessories, jute and coir products, home THE CONTROVERSY OVER CALCULATION OF AGR
décor and office furnishings, directly to various • The Telecom operators earn revenue from both core
Government ministries, departments and institutions. (Telecom Services) as well as non-core (Sale of Assets,
• The initiative aligns with Government’s initiatives for Sale of Mobile Handsets, Interest earned from Banks'
MSMEs, especially to reserve 3 percent in government deposits etc.) activities. The controversy arose on
procurement from women entrepreneurs. account of differences between the Government and
• Promotes women entreprenuership Telecom Operators as to what constitutes the AGR.
• Womaniya on GeM will spur hyper-local economic • The Telecom Operators wanted that the AGR should
opportunities for women entrepreneurs and address include only the revenue earned by them through the core
goals and objectives under United Nations Sustainable activities of provision of Telecom Services. However, the
Development Goal 5: Achieve gender equality and Government wanted that AGR should revenue earned
empower all women and girls. from both core and non-core activities.
• Nearly 80 percent women-owned establishments are self- • The Supreme Court has ruled that the AGR would include
financed and more than 60 percent of 8 million units are the revenue earned from both core and non-core
owned and or led by women entrepreneurs from socially- activities.
challenged sections of the society.
• Telecom Operators would be required to pay around 1.4
• Since women tend to invest up to 90 percent of their lakh crores including the penalty on the AGR dues.
earnings back in their families to provide better nutrition,
IMPLICATIONS OF THE SC VERDICT
health care and education to their children, economic
empowerment of women is a step in the direction of • Impact on Telecom Sector: Further financial burden on
poverty alleviation. telecom companies who are loaded with debt. Reduce
their ability to invest in newer technologies such as 5G etc.
Closure of some companies can lead to reduced
►INTERCONNECT USAGE CHARGES competition in sector leading to increased tariffs and less
Reliance Jio started charging Interconnect Usage Charge (IUC) choice for customers.
of 6 paisa per minute on all outgoing calls made to Airtel and • Banks who have given credit to Telecom companies will
Vodafone-Idea’s networks. suffer from NPAs.
• IUC is the cost paid by one mobile telecom operator to
• Impact on Economy: The Indian Government needs to
another when its customers make outgoing mobile calls to
focus on new age digital technologies such as Big data,
the other operator’s customers.
Artificial Intelligence, Internet of Things (IoT) etc.
• IUC is mandated by TRAI.
67
► ZERO DEFECT ZERO EFFECT • The equity participation between NALCO, HCL and MECL is
in the ratio of 40:30:30.
PM urged the industry, especially the Micro, Small and
Medium Enterprises (MSMEs) of India, to manufacture goods WHY KABIL?
in the country with "zero defects" and to ensure that the The objective of constituting KABIL is to ensure a consistent
goods have "zero effect" on the environment. supply of critical and strategic minerals to Indian domestic
ZERO EFFECT ZERO DEFECT market and ensure mineral security of India.
The Model shall be applicable for all sectors of manufacturing IMPORTANCE OF CRITICAL MINERALS FOR INDIA
industries. It will focus on MSMEs and small businesses. It will
• 12 critical minerals are critical for Make in India
address the quality and ecological needs of domestic and
overseas customers, society, employees, partners, regulators, • These critical minerals such as beryllium, germanium,
and investors. Lithium, Cobalt, rhenium, tantalum, etc. find
VISION specialised use in a range of industries and modern
To enable the advancement of Indian industry to a position of applications, such as Electric Vehicles, aerospace,
eminence in the global marketplace and leverage India’s defence, laptops, medical imaging, nuclear energy and
emergence as the world’s supplier through the ‘Made in India’ smartphones.
mark. • These critical minerals would play a role in nurturing the
MISSION domestic manufacturing capacity to support the
• To develop and implement a ‘ZED’ culture in India based government’s low-carbon plans, such as the 100GW (giga
on the principles of: watt) solar target, faster adoption and manufacturing of
Zero Defect (focus on customer) hybrid and electric vehicles and the national domestic
ο Zero non-conformance/non-compliance efficient lighting programme.
ο Zero waste • Presently, India has no declared domestic reserves for

Zero Effect (focus on society) majority of the identified critical minerals and may be
heavily import dependent on China for a few of them
ο Zero air pollution/liquid discharge (ZLD)/solid waste
over the coming years
ο Zero wastage of natural resources
• China is currently a leading global supplier for 6 out of the
IMPLEMENTATION
12 mineral resources identified as critical for India by 2030.
• Ministry of MSME with Quality Council of India (QCI) has
worked out a ‘ZED Certification’ model encompassing an • It is against this backdrop, KABIL has been set up to ensure
array of quality parameters in manufacturing. mineral security in India.
• The Government has launched a new scheme namely HOW SETTING UP OF KABIL WOULD BENEFIT?
“Financial Support to MSMEs in ZED Certification • The KABIL would carry out identification, acquisition,
Scheme”. exploration, development, mining and processing of
• Quality Council of India (QCI) has been appointed as the strategic minerals overseas for commercial use and
National Monitoring & Implementing Unit (NMIU) for meeting country’s requirement of these minerals.
implementation of ZED.
• The sourcing of these minerals or metals is to be done by
creating trading opportunities, G2G collaborations with
►KABIL the producing countries or strategic acquisitions or
The Government has recently stated that a joint venture investments in the exploration and mining assets of these
company known as Khanij Bidesh India Ltd. (KABIL) would minerals in the source countries.
be set up to ensure mineral security of India. • The new company will help in building partnerships
OWNERSHIP STRUCTURE with other mineral rich countries like Australia and
• For this, Central Public Sector Enterprises-National those in Africa and South America, where Indian
Aluminium Company Ltd.(NALCO), Hindustan Copper expertise in exploration and mineral processing will be
Ltd.(HCL) and Mineral Exploration Company Ltd. mutually beneficial bringing about new economic
(MECL) have recently come together to set up joint opportunities.
venture company KABIL.
68
►CCI GREEN CHANNEL (i) Promoting entrepreneurship in apparel manufacturing,

(ii) Creating additional manufacturing capacity and
• The Competition Commission of India introduced an
automatic system of approval for combinations (Mergers (iii) Generating additional employment opportunities.
of companies) under 'Green Channel'. • Three projects have been sanctioned by the Government
• Under this process, the combination is deemed to have one each in the States of Madhya Pradesh, Odisha and
been approved upon filing the notice in the prescribed Haryana.
format. This system would significantly reduce time and • All the projects are in various stages of construction. As on
cost of transactions and thereby contributing towards ease date, no proposal has been received from the State of
of doing business in India. Maharashtra.
►NATIONAL FINANCIAL REPORTING ►CONTRACT MANUFACTURING

AUTHORITY • Union Cabinet approved 100% FDI in contract
The first Audit Quality Review (AQR) report of NFRA was manufacturing under automatic route. DPIIT notified the
released in the IL&FS case. AQR was conducted pursuant to changes through Press notes.
provisions in Companies Act, 2013 and NFRA Rules, 2018 • Earlier, FDI policy allowed for 100% FDI under automatic
which require NFRA to monitor and enforce the compliance route in manufacturing sector.
with accounting standards and auditing standards in India. • Manufacturing activities may be conducted either by the
ABOUT NFRA investee entity or through contract manufacturing in India
• It was constituted under provisions of Companies Act, under a legally tenable contract, whether on principal to
2013. principal or principal to agent basis,
• It is an independent regulator for the auditing profession. ABOUT CONTRACT MANUFACTURING:

Jurisdiction of NFRA: • contract manufacturing means a business model under
1. Listed companies on stock exchanges. which the entity concerned (distributor/principal entity)
outsources manufacturing activity to another entity
2. Unlisted companies having capital of more than 500 crores
(contract manufacturer), which possesses manufacturing
or turnover of rs 1000 crores.
facilities (including but not limited to plant, machinery and
3. Insurance, Banking, companies engaged in supply or labour force required to manufacture relevant product as
generation of electricity etc. well as sourcing and supplying necessary raw materials)
FUNCTIONS and the requisite licence/registration.
1. Recommend accounting and auditing standards to be • The contract manufacturer undertakes manufacturing
adopted by companies for approval by Central activity at the instance of the distributor/principal entity
Government. and does not hold any intellectual property right or right to
2. Monitor and enforce compliance with accounting commercially exploit the end products. In such an
standards and auditing standards arrangement, the contract manufacturer receives
extensive instructions about the quantity, quality and
3. Oversee the quality of service of professions associated
quantum of production.
with ensuring compliance.
►SCHEME FOR INCUBATION IN ►TRADITIONAL KNOWLEDGE DIGITAL
APPAREL MANUFACTURING (SIAM) LIBRARY (TKDL)

• It is an initiative to prevent misappropriation of country’s
• It is a demand driven scheme launched my
traditional medicinal knowledge at international Patent
• The objective of the Scheme is to promote entrepreneurs
offices.
in apparel manufacturing by providing them an
• It is checking bio piracy.
integrated workspace and linkages based
entrepreneurial ecosystem with plug and play facility • CSIR is the implementing agency of TKDL project.
which help them in reducing operational and financial cost • Ministry of Ayush in collaboration with CSIR has
for establishing and growing a new business. established TKDL.
• The outcomes envisaged include
69

WHAT IS “INFRASTRUCTURE STATUS”?
INFRASTRUCTURE RELATED
The Infrastructure Policy and Finance Division under
►NATIONAL INFRASTRUCTURE Department of Economic Affairs, Ministry of Finance
maintains Harmonised Master List of Infrastructure Sub-
PIPELINE sectors.
Government plans to invest Rs 100 lakh crore on the Sectors included in Infrastructure sub-sectors are:
infrastructure sector over the next 5 years.
1. Transport and Logistics
To achieve this objective, Ministry of Finance constituted a
2. Energy
committee to draw the National Infrastructure Pipeline for
each of the years from FY 2019-20 to FY 2024-25. The Task 3. Water and Sanitation
force was chaired by Secretary, Department of Economic 4. Communication
Affairs, Ministry of Finance. 5. Social and Commercial Infrastructure such Educational
• It will enable a forward outlook on infrastructure projects Institutions, Sports Infrastructure, Hospitals, Tourism
which create jobs, improve ease of living and provide infrastructure, Common infrastructure for Industrial Parks,
equitable access to infrastructure for all. SEZs, food parks, textile parks, agriculture markets, Post-
• It is expected to be followed up by a periodical review harvest storage infrastructure for agriculture and
process. horticultural produce including cold storage, Terminal
markets, Soil-testing laboratories, Cold Chain, Affordable
• It includes economic and social infrastructure projects.
Housing.
• According to NIP, from 2020 to 2025 about 102 lakh crore
BENEFITS OF INFRASTRUCTURE STATUS:
of capital expenditure on infrastructure segment will be
incurred. • Longer maturity loans
• Order of sectors on the basis of expenditure: Energy > • Eligibility for slightly higher equity ratios
Roads > Urban > Railways • Advantages and flexibility in floating ECBs
• The Centre (39%) and states (39%) are expected to have • Eligible for refinancing with specialised lenders like IDFC,
equal share of the capital expenditure to be undertaken in IIFCL etc.
the infrastructure sector, followed by the private sector
(22%).
►REGIONAL AIR CONNECTIVITY-
UDAN
►CENTRAL ROAD AND th
4 round of Regional Connectivity Scheme - UDAN (Ude Desh
INFRASTRUCTURE FUND, 2000 Ka Aam Nagrik) to enhance the connectivity to remote and
The fund was established by amending the Central Road regional areas of the country was launched. The focus in this
Fund Act, 2000 in 2018 to establish Central Road and round will be North East Region, Hilly States, Jammu and
Infrastructure fund. Kashmir, Ladakh and Islands.
Under the act, a cess is levied and collected on high speed UDAN
petrol and diesel. The proceeds of the cess are accrued to the • UDAN (Ude Desh Ka Aam Nagrik) is the Government’s
Consolidated Fund of India. initiative to make air travel to India’s tier II and tier III
The proceeds of this cess can be utilised for: cities affordable. Incentivises domestic airlines to ply more
• Development of Rural roads on regional routes (Viability Gap Funding) to make these
routes profitable.
• Development and maintenance of National Highways
• Airlines are required to bid for exclusive rights to fly on the
• Development and maintenance of other State Roads
regional routes opened up under the scheme.
including roads of inter-state and economic importance.
• They must sell a specific number of seats on each flight at
• Construction of roads either under or over the railways,
a fixed fare of ₹2,500 for one hour of flying.
erection of safety works at unmanned rail-road crossings,
new lines, conversion of existing standard lines into gauge • Helicopter operations have been allowed for the first time
lines and electrification of rail lines. in the fourth round. Fares are capped at ₹2,500 for a 30-
minute Heli flight.
• Other infrastructure projects which has been given
infrastructure status. KEY FEATURES OF UDAN 4.0
Some of the key features of the Scheme are:
70

• Revision of (Viability Gap Funding) VGF cap – The OTHER MAJOR PORTS OF INDIA
provision of VGF for Category 2 / 3 aircraft (more than 20 Kandla, Gujarat, JNPT, Maharashra, Mumbai Port, Mormugao
seater) has been enhanced for operation of RCS flights in Port, Goa, New Mangalore port, Cochin Port (Kerala)
Priority Area(s) (Union Territories [UT] of Ladakh and
EAST COAST
Jammu & Kashmir; the States of Himachal Pradesh,
1. Kolkata Port (Only riverine major port, West Bengal)
Uttrakhand, North Eastern State; UT of Lakshadweep and
Andaman & Nicobar). The VGF cap applicable for various 2. Paradip Port
stage lengths for operation through category 1 / 1 A 3. Kamarajar Port (Ennore Port)( Kamarajar Port is the only
aircraft (below 20 seater) has also been revised to further corporatized major port and is registered as a company.)
incentivize the operation of small aircraft under the
4. Tuticorin Port
Scheme.
5. Chennai Port
• Promoting short-haul routes – The provision of VGF
6. Vishakhapatnam Port
would be restricted for routes with stage length up to 600
kms, for operation of Category 2 / 3 aircraft, beyond it no LANDLORD PORT
monetary support would be provided. A landlord port is characterised by its mixed public private
• Well defined Prioritization framework – Airports that orientation. Here the port acts as regulatory body and as
has already been developed by AAI would be given higher landlord, while port operations (especially cargo handling) are
priority for award of VGF under the Scheme, followed by carried out by private companies. It is dominant port model
airports not part of the above list but located Priority in larger and medium sized ports.
Area(s) would be given a priority, followed by airports Service Port Model where port operations and ownership is
located in areas other than Priority Area(s). with government.
• Flexibility to change the frequency of flight operation - ABOUT MAJOR PORTS
The Selected Airline Operator (SAO) would be allowed to 1. Major Ports of India are ports which are governed under
change the frequency of flight operation, during the tenure the Central Government. (Except Ennore Port)
of flight operation of the given route, provided that the
2. Major Ports are regulated under the Major Ports Trust Act,
total scheduled flight operation submitted as part of the
1963.
Technical Proposal, is conformed and adhered to within a
period of one year. 3. Tariff Authority for Major Ports (TAMP) is a statutory
body under the Major Ports Trust Act, 1963. It is an
• Inclusion of helicopter and sea plane operation under
independent authority to regulate all tariffs, both vessel
NSOP license.
related and cargo related, and rates for lease of properties
in respect of Major Port Trusts and the private operators
►VADHAWAN PORT located therein.
• A new Major Port is being set up at Vadhavan near Dahanu
in Maharashtra. ►BALTIC DRY INDEX (BDI)
• The port will be developed in ‘Land Lord Model’. A Special BDI has fallen sharply since a trade dispute between the
Purpose Vehicle will be formed with Jawahar Lal Nehru United States and China started and resulted in the world’s
Port Trust as the lead partner with majority stake to two biggest economies slapping import tariffs on each other’s
implement the project. SPV will develop port goods.
infrastructure, reclamation, construction of breakwater,
• An economic indicator issued daily by the London-based
besides connectivity with hinterland.
Baltic Exchange.
NEED FOR THE PORT
• It provides an assessment of the price of moving the
• JNPT is largest container port in India. However, it is major raw materials by sea.
th
ranked at 28 position globally. After capacity addition by
th • It takes into account the freight rates for bulk commodities
2023, the port will be 17 largest container port.
such as coal, iron ore and grain.
• It will be one of the 10 largest container ports in the
WHY DOES IT MATTER?
world.Vadhavan port will have a draft of 20 meters, making
it possible to handle bigger vessels. • On account of trade war between USA and China, BDI has
seen a sharp fall.
71

• It is a representative of demand for raw materials and ο Better road safety management
recent declines in activity point to a serious economic ο Safer roads, vehicles and people
slowdown.
ο Enhanced post-crash care
• It is a measure of the demand for shipping
• Speeding up the shift to safe, affordable, accessible and
manufactured goods from producers to consumers,
sustainable modes of transport like walking, cycling and
container rates are also seen as a leading economic
public transport.
indicator.
VISION ZERO
OTHER INDICES FOR TRACKING FREIGHT RATES
• Concept of Vision Zero was decided by Swedish
The Baltic Dirty Tanker Index tracks freight rates for crude
Parliament. It turned the traditional view of road safety
oil and the Baltic Clean Tanker Index tracks freight rates for
work upside down. From a focus on the prevention of
petroleum products.
accidents, it focuses that no-one should die or be seriously
injured in traffic.
►NATIONAL COMMON MOBILITY • According to Vision Zero, the main problem is not that
CARD (NCMC) accidents occur - it is instead whether the accidents lead to
death or lifelong injury.
India's First Indigenously developed Payment Platform,
National Common Mobility Card has been recently launched • It aims that roads and vehicles need to be adapted to
in Ahmedabad. match capabilities of people that use them.
• A user should be able to pay one fare and travel in all the ROAD SAFETY IN INDIA
required modes to reach the destination. • India is the largest producer of Two wheelers in the world
• National Payments Corporation of India (NPCI) has and amongst the largest producers of cars.
prepared the standards & specifications of the National • India has the second largest road network in the world.
Common Mobility Card (NCMC). 11% of deaths due to road accident of the world take place
• These are bank issued Debit/Credit/Prepaid cards and in India alone.
the customer may use this single card for payments across • According to the Road Accident Report 2018, published by
all segments including metro, bus, suburban railways, toll, the Ministry of Road Transport and Highways
parking etc.
• The stored value on card supports offline transaction ►NATIONAL ELECTRONIC TOLL
across all travel needs with minimal financial risk to
involved stakeholders.
COLLECTION PROGRAM – FASTAG
WHAT ARE THE BENEFITS OF NCMC? • It is a simple to use, reloadable tag which enables
automatic deduction of toll charges and lets you pass
• Interoperability for passenger between bus, train, metro,
through the toll plaza without stopping for the cash
parking etc. in the urban area.
transaction.
• Single e-purse with access to multiple products.
• It is linked to a prepaid account from which the applicable
toll amount is deducted. The tag employs Radio-frequency
►3rd GLOBAL MINISTERIAL Identification (RFID) technology and is affixed on the
CONFERENCE ON ROAD SAFETY vehicle's windscreen after the tag account is active.
It has a validity of 5 years and after purchasing it, you only
• It is global conference organised by WHO and Government
need to recharge/ top up the FASTag as per your
of Sweden. A road map for reaching UN's goal set under
requirement.
UN Decade of Action of reducing road crashes by 2030.
• MORTH had mandated to declare all lanes of fee plazas on
• Global Status report on road safety 2018 was published by
National Highways as “FASTag lanes while provisioning one
WHO at the conference.
lane (extreme left lane in each direction) which would be
STOCKHOLM DECLARATION WAS ADOPTED AT THE kept as hybrid lane to accept FASTag as well as other.
CONFERENCE
• Any vehicle user without a FASTag entering into a “FASTag
• It calls for reduction in road traffic deaths and injuries by lane” at a NH fee plaza shall have to pay a fee equivalent to
50% by 2030. two times of the applicable fees to that category of vehicle.
• Invites strengthened efforts on activities in all five pillars of
the Global Plan for the Decade of Action
72

