Reduction of poverty,increase in income,indian companies abroad

Challenges:-

• Reducing job elasticity or jobless growth

• Neglecting agri + mncs so rural urban
• Skipped manufacturing:-service sector no employment potential
• FDI in consumer goods>no infra
• Financial market:-still bond market not developed
• State held back from human resource dev
• Increasing inequality

POST COVID:-
POVERTY ALLEVIATION SCHMES:-

Way forward:-

• Participation of local self govt

• Effective distribution of wealth
• Land distribution or reforms

INFLATION:-CPI-C-reached 6.6% in 2020-21(apr-dec) mainly food (higher urban than rural)

Inflation issues:-
Depreciation of Rupees:oil import don’t miss that

HOUSING:-

Issues:-

• Finance
• Multi level approval in municipality
• Land banks-
• Conventional construction >tech like pre fabricated and pre engineered materials
• Insufficient trained masons
• ULBs capacity constraint to formulate and design mass housing projects

Way forward:-encourage PPP through swiss challenge method,finance,skills,tech

FINANCIAL INCLUSION:-

SEVEN YEARS OF PRADHAN MANTRI JAN DHAN YOJANA:-

Impact:-

• Prevent Leakage:Whether it is DBTs, COVID-19 financial assistance, PM-KISAN, MGNREGA

• Financial inclusion:-o provide every adult with a bank account,
• Formalization of the financial system-an avenue to remit money to their families in villages besides
taking them out of the clutches of the usurious money lenders.

Challenges faced in PMJDY:-

• Infrastructural Issues:Connectivity(NE,J&K,bihar)+Technological issues:

• Keeping the accounts ‘LIVE’:financially unsustainable to run-bank spend 150rs per acc
• o A survey conducted by Visa reveals that 65 percent of Indians lack financial literacy.
• Duplication of Accounts:-multiple accounts in different banks using diff identity>no database
WAY FORWARD:-

• Create Database:
• Model of credit history:-building credit models using artificial intelligence techniques to promote
digitalpayments

LIQUIDITY TRAP
Why in news?
Recently, the IMF economist Gita Gopinath stated that the global economy may be heading towards
a liquiditytrap.

A liquidity trap is a contradictory economicsituation in which interest rates are very low and
savings rates are high, rendering monetary policyineffective. It leads to a scenario where any
additional money supply that is generated in theeconomy get channeled towards savings rather
than investment thus rendering the economy toremain at same liquidity level

Why?

• Very low interest rates of advanced economies

• Global demand still sluggish:
• Threat of a potential currency warDue to decrease in interest rates
• developing world:Peru and Chile havealmost brought the borrowing costs to zero

• Avg farm size=1.15ha(census-2011)

• LESS THAN 10% LAND UNDER NON AGRI USES

LAND RECORD DIGITISATION:-

• land-related disputes in India account for 60-70% of all civil litigation+pendency

• States including Karnataka, Rajasthan, Kerala UP,Gujarat, Madhya Pradesh, Andhra Pradesh,
andTelangana have fully digitised their landrecord, enabling banks to create online
bank charge on land records that helpsin better credit delivery.
• Benefits:-reduce conflict,fast track litigation,better credit for farmers,speed up land
acquisition,HELP LAND BOARDS,less fraud:multiple land owners

Efforts:-

• Digital India Land RecordsModernisation Programme(DILRMP)

• to assess the states and union performance-NCAER Land Records and Services Index (N-
LRSI)
• Unique Land Parcel Identification Number (ULPIN) scheme:14-digit Alpha–Numeric Unique
IDfor each land parcel.
• (SVAMITVA) Scheme:for unmapped in rural inhabited(aabadi) areas using drone technolog

Challenges faced in Digitization of Land Records:-

• legal framework in India does not provide for guaranteed ownership

• lack of skilled manpower in land record departments in states
• Poor synergy across land record departments: Revenue department vs survey and settlement
department vs registration department,
• absence of data privacy laws
• digital divide

Way Forward:-

• tech:-geographical information system

• Digital record departmentoutsourced to third parties
• Periodic surveys:
• Conclusive land titles:moving from a PRESUMPTIVE TO CONCLUSIVE titling system

LAND BANKS:-

DIPAM has finalised the structure of the Land BankCompany that will be tasked with selling land
parcels owned by government departments and public sectorcompanies.