• Indian Highway Management Company Limited (IHMCL) ►TOLL OPERATE TRANSFER MODEL
subsidiary of NHAI and NPCI are implementing it. For
recharge facility, NHAI/IHMCL has developed UPI recharge
BY NHAI
facility via My FASTag App. FASTag can be also be • Public funded National Highway projects which are
recharged by visiting respective bank’s portal through net- operational and have toll revenue generation history
banking, credit/debit card, UPI and other popular means of of one year after Commercial Operations Date will be
payment. monetised through Toll operate Transfer model.
BENEFITS • Corpus generated from proceeds of such project
• Saves fuel and time monetisation shall be utilised by Government to meet its
fund requirements regarding future development and
• SMS alerts for transactions
Operation and management of highways.
• Online recharge
• TOT Model will facilitate efficient toll realisation through
• No need to carry cash private sector.
• Web portals for customers
• Other benefits are:
(a) Environmental benefit : Reduced air pollution,
Reduced use of paper
(b) Social benefit : Reduced toll payment hassles,
Analytics for better highway management
(c) Economic benefit : Reduced effort in management at
toll plaza, Reduced effort in monitoring centrally
73
SECTION 7
GRICULTURE
►RAINBOW REVOLUTION IN ►MINIMUM SUPPORT PRICE (MSP)
AGRICULTURE • MSP is the minimum price set by the government at which
farmers can expect to sell their produce for the season.
NAME PRODUCT
• When market prices fall below the announced MSPs,
Protein revolution Higher agricultural procurement agencies step in to procure the crop and
production ‘support’ the prices.
Yellow revolution Oil Seed production • The Cabinet Committee of Economic Affairs announces
MSP for various crops at the beginning of each sowing
Blue revolution Fish production
season based on the recommendations of the
Brown revolution Non-conventional energy Commission for Agricultural Costs and Prices (CACP).
• The CACP takes into account demand and supply, the cost
Golden revolution Fruits/honey/horticulture
of production and price trends in the market among other
Golden fiber revolution Jute production things when fixing MSPs.
Grey revolution Fertilizers • The Cabinet Committee on Economic Affairs has approved
the increase in the Minimum Support Prices (MSPs) for all
Pink revolution Meat
kharif crops for 2018-19.
Silver revolution Eggs/poultry • Government announces MSP on 23 crops. These include
seven cereal crops (paddy, wheat, jowar, bajra, maize, ragi
Red revolution Tomatoes
and barley), five pulse crops (gram, tur, moong, urad and
Round revolution Potato lentil), seven oilseeds (groundnut, sunflower seed,
Green revolution Food grains soyabean, rapeseed, mustard, safflower, nigerseed and
seasmum), copra (dried coconut), cotton, raw jute and
White revolution/operation Milk production sugarcane.
flood
• In order to define minimum support prices for farmers,
The various colours represent the variety of farm practices government has decided a new formula. The new formula
such as crop cultivation, horticulture, forestry, fishery, is different from the C2 cost formula (Favoured by MS
poultry, animal husbandry and food processing industry. The Swaminathan). C2 formula factors in a lot of costs like
integrated development of these sectors through these imputed rent on land and interest on capital, which makes
revolutions is also termed as Rainbow Revolution. the cost of production much higher than the level on
which the Commission for Agricultural Costs and Prices
74
AGRICULTURE
bases its recommendations. A2+FL costs formula may be • Currently, MSP is announced for 50 Minor Forest
used for fixation o fMSP. A2+FL considers actual cost plus Produce.
imputed value of family labour in the production of a crop. • MSP declared by GOI shall be reference MSP for fixing MSP
• Government has decdded to implement the and State Government shall have latitude of 10% of MSP
recommendation of Swaminathan Committee on declared by GOI ie, State can fix MSP upto 10% higher or
agriculture for MSP payments. Now farmaers will be lower than MSP declared by GOI.
provided 50% minimum profit over their cost of • State is also at liberty to suspend process of procurement
productions. For calculating cost of production A2 + FL or not to do procurement of MFP at all.
formula will be used in place of C2 formula proposed by
• The area of coverage of the scheme has been extended
Swaminathan committee.
beyond existing 9 Schedule 5 and now scheme is
• Production costs in Agriculture: The Commission for applicable in all states.
Agricultural Costs and Prices (CACP) proposes three
• The procurement mechanisms at the Haat Bazars where
definitions of production costs in agriculture. They are:
tribals bring their commodities have now also been
• A2: It is the actual paid-out expenses incurred by farmers – worked. 307 District Collectors have been given
in cash and kind on seeds, fertilisers, pesticides, hired responsibility through the State Agencies to provide
labour, fuel, irrigation and other inputs from outside. Minimum Support Price to the tribal gatherers.
• A2 + FL: It includes A2 cost plus an imputed value of • It is proposed to set up almost 6000 Van Dan Vikas
unpaid family labour. Kendras comprising 300 tribal gatherers each in the
• C2: It accounts for the rentals or interest loans, owned Country providing employment to almost 45 Lakh tribals.
land and fixed capital assets over and above A2 + FL.
The Swaminathan Committee recommended the MSP to be ►FARMERS PRODUCER
basic cost and prescribed MSP 50 per cent above C2.
ORGANISATION (FPOS)
• In the Budget, 2019-20, government had announced
►MSP EXTENDED TO MINOR FOREST formation of 10,000 new FPOs.
PRODUCE • A new Central Sector Scheme has been created by
• The Ministry of Tribal Affairs has declared inclusion of 17 Department of Agriculture Cooperation and Farmers
new minor forest produce (MFP) under the government’s Welfare (DACFW) titled ‘Formation and Promotion of
minimum support price scheme. Farmers Produce Organisations’.
• The new MFP under the scheme includes AMahua flowers • Aims to create 10,000 new FPOs to be formed in 5 years
(dried), Tejpatta (dried) and Kokum (dry). period from 2019-20 to 2023-24. Each FPO will be
supported for 5 years from its year of inception.
• The Pricing Cell, constituted by the Tribal Cooperative
Marketing Development Federation of India Ltd PROVISIONS
(TRIFED), recommended inclusion of new MFPs under the • There will be three implementing agencies to form and
scheme, given their importance to the economy of local promote FPOs - SFAC, NCDC and NABARD. States may
communities. also nominate their implementing agency in consultation
MFP with DACFW.
• A Planning Commission report had noted that MFP • DACFW will allocate Cluster/States to implementing
contributes to 20 to 40 per cent of the income of forest- agencies which in turn will form the Cluster Based
dependent communities, especially the landless with a Business Organisation (CBBO)in the States.
dominant population of tribals, and “provides critical • CBBO will promote and form FPOs engaged at the
subsistence during lean seasons.” State/Cluster level by implementing agencies. CBBOs to
• The MFP economy, however, is also known to suffer from have 5 categories of specialists related to agriculture, agri
unorganised and uncertain market demands, affecting marketing, social mobilization, law and accounts, IT/MIS.
economic returns to these communities. CBBOs to act as platform for an end to end knowledge for
all FPO promotion.
ABOUT MSP FOR MINOR FOREST PRODUCE
• A National Project Management Agency (NPMA) at SFAC
• The MSP is announced by the Ministry of Tribal Affairs
for providing overall project guidance, data compilation
based on the recommendations of Pricing Cell constituted
and maintenance.
by TRIFED.
75
AGRICULTURE
• Minimum number of members in FPO will be 300 in plain • Volume of honey exports from 29.6 to 51.5 thousand
areas and 100 in North East and hilly areas. DACFW may tonnes between 2014-15 and 2017-18.
revise the minimum membership based on experience • Four major honey bees species are found in India:
with approval of Union Agriculture Minister.
1. India or Asian honey bee (domesticated) (Accounts for 5-
• Priority to formation of FPOs in aspirational districts with 10% of honey produced in India)
at least 1 FPO in each block of aspirational districts.
2. European honey bee (domesticated) (Introduced species in
• FPOs will be promoted under ‘One District One Product’ India) (Accounts for 70-75% of honey produced)
cluster to promote specialisation and better processing,
3. Dwarf honey bee (wild)
marketing, branding & export by FPOs.
4. Rock honey bee (wild) (20% honey produced)
• Provision of equity grant for strengthening equity base of
Honeybees exhibit Eusociality in which they live in colonies
FPOs.
with a highly organised system of division of labour, take care
• Credit Guarantee Fund of up to Rs 10,000 crore in NABARD of their young ones with cooperative brood care.
with equal contribution by DACFW and NABARD and Credit
Guarantee Fund of Rs 500 crore in NCDC with equal
►NATIONAL BEE BOARD
contribution and NCDC for providing suitable credit
guarantee cover to accelerate flow of credit to FPOs • It was reconstituted in 2006 with the aim to facilitate
overall development of Beekeeping by promoting Scientific
• States/UT can avail loan at concessional rates under Agri-
Beekeeping in India to increase the productivity of crops
Market Infrastructure Fund approved for set up in
through pollination and increase the Honey production for
NABARD for developing agriculture marketing and
increasing the income of the Beekeepers/ Farmers.
infrastructure in GrAMs,
• Headed by Secretary, Department of Agriculture and
• Provision of training. Farmers' Welfare
• Budgetary provision of Rs 4,496 crore for five years (2019- • Functions under the Ministry of Agriculture and Farmers'
20 to 2023-24) with a further committed liability of Rs Welfare.
2,369 crore for the period from 2024-25 to 2027-28
OBJECTIVES
towards handholding of each FPO for five years from its
1. Development of scientific beekeeping
aggregation and formation.
2. Development of nucleus stock production, capacity
BENEFITS OF FPOs
building
• Ensures economies of scale for farmers
3. Dissemination of information on technological
• Small and marginal farmers advancement in the field of beekeeping
ο Status of FPOs in India 4. Steps for quality honey production and other bee hive
ο Currently, there are around 6,000 FPOs existing in India. products for overseas and domestic markets, enhancing
productivity of various crops through bee population
ο NABARD has promoted around 4000 FPOs.
PRODUCE Fund (Producers Organization Development and

Upliftment Corpus) has been created with a corpus of Rs 200 ►APIARY ON WHEELS
crore in NABARD for the promotion of 2000 FPOs in India. • It is a concept developed by KVIC for the easy upkeep and
migration on Bee Boxes having live Bee colonies.
►BEEKEEPING DEVELOPMENT • Platform which can carry 20 Bee boxes from one place to
another without any difficulty.
COMMITTEE REPORT
• Connected with solar panel which automatically triggers a
• Committee was headed by Bibek Debroy
fan inside the compartment as soon as temperatures
• India is 8th largest producer of honey in the world. (China 0
reaches 35 C or above.
is first).
• Has sugar drips which helps to feed bees in the summer
• Based on the area under cultivation in India and bee season
forage crops, India has a potential of about 200 million bee
• It is like an attachment which can be easily connected with
colonies as against 3.4 million bee colonies today.
a Tractor or trolley and may be pulled to any suitable
• Increasing the number of bee colonies will not only destination.
increase the production of bee-related products but will • It will enable:
boost overall agricultural and horticultural productivity.
1. Easy migration of bees
76
AGRICULTURE
2. Reduce labour and cost of maintaining and upkeeping of ►PPVFR ACT, 2001
Bee boxes and live bee colonies across India.
Recently, PepsiCo filed a case against the potato farmers in
3. Easy feeding of bees
Gujarat for allegedly growing its registered potato variety
4. Help bees to sustain even in extreme summers. "FC5" which is used to make ‘Lays’ chips. The Company
sought a compensation of around Rs 1 crore from the
►HONEY MISSION farmers for the violation of its rights under the Protection of
Plant Varieties and Farmers' Rights Act, 2001.
• It is a mission launched by KVIC in 2017.
WHAT IS PPVFR ACT, 2001?
• It involves:
• The PPVFR Act, 2001 was enacted to grant intellectual
1. Training of beekepers
property rights to plant breeders, researchers and
2. Distributing Bee boxes farmers who have developed any new or extant plant
3. Helping rural, educated but unemployed youth to earn varieties.
extra income through beekeeping. • It seeks to balance the interests of the breeders with the
farmers wherein it promotes research in the development
►HONEY AND NORTH EAST of new plant varieties without adversely affecting the
• High altitude honey is rich in antioxidants. It can be sold at interests of the farmers.
a premium price. BACKGROUND TO THE ADOPTION TO PPVFR ACT

• Other products such as pollen, propolis, royal jelly and bee • TRIPS agreement provides for a flexibility mechanism to
venom the countries wherein that new plant variety can be
protected either by issuing patents or an effective "sui
►TRADEMARK PROTECTION OF KHADI generis" system or a combination of the two. The "sui
generis" system means that the country may adopt its own
• KVIC is the registered proprietors of over a hundred
law in order to meet its special needs.
trademarks registrations including the symbol of 'Charkha'
• TRIPS agreement provides that Union for protection of
in India and other countries like Russia, China, Germany,
Plant Varieties (UPOV) may be used as the basis for "sui
Australia, UK and Bhutan.
generis" system.
• To prevent the misuse of these trademarks by private
players KVIC has taken up matter seeking International • India decided to enact domestic law in the form of PPVFR
Trademark protection of symbol of Charkha under article Act, 2001 without becoming a member of UPOV. This
6ter of the Paris Convention. was specifically done in order to protect the interest of the
farmers since the UPOV denies the farmers the freedom to
ARTICLE 6TER OF THE PARIS CONVENTION
re-use farm saved seeds and to exchange them with their
• Article 6ter of the Paris Convention for the protection of
neighbours.
Industrial property of 1883 (1967 Stockholm Act) protects
UPOV
armorial bearings, flags and other State emblems as well
as official signs and hallmarks of the States party to the • The International Union for the Protection of New
Paris Convention. Varieties of Plants (UPOV) is an intergovernmental
• The signs published with World Intellectual Property organization based in Geneva, Switzerland.
Organization (WIPO) under this act are prevented from • UPOV was established by the International Convention for
being registered or used as trademarks, across the world, the Protection of New Varieties of Plants. The Convention
without authorization. was adopted in Paris in 1961 and revised in 1972, 1978
EXCLUSIVE HS CODE BRACKET FOR KHADI and 1991.
• HS stands for Harmonised System. It is a 6 digit • The mission of UPOV is to provide and promote an
identification code. effective system of plant variety protection, with the
• Developed by World Customs Organisation aim of encouraging the development of new varieties of
plants, for the benefit of society.
• Custom officers use HS code to clear every commodity that
enters or crosses any international border. • India is not a member country of UPOV. However, it is an
observer country.
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AGRICULTURE
WHAT KIND OF VARIETIES CAN BE REGISTERED UNDER THE ►SUGAR SECTOR
ACT?
Sugar industry is in trouble leading to agrarian distress.
• A new variety if it conforms to the criteria of novelty,
Reasons:
distinctiveness, uniformity and stability.
• Low domestic prices of sugar
• An extant variety if it conforms to criteria of
• Mismatch between demand and supply of sugar. Demand
distinctiveness, uniformity and stability. An “Extant Variety”
of sugar has remained stagnant at around 25 million
means a variety, which is (i) notified under section 5 of the
tonnes.
Seeds Act, 1966; or (ii) a farmers’ variety; or (iii) a variety
• Rise of alternative sweeterners such as Aspratame.
about which there is common knowledge; or (iv) any other
Increasing health consciousness among people.
variety which is in the public domain.
• Low international prices of sugar
RIGHTS UNDER THE ACT
• Policy environment affecting procurement, pricing of raw
Breeders’ Rights
material and finished products.
• Breeders have exclusive rights to produce, sell, market,
• Increasing NPAs in sugar sector.
distribute, import or export the protected variety.
SUGAR PRODUCTION IN INDIA
Researchers’ Rights
• The Sugar industry is the second largest agro-based
• Researcher can use any of the registered variety under the industry in India. India is also the second largest
Act for conducting experiment or research. producer of sugar after Brazil.
Farmers' Rights • Within India, Uttar Pradesh, Maharashtra and
• A farmer who has evolved or developed a new variety is Karnataka are the three largest producers.
entitled for registration and protection in like manner as a • The Sugar production in India has increased from 24
breeder of a variety; million tonnes in 2015-16 to 32 million tonnes in 2017-18
• Farmers can claim for compensation if the registered and is expected to touch 35 million tonnes in 2018-19.
variety fails to provide expected performance under given PROBLEMS WITH THE SUGARCANE PRICING IN INDIA
conditions. • Sugarcane prices in India are controlled by the Central as
• Farmers engaged in the conservation of genetic resources well as State Governments. Each year the Cabinet
of land races and wild relatives of economic plants and Committee on Economic Affairs fixes a Fair and
their improvement through selection and preservation are Remunerative Price (FRP) on the recommendations of
recognised and rewarded Commission for Agricultural Costs and Prices (CACP) to
be paid to sugarcane farmers for procurement of
• A farmer can save, use, sow, re-sow, exchange, share or
sugarcane by sugar mills. Additionally, states also fix up a
sell his farm produce including seed of a variety protected
State Advised Price (SAP). The SAP has typically been
under the law in the same manner as he was entitled higher than FRP. FRP gives guaranteed price to cane
before the coming into force of this Act. However, the growers. FRP of sugarcane is determined under Sugarcane
farmer is not allowed to sell branded seed of a variety (Control) Order 1966.
protected under the law.
• However, the sugar prices are determined by the market
• Note: Branded seed means any seed put in a package or forces of demand and supply. Thus, even though, the
any other container and labelled in a manner which gives sugar prices in the domestic market has decreased, but
indication that such seed is of a variety protected under the sugarcane prices fixed by the government has
this Act. continued to increase.
DURATION OF PROTECTION • This has put an additional burden on the sugar mills for
• The duration of protection of registered varieties is the payment of money to the sugarcane farmers.
different for different type of crops which are as below:

1. Trees and vines - 18 years. ►AGRI EXPORT POLICY
2. For other crops - 15 years WHY INDIA NEEDS AGRICULTURE EXPORT POLICY?
3. For extant varieties notified - 15 years from the date of • In spite of being among the largest producers agricultural
notification under section 5 of the Seeds Act, 1966. commodities, India’s share in global exports of agriculture
products is quite marginal at 2.2 %.
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AGRICULTURE
• World agricultural trade has been relatively stagnant in the inflation and protecting the domestic industry has had an
last five years (2013-2017). India’s agricultural trade adverse effect.
dropped from US$ 36 Billion in 2013 to US$ 31 Billion in • A policy assurance that the processed agricultural
2017. products and all kinds of organic products will not be
• However, between 2000 and 2014, the country’s brought under the ambit of any kind of export restriction
agricultural production has surged from $101 billion to (viz. Minimum Export Price (MEP), export duty, export ban,
$367 billion, driven mainly by high-value segments such as etc).
horticulture, dairy, poultry and inland aquaculture. • Identification of few commodities which are essential for
• No other country has a more diverse food and non-food food security. Any export restriction on such identified
agriculture base as India and this generates the optimism commodities under extreme price situation will be based
that India can be a leading player in the world agricultural on decision of high level committee. Export prohibitions
trade. would be taken up in a WTO compatible manner.
• India’s export basket is basically led by marine products, • Liberalised import of agricultural products for value
meat and rice which together constitute 52% of its addition and re-export.
total agri exports. REFORMS IN APMC ACT
• There is ample scope for diversification of export of 1) Liberalizing Land Leasing Norms: The Ministry of
agricultural commodities from India. Agriculture has recently come out with Model Contract
• Majority of India’s exports are low value, semi-processed Farming Act. The Agri Export Policy would aim at taking
and marketed in bulk. The share of India’s high value forward these reforms.
and value added agri produce in its agri export basket 2) Infrastructure and Logistics Boost:
is less than 15% compared to 49% in China.
ο Greater involvement of State Government in Agri
• Thus, there needs to renewed focus on "Bake in India" on Exports
the lines of "Make in India" to promote the export of
ο Focus on Clusters
processed agricultural commodities.
ο Promoting Value added exports
MAJOR OBJECTIVES
ο Marketing and promotion of ‘Brand India’
• To double agricultural exports from present US$ 30
ο Attracting private investment into production and
Billion to US$ 60 Billion by 2022 and reach US$ 100 Billion
in the next few years thereafter, with a stable trade policy processing
regime. ο Establishment of Strong Quality Regimen
• To diversify our export basket, destinations and boost 3) Research and Development
high value and value added agricultural exports 4) Creation of Agri-Start up fund: It will support
including focus on perishables. entrepreneurs to start a new venture in Agri products
• To promote novel, indigenous, organic, ethnic, traditional exports during their initial period of establishment.
and non-traditional Agri products exports. Proposals will be referred to fund manager for evaluation.
• To provide an institutional mechanism for pursuing market
access, tackling barriers and deal with sanitary and phyto- ►COMPARISON OF INCOME SUPPORT
sanitary issues. SCHEMES- PM-KISAN VS KALIA VS
• To strive to double India’s share in world agri exports by RYUTHUBANDHU
integrating with global value chain at the earliest.
Comparison of Income Support Schemes for the Farmers
• Enable farmers to get benefit of export opportunities in RYUTHU PM-
overseas market. KALIA SCHEME BANDHU KISAN
SCHEME SCHEME
• Policy has been released by Ministry of Commerce and Government Odisha Telangana Centre
Industry. • Small and Marginal
Farmers
STRATEGIES ADOPTED All the
• Landless Agricultural
All the Land
Stable Policy Regime Households
Farmers holding
• Vulnerable Agricultural
Farmers.
• The tendency of the government to utilize trade policy as Household
an instrument to attain short-term goals of taming • Sharecroppers Yes
Sharecroppe
Yes No No
rs included?
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AGRICULTURE
Rs 4,000 per INITIATIVES OF GOVERNMENT
acre per
Assistance Differs for different season (No Rs 6,000 • Union Ministry of Agriculture and Farmer’s Welfare has
Provided categories Cap on the per year revised the norms for the Rashtriya Krishi Vikas Yojana-
acres owned
Remunerative Approaches for Agriculture and Allied
by Farmers)
Life sector Rejuvenation (RKVY-RAFTAAR) and the
Not
Insurance Rs 2 Lakhs Not Provided
Provided
Paramparagat Krishi Vikas Yojana.
Support
Interest • Both Centrally-sponsored schemes now allow States to use
Loans up to Rs 50,000 @ Not
Free Crop Not Provided their funds to promote the ZBNF, Vedic farming, natural
Not Provided 0% interest Provided
Loan farming, cow farming and a host of other traditional
methods.
►ZERO BUDGET NATURAL FARMING BENEFITS
The budget document of 2019-20 and the Economic Survey • Reduce the input costs which have been responsible for
2018-19 focused on adoption of ‘Zero Budget Natural
present agrarian distress.
Farming’ (ZBNF) in order to double the farmers’ income by
• Reduce the dependence of the farmers on the credit which
the end of 2022.
has been responsible for the debt trap.
WHAT IS ZNBF?
• Enhancement in the soil fertility.
• It is a set of farming methods, and also a grassroots
• Optimum utilization of water and reduce water
peasant movement, which has spread to various states in
consumption.
India.
• It has attained wide success in southern India, especially • Promote diversification of the agriculture- towards other
the southern Indian state of Karnataka where it first crops and towards livestock rearing. This can also lead to
evolved. The agricultural practices under ZBNF was put reduction in the risks and enhance non-farm income.
forward by Subhash Palekar. • Enhance the farmers’ income in the long term.
• The word ‘budget’ refers to credit and expenses, thus the
phrase "Zero Budget" means without using any credit, ►GREEN-AG PROJECT
and without spending any money on purchased inputs.
The government has launched a Global Environment
"Natural farming” means farming with Nature and without
Facility (GEF) assisted project namely, “Green – Ag:
chemicals.
Transforming Indian Agriculture for global environment
FOUR PILLARS OF ZBNF
benefits and the conservation of critical biodiversity and
Jeevamrutham: a fermented Benefits: Stimulate microbial forest landscapes”.
microbial culture derived primarily activity to make nutrients
OBJECTIVE
from cow dung and urine, jaggery, plant-available; protect against
pulse flour and uncontaminated pathogens; increase soil Bring about changes in agricultural sector in order to support
soil carbon. achievement of national and global environmental benefits
Beejamrutham: microbial coating Benefits: protects young roots and conservation of critical biodiversity and forest
of seed/ seedlings, is based on cow from fungus and seed-borne landscapes.
dung and urine and lime. or soil-borne diseases. NEED
Acchadana-Mulching: the process Benefits: produces "humus", • India needs to strengthen rural livelihood and meet its
of covering the top soil with cover conserves topsoil increase
food and nutritional security. However, at the same time,
crops and crop residues water retention, encourage soil
we also need to ensure that Indian agriculture has to take
fauna and supply the soil with
essential nutrients, control into account the environmental objectives of sustainable
weeds. management practices and conservation of biodiversity.
Whaphasa: soil aeration, a result Benefits: increase water • Hence, in this regard, the project seeks to mainstream
of jivamrita and acchadana - availability, water use biodiversity, climate change and sustainable land
represents the changes in water efficiency; increase resilience management objectives and practices into Indian
management brought about by to droughts.
agriculture.
improved soil structure and humus
content WHERE IS IT BEING IMPLEMENTED?
• Madhya Pradesh : Chambal Landscape
• Mizoram: Dampa Landscape
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AGRICULTURE
• Odisha: Similipal Landscape Livestock
• Rajasthan: Desert National Park Landscape
• Uttarakhand: Corbett-Rajaji Landscape.
►LIVESTOCK CENSUS
The Department of Animal Husbandry & Dairying, Ministry of
Fisheries, Animal Husbandry and Dairying has recently
released the 20th Livestock Census report.
ABOUT THE 20TH LIVESTOCK CENSUS REPORT
• Data on livestock numbers are collected through a
quinquennial (every 5 years) Livestock Census that is a
complete enumeration of all households with regard to
livestock population.
• The data collected are quite detailed; the livestock is
classified according to various species of animals by
breed, sex and age. HIGHLIGHTS OF THE REPORT
• The 20th Livestock Census was conducted in all the • Total Livestock Population: The total Livestock
districts of the India in participation with all States and population is 535.78 million showing an increase of 4.6%
Union Territories. Various species of animals possessed by over Livestock Census-2012.
the households, household enterprises/non-household 1. Distribution of Livestock Population: 35.94%-Cattle,
enterprises and institutions have been counted at their 27.80%-Goat, 20.45%-Buffaloes, 13.87%-Sheep, 1.69%-
site. Pigs. Mithun, Yaks, Horses, Ponies, Mules, Donkeys and
• The 20thLivestock Census would be a Breed-wise Camels taken together contribute 0.23% of the total
Livestock Census which will be helpful for framing livestock. As compare to previous census the percentage
policies or programmes for Breed improvement. Please share of sheep and goat population has increased
note that the First Livestock Census was conducted in whereas the percentage share of cattle, buffalo and pig
1919-20. has marginally declined.
Table: Livestock Population - Major Species 2. Livestock Population-Major States: UP, Rajasthan,
Madhya Pradesh, West Bengal and Bihar.
Population Population
Category 3. Cattle Population: The total number of cattle in the
(In million) (In million) % growth
2012 2019 country in 2019 is 192.49 million showing an increase of
0.8 % over previous Census. The Female Cattle (Cows
Cattle 190.90 192.49 0.83 population) is 145.12 million, increased by 18.0% over the
Buffalo 108.70 109.85 1.06 previous census (2012).
Sheep 65.07 74.26 14.13 4. Type of Cattle: The Exotic/Crossbred and

Indigenous/Non-descript Cattle population in the country
Goal 13547 148.88 10.14 is 50.42 million and 142.11 million respectively. There is a
Kg 10.29 9.06 –12.03 decline of 6 % in the total Indigenous/ Non-descript cattle
population over the previous census. However, the pace
Mithun 0.30 038 26.66
of decline of Indigenous/ Non-descript cattle population
Yak 0.08 0.06 –25.00 during 2012-2019 is much lesser than as compared to the
2007-12 which was about 9%.
Morses & 0.63 0.34 –45.58
Ponies RELATED INFORMATION: IMPORTANT INDIGENOUS
CATTLE BREEDS IN INDIA
Mule 0.20 0.08 –57.09
Donkey 0.32 0.12 –61.23 Cattle Type Description

Name
Camel 0.40 0.25 –37.05
Gir Milch Originated in Gir forests of South
Total 512.06 535.78 4.63
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AGRICULTURE
Kathiawar in Gujarat also found in district).

Maharashtra and adjacent
Rajasthan. Dual
Ongole Found in Guntur District of AP
Horns are peculiarly curved, giving Purpose
a ‘half-moon’ appearance.
Originated from Krishna river valley
Krishna Dual
Originated in Karachi and in Karnataka and also found in
Valley Purpose
Hyderabad (Pakistan) regions of border districts of Maharashtra.
Red Sindhi Milch undivided India and also reared in
certain organized farms in our Originated in Western Andhra
country. Pradesh and also found in
Dual
Deoni Marathwada region of Maharashtra
Purpose
Originated in Montgomery region state and adjoining part of
of undivided India. Heavy breed Karnataka.
Sahiwal Milch
with symmetrical body having
loose skin.
IMPORTANT INDIGENOUS BUFFALO BREEDS IN INDIA
Originated from the former
Buffalo Description
Hallikar Draught princely state of Vijayanagar,
Breed
presently part of Karnataka.
Murrah Mainly found in Rohtak, Hisar districts of
Originated in Hassan, Chikmagalur
Haryana, Patiala district of Punjab.
Amritmahal Draught and Chitradurga district of
Karnataka. Surti Mainly found in Kaira and Baroda district of
Gujarat.
Originated from Sholapur and
Khillari Draught Sitapur districts of Maharashtra. Jaffrabadi Mainly found in Gir forests, Kutch and
Closely resembles Hallikar breed. Jamnagar districts of Gujarat.
Originated from Tamil Nadu.The Bhadawari Mainly found in Agra and Etawah district of
horns are spread apart, nearly Uttar Pradesh and Gwalior district of Madhya
Kangayam Draught
straight with a slight curve Pradesh.
backwards.
Nili Ravi Found in Sutlej valley in Ferozpur district of
Found around Bargur hills in Punjab and in the Sahiwal (Pakistan) of
Bargur Draught Bhavani taluk of Erode district in
undivided India.
Tamil Nadu.
Mehsana Found in Mehsana and Banaskanta districts in
Originated from Thanjavur District Gujarat and adjoining Maharashtra state.
Umblachery Draught
of TN.
Nagpuri Found in Nagpur, Akola and Amravati districts
Originated from Madurai District of of Maharashtra.
Pulikulam Draught
TN.
Toda Named after Toda Tribes of Nilgiris Hills in
Originated from Dharmapuri south India
Alambadi Draught
District of TN.
Originated in Tharparkar district

Dual ►NABVENTURES
Thaparkar (Pakistan) of undivided India and
Purpose
also found in Rajasthan. It is a subsidiary of NABARD. It has launched a new venture
capital fund in order to provide funding support to agri-
Dual Originated from Rohtak, Hisar, Jind
Hariana related enterprises.
Purpose and Gurgaon districts of Haryana
DETAILS ABOUT NABVENTURES
Originated from Southeast Rann of • Recognising the need for early-stage support for
Dual
Kankrej Kutch of Gujarat and adjoining
Purpose agriculture and rural enterprises and the lack of adequate
Rajasthan (Barmer and Jodhpur
institutional support, NABARD (the National Bank for
82
AGRICULTURE
Agriculture and Rural Development) had set up resistance of the militants and lack of availability of
NABVENTURES Limited in Jan 2019. enough trucks.
• The Nabventures has been set up in order to support ABOUT MARKET INTERVENTION SCHEME (MIS)
start-ups in the field of the agriculture by providing • It is an ad-hoc scheme under which are included
them necessary financial support. horticultural commodities and other agricultural
ABOUT THE NEW VENTURE CAPITAL FUND commodities which are perishable in nature and which
• The Venture Capital refers to the capital support provided are not covered under the minimum price support
to the new start-up companies. The Nabventures has now scheme.
announced its maiden fund of Rs 700 crores to back • In order to protect the growers of these
agriculture and rural enterprises. horticultural/agricultural commodities from making
• NABARD has been contributing to other funds till now and distress sale in the event of bumper crop during the peak
this is the first time that NABARD has launched a fund of arrival period when prices fall to very low level,
its own. Government implements M.I.S. for a particular commodity
on the request of a State Government concerned.
• The fund will have a high impact as it will provide a boost
to investment ecosystem in the core areas of agriculture, • Losses suffered are shared on 50:50 basis between
food and improvement of rural livelihoods. Central Government and the State.
►MARKET INTERVENTION SCHEME ►PRICE STABILISATION FUND

• Price Stabilisation Fund (PSF) refers to any fund
The Central Government has recently introduced Special
constituted for the purpose of containing extreme
Market Intervention Price Scheme (MISP) in the Jammu
volatility in prices of selected commodities.
and Kashmir for the benefit of apple growers.
• The amount in the fund is generally utilised for activities
DETAILS
aimed at bringing down/up the high/low prices say for
• Under MISP, 2 lakhs Metric Tonnes of apples will be instance, procurement of such products and distribution
procured at remunerative prices from Kashmir growers. of the same as and when required, so that prices remain in
• The scheme assumes significance because this is the first a range.
time that such a scheme has been introduced in • PSF mechanism is apart from the Minimum Support
Kashmir valley. Price (MSP) based initiatives already existing in the
• Under the scheme, the Department of Agriculture and country for certain agricultural goods. In contrast to MSP
Cooperation, Government of India and the National and consumer fed operations, a PSF is generally
conceived to be operative in both directions of price
Agriculture Cooperative Marketing Federation of India
movement, subject to prices crossing some threshold
(NAFED) will procure apple in J&K from the
level.
growers/aggregators so as to ensure remunerative prices
for the apple crop. HISTORY OF PSF IN INDIA
• For fixing the price of the apple based on its variety and Scheme for Plantation Crops
grade, Government will constitute a State Level Price • In view of the fluctuating nature of international prices
Fixation Committee. in plantation crops and the dependence of growers on
the export markets, Government launched and
• The period of procurement would be from September 1,
implemented the Price Stabilization Fund (PSF) Scheme
2019 to March 1, 2020 i.e. six months. The fund st th
from 1 April, 2003 to 30 September, 2013 to provide
requirement for the scheme has been estimated as Rs
financial relief to small growers of coffee, tea, rubber and
8000 Cr.
tobacco having land holdings up to four hectares.
SIGNIFICANCE OF THE SCHEME
• This Scheme was administered by Ministry of Commerce.
• Kashmir produced around 20 lakhs metric tonnes of apple Scheme for Perishable Agricultural Commodities
in 2018, contributing almost 73% to the total apple
• Another fund was created in 2015 with a corpus of Rs.500
production in the country.
crores as a Central Sector Scheme, to support market
• However, Kashmir is finding it difficult to export the apples interventions for price control of perishable agri-
to the other regions of the country due to strong horticultural commodities during 2014-15 to 2016-17.
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AGRICULTURE
• Initially the fund was proposed to be used for market PRESENT STATUS OF OILSEEDS AND VEGETABLE OIL
interventions for onion and potato only and pulses were PRODUCTION IN INDIA
added subsequently. • The Oilseed crops are considered to be the second most
• The Price Stabilization Fund will be managed centrally by a important agricultural crops next only to cereals. The
Price Stabilization Fund Management Committee self-sufficiency in oilseeds attained through “Yellow
(PSFMC) which will approve all proposals from State Revolution” during early 1990’s, could not be sustained
Governments and Central Agencies. beyond a short period.
• The PSF will be maintained as a Central Corpus Fund • Despite being the fifth largest oilseed crop producing
by Small Farmers Agribusiness Consortium (SFAC), a country in the world, India is also one of the largest
society promoted by Ministry of Agriculture for linking importers of vegetable oils.
agriculture to private businesses and investments and • In 2017-18, the Oil seeds were cultivated over an area of
technology. 26 million hectares leading to the production of around 30
million tonnes. Almost 70% of the oilseeds are cultivated
►KRISHI KISAN APP in rainfed areas. The vegetable oil production is around 7
million tonnes from about 30 million tonnes of oilseeds.
• The Krishi Kisan App will provide farmers the information
of best demonstration of high-yielding crops and seeds • Due to demand-supply mismatch, India has emerged as
in their nearby area. the largest importer of vegetable oils in the world
followed by China & USA.
• Any farmer with high quality of crops can utilise this
platform to demonstrate best practices of cultivation to • Of imported edible oils, share of palm oil is about 60%
other farmers so that this will help other farmers also to followed by soybean oil and sunflower.
adopt these methods. • India imports almost 60% of its vegetable oil requirements
• The App will also help in geo-tagging and geo-fencing of which accounts for around $11 billion (about Rs 77,000
crop and give weather forecast message to farmers. crores).
• Launched by Ministry of Agriculture and Farmers’ Welfare. GOVERNMENT'S INITIATIVES TO BOOST PRODUCTION OF
OILSEEDS
• National Food Security Mission (NFSM)-Oilseeds & Oil
►OILSEED PRODUCTION
Palm: It aims to augment the availability of vegetable oils
The demand-supply gap in the edible oils has necessitated and to reduce the import of edible oils by increasing the
huge imports accounting for 60 per cent of the country’s production and productivity of oilseeds from an average
requirement. production of 30 million tonnes and productivity of 1122
SOURCES OF VEGETABLE OIL kg/ha during 12th plan period to 36 million tonnes and
• Nine oilseeds are the primary source of vegetable oils in 1290 kg/ha, respectively by end of 2019-20. Under this
the country - Soybean, Groundnut, Rape seed and scheme, financial assistance is provided to farmers
Mustard, Sunflower, Safflower, Sesame, Niger, Castor, through State Government for various interventions like
linseed. Production and distribution of quality seeds of new
varieties, Demonstration of improved technologies,
• Among these, soybean (34%), groundnut (27%),
Distribution of bio-pesticides, weedicides, micronutrients,
rapeseed & mustard (27%) contributes to more than
gypsum, lime, bio-fertilizer, Farm machinery & implements,
88% of total oilseeds production.
etc.
• Andhra Pradesh & Gujarat (Groundnut), Haryana
• Increase in the import duties on Vegetable Oils to
(Mustard), Karnataka (Groundnut), M.P (Soybean),
incentivise farmers to produce oilseeds
Maharashtra (Soybean), Rajasthan (Mustard & Soybean),
Tamil Nadu (Ground nut), U.P (Mustard), West Bengal • Increase in the Minimum Support Price (MSP)
(Mustard) contribute more than 95% of total oilseed
production in the country. ►NATIONAL MISSION ON EDIBLE OIL
• In addition to nine oilseeds, vegetable oil is also being Aims to increase domestic availability and reduce import
harnessed from secondary sources like cottonseed, rice dependency. It will for 5 years from 2020-21 to 2024-25.
bran, coconut, Tree Borne Oilseeds (TBOs) and Oil
It will aim to
Palm.
• increase production from 30.88 to 47.80 million tonnes of
oilseeds.
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AGRICULTURE
• Productivity will increase from 1263 to 1587 kg per like water conservation, irrigation and micro irrigation
hectare etc.
• Reduction of import dependence from 60% to 45%. ο Provision of Loans and grants to State Governments for
financing cooperative societies
• Edible oil production will be 18 million from 10.5 million
tonne presently.
Submissions under NMEO aim at increasing production of ►REFINED OIL PALM IN RESERVED
oilseeds from: CATEGORY OF IMPORTS
1. Primary Sources: Annual crops, Plantation crops and • Director General of Foreign Trade has changed import
Edible Oils category of imported Oil Palm from 'free list' to 'restricted
2. Secondary Sources: Rice bran oil and cotton seed oil list'.
3. Consumer Awareness for maintaining edible oil • Putting refined palm oil in restricted category means an
consumption at 19 kg per person per annum. importer will require license or permission for inbound
shipment.
Action point for increasing production and productivity of
• There are three categories in which items can be imported
oilseeds and promotion of Secondary sources of Edible oils:
- Open, Free and Prohibited.
1. Increasing seed replacement rate and varietal replacement
• This restriction is product specific and not country specific.
rate
• However, crude oils can continued to be shipped in the
2. Promotion of oilseed in rice fallow/ potato areas
free category.
3. Promotion of oilseeds through intercropping
IMPACT
4. Extending Oilseed cultivation in non traditional areas • Encourage import of crude oil and help the domestic
5. Targeting 100 low productivity districts refining industry.
6. Crop diversification in different seasons • India is the world's largest importer of vegetable oils. India
7. Promotion of community based oil extraction unit imports about 15 million tonnes of vegetable oil annually.
Of this, palm oil comprises 9 million tonnes and 6 million
8. Value addition and promotion of export
tonnes of soybean and sunflower.
9. Promotion of rice bran and cotton seed oil
• Indonesia is world's largest producer, followed by
10. Consumer awareness for judicious consumption of oils for Malaysia. India also imports palm oil from Nepal.
good health.
►KCC SCHEME
►NATIONAL COOPERATIVE The Government of India has recently stated that it has
DEVELOPMENT CORPORATION extended the facility of Kisan Credit Card (KCC) to fisheries
and animal husbandry farmers to help them meet their
The First Ever India International Cooperatives Trade Fair
working capital needs.
(IICTF) was recently held in New Delhi. The fair was jointly
organised by National Cooperative Development Corporation ABOUT KCC
(NCDC) in association with the Bangkok based Network for • KCC scheme was introduced in 1998 for issue of Kisan
Development of Agricultural Cooperatives in Asia and the Credit Cards to farmers so that farmers may use them to
Pacific (NEDAC). readily purchase agriculture inputs such as seeds,
ABOUT NCDC fertilizers, pesticides etc. and draw cash for their
production needs.
• The National Cooperative Development Corporation
(NCDC) was established by an Act of Parliament in 1963 as • The scheme was further extended for the investment
a statutory Corporation under the Ministry of credit requirement of farmers viz. allied and non-farm
Agriculture & Farmers Welfare. Some of the functions of activities in the year 2004.
the NCDC include: • The Kisan Credit Card Scheme is to be implemented by
ο Planning, promoting and financing programmes for Commercial Banks, RRBs, Small Finance Banks and
production, processing, marketing, storage, export and Cooperatives.
import of agricultural produce. • The farmers eligible under the KCC scheme include small
ο Finance projects in the rural industrial cooperative farmers, marginal farmers, share croppers, oral lessee and
sectors and for certain notified services in rural areas tenant farmers.
85
AGRICULTURE
• The Self Help Groups (SHGs) or Joint Liability Groups (JLGs) time ensuring availability of the raw material for
are also eligible for availing benefits under the scheme. consumers at affordable prices. Brand “Indian Natural
EXTENSION OF KCC TO FISHERIES AND ANIMAL Rubber” distinguishing Indian rubber in the international
HUSBANDRY market with its assured and consistent quality parameters
may also be promoted.
• The KCC facility will help fisheries and animal husbandry
farmers to meet their short term credit requirements of • Revamping Institutional Framework: Functioning of the
rearing of animals, poultry birds, fish, shrimp, other Rubber Board should be aligned with the policy.
aquatic organisms and capture of fish. • Productivity enhancement: Capacity of existing
• Under KCC facility, Interest subvention is available for departmental nurseries under Rubber Board should be
animal husbandry and fisheries farmers @ 2% per annum fully utilized for propagation of genetically superior and
at the time of disbursal of loan and additional interest quality planting materials.
subvention @ 3 % per annum in case of prompt
repayment as Prompt Repayment Incentive. ►BIS CERTIFICATION ON PASHMINA
The Bureau of Indian Standards (BIS) has published an Indian
►NATIONAL RUBBER POLICY, 2019 Standard for identification, marking and labelling of
The Minister of Commerce and Industry released the National Pashmina products to certify its purity.
Rubber Policy 2019. ABOUT PASHMINA
INDIA'S RUBBER PRODUCTION • The Changthangi or Pashmina goat is a special breed of
• India is currently the sixth largest producer and second goat indigenous to the high altitude regions of Ladakh in
largest consumer of natural rubber in the world. Jammu and Kashmir. This goat grows a thick, warm
undercoat which is the source of Kashmir Pashmina wool –
• Traditional rubber-growing states comprising Kerala and
the world’s finest cashmere.
Tamil Nadu account for 81% of production.
• These goats are generally domesticated and reared by
• Major non-traditional rubber growing regions are the
nomadic communities called the Changpa in the
North Eastern states of Tripura, Assam and Meghalaya,
Changthang region of Greater Ladakh. The Changthangi
Odisha, Karnataka, Maharashtra and West Bengal.
goats have revitalized the economy of Changthang, Leh
LEGAL AND INSTITUTIONAL FRAMEWORK and Ladakh region.
• The Rubber Act, 1947 provides for the development of HOW BIS CERTIFICATION WOULD HELP?
the rubber industry under the control of the Union. The
• Help curb the adulteration of Pashmina and protect the
Rubber Board, headquartered at Kottayam, Kerala, under
interests of local artisans and nomads who are the
the administration of the Ministry of Commerce and
producers of Pashmina raw material.
Industry has been effectively supporting the rubber
industry. • Assure the purity of Pashmina for customers and would
discourage counterfeit or substandard products presently
• For promotion of rubber sector, Government of India has
mislabeled and sold as genuine Pashmina.
allowed 100% Foreign Direct Investment (FDI) in
plantations of rubber, coffee, tea, cardamom, palm oil tree • Ladakh produces 50 MT of the finest grade of Pashmina in
and olive oil tree. the world (12-15 microns) and this initiative will further
boost value addition of Pashmina in Ladakh.
NATIONAL RUBBER POLICY 2019
• Status of Natural Rubber: The government must explore
the possibility of treating natural rubber as an agricultural ►NATIONAL AGRICULTURAL HIGHER
product and income from rubber production as EDUCATION PROJECT (NAHEP)
agricultural income for all practical and legal purposes.
Indian Council of Agricultural Research (ICAR) has launched
• Sustainability in Production: The domestic production of National Agricultural Higher Education Project (NAHEP) to
natural rubber should be able to meet at least 75% of the attract talent and strengthen higher agricultural education in
requirement in 2030 and hence the government must the country.
explore the possibility of increasing the area under rubber
ABOUT THE PROJECT
plantation, particularly in the non-traditional states.
• Develop resources and mechanism for supporting
• Import- Export Policy: The import of natural rubber has
infrastructure, faculty and student advancement, and
seen a significant increase over the years. Protection to
providing means for better governance and management
rubber growers against unwarranted imports adversely
of agricultural universities, so that a holistic model can be
influencing domestic prices is proposed, and at the same
developed to raise the standard of current agricultural
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AGRICULTURE
education system that provides more jobs and is • SFAC is implementing the following schemes:
entrepreneurship oriented and on par with the global 1. Agri-Business Development (ABD) through Venture
agriculture education standards. Capital Assistance (VCA) and Project Development
• ICAR with financial assistance of the World Bank for Facility (PDF)
NAHEP. 2. Equity Grant and Credit Guarantee Fund Scheme for
• The project would benefit all the Agricultural Universities Farmer Producer Companies
(AUs), i.e. 63 State Agricultural Universities modelled on 3. Price Stabilisation Fund
the US Land Grant University pattern, 5 Deemed to be
Universities (DUs), three Central Agricultural University
(CAUs) and four Central Universities (CUs) with Agriculture
►e-NAM
Faculty. National Agriculture Market (eNAM) is a pan-India electronic
FUNDING trading portal which networks the existing APMC mandis to
create a unified national market for agricultural commodities.
• NAHEP has been formulated by ICAR with a total cost of
(Rupees 1100 crores) for five years starting from 2017-18. • NAM will create a national network of physical mandis
which can be accessed online. It seeks to leverage the
• The project is proposed on 50:50 cost sharing basis
physical infrastructure of the mandis through an online
between the World Bank and the Government of India,
trading portal, enabling buyers situated even outside the
implemented at the Education Division, ICAR, New Delhi.
State to participate in trading at the local level.
• Small Farmers Agribusiness Consortium (SFAC) is the
►SMALL FARMERS’ AGRI-BUSINESS lead agency for implementing eNAM under the aegis of
CONSORTIUM (SFAC) Ministry of Agriculture and Farmers’ Welfare.
ABOUT SFAC VISION
• The Union Ministry of Agriculture and Farmer’s Welfare To promote uniformity in agriculture marketing by
streamlining of procedures across the integrated markets,
• established Small Farmers’ Agri-Business Consortium
removing information asymmetry between buyers and sellers
(SFAC) as a Society in 1994 to facilitate agri-business
and promoting real time price discovery based on actual
ventures by catalyzing private investment through
demand and supply.
Venture Capital Assistance (VCA) Scheme in close
association with financial institutions. MISSION
• The setting up of State level SFAC as counterpart agency Integration of APMCs across the country through a common
of Central SFAC for agribusiness projects was part of the online market platform to facilitate pan-India trade in
Scheme. agriculture commodities, providing better price discovery
through transparent auction process based on quality of
• The Scheme envisaged a corpus contribution from Central
produce along with timely online payment.
SFAC of Rs. 50.00 lakh to each State which establishes a
State Level SFAC. So far, 21 States have received funds for FEATURES
Central SFAC for setting up of State SFAC. • A National e-market platform for transparent sale
ROLE OF STATE SFACs transactions and price discovery in regulated markets,
kisan mandis, warehouses and private markets. Willing
• The role of State SFACs is to aggressively promote
States to accordingly enact provision for e-trading in their
agribusiness project development in their respective
APMC Act.
States. The main functions of SFAC are:
• Liberal Licensing of traders / buyers and commission
ο Promotion of development of small agribusiness
agents by State authorities without any pre-condition of
through VCA scheme;
physical presence or possession of shop / premises in the
ο Helping formation and growth of Farmer Producer
market yard.
Organizations (FPOs) / Farmer Producer Companies
• One license for a trader valid across all markets in the
(FPCs);
State.
ο Improving availability of working capital and
• Harmonization of quality standards of agricultural
development of business activities of FPOs/FPCs
produce and provisions of assaying (quality testing)
through Equity Grant and Credit Guarantee Fund
infrastructure in every market to enable informed bidding
Scheme;
by buyers.
ο Implementation of National Agriculture Market (e-
• Restriction of agriculture Produce Marketing Committee’s
NAM) Electronic Trading platform.
(APMC) jurisdiction to within the APMC market yard / sub
SCHEMES IMPLEMENTED BY SFAC
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AGRICULTURE
yard instead of a geographical area (the market area) at ►HORTICULTURE
present.
Department of Agriculture, Cooperation and Farmers
• Single point levy of market fees i.e. on the first wholesale Welfare released the Third Advanced Estimate (2018-
purchase from the farmer. 19) of Area and Production of various Horticulture Crops.
PRESENT STATUS HIGHLIGHTS OF THE REPORT
• 585 wholesale regulated markets of 16 States and 02 • Total horticulture production in the country is 313.85
Union Territories (UTs) have been integrated with e-NAM million tonnes. The area under horticulture crops
platform. has increased to 25.49 million hectares in 2018-19 from
• The very first Inter State transaction in tomatoes has been 25.43 million hectares in 2017-18.
carried out between trader of Bareilly e-NAM APMC of
Uttar Pradesh and farmer of Haldwani e-NAM APMC of
Uttarakhand.
►NATIONAL ANIMAL DISEASE