Benefits of a land Bank:-

• Land use efficiency:notified SEZs, which has about 52% of vacant land.+govt lands
• Boosts Investment:
• EODB:Tata Motors’ project in Singur (West Bengal) got cancelled due to land issues
• decreasing the corporate bankruptcy.
• reduced burden on judiciary

issues:-

• State governments are rushing:even pvt land so loss of rights

• In FCA 1980>there is no provision to obtain forest clearance for a ‘land bank’ under the Act
• One-time solution:continually finding new vacant lands isdifficult. Moreover, some projects
require lands in particular areas

Way ahead:-
URBAN PLANNING:-

• Multiple authorities
• Lack of pvt sector(more public+pvt involvement)+lack of master plan
• Don’t take disaster resilience-conduct hazard mapping of dist
• Human resource:-shortage of urban planners

STEPS for urban:-smart cities

• PMAY>Affordable Rental Housing Complexes (ARHCs) for urban migrants/ poor

• AMRUT:-water tap,sewer.LED
• SCM:-70 Smart cities have developed andoperationalized their Integrated Command and
Control Centres (ICCCs)
• Climate Smart Cities Assessment Framework (CSCAF) 2.0
• TULIP (The Urban Learning Internship Program) Report
• Smart Cities Mission 2.0 website has been redesigned to serve as a single stop for all Smart
Citiesinitiatives.
• Smart Code Platform:repository of open-sourcecode for various solutions and applications for
urban governance

NATIONAL URBAN DIGITAL MISSION:-(MoHUA) along with(MeitY)to improve urban

connectivity thatwill connect nearly 2,535 cities.NUDM aims to build theshared digitalinfrastructure
for urbanIndia, working across thethree pillars of people,process(Improve
governance), and platform.

It will institutionalize a citizen-centric and ecosystem-driven approach to urban governance and

servicedelivery in cities by 2022 and across all cities and towns in India by 2024

Objectives of NUDM:
• To catalyse an urban national open digital ecosystem (u-NODE) that leverages NUDM build new
platforms, solutions, and innovations.
• To create open standards and enforce the adoption of open standards by all national digital urban
stakeholders.
• To establish registries at appropriate levels to create single source of truth in respect of urban
assets,service delivery, urban data, and actors.
33
• To promote the development of nationally scalable application systems with a special focus on
achieving the Sustainable Development Goals (SDGs) for urban.
• To adopt the best principles of cooperative federalism while working with the States, Union
Territories and ULBs for the realization of the vision.
• To provide for enhancing the efficiency and effectiveness of governance at all levels

FISCAL POLICY AND RELATED NEWS:-

FD=9.3% for 20-21

FIFTEENTH FINANCE COMMISSION:-

How the Terms of Reference (ToR) of Fifteenth FC were different from previous commissions?

• Fiscal Consolidation Roadmap

• evaluate the impact of the GST
• Measurable Performance Incentives for states and LBs
• Using 2011 population against 1971 population data
• Analyzing the possibility of creation of a non-lapsable defense fund
• Reviewing the present arrangements on financing Disaster Management initiatives

What are the recommendations given by the Fifteenth FC Report for 2021-26 period?:-

• Vertical Devolution-41%
• Horizontal Devolution-based on need of states, equity among states and performance of states.

Fiscal Management and Consolidation Roadmap:-

• Extra annual borrowing worth 0.5% ofGSDP will be allowed to states duringfirst four years (2021-25)
uponundertaking POWER SECTOR REFORMS
• It recommended forming a highpowered inter-governmental groupto: (i) review the Fiscal
Responsibilityand Budget Management Act (FRBM),(ii) recommend a new FRBM
framework for centre as well as statesand oversee its implementation.
• GST:-inverted duty structure+ REVENUE NEUTRALITY OF GST
 • INDEPENDENT FISCAL COUNCIL should be established with powers to assess records from the
Centre as well as states.
Otherrecommendations:-
• DEFENCE MODERNISATION FUND-Non lapsable
• States to spend 8% of gdp on health with PHC 2/3rd
• to phase out CSS

ISSUES WITH STATE FINANCE:-

• Shortfall in tax collections by union
• Lower gst collection by centre
• Lowering Share of States in divisible pool:cess& surcharge=36.6% in FY19 to 32.4% in FY20
• Increased reliance on borrowing
• Populism
• Deteriorating financial situation of discoms: More than 60% of the total outstanding guarantees
given bystate governments is for power sector companies
• Shortfall in GST compensation cess

Steps taken to improve State Finance in the wake of COVID-19:-

• Raised Borrowing Limits: to 5% of gsdp
• RBI measures:certain relaxations on Overdraft (OD) facilities
• The Central government has released around Rs. 80,000 crore to the States under National
Health Mission (NHM) as grants.