CONTROL PROGRAMME (NADCP)
• This programme seeks to control and eradicate the Foot
& Mouth Disease (FMD) and Brucellosis amongst the
livestock in the country.
• The programme aims to vaccinate over 500 million
livestock against FMD, and some 36 million female bovine WHAT IS HORTICULTURE?
calves annually against brucellosis. • Horticulture is the branch of agriculture concerned
with intensively cultured plants directly used by man for
• The NADCP aims to control these two diseases by 2025,
food, medicinal purposes and aesthetic gratification.
and to eradicate them by 2030.
• It is the cultivation, production and sale of vegetables,
• It is a program under the Ministry of Fisheries, Animal
fruits, flowers, herbs, ornamental or exotic plants.
Husbandry and Dairying.
TYPES OF HORTICULTURE
ABOUT FOOT AND MOUTH DISEASE (FMD)
• Pomology: Planting, harvesting, storing, processing, and
• It is a highly infectious viral disease affecting the livestock.
marketing of fruit and nut crops.
Transmission occurs through direct and indirect contact
• Olericulture: Producing and marketing vegetables.
with the infected animals. Airborne transmission has also
been reported. • Arboriculture: Study, selection and care of
individual trees, shrubs or other perennial woody
• FMD is generally not fatal in adult animals but leaves
plants.
them severely weakened, and results in a drastically
reduced production of milk. • Ornamental Horticulture: It has two subparts-
• The economic loss due to FMD is tremendous due to death ο Floriculture: Production, use and marketing of floral
of young animals, marked reduction in milk yield, abortion crops.
in advance stage of pregnancy and reduced working ability ο Landscape Horticulture: Production and marketing
of drought animals, decline in quality of meat, reduction in of plants used to beautify the outdoor environment.
fertility and poor quality of semen in breeding bull etc. ACHIEVEMENTS IN HORTICULTURE SECTOR
• The diseases also restrict the possible export of livestock • In the last few decades, this sector has gained prominence
and livestock products in the overseas. over contributing a growing share in Gross Value Addition
ABOUT BRUCELLOSIS of the Agriculture and allied sectors.
• Brucellosis is a contagious disease of livestock with • Mission for Integrated Development of Horticulture
significant economic impact. The disease is caused by (MIDH) is being implemented by adopting an end to end
various bacteria of the family Brucella, which tend to approach for increasing production of horticulture crops
infect cattle, swine, sheep and goats, camels, equines, and and reducing post-harvest losses.
dogs. • The production of fruits and vegetables has overcome the
• It may also infect other ruminants, some marine mammals production of food grains in the country.
and humans. • The total horticulture production has increased from 211.2
• Brucellosis causes early abortions in animals, and prevents million tonnes in 2007-08 to 311.71 million tonnes in
the addition of new calves to the animal population. 2018-19.
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AGRICULTURE
• India is the second largest producer of fruits and ►AGMARK
vegetables in the world with first rank in the production
Union Ministry of Agriculture and Farmers’ Welfare has
of Banana, Mango, Lime & Lemon, Papaya and Okra.
launched an online platform for processing applications
• INITIATIVES IN THE HORTICULTURE SECTOR
related to quality certification mark 'Agmark' for agricultural
Mission for Integrated Development of Horticulture products.
(MIDH)
WHAT IS AGMARK?
• Centrally Sponsored Scheme for the holistic growth of
• AGMARK is a certification mark employed on
the horticulture sector covering fruits, vegetables and
agricultural products in India, assuring that they
other areas.
conform to a set of standards approved by
• Under MIDH, Government of India contributes 60% of the the Directorate of Marketing and Inspection under the
total outlay for developmental programmes in all the Department of Agriculture, Cooperation and Farmers
states (except North Eastern and Himalayan states where Welfare under Ministry of Agricultural & Farmers Welfare
GOI contributes 90%) & 40% is contributed by State an agency of the Government of India.
governments.
• The AGMARK Head Office at Faridabad (Haryana) is
• It has five major schemes on horticulture- legally enforced in India by the Agricultural Produce
1. National Horticulture Mission (NHM) (Grading and Marking) Act of 1937.
2. Horticulture Mission for North East and Himalayan • The present AGMARK standards cover quality guidelines
States (HMNEH) for 222 different commodities spanning a variety
3. National Horticulture Board (NHB) of pulses, cereals, essential oils, vegetable oils, fruits and
4. Coconut Development Board (CDB) & vegetables and semi-processed products like vermicelli.
5. Central Institute of Horticulture (CIH), Nagaland AGMARK LABORATORIES
NATIONAL HORTICULTURE BOARD (NHB) • The Agmark certification is employed through fully state-
• It was set up in 1984 on the basis of recommendations of owned Agmark laboratories located across the nation
the "Group on Perishable Agricultural which act as testing and certifying centres.
Commodities", headed by Dr M. S. Swaminathan. • In addition to the Central AGMARK Laboratory in
• Headquartered at Gurugram. Nagpur, there are Regional AGMARK Laboratories (RALs)
in 11 nodal cities.
• Objective is to improve integrated development of
Horticulture industry and to help in coordinating, • Each of the regional laboratories is equipped with and
sustaining the production and processing of fruits and specializes in the testing of products of regional
vegetables. significance. Hence the product range that could be tested
varies across the centres.
HORTICULTURE AREA PRODUCTION INFORMATION
SYSTEM (HAPIS) COMMODITIES AND TESTS
It is a web enabled information system by which data from The testing done across these laboratories include chemical
the states/districts is reported, minimising the time-lag and analysis, microbiological analysis, pesticide residue,
maximising the coverage area. and aflatoxin analysis in food products.
COORDINATED PROGRAMME ON HORTICULTURE WHY ONLINE SYSTEM?

ASSESSMENT AND MANAGEMENT USING • The existing procedures for Agmark certification were in
GEOINFORMATICS (CHAMAN) physical form and time consuming.
Its objective is to develop & firm up scientific methodology for • Through the Agmark online system, certificate of
estimation of area & production under horticulture crops authorisation, permission of printing press, permission of
through Remote Sensing and Sample Survey Techniques. laboratories and services related to laboratory information
management system will be provided.
89
SECTION 8
NTERNATIONAL
RGANISATION
►SUSTAINABLE DEVELOPMENT Development the Sustainable Development Goals
(SDGs) at the global level.
GOALS
• Assessment is based on:
HIGH LEVEL POLITICAL FORUM
ο Voluntary national reviews that it receives from
• The establishment of the United Nations High-level member states
Political Forum on Sustainable Development (HLPF) was
ο Annual progress report on SDGs is prepared by the
mandated in 2012 by the outcome document of the United
Secretary-General of the UN.
Nations Conference on Sustainable Development (Rio+20),
"The Future We Want". ο HLPF is also informed by the Global Sustainable
Development Report (GSDR), which aims to strengthen
• High Level Political Forum on SDGs
the science-policy interface at the HLPF. Published every
• The Forum meets annually under the auspices of 4 years.
the Economic and Social Council for eight days, including a
MEMBERSHIP
three-day ministerial segment and every four years at the
level of Heads of State and Government under the • All State Members of UN and States members of
auspices of the General Assembly for two days. specialised agencies
• The Forum’s first meeting was held on 24 September 2013. STRUCTURE

It replaced the Commission on Sustainable • Every 4 years at the level of Heads of State and
Development, which had met annually since 1993. Government under the auspicies of the General Assembly
• The HLPF is the main United Nations platform on for two days
sustainable development and it has a central role in the • Every year under the auspicies of ECOSOC for a period of 8
follow-up and review of the 2030 Agenda for Sustainable days, including three day ministerial segment.
RAU’S IAS FOCUS SPECIAL EDITIONS | PRELIMS COMPASS (C3 CURATION) for CSE 2020 90
INTERNATIONAL ORGANIZATION
• The organisations of UN system, including the Bretton 12. Responsible Consumption and Production
Woods institutions and other relevant intergovernmental 13. Climate Action
organisations, including the WTO are invited to
14. Life Below Water
contributed to the discussions of the forum.
15. Life on Land
• The Office for Intergovernmental Support and
Coordination for Sustainable Development of ECOSOC 16. Peace Justice and Strong Institutions
serves as the Secretariat of HLPF. 17. Partnerships for the Goals
MONITORING OF SDGS Division for Sustainable Development Goals in the UNDESA

• SDGs are not legally binding. Nevertheless, countries are provides substantive support and capacity building for the
SDGs and their related thematic issues.
expected to take ownership and establish a national
framework for achieving the 17 goals. Countries have the TECHNOLOGY FACILITATION MECHANISM (TFM)
primary responsibility to follow-up and review • 2030 Agenda for Sustainable development announced the
implementation of SDGs. launch of a ‘Technology Facilitation Mechanism’ in order to
GLOBAL INDICATOR FRAMEWORK support the implementation of SDGs.
• For global monitoring of the SDGs, US Statistical • The TFM has three components:
Commission constituted an Inter-Agency and Expert Group ο United Nations Interagency Task Team on Science,
on SDGs (IAEG-SDG) with 28 member countries in 2015. Technology and Innovation for the SDGs (IATT),
India is a member of IAEG-SDGs. Based on the including the 10-Member Group of representatives
recommendation of IAEG-SDG, the UN Statistical from civil society, the private sector and the scientific
Commission adopted a Global Indicator Framework. It community
consists of 232 unique indicators.
ο Collaborative Multi-stakeholder Forum of Science,
ο Sustainable Development Goals in India Technology and Innovation for the SDGs (STI Forum)
ο MOSPI has developed National Indicator Framework ο Online Platform as a gateway for information on
for monitoring of various SDG goals at the national existing STI initiatives, mechanisms and programs.
level.
GLOBAL SUSTAINABLE DEVELOPMENT REPORT (GSDR)
ο It consists of 306 statistical indicators. Statistical • The First edition of GSDR was released in 2019. It is
indicators of National Indicator Frameworks (NIF) will be published every four years. The name of the first edition of
the backbone of monitoring of SDGs at the national and
GSDR is ' “The Future is Now: Science to Achieve
state level and will scientifically measure the outcomes
Sustainable Development '.
of the policies to achieve the targets under different
• The origin of GSDR is in outcome document of Rio+20. It
SDGs.
aims to strengthen science-policy interface to strengthen
ο SDG Unit has been created in Social Statistics Division achievement of SDGs by 2030.
(SSD) of Central Statistics Office.
• It has been drafted by an independent group of 15
17 SUSTAINABLE DEVELOPMENT GOALS
scientists appointed by the United Nations Secretary-
1. No poverty General.
2. Zero Hunger NITI AAYOG AND SDGs
3. Good Health and Well Being NITI Aayog has been entrusted with the role to co-ordinate
4. Quality Education SDGs.
5. Gender Equality
6. Clean Water and Sanitation ►WORLD BANK
7. Affordable Clean Energy • The World Bank was set up in 1945 following the Bretton
Woods agreements.
8. Decent Work and Economic growth
• The World Bank Group is a family of 5 organisations which
9. Industry, Innovation and Infrastructure
gives loans to poor countries.
10. Reduced Inequalities
• It is responsible for the preparation of World
11. Sustainable Cities and Communities
Development Report.
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INTERNATIONAL ORGANIZATION
INSTITUTION OBJECTIVE ASSOCIATED FACTS
International Bank Works with all institutions of the World Bank

for Reconstruction Group and the public and private sectors in
It was set up in 1949.
and Development developing countries to reduce poverty and
(IBRD) build shared prosperity.
International Lends money to private sector companies of

• It was set up in 1956.
Finance Corporation its member countries thereby promoting
• It is also known as Private Arm of World Bank.
(IFC) economic development
• It was set up in 1960.

International Provide loans for infrastructure development • It is also known as Soft Window of the World
Development and long term lending for development of Bank.
Association (IDA) economic services. • India has been the biggest beneficiary of the IDA
support.
• It was set up in 1966 under the Convention on the

Settlement of Investment Dispute between States
International Centre and Nationals of other States.
Settles investment disputes between investing
for Settlement of • India is not a member of ICSID. Instead, it is a
foreign companies and the host countries
Investment member of Bilateral Investment Promotion and
where investments have been done
Disputes (ICSID) Protection Agreement (BIPA) in order to protect
and promote on reciprocal basis investment of
the investors.
Multilateral Encourages foreign investment in developing

Investment economies by offering insurance to foreign
It was set up in 1988.
Guarantee Agency private investors against loss caused by non-
(MIGA) commercial risks.
►WTO AND ITS REFORMS include direct income supports for farmers that are not
related to current production levels or prices.
India has recently hosted the second mini-ministerial meet of
ο Blue Box: Any support that would normally be in the
the World Trade Organisation (WTO). It was a kind of
amber box is placed in the blue box if the support also
preparatory meeting to set a common agenda at the 12th
requires farmers to limit production. At present there
Ministerial Conference, scheduled for June 2020 at Astana,
are no limits on spending on blue box subsidies.
Kazakhstan.
ο Amber Box: Those domestic support outside of blue
AGREEMENT ON AGRICULTURE (AOA)
and green box. There are seen to trade distorting and
• The AoA came into being in 1995 at the end of Uruguay
include measures that support prices or subsidies that
Round of General Agreement on Tariffs and Trade (GATT).
go related to production quantities.
This agreement basically aims to facilitate international
De-minimis limits on supports allowed under amber
trade in agricultural goods by putting a cap on the
box:
agricultural subsidies given by the member countries.
 Developing countries: 10% of the domestic
• Categories of subsidies:
agricultural value production in 1986-88.
ο Green Box: These subsidies do not distort trade or at
 Developed countries: 5% of the domestic
most cause minimal distortion. They have to be
agricultural value production in 1986-88.
government funded and must not involve price support.
They are not targeted towards a particular product and
92
INTERNATIONAL ORGANISATION
PLURILATERAL AND MULTILATERAL AGREEMENT Agreement on E-Commerce
• A Multilateral agreement is an agreement under the • The developed countries led by USA have been pushing
WTO which is adopted through consensus among all the forward for a comprehensive agreement on E-
member countries. The provisions of the multilateral Commerce under the ambit of WTO.
agreements are applicable to all the member countries. • As part of this agreement, the developed countries have
• Such agreements may decide to incorporate special and put forward a number of proposals which include tackling
differential treatment for the benefit of poor and barriers that prevent cross-border sales; addressing forced
developing economies. data localization requirements and permanently
• Most of the WTO agreements such as AoA, GATS, TRIPS banning customs duties on electronic transmissions,
etc. are multilateral agreements which the member among others.
countries are obliged to follow. • India has clearly stated that it is against any binding rules
• A plurilateral agreement is an agreement between in e-commerce.
limited number of WTO member countries wherein the Permanent Solution to Public Stock holding
countries would be given the choice to agree to new rules • India has been demanding a permanent solution on Public
on a voluntary basis. In other words, the provisions of stockholding in order to implement National Food Security
plurilateral agreement would not be applicable to all the Act. At the Bali ministerial conference in December 2013,
member countries. India secured a “peace clause".
• Examples of Plurilateral agreements under WTO include • Under it, if India breaches the 10% limit on subsidy under
Trade in civil aircraft; Government Procurement; Bovine AoA, other member countries will not take legal action
meat; Dairy products. under the WTO dispute settlement mechanism. Further, in
WHAT ARE THE ISSUES UNDER THE WTO NEGOTIATIONS? 2014, India forced developed countries to clarify that the
Plurilateral vs. Multilateral Agreements peace clause will continue indefinitely until a permanent
solution is found.
• Since the multilateral agreements are consensus driven,
normally the trade negotiations under multilateral
framework tend to be slow paced and lead to unnecessary ►SPECIAL AND DIFFERENTIAL
delay. However, the good aspect about the multilateral PROVISIONS
agreements is that they take into account the special
Some developed countries have been arguing for the
needs and interests of poor and developing countries.
discontinuation of Special and differential provisions
• In this regard, the debate has arisen between the
provided to the developing countries in the WTO Agreements.
developed and developing countries with respect to the
In this regard, India along with other countries such as China
nature of trade negotiations under the WTO.
and Brazil has argued for its continuation stating that
• The developed countries have put forward four discontinuation of this provision would adversely affect the
plurilateral agreements in the areas of e-commerce, interests of Least Developed countries (LDCs) as well as
investment facilitation, MSME and gender. However, developing Countries.
developing countries led by India have staunchly opposed
WHAT ARE SPECIAL AND DIFFERENTIAL PROVISIONS?
the plurilateral agreement and instead pushed forward for
• The WTO agreements contain special provisions which
the continuation of multilateral framework under WTO.
give developing countries special rights and allow other
Agreement on Fishery Subsidies
members to treat them more favorably. These are “special
• The WTO member countries are presently negotiating a and differential treatment provisions”. The special
multilateral treaty of Fishery Subsidies. This agreement provisions include:
seeks to prohibit certain forms of fisheries subsidies that
ο longer time periods for implementing agreements and
contribute to overcapacity and overfishing.
commitments;
• Some of the developed countries such as USA have been
ο measures to increase trading opportunities for these
insisting that larger developing countries like India and
countries provisions requiring all WTO members to
China should not continue to get special and differential
safeguard the trade interests of developing countries;
treatment.
ο support to help developing countries build the
• However, India has argued that special and differential
infrastructure to undertake WTO work, handle disputes,
treatment should be built into the fisheries subsidies
and implement technical standard;
agreement.
93
ο provisions related to least-developed country (LDC) Japan at the WTO against India's import duties on certain
members. information and communication technology products.
• In the Doha Declaration, ministers agreed that all special ITA-1
and differential treatment provisions should be reviewed, • The Information Technology Agreement (ITA) is
in order to strengthen them and make them more precise, a plurilateral agreement under the WTO which came
effective and operational. into force in 1997. Initially, it was signed by 29 countries
WHY IS IT IN NEWS NOW? including India and now it presently covers 81 WTO
• The WTO is of the belief that subsidies given by the member countries which account for approximately 97 per
member countries to promote fisheries sector is leading to cent of world trade in information technology products.
overfishing and is adversely affecting the marine • The aim of the treaty is to eliminate all taxes and tariffs
ecosystem. Further, such subsidies are also contributing to on information technology products. Unlike other WTO
illegal, unreported and unregulated (IUU) fishing. agreements, the coverage of the IT products under this
• In this regard, WTO negotiations on fisheries subsidies agreement is fixed.
were launched in 2001 at the Doha Ministerial • Every member country signing this agreement is required
Conference in order to prohibit certain forms of fisheries to eliminate tariffs on IT products listed in the Annex A and
subsidies that contribute to overcapacity and overfishing. Annex B of the IT Agreement. Some of the IT products
• Further, WTO has made a multilateral commitment to fulfil covered in this agreement include computers laptops,
Sustainable Development Goal 14, which calls for the mobile phones, set up boxes, semiconductors,
prohibition and elimination of fisheries subsidies that telecommunication equipment and parts etc.
contribute to IUU fishing and to overcapacity and • India is a signatory to ITA-1 and hence it has
overfishing. eliminated customs duties on 217 IT products over a
• As part of WTO negotiations on fisheries subsidies, period of time.
some developed countries have been insisting that larger • ITA-2
developing countries like India and China should not • In 2015, some of the member countries agreed to expand
continue to get special and differential treatment. the products covered by the Information Technology
• However, India has argued that special and differential Agreement by eliminating tariffs on an additional list of
treatment should be built into the fisheries subsidies 201 products. This was done on account of new advances
agreement. in the field of information technology.
HOW SPECIAL AND DIFFERENTIAL TREATMENT WOULD • The new accord covers new generation semi-conductors,
BENEFIT DEVELOPING COUNTRIES? semi-conductor manufacturing equipment, optical lenses,
• It is expected that integration of special and differential GPS navigation equipment, and medical equipment such
treatment into the agreement on fisheries would as magnetic resonance imaging products and ultra-sonic
benefit the developing countries mainly in two ways. scanning apparatus.
• Firstly, the reduction commitment for the subsidies would • However, it is to be noted that India has not signed ITA-2
be lower for developing countries as compared to since it would have an adverse impact on domestic
developed economies. The lower reduction commitment manufacturing due to cheaper imports.
on subsidies would enable the developing countries to • IMPACT OF ITA-1 ON INDIA
take into account the interests of fishermen. • The elimination of customs duties on IT products under
• Secondly, special and differential treatment would enable the ITA-1 has adversely affected the domestic
the developing countries to have longer implementation manufacturing of IT components in India.
period for the reduction in subsidies as compared to • The Telecom Regulatory Authority of India (TRAI) has
developed countries. The longer implementation period stated that the ratio of locally manufactured components
would ensure a smooth transition for the fisheries sector. used in electronic equipment has gone down from 50% in
1996-97 to about 20% due to inverted duty structure.
►INFORMATION TECHNOLOGY • The inverted duty structure refers to the tariff structure
AGREEMENT (ITA) wherein the customs duty on finished goods is lower
than the customs duty on raw materials. The inverted
The European Union, China, and Thailand have recently
duty structure promotes import of cheaper finished goods
expressed interest to join consultations in a case filed by
and discourages domestic manufacturing.
94
STEPS TAKEN BY INDIA OBJECTIVE
• In order to boost domestic manufacturing of IT products, • This agreement provides a definition of subsidies,
India levied customs duty on mobile phones and other categorises of such subsidies and lays down rules by
IT items at 10 per cent for the first time in July 2017 and which governments may grant the subsidies.
later increased it to 15 per cent that year. • Under this agreement, certain types of subsidies are
• Despite protests from a number of WTO members, allowed, others are prohibited.
customs duties on mobiles were further increased to 20 • It also provides certain safeguards to the member
per cent in 2018-19 Budget. countries which may get adversely affected due to
VIEW POINTS OF WTO MEMBER COUNTRIES subsidised imports from other member countries.
• The WTO member countries have raised concerns with DEFINITION OF SUBSIDY
respect to imposition of customs duty on IT products by • According to the agreement, the subsidy is defined in
India. These countries have alleged that duties imposed on terms of three basic elements- (i) a financial contribution;
IT products were against India’s obligations under ITA-1 of (ii) by a government or any public body within the territory
keeping them at zero per cent. of a Member; (iii) which confers a benefit. All three of
• In this regard, Japan had filed case before the WTO against these elements must be satisfied in order for a subsidy to
India's violation of ITA-1 agreement. Subsequently, other exist.
countries such as USA, European Union, China, Thailand • This simply means that a particular protection by the
etc. have also expressed their interest to join consultations Government would be considered as Subsidy only when
on this case. the Government or any of its agency makes financial
INDIA’S COUNTER ARGUMENTS contribution which confers a certain amount of benefit to
• India has stated that the IT goods in question do not fall any of its sector or Industry.
under the ITA-1. It has argued that IT and telecom PRINCIPLE OF SPECIFICITY
technologies have evolved with new applications and • Further, the measure of the Government is not considered
equipment which were neither existent nor even to be a subsidy if the subsidy is given in the entire
conceived at the time of signing the ITA-I in December economy.
1996
• A Government's measure is treated as subsidy based on
• Therefore, the new IT products including the latest Apple the principle of Specificity i.e. only when the subsidies are
phones and other IT products do not strictly fall under the given to specific Industry or Specific Sector or Specific
scope of ITA-I agreement. Region in a country, then it would be treated as subsidy
under the agreement.
►WTO’S AGREEMENT ON SUBSIDIES • This is based on the principle that a subsidy that distorts
AND COUNTERVAILING MEASURES the allocation of resources within an economy should be
subject to discipline. Where a subsidy is widely available
(SCM AGREEMENT) within an economy, such a distortion in the allocation of
India has lost the WTO case filed by USA against India's resources is presumed not to occur.
export incentive scheme. The WTO dispute settlement panel • Thus, only “specific” subsidies are subject to the SCM
has concluded that the export incentive schemes of the Agreement disciplines. There are four types of
Indian Government are against the provisions of the WTO's “specificity” within the meaning of the SCM Agreement:
agreement on Subsidies and Countervailing Measures
1. Enterprise-specificity: A government targets a
(SCM Agreement).
particular company or companies for subsidization;
ABOUT THE SCM AGREEMENT
2. Industry-specificity: A government targets a particular
Rationale of the Agreement sector or sectors for subsidization.
• The countries across the world provide subsidies to their 3. Regional specificity: A government targets producers
farmers and Industries in order to support them. However, in specified parts of its territory for subsidization. (This
in case of International trade, they may end up adversely may be done for development of backward areas)
affecting the domestic Industries of the importing country.
4. Prohibited subsidies: A government targets export
• To counter this, WTO member countries agreed to SCM goods or goods using domestic inputs for subsidization.
Agreement. This agreement entered into force on 1st Jan
1995.
95
CATEGORIES OF SUBSIDIES BENEFITS GIVEN TO DEVELOPING COUNTRIES UNDER WTO
The SCM Agreement creates two basic categories of ARE:
subsidies: Prohibited Subsidies and Actionable Subsidies. • Longer transition periods before they are required to fully
a) Prohibited Subsidies: These subsidies are prohibited implement the agreement
under the agreement and includes two sub-categories- • Developing countries can receive technical assistance.
Export Subsidies and Local Content Subsidies.
• That a WTO member announces itself as a developing
ο Export Subsidies: Subsidies given by the Governments
country does not automatically mean that it will benefit
specifically for boosting the exports from their
from the unilateral preference schemes of some of the
economies. Some of these subsidies may include
developed country members such as the Generalized
Provision of direct subsidies to the Industries based
System of Preferences (GSP). In practice, it is the
upon their export performance, Internal transport and
freight charges on export shipments etc. preference giving country which decides the list of
developing countries that will benefit from the
ο Local Content Subsidies: Subsidies given by the
preferences.
Government to the Industries to prefer the domestic
goods over the imported goods in their manufacturing • Thus, USA has right to choose its own definition of
process. developing country to accord the benefits under WTO
Both these categories of subsidies are prohibited and not agreements.
allowed under the agreement.
b) Actionable Subsidies: Those subsidies which are basically ►GENERALISED SYSTEM OF
given in order to enhance the production of goods and
services. These may include loans at concessional rates,
PREFERENCES (GSP)
cheaper land, tax benefits etc. These subsidies are not USA revoked India’s preferential trade Status under GSP
prohibited. However, if any member country believes that Status.
the actionable subsidies of any other member country is
ABOUT GSP
adversely impacting its domestic Industry, then a member
• IT was Instituted in 1971 under the aegis of UNCTAD.
country can possibly take two actions. It may either impose
countervailing duty or it can challenge such subsidies at • IT has created an enabling environment for developing
the WTO. countries.
COUNTERVAILING DUTY • 13 counties at present grant GSP preferences: Australisa,
• Countervailing duty is form of additional customs duty Belarus, Canada, EU, Iceland, Russia, New Zealand,
which is imposed on the imported goods so as to offset Norway, Switzerland, Turkey and USA. Each of these
the negative impact of subsidised imports. countries design their own GSP regulations.
• The idea here is to increase the prices of the subsidised • UNCTAD’s support on GSP aims to help developing
imported goods and to protect the domestic Industry. countries – particularly LDCs – to increase utilisation of
GSP and other trade preferences and in turn promote
►WTO CRITERIA FOR DEVELOPING productive capacity development and increased trade.
COUNTRIES GSP PROGRAM OF USA
• USA has advocated for revocation of developing country 1. Largest and oldest trade preference program of USA
status to India and China. 2. It is designed to promote economic development by
• There are no WTO definitions of 'developed' and allowing duty-free entry for thousands of products from
'developing' countries. Members announce for themselves designated beneficiary countries.
whether they are developed or developing countries.
3. India was the largest beneficiary of the program in 2017
However, other members can challenge the decision of a
with $5.17 billion in imports to the US given duty free
member to make use of provisions available to developing
status.
countries.
4. USA revoked GSP status to India as it alleged that India
failed to give US companies equitable and reasonable
access to its markets.
96
►INTERNATIONAL MONETARY FUND • It meets twice a year and discusses matters of common
concern affecting the global economy and also advises the
(IMF) IMF on the direction its work
• IMF is a multilateral institution with its main functions as ABOUT QUOTA
exchange rate regulation, purchasing short-term foreign
• The Quotas determine the maximum amount of
currency liabilities of member countries, allotting special
financial resources a member is obliged to provide to
drawing rights to the member nations and as the bailor to
the IMF.
member economies in the situation of a BoP crisis.
• The financial contribution of each member country is
• International Monetary and Finance Committee
mainly determined based on 4 indicators- Size of GDP
(IMFC): IMFC is a key body providing strategic direction to
(50%), Openness (30%), Economic Variability (15%) and
the work and policies of the IMF. The IMFC advises and
International Reserves (5%).
reports to the IMF Board of Governors on the supervision
and management of the international monetary and • The Quotas are denominated in Special Drawing rights
financial system, including on responses to unfolding (SDRs) which is the IMF's unit of account.
events that may disrupt the system. A number of • The Quotas in the IMF also determines the member
international institutions, including the World Bank, country's financial and organisational relationship with the
participate as observers in the IMFC’s meetings. It lends to IMF in the following manner:
member countries only 1. Voting Power: The Quota also largely determines the
• World Economic Outlook Report: The IMF releases the voting power of the member countries.
World Economic Outlook Report which ranks over 200 2. Borrowing Limit: The Quota also determines the
countries in terms of per capita GDP based on purchasing amount of loans which a member country can avail
power parity (PPP). from the IMF. For example, presently the member
• India’s Status in IMF: At present India’s quota in IMF countries are allowed to borrow up to 145% of its quota
stands at 2.7% while voting rights stand at 2.6%. India is on annual basis and 435% cumulatively.
among 10 largest members at IMF. Finance Minister is the HOW DOES THE QUOTA REVIEW WORKS?
ex-officio Governor on the Board of Governors of the IMF.
• The IMF's Board of Governors usually undertakes the
RBI Governor is the Alternate Governor at the IMF.
review of the Quotas at regular intervals (usually once in 5
years). Any changes in Quota have to be approved by 85%
►IMF- QUOTA, SDR AND REFORMS majority of the total votes and a member's quota cannot
be changed without its consent.
The members of the International Monetary and Finance
Committee (IMFC) have decided to increase the non- • During the 14th Quota review in 2010, it was decided to
permanent sources of IMF funds i.e. New Arrangements to increase the quotas of the developing countries by shifting
Borrow (NAB) and Bilateral borrowings from other countries. more than 6% of the quota shares from the over-
However, it has failed to make changes to the quota and represented countries to the under-represented countries.
voting rights in the IMF, which has been a long standing • Subsequently, India's quota and voting rights have
demand of developing countries such as India and China. increased to 2.76% and 2.64% respectively. The USA has
INTERNATIONAL MONETARY AND FINANCE COMMITTEE the highest quota and voting rights at 17.46% and 16.52%
(IMFC) respectively.
• The highest decision making body of the IMF is the • Presently, the top 10 countries with the highest quota and
Board of Governors. It consists of one governor and one voting rights are USA, Japan, China, Germany, France, UK,
alternate governor for each member country. The Italy, India, Russia and Brazil in the descending order.
governor is appointed by the member country and is ABOUT SPECIAL DRAWING RIGHTS (SDRS)
usually the minister of finance or the head of the central • The SDR is an international reserve asset created by the
bank. IMF in 1969 to supplement its member countries’ official
• The IMFC advises and reports to the IMF Board of reserves. SDRs are allocated to member countries in
Governors on the supervision and management of the proportion to their IMF quotas.
international monetary and financial system. • The value of the SDR is based on a basket of five
• It has 24 members who are drawn from the pool of 189 currencies—the U.S. dollar, the Euro, the Chinese
governors. Its structure mirrors that of the IMF Executive
Board.
97
Renminbi, the Japanese Yen, and the British Pound ►GEOGRAPHICAL INDICATION (GI)
Sterling.
TAG
• It is a reserve asset which implies that it is not used in
• A GI is primarily an agricultural, natural or a manufactured
conventional manner to settle transactions. Rather SDR
product (handicrafts and industrial goods) originating from
can be used to obtain other foreign currencies. Hence, it is
a definite geographical territory.
also called as "Paper Gold".
• Such a name conveys an assurance of quality and
WHAT ARE THE SOURCES OF THE IMF'S FUNDS? distinctiveness which is essentially attributable to its origin
• Presently, the lending capacity of the IMF is around $ 1 in that defined geographical locality.
trillion. The IMF raises money in the following manner: • GI tag is covered under WTO’s Agreement on Trade-
1. Quota: Financial Contribution made by the member Related Aspects of Intellectual Property Rights (TRIPS).
countries. • India has enacted the Geographical Indications of Goods

(Registration and Protection) Act, 1999 to promote and
2. New Arrangements to Borrow (NAB): Through the
protect GI tags in India.
New Arrangements to Borrow (NAB) a number of
BENEFITS
member countries and institutions stand ready to lend
additional resources to the IMF. The NAB constitutes a • A geographical indication right enables those who have the
right to use the indication to prevent its use by a third
second line of defense to supplement IMF resources.
party.
3. Bilateral Borrowing Agreements: They serve as a third
• It provides legal protection to Indian Geographical
line of defense after quotas and the NAB. Under this
Indications which in turn boost exports. It promotes
mechanism, the IMF has entered into several rounds of
economic prosperity of producers of goods produced in a
bilateral borrowing agreements with certain member geographical territory.
countries to ensure that it could meet the financing
APPLICATION FOR THE REGISTRATION OF A
needs of its members. GEOGRAPHICAL INDICATION
RECENT DECISION OF THE IMFC Any association of persons, producers, organisation or
• During the recent meeting of the IMFC, it was decided to authority established by or under the law can apply for
maintain the total lending capacity of IMF at $ 1 trillion registration of GI Tag. The applicant must represent the
without enhancing the quota/ voting rights of the interest of the producers
developing countries including India. VALIDITY
• It has sought to double the borrowing limit under the The registration of a geographical indication is valid for a
period of 10 years. However, it can be renewed from time to
New Arrangements to Borrow (NAB).
time for further period of 10 years each.
• It is to be noted that presently, 15th quota review is
HOW IS GI TAG DIFFERENT FROM A TRADE MARK?
underway and India has been demanding for an increase
• A trade mark is a sign which is used in the course of trade
in its quota and voting shares in the IMF. However, the
and it distinguishes goods or services of one enterprise
developed economies led by USA are opposed to increase
from those of other enterprises.
in the voting rights of the developing countries such as
• Whereas a geographical indication is an indication used to
USA and China.
identify goods having special characteristics originating
• That makes this entire exercise difficult is that, the quota from a definite geographical territory.
changes can be approved only through 85% of the votes
and since USA enjoys more than 15% of the voting
►KIMBERLEY PROCESS
rights, it can exercise a virtual veto over the decisions
India has assumed Chairmanship of the Kimberley Process
of the IMF.
Certification Scheme (KPCS) from January 1, 2019,
• However, the IMFC has issued a statement highlighting
WHAT IS KIMBERLEY PROCESS?
that it would revisit the adequacy of quotas under the 16th
• The Kimberley Process (KP) is a multilateral trade regime
General
established in 2003 with the goal of preventing the flow
of conflict diamonds.
98
• The core of this regime is the Kimberley Process • Thus, Conflict-Free Gold Standard provides assurance that
Certification Scheme (KPCS) under which States their gold has been extracted in a manner that does not
implement safeguards on shipments of rough diamonds cause, support or benefit unlawful armed conflict or
and certify them as “conflict free". contribute to serious human rights abuses or breaches of
• The conflict diamonds are defined as: ‘rough diamonds international humanitarian law.
used to finance wars against governments’. Hence, the
Kimberley process was set up "to ensure that diamond ►WIPO
purchases were not financing violence by rebel
World Intellectual Property Indicators 2018 report was
movements and their allies seeking to undermine
recently released in Geneva by the World Intellectual
legitimate governments”.
Property Organization (WIPO).
• In order for a country to be a participant, it must ensure
WORLD INTELLECTUAL PROPERTY INDICATORS 2018
that any diamond originating from the country does not
REPORT
finance a rebel group or other entity seeking to overthrow
• Patent applications filed worldwide reached 3.17 million in
a UN-recognized government.
2017.
• The country must ensure that every diamond export be
• China has received most patent applications, almost
accompanied by a Kimberley Process certificate and that
double the number received by the US.
no diamond is imported from, or exported to, a non-
member of the scheme. • India granted 50.2% more patents in 2017 than in 2016.
The steep increase in the number of patents was driven by
• The working of the KPCS is ensured by the chair country
patents granted to foreigners who accounted for 85 per
elected on an annual basis at a plenary meeting. A
cent of the total increase. Pharmaceuticals accounted
working group on monitoring works to ensure that each
for 15.7 per cent of the Indian domestic applications
participant is implementing the scheme correctly. The
for patents last year.
working group reports to the Chair.
• While India ranked 10th in the number of patents given
last year, no Indian company or university figures in last
►WORLD GOLD COUNCIL
year's global list of the top 50 patent applicants.
• It is an association consisting of the world’s leading gold
ABOUT WIPO
mining companies. It helps to support its members to
• The WIPO is a United Nations (U.N) agency charged with
mine in a responsible way.
protecting intellectual property (IP) through an
OBJECTIVE
international system that promotes and sustains creativity
• It seeks to develop the Gold Market across the World by and innovation and helps develop international
providing insights into the international gold markets, economies.
helping people to understand the investment qualities of
• WIPO helps governments, businesses and society realize
gold and its role in meeting the social needs of society.
the benefits of IP by providing a policy forum to shape
• It works with governments, international agencies and balanced international IP rules for a changing world. It
policy-makers to develop policies that reduce barriers and provides global services to protect IP across borders and
improve access to gold. to resolve disputes.
MAJOR CONTRIBUTION • WIPO publishes Global Innovation Index (GII) Report, which
• There are growing concerns that the newly mined gold is an annual ranking of countries by their capacity for, and
could be used to finance armed conflicts in the countries. success in, innovation.
Thus, there is a need to ensure that the gold that is sold in
the market does not indirectly finance such conflicts. ►WIPO TREATIES
• In this regard, the World Gold Council has developed the
The Union Cabinet has approved the proposal for India’s
Conflict-Free Gold Standard to help companies to
Accession to the Nice, Vienna and Locarno Agreements
provide assurance that their gold is not contributing to
dealing with examination of trademarks and designs. All
conflict.
these multi-lateral agreements are administered by WIPO.
99
NICE AGREEMENT LOCARNO AGREEMENTS
• The Nice Agreement came into being in 1957 and • The Locarno Classification is an international
establishes a mechanism for the classification of goods classification system used to classify goods for the
and services for the purposes of registering purposes of the registration of industrial designs. This
trademarks and service marks. Agreement was adopted in 1968.
• The trademark offices of the countries signatory to the • Use of the Locarno Classification by national offices has
Nice Agreement agree to employ the internationally the advantage of filing applications for the registration of
designated classification codes in their official documents industrial designs with reference to a single classification
and publications. system.
VIENNA CONVENTION BENEFITS OF INDIA'S ACCESSION TO THESE AGREEMENTS
• The Vienna Agreement establishes an International • It would help the Intellectual Property Office in India to
Classification of the Figurative Elements and entered harmonise the classification systems for examination of
into force in 1985. trademark and design applications, in line with the
• Use of the Vienna Classification by national offices has the international classification system.
advantage of filing applications for the registration of • It would give an opportunity to include Indian designs,
marks containing figurative elements codified according to figurative elements and goods in the international
a single classification system. classification systems.
• Examples of figurative elements: Bottles and flasks, crowns • The accession is expected to instil confidence in foreign
etc. investors in relation to protection of IPs in India.
• The accession would also facilitate in exercising rights in
decision making processes regarding review and revision
of the classifications under the agreement.
100
SECTION 9
OMMITTEES /
EPORTS / NDICES
►HUMAN DEVELOPMENT INDEX (HDI) ο Multidimensional Poverty Index (MPI).
India was ranked 129 out of 189 countries on the 2019

Human Development Index (HDI) improving from ►HUMAN CAPITAL INDEX
th
the 130 position in 2018. HCI was developed by World Bank as part of its Human
• HDI is part of the Human Development Report that Capital Project.
is published by the United Nations Development It has three componens:
Programme (UNDP).
1. Survival: measured by Under-5 mortality rate
• HDI measures average achievement of a country in three
2. Education: Measures both Quality and Quantity of
basic dimensions of human development: Education.
1. A long and healthy life, ο Quantity of Education: Number of years of school a
2. Access to knowledge, and child can expect to obtain by age 18
3. A decent standard of living. ο Quality of Education: calculated by harmonising test

scores from major international student achievement
• Top Performers in 2019-Norway, Switzerland,
testing programs such as PISA, TIMSS etc.
Ireland occupied the top three positions in that order.
3. Health: Measured by
• The other indices that form the part of the 2019 Report
are: ο Adult survival rates: Share of 15 years old who survive
until age 60.
ο Inequality-adjusted Human Development Index (IHDI),
ο Healthy growth among children under age 5:
ο Gender Development Index (GDI),
ο Gender Inequality Index (GII) and
101
COMMITTEES / REPORT / INDICES
►PROGRAM FOR INTERNATIONAL • It aims to promote rights at work, encourage decent

employment opportunities, enhance social protection and
STUDENT ASSESSMENT (PISA) strengthen dialogue o work-related issues.
• It is a triennial international survey which aims to evaluate • Flagship Reports of ILO:
education systems worldwide by testing skills and
ο World Employment and Social Outlook
knowledge of 15 year old students who are nearing end of
ο World Employment and Social Outlook: Trends
their compulsory education.
ο Global Wage Report
• Every three year students are tested in key subjects:
Reading, Mathematics and Science and collaborative ο World Social Protection Report.
problem solving.
• PISA uses test items aligned with international ►GLOBAL REPORT ON FOOD CRISIS
benchmarks. Test items are adapted to the local context
Food and Agriculture Organization (FAO) released Global
and language, pilot tested and validated before being
Report on Food Crisis.
used for the test.
The Global Food Crises Report is an annual study launched
• It is initiated by OECD.
three years ago which takes stock of the countries facing the
• OECD conducts PISA in member countries and non- greatest difficulties in tackling hunger.
member countries.
• Next Test is scheduled to be conducted in 2021. India has ►SPECIAL 301 REPORT
decided to participate in PISA 2021. OECD has agreed to
contextualise the questions for Indian students. The United States has again placed India on its ‘Priority
Watch List’.
• Schools run by Kendriya Vidyalaya Sangathan (KVS),
• India has been on the priority watch list reportedly for
Navodaya Vidyalaya Samiti (NVS) and schools in the UT of
Chandigarh will participate. over 25 years, for “lack of sufficient measurable
improvements to its IP framework that have negatively
• India participated in the PISA only once in 2009 when
affected US right holders”.
students from Himachal Pradesh and Tamil Nadu
nd
participated. India ranked 72 out of 73 countries. • The office of the US Trade Representative identified 11
countries, including India, in its ‘Priority Watch List’. The list
is topped by China.
►FUTURE OF WORK REPORT
• “Priority Watch List” and “Watch List” countries are
• International Labour Organization (ILO)’s Global identified by the annual Special 301 Report. “Priority
Commission on the Future of Work has published Future Watchlist countries” are judged by the USTR as having
of work report 2019 titled "Work for a brighter future". “serious intellectual property rights deficiencies” that
• The report was published on the 100th Anniversary of ILO. require increased USTR attention. “Watch List” countries
• Stefan Lofven, PM of Sweden and Cyril Ramphosa, have been identified by the USTR as having “serious
President of South Africa were Chairpersons of Global intellectual property rights deficiencies” but are not yet
Commission on the Future of Work. placed on the “Priority Watchlist”.
INTERNATIONAL LABOUR ORGANISATION:

• The International Labour Organization (ILO) was founded
►GROSS DOMESTIC KNOWLEDGE
in 1919 to promote social justice and thereby contribute PRODUCT
to universal and lasting peace.
• The Gross Domestic Knowledge Product (GDKP) takes a
• The ILO is responsible for drawing up and overseeing different approach to measuring a nation’s growth and
international labour standards. future
• It is the only tripartite United Nations agency that • Provides a fundamental measure of growth by including
brings together representatives of governments, factors that involve the creation and accumulation of
employers and workers to jointly shape policies and knowledge.
programmes promoting decent work for all.
• It creates a comparable measure of the production of
• It became the first specialised agency of the UN in1946. individual wealth based on knowledge, which counts not
only for evaluating the future wealth of individuals but
also the their contribution to the wealth of their country.
102

- It creates a optimal capital investment measure for private
companies in knowledge rather then in other forms of
capital investments.
GDKP IS BASED ON FOUR BASIC PILLARS
• Knowledge items (Ki)
• Country’s Knowledge Producing Matrix (CKPM)
• Country’s Knowledge User Matrix (CKUM)
• Cost of Individual Learning, compared to the Cost of Living
3 AREAS SO THAT KNOWLEDGE CONTENT CAN BE
ISOLATED
• Knowledge Production Research and Development (R&D)
and Technology & Computer Infrastructure Infostructure, ►WORLD ECONOMIC SITUATION AND
Education and Training PROSPECT REPORT
• Knowledge Transmission The United Nations Conference on Trade and
• Knowledge Transfer Development (UNCTAD), United Nations Department of
Economic and Social Affairs (UN DESA) and the five
BENEFITS
United Nations Regional Economic Commissions have
• a. They provide a pretty good notion of knowledge jointly released the World Economic Situation and
economy Prospects 2020 (WESP) recently.
• b. Once the acceptable algorithm has been elaborated it
can be used for GDP of all countries to establish basic
comparisons. ►SERVICE TRADE RESTRICTIVE
• The model was first used to calculate GDKP for India. This INDEX
model has been developed by Prof. Umberto Sulpasso, Ministry of Commerce and Industry, of India has found
from the Centre of Digital Future. problems with the current methodology of Services Trade
Restrictiveness Index developed by OECD. Indian
Institute of Foreign Trade (IIFT) will develop a Services
►GLOBAL ECONOMIC POLICY
Trade Restrictiveness Index for India.
UNCERTAINTY INDEX • OECD releases Services Trade Restrictive Index.
• This index measures policy related uncertainty. It • It provides information on regulations affecting trade in 22
measures three components: sectors in OECD countries in all OECD member countries
• newspaper coverage of policy-related economic and non OECD countries such as 9 non-OECD countries
uncertainty including India.
• 5 broad policy areas where service traders of each sector
• number of federal tax code provisions set to expire in
face a set of restriction while trading their services.
future years
ο Foreign Entry Restrictions: Foreign Equity Limits,
• disagreement among economic forecasters as a proxy for
restrictions on cross border M&A, nationality
uncertainty
requirements for board of directors.
INDIAN ECONOMIC POLICY UNCERTAINTY INDEX
ο Restrictions on Movement of People: Labour market
• Based on 7 Indian Newspapers tests, recognition of degrees, duration of stay
• For each paper, we count the number of news articles ο Other Discriminator Measures and International
containing at least one term from each of three term sets. Standards: National treatment, discriminatory
The first set is uncertain, uncertainties, or uncertainty. The taxes/subsidies
second set is economic or economy. The third set consists ο Barriers to competition: Minimum capital requirement,
of policy relevant terms such as 'regulation', 'central bank', restrictions of advertising/fee-setting
'monetary policy', 'policymakers', 'deficit', 'legislation', and ο Regulatory Transparency and other administrative
'fiscalpolicy'. requirements: Visa cost, availability of single contact
• Figure showing EPU for India. points, number of procedures to register a company.
103
►DIGITAL SERVICES TRADE • A Citizen Perception Survey will be conducted as part of

Ease of living Index which carries 30% marks.
RESTRICTIVENESS INDEX
• It will provide a holistic view of Indian cities - beginning
• Released by OECD from the services provided by local bodies, the
• It measures barriers that affect trade in digitally enabled effectiveness of the administration, the outcomes
services across all OECD and countries. generated through these services in terms of the
liveability within cities and, finally, the citizen perception of
these outcomes.
►LOGISTICS EASE ACROSS
• Assessment of ease of living of citizens across three
DIFFERENT STATES (LEADS INDEX) pillars: Quality of Life, Economic Ability and Sustainability
• Released by Ministry of Commerce and Industry. (Nodal
Ministry for Logistics Sector)
►MUNICIPAL PERFORMANCE INDEX
• Gujarat has again topped a perception-based index of
• Released by Ministry of Housing and Urban Affairs
mobility of goods and efficiency of logistics chain, closely
followed by Punjab and Andhra Pradesh. • It will assess the quality of life of citizens in 100 Smart
cities and 14 other Million plus cities
• It is not an index of the performance of the State
Government but may be used to assess the status of • Assesses the performance of municipalities based on five
logistics efficiency in each State. parameters: Service, Finance, Planning, Technology and
Governance.
• Among the hilly Eastern States, Tripura is the top
performer. • It will help municipalities in better planning and
management, filling the gaps in city administration and
• 9 Indicators used:
improving liveability of cities for its citizens.
ο Availability of logistics infrastructure
ο Quality of logistics infrastructure
►INDIA INNOVATION INDEX
ο Quality of logistics services provided by service
providers • NITI (National Institution for Transforming India)
ο Ease of arranging logistics at competitive rates

Ayog with the Institute for Competitiveness has
released the India Innovation Index 2019.
ο Timelines of cargo delivery
• The India Innovation Index 2019 is calculated as
ο Ease of track and trace
the average of the scores of its two dimensions -
ο Safety and security of cargo
Enablers and Performance.
ο State facilitation and coordination
• The Enablers examine innovative capacities: Human
ο Efficiency and regulatory processes
Capital, Investment, Knowledge Workers, Business
• Among Union Territories (UTs) Chandigarh was selected as
Environment, and Safety and Legal Environment.
the best performing UT.
• The Performance captures benefits that a nation derives
from the inputs: Knowledge Output and Knowledge
►GLOBAL COMPETITIVENESS INDEX
Diffusion.
• Released by World Economic Forum.
• Singapore has become the world’s most competitive
►WORLD INTELLECTUAL PROPERTY
economy in 2019, pushing the U.S. to the second place.
rd
Hong Kong SAR is ranked 3 . INDICATORS REPORT
• India is ranked also high at 15th place in terms of World Intellectual Property Indicators Report-2019,
corporate governance, while it is ranked second globally global Intellectual Property (IP) filing activity continued to
for shareholder governance.
grow at a rapid pace.
• India has moved down 10 places to rank 68th from 58th
• In 2018, patent filings around the world exceeded by
on an annual global competitiveness index.
around 3.3 million, representing a 5.2% growth over 2017
►EASE OF LIVING INDEX figures.
• Released by Ministry of Housing and Urban Affairs • Asia accounted for two-thirds of these applications,
• It will assess the quality of life of citizens in 100 Smart being the global hub for IP applications.
cities and 14 other Million plus cities.
104

• China has been at the leading position of global growth • Business Ecosystem
in worldwide IP filings in 2018 whereas the United States • Investment Climate
of America marked its first decline since 2009.
►TRAVEL AND TOURISM

►GLOBAL FOOD SECURITY INDEX
COMPETTIVENESS REPORT
• Published by Economist Intelligence Unit.
Released by World Economic Forum. It measure
Seeks to determine which countries are most and least competitiveness of a country in tourism sector.
vulnerable to food insecurity across 113 countries.
Parameters
Parameters:
1) Enabling Environment for Tourism
1. Affordability
2) Travel and Tourism Policy and Enabling conditions
2. Availability
3) Infrastructure
3. Quality and Safety
4) Natural and Cultural Resources
4. Natural Resources and Resilience (Adjustment Factor)
India's rank improved to 34th. Spain was first.
India was ranked 72 in the 2019 GFSI. Singapore was ranked
first.
►ENERGY TRANSITION INDEX
Released by World Economic Forum. It measure transition of
►GLOBAL UNICORN LIST
a country toward sustainable energy:
• Released by Hurun Research Institute (for the first time).
• System Performance Score (50% Weight)
• It is a ranking of the world’s billion-dollar tech ‘start-ups’
ο Economic Development and growth
founded in the 2000s and not yet listed on a public
exchange. ο Environmental Sustainability
• This is the first year of the list and follows from the 6th ο Energy Security & Access
quarterly Hurun China Unicorn Index. • Transition Readiness Score (50% Weight
• China has topped the list with 206 unicorns, followed by ο Capital & investment
US with 203. ο Regulation & political commitment
• While India has been ranked 3rd in the list with 21 ο Institutions & Governance
unicorns.
ο Infrastructure & Innovative business environmnent
ο Human capital & consumer participation
►SARAL: STATE ROOFTOP SOLAR
ο Energy System structure
ATTRACTIVENESS INDEX It is published in the Fostering Effective Energy Transition
• Released by Ministry of New and Renewable Energy Report
• SARAL evaluates Indian states based on their attractiveness
for rooftop development. Karnataka has been placed at 1st ►GLOBAL GENDER NORMS INDEX
rank in Index followed by Telangana, Gujarat and Andhra
• Released by UNDP in Human Development Report
Pradesh which got 2nd, 3rd and 4th rank respectively.
• It measures how social beliefs obstruct gender equality.
• It is the 1st of its kind index to provide a comprehensive
overview of state-level measures adopted to facilitate • It captures four dimensions: Political, Economic,
rooftop solar deployment. Educational and Physical Integrity.
• Designed by: The Index has been designed by Union • It is a survey of gender based attitudes.
Ministry of New and Renewable Energy (MNRE) in
collaboration with Shakti Sustainable Energy Foundation ►ASIA COMPETITIVENESS
(SSEF), Associated Chambers of Commerce and Industry of
India (ASSOCHAM) and Ernst & Young (EY). INSTITUTE’S (ACI) EDB INDEX
5 KEY ASPECTS CAPTURED BY SARAL • Released by Asia Competitiveness Institute (ACI) has
• Robustness of Policy Framework released the Ease of Doing Business Rankings for Indian
• Consumer Experience states.
• Implementation Environment
105

• Andhra Pradesh has topped the Ease of Doing Business
Brief (tracks remittances)
rankings. Maharashtra and Delhi came in second and • Global Economic Prospects
third place respectively. Report
• Ease of Doing Business (EDB) Index compiled by 4. Human Development Report UNDP
Singapore based Asia Competitiveness Institute (ACI) for
5. • The Global Risks Report World Economic
economies of 21 states of India.
• Global Competitiveness Forum
• Three parameters called ABC – Attractiveness to Investors, Report
Business Friendliness and Competitiveness Policies. • Top 10 Emerging Technologies
• Global gender gap report
►MULTIDIMENSIONAL POVERTY 6. Social Institutions and Gender OECD

Index (SIGI)
INDEX (MPI)
7. Global Food Policy Report IFPRI
• Global Multidimensional Poverty Index - 2019 (MPI),
released by the United Nation Development 8. • World Intellectual Property WIPO
Indicators Report
Programme (UNDP).
• World Intellectual Property
• The MPI captures both the incidence and intensity of Report
poverty and tracks 101 countries on deprivations across
9. Global Innovation Index Released jointly by
ten indicators in health, education, and standard of
(Switzerland ranked 1st, WIPO, Cornell
living. University and
• Index is developed by the Oxford Poverty and Human INSEAD
Development Initiative (OPHI) and the United Nations 10. World Talent Ranking International
Development Programme (UNDP). Institute for
• As per report a single measure is not a sufficient guide to Management
Development
both inequality and multidimensional poverty, and studies
(Switzerland)
such as the MPI, Human Development Index, and
the Gini coefficient (which measures countries wealth- 11. • Inclusive Internet Index Economist
income distribution), can contribute important and • Democracy Index Intelligence Unit
• Climate Change Resilience
distinctive information for policy action to effectively
Index
reduce poverty. • Global Liveability Index
• Global Microscope
• Blue Peace Index
►LIST OF IMPORTANT REPORTS
• Safe Cities Index
1. • World Trade Outlook Report World Trade
12. • The State of Food and Food and
• World Trade Report Organisation
Agriculture Agriculture
• World Trade Statistical Review
• The State of Food Security and Organisation
2. • World Economic Outlook International Nutrition in the World
• Global Financial Stability Monetary Fund • The State of World Fisheries
Report (IMF) and Aquaculture
• Fiscal Monitor • The State of World's Forests
• External Sector Report • The State of Agricultural
• Global Housing Watch (Global Commodity Markets
Real House Price Index)
13. Industrial Development Report UNIDO (United
3. • World Development Report World Bank 2020 Nations Industrial
• Ease of Doing Business Report Development
• State of Trends of Carbon Organisation)
Pricing
14. • Trade and Development UNCTAD
• South Asia Economic Focus
Report
• Migration and Development
106
• World Investment Report 10. Usha Thorat Offshore Ruppee Markets

• Digital Economy Report
• Review of Maritime Transport
11. Nandan Nilekani Deepening of Digital Payments
Report
• Technology and Innovation
Report 12. Y M Deosthalee Public Credit Registry for India
• Commodities and
Development Report 13 Surjit Bhalla HLAG on Trade and Policy
15. • World Employment and Social International

14. Injeti Srinivas • Committee to review
Outlook Report Labour
competition law
• World Employment and Social Organisation
Outlook: Trends • Committee to review provisions
• Global Wage Report related to Corporate Social
• World Social Protection Report Responsibility
• Committee to review of penal
provisions of Companies Law
►COMMITTEES
15. Subhash Chandra • Committee on Virtual Currencies
1. Bibek Debroy Beekeeping Development Report Garg • Committee to regulate on fintech
committee
16. Aruna Revival of Telecom Sector

2. U K Sinha Development of MSME sectors Sundarajan
committee
17. Rajiv Kumar Selling of OIL, ONGC fields for

3. Tapan Ray Committee on Core Investment Private Sector
Companies
18. Akhilesh Ranjan Direct Tax Code

4. FMOD Liquidity Management Framework
19. Baba Kalyani Review of Special Economic Zones.

5. Mahesh Kumar Review Agricultural Credit
Jain
20. Shiv Nandan Implement Merit Order Dispatch
Sahai across all power plants in the
6. Harsh Vardhan Development of Housing Finance country.
Securitisation Market
21. Ramesh Chand Revision of Wholesale Price Index

7. T N Manoharan Development of Secondary Market
for Corporate Loans
8. Bimal Jalan Review Extant Economic Capital

Framework of RBI
9. Executive Enabling Framework for Regulatory

Director, RBI Sandbox
107
SECTION 10
NSWER KEY
1. Which of the following is/are the source(s) of non-debt (c) Both 1 and 2 (d) Neither 1 nor 2
revenue for the government?
1. Direct tax collection 3. Which of the following statements is/are correct?
2. Recovery of loans 1. Gross Domestic Product (GDP) is the value of all
3. Proceeds out of sale of G-Secs the final goods and services produced by a nation
Select the correct answer using the code given below: during one year period.
(a) 1 only (b) 1 and 2 only 2. Net Domestic Product (NDP) is the GDP calculated
after adjusting the weight of the value of
(c) 1, 2 and 3 (d) None of the above
‘depreciation’.
Select the correct answer using the code given below:
2. An economy has reported an increase in GDP at factor
(a) 1 only (b) 2 only
cost at constant prices. In this case, which of the
following is/are necessarily true about the economy? (c) Both 1 and 2 (d) Neither 1 nor 2
1. The economy has produced more goods and
services in the current period, compared to the 4. Which of the following necessarily occurs/occur if the
previous period. interest rate in the economy is increased?
2. The general price level of the goods and services (a) Private investment decreases
in the economy is showing an upward trend.
(b) Tax collection decreases
(c) GDP increases
108
PRACTICE MCQ’S
(d) All of the above 3. Launch of Ayushman Bharat
5. Consider the following statements: (a) 1 only (b) 1 and 2 only
1. An increase in fiscal deficit indicates government (c) 1 and 3 only (d) 1, 2 and 3
is resorting to borrowings to meet its day-to-day
expenses.
10. Which of the following best explain ‘twin deficits’ in the
2. A higher revenue deficit is more dangerous than a economy?
higher fiscal deficit in the economy.
(a) Fiscal Deficit and Current Account Deficit
Which of the statements given above is/are correct?
(b) Fiscal Deficit and Revenue Deficit
(c) Fiscal Deficit and Capital Account Deficit
(c) Both 1 and 2 (d) Neither 1 nor 2
(d) Fiscal Deficit and Budgetary Deficit
6. Recently the Indian economy is said to be going

11. Which of the following contributes/ contribute to
through a slowdown. Which of the following
‘macro-economic stabilization’?
indicates/indicate slowdown in an economy?
1. Increase in aggregate demand in the economy
1. Declining consumption expenditure
2. Structural reforms
2. Declining credit growth
3. Export competitiveness
3. Falling rural income
(a) 1 only (b) 1 and 2 only
(c) 1 and 3 only (d) 1, 2 and 3
(c) 2 and 3 only (d) 1, 2 and 3
12. Recently, the government is taking various fiscal policy

7. Which of the following situations best explains the
measures to tackle the slowdown in the economy. In
term ‘Fiscal Drag’?
this context, which of the following may be termed as
(a) There is an increase in government receipts, but ‘counter-cyclical fiscal policy’ measures?
reduction in demand in the economy.
1. Reduction in corporate tax rates
(b) There is a decrease in government receipts, but
2. Bank recapitalisation
increase in demand in the economy.
3. Setting up of alternate investment fund in the real
(c) There is a decrease in government receipts and
estate sector
also decrease in demand in the economy.
4. Strategic disinvestment of Central Public Sector
(d) There is an increase in government receipts and
Enterprises
increase in demand in the economy.
(a) 1 and 2 only (b) 1 and 3 only
8. Which of the following indicates/ indicate that an
economy is following a system of progressive taxation? (c) 2 and 4 only (d) 1, 2, 3 and 4
1. Having only one rate for GST

2. Cess on income tax in the highest tax bracket 13. ‘Crowdingout’ is a term that is often seen in the news.
Which of the following results in ‘crowding out’ of
3. Tax exemption in low income bracket
private investments?
(a) Decreased government spending due to demand
(a) 1 only (b) 2 and 3 only slump in the economy.
(c) 3 only (d) 1, 2 and 3 (b) Increased government spending mainly funded by
borrowings.
9. Which of the following steps is/are taken by the (c) Decreased private investment due to demand
government to promote ‘inclusive growth’ in the slump in the economy.
economy? (d) Increased private investment but demand slump
1. Launch of the Pradhan Mantri Jan Dhan Yojana in the economy.
2. Launch of Payment Banks
109
PRACTICE MCQ’S
14. Which of the following statements is/are correct about 2. Currency war is a situation when one country
GNP deflator? mops up a foreign currency from the international
1. The GNP deflator provides an alternative to the market in order to create a trade imbalance in
Consumer Price Index (CPI). that country.
2. The higher the GNP deflator, the lower the rate of Which of the statements given above is/are correct?
inflation for the period. (a) 1 only (b) 2 only
Select the correct answer using the code given below: (c) Both 1 and 2 (d) Neither 1 nor 2
(c) Both 1 and 2 (d) Neither 1 nor 2 19. Dumping is a strategy used by one country to distort
the market of another country for the product that is
dumped. Which of the following strategies does a
15. Which of the following is/are said to increase the
country adopt to ‘dump’ a product in another country?
Current Account Deficit of India?
(a) It exports the product at a price less than that in
1. A foreign national visiting a yoga camp in
its domestic economy.
Haridwar.
(b) It exports the product at a price less than the cost
2. An Indian national going to study abroad.
of production for that product.
3. Rise in international oil prices.
(c) Both (a) and (b)
(d) None of the above
(c) 2 and 3 only (d) 1, 2 and 3
20. The Global Commission on the Future of Work is an
initiative of which of the following international
16. Introduction of GST is said to have increased tax organizations?
buoyancy in India. Which of the following statements (a) The International Labour Organisation (ILO)
best explains/explain the term ‘tax buoyancy’?
(b) The Socialist International
(a) It means that for every rupee of tax paid, a
(c) The International Centre for Trade Union Rights
proportionate growth in GDP is seen.
(d) The World Economic Forum
(b) It means that any increase in growth results in
proportionate increase in tax revenue.
(c) It means that increase in the number of people in 21. Which among the following are parts of India's
higher tax bracket will result in more number of nationally determined contributions (NDCs) as part of
people in lower tax bracket. the Paris Climate Change Agreement?
(d) Both (a) and (b) 1. Reduce emissions intensity of its GDP by 33% to
35% by 2030 from 2005 level.
2. Achieve about 50% electric power installed
17. Which of the following is/are said to be the effect(s) of
capacity from non-fossil fuel based energy
a depreciating rupee?
resources.
1. Imports become costlier
3. Create an additional carbon sink of 2.5 to 3 billion
2. Exports become cheaper tonnes of CO2 equivalent through additional
Select the correct answer using the code given below: forest and tree cover.
(a) 1 only Select the correct answer using the code given below:
(b) 2 only (a) 1 and 2 only (b) 1 and 3 only
(c) Both 1 and 2 (c) 2 and 3 only (d) 1, 2 and 3
(d) Neither 1 nor 2
18. Consider the following statements regarding currency 22. Which of the following energy efficiency
wars that are often seen in the news: schemes/programmes are implemented by the
1. Currency war is a situation when countries Bureau of Energy Efficiency (BEE)?
devalue their currency deliberately to make their 1. Standards and Labeling Programme
exports competitive. 2. Energy Conservation Building Code (ECBC)
3. UJALA Scheme
110
PRACTICE MCQ’S
4. Atal Jyoti Yojana (AJAY) Select the correct answer using the code given below:
Select the correct answer using the code given below: (a) 1 only (b) 1, 2 and 3 only
(a) 1 and 2 only (b) 1, 2 and 3 only (c) 1 and 4 only (d) None of the above
(c) 1, 2 and 4 only (d) 1, 2, 3 and 4
28. A country is said to have reduced the Poverty Gap
23. What does the NABH Nirman initiative of the Ratio from 2010-11 to 2019-2020. What does it imply?
Government deal with? (a) It has less number of people below poverty line in
(a) Construction of national highways in Naxal 2019-20 as compared to 2010-11.
affected areas. (b) It requires fewer resources in 2019-2020 as
(b) Development of new airports. compared to that in 2010-11 to eliminate poverty.
(c) Development of national waterways. (c) It requires more resources in 2019-2020 as

compared to that in 2010-11 to eliminate poverty.
(d) Promotion of coastal shipping.
(d) More people will fall below poverty line in the near
24. What does the 'LaQshya - Quality Improvement
future.
Initiative' of the Government deal with?
(a) Improve the quality of primary education.
29. Which of the following is/are the common feature(s) of
(b) Reducing the maternal and new born mortality.
developing countries?
(c) Improving the sanitation outcomes.
1. Low rate of growth of population
(d) Provide housing for all by the end of 2022.
2. Low rate of capital formation
3. Low social indicators of development
25. Which among the following would occur if the fertility
rate in a country is lower than the replacement level
fertility? (a) 1 only (b) 2 and 3 only
(a) Increase in the population growth rate (c) 1 and 3 only (d) 1, 2 and 3
(b) Zero population growth rate

(c) Decrease in the population 30. ‘Six Signature Solutions’ is related to which of the
following organizations?
(d) Increase in the population, but at a lower growth
rate. (a) The International Monetary Fund
(b) The United Nations Development Programme
26. Which among the following statements can be (c) The World Bank
considered as the best argument to promote human (d) The Asian Development Bank
development in a country?
(a) Human development would lead to an increase in 31. Climate change is said to affect large sections of poor
the GDP growth rate. population in the coastal area of Rayalaseema who will
(b) Human development would promote political migrate to a relatively rich Vijayawada in search of jobs
development and strengthen democratic values. in construction sector. In this case which of the
(c) Human development enhances the ability of the following is correct?
people to make their own choices. (a) Gini Coefficient in Vijayawada will increase.
(d) Human development would promote inclusive (b) Gini Coefficient in Vijayawada will decrease.
and balanced growth and development. (c) Gini Coefficient in Vijayawada will be unaffected.
(d) Inconclusive.
27. Which of the following schemes is/are meant only for
BPL (Below Poverty Line) households?
32. India has a score of 0.44 in the Human Capital Index
1. MGNREGA released by the World Bank. What does this imply?
2. PM Ujjwala Yojana (a) Only 44% of the population of India is fully
3. Ayushman Bharat Yojana developed and works with optimum productivity.
4. Deendayal Antyodaya Yojana - National Rural (b) A child born in India will only be 44% productive
Livelihoods Mission (NRLM) when he attains the age of 18, compared to what
111
PRACTICE MCQ’S
he would be had he received full education and 2. Put a limit on lending for a particular sector in
health. some cases
(c) Only 44% of the population is employable in India. 3. Put a limit on number of branches a bank can
(d) All of the above. open.
4. Can set a minimum limit to the government
borrowing from the banks
33. Consider the following statements about ‘Revenue
5. Print currency to supply credit to the government.
Receipts’:
6. Transfer surplus funds earned out of open market
1. They neither create any liability nor reduce any
operations, liquidity adjustment facility etc., to
asset of the government.
Government of India.
2. They are irregular and non-recurring in nature.
3. There is no future obligation to return the
(a) 1, 2 and 4 only
amount.
(b) 1, 2, 3, 4 and 6 only
(c) 1, 2, 3, 4 and 5 only
(a) 1 and 3 only (b) 3 only
(d) 1, 2, 3, 4, 5 and 6
(c) 1 and 2 only (d) 1, 2 and 3
38. Consider the following statements about ‘capital

34. Which of the following comes/come under the
receipts’:
revenue receipts of the government?
1. They either create a liability or reduce an asset of
1. Corporation tax
the government.
2. GST and taxes of the Union territories
2. Borrowings and disinvestment are examples of
3. Custom duties
Capital Receipts.
3. They are regular and recurring in nature.
(c) 1 and 3 only (d) 1, 2 and 3
(c) 1 and 3 only (d) 1, 2 and 3
35. The Central Bank of a country is responsible for
money supply in the economy. In this context,
39. In the context of banking in India, Prompt Corrective
consider the following statements:
Action is often seen in the news. Which of the
1. A Central Bank adopts cheap money policy in
following statements is/are correct with respect to
order to reduce inflation in the economy.
Prompt Corrective Action?
2. A dear money policy is often adopted in order to
1. If there is more number of banks under the
revive growth in the economy.
Prompt Corrective Action Framework, it means
Which of the statements given above is/are correct? that the health of banking is good.
(a) 1 only (b) 2 only 2. More number of banks under the Prompt
(c) Both 1 and 2 (d) Neither 1 nor 2 Corrective Action Framework essentially means
the credit growth in the economy has slowed
36. Consider the following statements: down.
1. The Fiscal Responsibility and Budget Management Select the correct answer using the code given below:
(FRBM) Act was enacted in 2003, which set targets (a) 1 only (b) 2 only
for the government to reduce fiscal deficits. (c) Both 1 and 2 (d) Neither 1 nor 2
2. The central government set up a committee under
N. K. Singh to review the FRBM Act.
40. The Reserve Bank of India (RBI) is said to be in favour
Which of the statements given above is/are correct? of introducing a 'digital fiat currency' in India. What
(a) 1 only (b) 2 only is/are the possible impact(s) of introducing a 'digital
(c) Both 1 and 2 (d) Neither 1 nor 2 fiat currency'?
1. The banks will have no role in transfer of such
37. Which of the following functions are being performed currencies.
by the Reserve Bank of India (RBI)? 2. If they take off in a big way, they will profit the
1. Management of liquidity digital payment product makers, like Paytm.
112
PRACTICE MCQ’S
Select the correct answer using the code given below: (c) 3-1-2 (d) 3-2-1
(c) Both 1 and 2 (d) Neither 1 nor 2 45. An increase in Cash Reserve Ratio will result in which
of the following in an economy?
41. Which of the following indicate a situation of monetary (a) The banks will have more money to led in the
policy transmission in the economy? economy.
1. The banks benchmarking their lending rates (b) There will a credit squeeze in the economy.
based on MCLR (Marginal Cost of funds based (c) The government will have more money for social
Lending Rate). sector spending.
2. A decrease in repo rate leads to an increase in (d) The fiscal deficit of the government will decrease.
demand for home loans.
3. An increase in repo rate leads to an increase in 46. Consider the following statements with respect to
demand for home loans. different monetary policy instruments:
4. A decrease in repo rate leads to a decrease in 1. To tackle the liquidity crunch in the short term, the
demand for home loans. banks borrow money from the Reserve Bank of
Select the correct answer using the code given below: India (RBI) at repo rate only with collateral.
(a) 1 and 2 only (b) 2 and 3 only 2. In times of excess cash in the economy, like
(c) 3 and 4 only (d) 1 and 4 only demonetization, the RBI can borrow money from
the banks without collateral.
42. Which of the following situations indicates that there is
liquidity trap in the economy? (a) 1 only (b) 2 only
(a) A decrease in policy rates (repo rates, Cash (c) Both 1 and 2 (d) Neither 1 nor 2
Reserve Ratio-CRR, the statutory liquidity ratio -
SLR) leads to revival of demand in the economy. 47. Which of the following statements is/are correct with
(b) A decrease in policy rates has not led to revival of respect to the functions of the Payments Banks?
demand in the economy. 1. They can maintain both savings and current
(c) An increase in policy rates has led to revival of accounts.
demand in the economy. 2. They can issue debit cards and credit cards.
(d) None of the above 3. They can maintain fixed deposits for senior
citizens.
43. Which of the following best represent the concept of Select the correct answer using the code given below:
differentiated banks in India? (a) 1 only (b) 1 and 2 only
1. Small Finance Banks (c) 1 and 3 only (d) 1, 2, and 3
2. Payment Banks
3. Regional Rural Banks 48. Which of the following statements is/are incorrect
4. The Industrial Development Bank of India about Wholesale Price Index (WPI) and the Consumer
Select the correct answer using the code given below: Price Index (CPI)?
(a) 1 and 2 only (b) 1 and 3 only 1. Both follow the same base year, 2011-12.
(c) 2 and 3 only (d) 1, 2, 3 and 4 2. CPI is released by the Office of Economic Adviser,
Department for Promotion of Industry and
Internal Trade (DPIIT).
44. Arrange the following assets in the increasing order of
3. In consumer’s basket, food has a much less
their liquidity:
weightage than in the wholesale basket.
1. Cash in hand
2. Time liabilities
3. Demand liabilities
(c) 2 and 3 only (d) 1, 2 and 3
(a) 1-2-3 (b) 2-3-1
113
PRACTICE MCQ’S
49. With reference to the Contingency Fund of India, 53. What does the word ‘Countercyclical fiscal policy’
consider the following statements: imply?
1. It has been placed at the disposal of the Prime (a) It amplifies government expenditure during
Minister of India to facilitate meeting of urgent booms and cuts expenditure during recession.
unforeseen expenditure. (b) It is a fiscal policy which remains unaltered despite
2. There is no need for either ex-ante or ex-post the business cycle.
facto approval from the Parliament for (c) It is a fiscal policy which is followed during the
undertaking expenditure from this Fund. times of structural reforms undertaken by the
3. The present corpus of the Fund stands at Rs 500 developing countries.
crore. (d) It is a fiscal policy in which during recession
Which of the statements given above is/are incorrect? government expenditure increases, while taxation
(a) 1 only (b) 1 and 2 only is increased during boom periods.
(c) 1 and 3 only (d) 1, 2 and 3

54. The World Investment Report is released by which of
the following organizations?
50. Which among the following union taxes contribute the
least to the gross tax revenue of the centre? (a) The World Economic Forum
(a) Union excise duties (b) UNCTAD (The United Nations Conference on
Trade and Development)
(b) Customs duty
(c) The World Bank
(c) Income tax
(d) The International Monetary Fund
(d) Corporate tax
55. What would happen to the “money multiplier” in an

51. With reference to the trends in the tax receipts in the
economy, if the cash reserve ratio (CRR) is reduced?
last 5 years, consider the following statements:
(a) The money multiplier would increase.
1. The tax to GDP ratio has increased in the last 5
years. (b) The money multiplier would decrease.
2. There has been increase in both direct and (c) The money multiplier would remain constant.
indirect tax collections in the last 5 years. (d) There is no relationship between the money
Which of the statements given above is/are correct? multiplier and the cash reserve ratio (CRR).
(a) 1 only
(b) 2 only 56. Which of the following factors is/are taken into
consideration while deciding the minimum support
(c) Both 1 and 2
price (MSP) by the Commission for Agricultural Costs
(d) Neither 1 nor 2 and Prices (CACP)?
1. Cost of cultivation per hectare
52. Consider the following statements about the ‘Effective 2. Prices in the international market
Revenue Deficit’:
3. Cost of processing of agricultural products
1. ‘Effective Revenue Deficit’ is defined by the Fiscal
Responsibility and Budget Management Act, 2003.
2. Targets have been set under the Fiscal
Responsibility and Budget Management Act to (c) 1 and 2 only (d) 1, 2 and 3
bring it to zero percent of GDP.
3. Effective Revenue Deficit is below 1% of the GDP 57. Which of the following categories is/are granted
in the recent years. ‘Priority Sector Lending’ in India?
Which of the statements given above is/are incorrect? 1. Housing
(a) 3 only (b) 1 and 2 only 2. Education
(c) 2 and 3 only (d) 1, 2 and 3 3. Micro, Small and Medium Enterprises
114
PRACTICE MCQ’S
(c) 1 and 2 only (d) 1, 2 and 3 (c) Both 1 and 2 (d) Neither 1 nor 2
58. Which of the following pairs related to agricultural 62. Which of the following will form part(s) of ‘Balance of
schemes has/have been matched correctly? Trade’ account of India?
1. Market Intervention Scheme: To stabilize the 1. Jack, an American national, spends $2,000 on
supply and prices of tomato, onion and potato. account of knee surgery in a hospital in India.
2. Price Stabilization Fund: To stabilize the prices of 2. Geeta, an Indian national, spends $50,000 on
wheat by selling it in the open market. account of a Ph.D programme in the University of
California.
3. Operation Greens: To introduce Green Revolution
in the eastern states. 3. Samsung, Noida, under its ‘Make for the World’
initiative sells its premium mobile phones in
Korean Market.
(c) 2 and 3 only (d) None of the above
(c) 2 and 3 only (d) 3 only
59. Which of the following statements, related to the
Purchasing Managers’ Index, is correct?
63. Which of the following will have an effect on the
(a) It is an index of the prevailing direction of
Current Account Deficit of India?
economic trends in both the manufacturing and
service sectors. 1. Infosys providing ‘Finacle’ digital banking solution
to a French multi-national bank Société Générale.
(b) It is an index of the prevailing direction of
economic trends in the service sectors only. 2. Japan International Co-operation Agency providing
assistance to infrastructure development of
(c) It is an index of the prevailing direction of
North- east and Delhi-Mumbai Industrial Corridor.
economic trends in the international market and
exchange rate. 3. Priya, a London-resident Indian, holding deposits
in the State Bank of India in India.
60. Recently the Infrastructure Investment Trust (InvITs) is
seen as an innovative way of funding the capital (c) 2 and 3 only (d) 1, 2 and 3
requirement in the infrastructure sector in India.
Which of the following statements is/are correct with 64. Which of the following is/are said to trigger a ‘currency
respect to InvITs? war’?
1. InvITs are pooled funds sourced both from 1. A central bank following expansionary monetary
individual and institutional investors. policy in order to devalue its currency.
2. InvITs, being financial instruments, are regulated 2. A central bank eases the money supply to lower
by the Reserve Bank of India (RBI) in India. exchange rates.
3. InvITs are aimed at filling the funding gap in Select the correct answer using the code given below:
under-construction projects only. (a) 1 only (b) 2 only
Select the correct answer using the code given below: (c) Both 1 and 2 (d) Neither 1 nor 2
(c) 1 and 3 only (d) 1, 2 and 3 65. An Indian solar manufacturer is said to have suffered
by cheap imports of solar panels from some countries.
61. Recently, the government has launched an Alternative Which of the following measures can India adopt
Investment Fund (AIF) in the real estate sector. In this under WTO’s GATT (General Agreement on Tariffs and
context, consider the following statements regarding Trade) to save the Indian manufacturer?
AIF: 1. India can impose countervailing duties on cheap
1. AIFs are basically constituted for providing solar panels.
refinancing facility for real estate projects. 2. A safeguard duty can be imposed on the solar
2. AIFs are aimed at financing stalled projects only. panels from those countries.
Which of the statements given above is/are correct? Select the correct answer using the code given below:
115
PRACTICE MCQ’S
(c) Both 1 and 2 (d) Neither 1 nor 2 70. The ‘Friends of Special Products’ is a term that is often
seen in the context of trade negotiations. Which of the
following best represents the ‘Friends of Special
66. Which of the following indicates/indicate that a
Products’?
currency is convertible?
(a) It is a group of developing countries that restricts
1. It can be freely exchanged for a foreign currency.
market access in the agricultural products.
2. There is no restriction for its use in a foreign
(b) It is a group of countries that is pushing for liberal
country.
access to e-commerce.
(c) It is a group of countries that seeks to protect its
(a) 1 only (b) 2 only rare-earth mineral resources from exploitation by
(c) Both 1 and 2 (d) Neither 1 nor 2 a third country.
67. Consider the following statements with respect to the
Generalized System of Preferences (GSP)? 71. Consider the following statements about GDP
1. It is a preferential treatment extended by a Deflator:
developed country to a developing country for 1. GDP Deflator is a better measure of inflation in an
duty-free entry of some products. economy than the CPI (Consumer Price Index) and
2. USA extends the benefit of GSP to India, the WPI (Wholesale Price Index).
particularly for textiles. 2. GDP Deflator includes the prices of imported
Which of the statements given above is/are correct? goods as well.
(a) 1 only (b) 2 only 3. Weights of goods differ according to the
(c) Both 1 and 2 (d) Neither 1 nor 2 production level of each goods in the GDP
Deflator.
Which of the statements given above are correct?
68. Which of the following statements are correct?
1. Foreign Portfolio Investment (FPI) involves holding
financial assets from a country outside of the (c) 2 and 3 only (d) 1, 2 and 3
investor's own.
2. FPI holdings can include stocks; American 72. Consider the following statements with respect to
depositary receipts (ADRs), bonds, mutual funds Monetary Policy Framework:
and exchange-traded funds. 1. According to Monetary Policy Framework, the
3. Like foreign direct investment (FDI), FPI consists of Monetary Policy Committee (MPC) sets an inflation
passive ownership. target for a 5-year period through the tenure of
Select the correct answer using the code given below: MPC.
(a) 1 and 2 only (b) 2 and 3 only 2. Inflation target is set on the basis of Consumer Price
Index.
(c) 1 and 3 only (d) 1, 2 and 3
69. ‘Dumping’ is said to be a trade distortionary practice.
Which of the following terms best explains/ explain the (c) Both 1 and 2 (d) Neither 1 nor 2
term ‘dumping’?
(a) It is said to occur when the price of a product is 73. Recently, the Reserve Bank of India (RBI) has made it
lower in the domestic market than that in the mandatory for the banks to link retail lending rates to
export market. an external benchmark, such as the repo rate. Which
(b) It is said to occur when the price of a product in of the following best represents the rationale behind
the domestic market is higher than that in the introducing external benchmarking?
export market. (a) It ensures that the growth of the Non- Performing
(c) It is said to occur when the price of a product is Assets (NPAs) can be controlled significantly.
the same in domestic and export markets. (b) It ensures better monetary policy transmission.
(d) Both (b) and (c)
116
PRACTICE MCQ’S
(c) It ensures that the cost of borrowing is lowered (a) 1 and 2 only
significantly. (b) 2 and 3 only
(d) It indicates an accommodative monetary policy (c) 1 and 3 only
stance.
(d) 1, 2 and 3
74. Consider the following statements with respect to the

78. Which of the following statements is/are correct?
Exchange-Traded Funds (ETFs):
1. Negative interest rates refer to a scenario in which
1. ETFs can be traded in secondary market, similar to
cash deposits incur a charge for storage at a bank,
shares.
rather than receiving interest income.
2. The Bharat Bond, launched recently, is a type of
2. Negative interest rates may occur during
ETF.
deflationary periods, when people and businesses
Which of the statements given above is/are correct? hold too much money instead of spending.
(a) 1 only (b) 2 only Select the correct answer using code given below:
(c) Both 1 and 2 (d) Neither 1 nor 2 (a) 1 only (b) 2 only
75. ‘Operation Twist’ is a term recently seen in the news. It
is related to which of the following?
79. With reference to the Ways and Means Advances,
(a) Open market operation by the Reserve Bank of consider the following statements:
India (RBI).
1. Under the ways and means advances, both the
(b) Strategy to tackle Non-Banking Financial Company central and the state governments can borrow
(NBFC) crisis. money in order to finance their deficits.
(c) Disinvestment in the Central Public Sector 2. There is no limit on the government's borrowings
Enterprises. under the ways and means advances.
(d) Step to boost the middle-income housing 3. The rate of interest on the ways and means
infrastructure. advances is below the market rate of interest.
Which of the statements given above is/are incorrect?
76. Which of the following statements is correctly related (a) 1 only (b) 1 and 2 only
to 'Greenwashing':
(c) 1 and 3 only (d) 1, 2 and 3
(a) It refers to the practice of planting green plants on
roof-tops.
80. Recently, WTO (the World Trade Organization) has
(b) Greenwashing is the process of conveying a false
ruled that India’s export promotion schemes are
impression or providing misleading information
illegal. Under which of the WTO Agreements were
about how a company's products are more
these found illegal?
environmentally sound.
(a) General Agreement on Tariffs and Trade
(c) It refers to painting the surface of Earth as green
to increase green cover. (b) General Agreement on Trade in Services
(d) None of the above (c) Agreement on Trade-Related Aspects of

Intellectual Property Rights
(d) Agreement on Subsidies and Countervailing
77. Consider the following statements about the Kisan
Measures
Credit Card (KCC) Scheme:
1. All the crops loans, eligible for interest subvention,
are routed through the KCC mode only. 81. Consider the following statements with respect to
Liquidity Adjustment Facility (LAF) in India
2. KCC can be used to extend working capitals loans
for fishery and animal husbandry farmers. 1. Repo auctions under LAF are aimed at managing
short-term liquidity only
3. Loans given under the KCC Scheme can be used to
meet consumption requirements of the farmer 2. Under LAF window banks can borrow money from
household. RBI by pledging the government securities held
under reserves (Statutory Liquidity Ratio)
Which of the statements given above are correct?
Which of the statement/s given above is/are incorrect?
117
PRACTICE MCQ’S
(a) 1 only (b) 2 only 2. The International Development Association (IDA)
(c) Both 1 and 2 (d) Neither 1 nor 2 arm of the World Bank lends to governments of
poorest countries only.
Which of the above given statements are correct?
82. The terms ‘treaty shopping’ and ‘round tripping’ are
often seen in news with respect to capital inflows into (a) 1 only (b) 2 only
a country. In this context consider the following (c) Both 1 and 2 (d) Neither 1 nor 2
statements.
1. An Indian National investing in India indirectly by 86. With reference to Off-Budget Financing, consider the
channelizing the investments through Singapore following statements:
to make use of a ‘treaty’ that India has with
1. It refers to the loans borrowed by the PSUs based
Singapore is called Treaty Shopping.
on the Government's guarantee of repayment.
2. An American resident investing in India indirectly by
2. The Off-budget Financing is undertaken only for
channelizing the investments through Singapore is
capital expenditure.
called as Round Tripping.
3. Treating Shopping and Round Tripping are one and
the same. (a) 1 only (b) 2 only
Which of the above given statements are incorrect? (c) Both 1 and 2 (d) Neither 1 nor 2

(c) 3 only (d) 1, 2 and 3 only 87. Which among the following is/are part of Model
Bilateral Investment Treaty put forth by the
Government?
83. Arrange the following arrangement in the increasing
1. Enterprise based Definition of Investment
order of their trade integration.
2. Exclusion of MFN treatment
1. Preferential Trade Agreement
3. Freedom to the investors to initiate international
2. Most Favoured Nation Status
arbitrations without any conditions.
3. Free Trade Agreement
4. Customs Union
5. Monetary Union
(c) 2 and 3 only (d) 1, 2 and 3
(a) 1-3-4-5-2 (b) 2-1-3-4-5
88. With which among the following countries has India
(c) 2-3-1-4-5 (d) 2-3-1-5-4 signed Free Trade agreement (FTA)?
1. USA
84. In the context of WTO negotiations, a term called ‘new 2. Japan
issues’ is often seen in news. Which of the following
3. South Korea
constitutes ‘new issues’?
4. Sri Lanka
1. E-commerce
2. Blockchain technology
3. Gender development
(c) 1, 2 and 3 only (d) 2, 3 and 4
4. Investment Facilitation
89. With respect to Operation Twist carried out by RBI
recently, consider the following statements:
(c) 1, 3 and 4 only (d) 1, 2, 3 and 4
1. It refers to buying of short term G-Secs and
simultaneously selling long term G-Secs to
85. Consider the following statements with respect to influence the yield rates.
World Bank Group. 2. It would lead to decrease in long term rates of
1. The International Bank for Reconstruction and Interest in the Indian Economy.
Development (IBRD) arm of the World Bank Which of the statements given above is/are correct?
primarily lends to middle-income countries.
118
PRACTICE MCQ’S
(c) Both 1 and 2 (d) Neither 1 nor 2 1. It would able to bring back the black money
stashed abroad into India.
90. With reference to Provisioning Coverage Ratio (PCR), 2. It would be able to promote Infrastructure
consider the following statements: development within India.
1. Under the RBI's provisioning norms, the banks are Select the correct answer using the code given below:
required to set aside certain percentage of their (a) 1 only (b) 2 only
profits in order to cover risk arising from NPAs (c) Both 1 and 2 (d) Neither 1 nor 2
2. The Provisioning Coverage Ratio (PCR) remains
same for all the categories of NPAs.
95. Which among the following categories of commodities
Which of the statements given above is/are correct? are covered under the Price Stabilization fund
(a) 1 only (b) 2 only Scheme?
(c) Both 1 and 2 (d) Neither 1 nor 2 1. Onions
2. Potato
91. Which among the following is/are considered to be 3. Pulses
part of India's Forex Reserves? 4. Tomato
1. Foreign Currency Assets (FCA) Select the correct answer using the code given below:
2. Gold (a) 1 and 2 only (b) 1, 2 and 3 only
3. Special Drawing Rights (SDRs) (c) 1, 2 and 4 only (d) 1, 2, 3 and 4
(a) 1 only (b) 1 and 2 only 96. Which among the following accounts for the highest
(c) 1 and 3 only (d) 1, 2 and 3 components in the External Debt of India?
(a) Multilateral Debt
92. Consider the following statements related to Long (b) Bilateral Debt
Term Repo Operations (LTROs) recently carried out by (c) External Commercial Borrowings
RBI:
(d) Trade Credit
1. The LTROs are similar to term repos but with a
longer maturity period of 1 year and 3 year.
97. With reference to Sovereign Gold Bonds (SGBs),
2. By carrying out LTROs, the RBI would inject
consider the following statements:
liquidity into economy at a rate which would be
higher than Repo rate. 1. The SGBs are interest free bonds which offer
superior alternative to investment in physical
Gold.
2. The investors are required to pay the issue price
(c) Both1 and 2 (d) Neither 1 nor 2 in cash and bonds will be redeemed in cash on
maturity.
93. What does the EASE Reforms Index deals with? Which of the statements given above is/are correct?
(a) Improve Ease of Doing Business Index in India (a) 1 only (b) 2 only
(b) Improve the Governance of Public Sector Banks (c) Both 1 and 2 (d) Neither 1 nor 2
(PSBs)
(c) Making it easier for the companies to obtain 98. With reference to Domestic-Systemically Important
environmental clearances. Banks (D-SIBs), consider the following statements:
(d) Improving the agricultural marketing 1. These banks are required to maintain additional
Infrastructure. capital requirements as mandated by the Reserve
Bank of India.
94. Recently, the Elephant Bonds were in news. How 2. Presently, only the State Bank of India has been
would the issuance of Elephant Bonds benefit Indian identified by the RBI as Domestic-Systemically
Economy? Important Bank (D-SIB).
119
PRACTICE MCQ’S
(c) Both 1 and 2 (d) Neither 1 nor 2 100. Consider the following statements related to recent
changes in the Pradhan Mantri Fasal Bima Yojana
(PMFBY):
99. Which among the following criteria is/are adopted by
the 15
th
Finance Commission for the horizontal 1. The revised PMFBY puts a limit on contribution of
distribution of taxes among the states? both Centre and State to the insurance premium.
1. Population (1971 Census) 2. The revised PMFBY provides for the compulsory
enrolment of both loanee and non-loanee farmers
2. Income Distance
under the scheme.
3. Population (2011 Census)
4. Tax Effort
5. Demographic performance
(a) 1, 2 and 4 only (b) 1, 2, 3 and 4 only
(c) 2, 3, 4 and 5 only (d) 2, 3 and 4 only
ANSWER KEY
1. b 23. b 45. b 67. a 89. b
2. a 24. b 46. c 68. a 90. a
3. b 25. c 47. a 69. b 91. d
4. a 26. c 48. d 70. a 92. a
5. b 27. d 49. b 71. b 93. b
6. d 28. b 50. b 72. b 94. c
7. a 29. b 51. c 73. b 95. c
8. b 30. b 52. d 74. c 96. c
9. d 31. a 53. d 75. a 97. b
10. a 32. b 54. b 76. b 98. a
11. d 33. a 55. a 77. b 99. c
12. d 34. d 56. d 78. c 100. d
13. b 35. d 57. d 79. d
14. a 36. c 58. d 80. d
15. c 37. b 59. a 81. c
16. b 38. b 60. a 82. d
17. c 39. d 61. b 83. b
18. a 40. a 62. d 84. c
19. c 41. a 63. a 85. c
20. a 42. b 64. c 86. a
21. b 43. d 65. c 87. b
22. a 44. b 66. c 88. d
120

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01 ►REVERSE REPO RATE 10

►FUNCTIONS OF MONEY 01 ►MARGINAL STANDING FACILITY (MSF) 10

►MONEY CIRCULATION 01 ►BANK RATE 11

►BEHAVIOUR OF MONEY 01 ►CASH RESERVE RATIO (CRR) 11

►MONETARY AGGREGATES 02 ►STATUTORY LIQUIDITY RATIO (SLR) 11

►TYPES OF MONEY 02 ►OPEN MARKET OPERATIONS (OMO) 11

►ORGANISATION OF BANKING IN INDIA 02 ►LATEST RBI BANK RATES IN INDIAN BANKING – AS OF 6

►MICRO UNITS DEVELOPMENT AND REFINANCE AGENCY ► CROSS-BORDER INSOLVENCY 14

►INDRADHANUSH ROADMAP 16 ►CONSUMER PRICE INDEX 25

►CLAWBACK AND MALUS 18 ►IMPORTANT COMMITTEES RELATED TO INFLATION 27

►NATIONAL SMALL SAVINGS FUND 18

SECTION 2 ►PATENT BOX MISUSE 31

Inflation ►FISCAL COUNCIL 31

24 ►MULTILATERAL CONVENTION ON BEPS 32

►DIVIDEND DISTRIBUTION TAX AND BUYBACK TAX 33 ►GOLD RELATED INVESTMENTS 38

►FINANCIAL INSTRUMENTS 35 ►BALANCE OF TRADE 41

►DEBENTURE 35 ►BALANCE OF INVISIBLES 41

►G-SECS 35 ►CURRENT ACCOUNT TRANSACTIONS 41

►NEGOTIATED DEALING SYSTEM 35 ►CURRENT ACCOUNT DEFICIT 41

►MUTUAL FUND 36 ►CAPITAL ACCOUNT TRANSACTIONS 41

►EXCHANGE TRADED FUND 36 ►CONVERTIBILITY 41

►ETF VS MUTUAL FUNDS 36 ►ECB, ADR/GDR AND FCCB 42

►DERIVATIVES 36 ►EXTERNAL COMMERCIAL BORROWINGS 42

►FUTURES 36 ►AMERICAN DEPOSITORY RECEIPTS 42

►OPTIONS 36 ►FOREIGN CURRENCY CONVERTIBLE BONDS 42

►COMMODITY MARKET 36 ►FOREIGN DIRECT INVESTMENT 42

►PARTICIPATORY NOTES 36 ►FOREIGN PORTFOLIO INVESTMENT 42

►SOVEREIGN WEALTH FUND 36 ►FOREX RESERVES 42

►NATIONAL INFRASTRUCTURE AND INVESTMENT FUND 37 ►APPRECIATION 42

►ALTERNATE INVESTMENT FUND 37 ►DEPRECIATION 42

►NATIONAL PENSION SCHEME 37 ►DEVALUATION 42

►MASALA BONDS 38 ►NIRVIK SCHEME 43

►INDIA AND RCEP 43 ►SUSTAINABLE ALTERNATIVE TOWARDS AFFORDABLE

►REMISSION OF DUTIES AND TAXES ON EXPORTED ►GREEN WINDOW INITIATIVE OF IREDA 58

and Energy ► IPRISM 59

►SOCIAL SECURITY CODE BILL, 2019 48 ►RELAXED DEFINITION OF STARTUPS 62

►INDUSTRIAL RELATIONS CODE BILL 2019 49 ►NATIONAL STARTUP ADVISORY COUNCIL 63

►WAGE CODE BILL 49 ►MISSION PURVODAYA 63

►PLFS REPORT 50 ►STEEL SCRAPPING POLICY 64

►VISION ZERO 50 ►GLOBAL FORUM ON STEEL EXCESS CAPACITY 64

►DUAL SYSTEM OF TRAINING 51 ►ELEPHANT BONDS 64

►AMENDMENT IN APPRENTICESHIP RULES 51 ►DEFINITION OF MSMES 64

ENERGY RELATED 52 ►TRADE RECEIVABLES DISCOUNTING SYSTEM (TREDS) 65

►NATIONAL FINANCIAL REPORTING AUTHORITY 69 ►PRICE STABILISATION FUND 83

►NATIONAL ELECTRONIC TOLL COLLECTION PROGRAM – ►e-NAM 87

►FARMERS PRODUCER ORGANISATION (FPOS) 75 ►WORLD BANK 91

►BEEKEEPING DEVELOPMENT COMMITTEE REPORT 76 ►WTO AND ITS REFORMS 92

►NATIONAL BEE BOARD 76 ►SPECIAL AND DIFFERENTIAL PROVISIONS 93

►APIARY ON WHEELS 76 ►INFORMATION TECHNOLOGY AGREEMENT (ITA) 94

►HONEY MISSION 77 ►WTO’S AGREEMENT ON SUBSIDIES AND COUNTERVAILING

►ZERO BUDGET NATURAL FARMING 80 ►WORLD GOLD COUNCIL 98

►GREEN-AG PROJECT 80 ►WIPO 99

►LIVESTOCK CENSUS 81 ►WIPO TREATIES 99

►INDIA INNOVATION INDEX 104

101 ►SARAL: STATE ROOFTOP SOLAR ATTRACTIVENESS INDEX

PRELIMS COMPASS 2020 BOOKLET ON BUDGET AND ECONOMIC SURVEY

►FUNCTIONS OF MONEY ►BEHAVIOUR OF MONEY

►MONEY CIRCULATION Increase in money supply → More money in circulation → People

3. Foreign Banks: Banks, registered and headquartered in a Applicable

Infrastructure Finance Company • Cannot issue loans or credit cards.

• The Insurance Companies are regulated by IRDA • Reserve Requirements

►DEVELOPMENT BANKS IN INDIA ► LAND DEVELOPMENT BANKS