Way forward:-
• 15th finance commission:-It recommended that both the central and state governments
should make full disclosure of extrabudgetary borrowings and these liabilities should be
clearly identified and eliminated in a time-bound
manner.o The Commission recommended broadeningthe tax base, streamlining tax rates,
and increasingcapacity and expertise of tax administration in all tiers of the government.
• Better service charge/fee-like discoms,property tax,populism
• Discoms privatisation
FOUR YEARS OF GST:-

Achievements of GST

• Widening of India’s tax base: Almost doubled

• Increase in GST revenue collection:The overall revenue collection in FY 2019-
20 soared by 42% in comparison to FY 2016-17.
• Ease of compliance:reduced number of indirect tax
• E WAY BILL>saved over 50% of logisticseffort and transit time
• Reduced transaction costs: By eliminating 2% on interstate sales tax
• Creates parity in service and manufacturing sector
• Regulation of unorganized sector

Challenges:-

• Overestimation of GST collection:

• Complex tax slabs:-frequent switching of items between them leads to
• Ambiguous and conflicting AAR judgmentsacross different State+ more than 80% of rulings,
since the establishment of the AARs, have been revenue biased, leading todisgruntled taxpayers.
• Tax evasion and tax fraud:fraudulent invoices, fake e-way
• GST council is reluctant to increase commodities under GST, especially fuel and alcohol.
• Concerns over GST shortfall and compensation to states
• Delay in reforms:-reforms related to revision of tax slabs, robust compliance regime, etc

Way Forward:-Simpler tax structure, like using the three tax slab structure
• we have a GST just for returning IGST
• widening of tax base by including electricity, petrol, diesel, real estate, or even agriculture
• Increasing transparency in areas like working of GSTCouncil,
• Cess issue

DIRECT TAX:-

GLOBAL MINIMUM CORPORATE TAX RATE:-(G7)

About Global Minimum Corporate Tax

• Global Minimum Corporate Tax is an additional tax imposed on large multinational companies
(MNCs),potentially forcing them to pay taxes to countries based on where their goods or services
are sold,regardless of whether they have a physical presence in that nation.

Need for a Global Minimum Corporate Tax Rate:-

• ending a decades-long "race to the bottom

 • Check on tax havens:discourage multinationals from shiftingprofits - and tax revenues - to
low-tax countries
• Additional tax revenue to fight pandemic:governments lose $245 billion annually
• Boost to global economy:-now instead of providing low tax to attract companies countries
wud invest in educating and training their work forces and investing in research and
development and infrastructure.
• Allow taxing global digital MNC

Challenges:-

• Consensus on tax rate: a minimum tax of 15% may not raise substantial revenues and there is a
possibility that other countries may want a higher minimum global tax rate.
• Impact on socio-economic development in developing/ least developed countries: MNCs are a
source of foreign direct investment (by lowering tax rates)
• Right to sovereignty:-Ireland, which has a tax rate of 12.5 percent, has come out against the
global minimum tax
• Silent on lack of clarification on the issue of digital taxation

Possible Impact on India

• India is likely to benefit as the effective domestic tax rateis above the threshold, and the country would
continue toattract investment.
o In 2019, India announced a sharp cut in corporatetaxes for domestic companies to 22% and for new
domestic manufacturing companies to 15%.
o The cuts effectively brought India’s headlinecorporate tax rate broadly at par with the average
23% rate in Asian countries.
• In respect of outbound investments, it will prevent baseerosion of tax in the country as the government will
beable to claw back any shortfall in tax paid below 15% by anoverseas business owned by an Indian resident

Tax loss incurred by india>$10.31 billion every year due to global tax abuse.

FINANCIAL MOBILIZATION FROM NON-TAX SOURCES:-

SOCIAL STOCK EXCHANGE:-

SSE functions as a regulated funding platform to allow For-Profit Social Enterprises (FPEs) and not-
forprofit organisations (NPO) with a social purpose, to raise funds.

(· India, a home to more than 2 million social enterprises (non-profits, for-profits and hybrid models·
inclusive growth.It make the exercise much cheaper for them by standardisation of the process and
does away with the need to engage and negotiate directlyApart from equity capital, social
enterprises need debt· Rewarding investors by issuing certificates, like in the case of income tax
return filing etc can add more value to their financial returns.)

Why needed?
• will ensure larger visibility of investor and investees.
• Transparency and accountability: Because of rigorous due-diligence and performance metrics
that an SSEwould be installing for background checks for investors.
• Performance- based Philanthropy:would be closelymonitored
• Reduced burden on government:development goals.

Challenges:-
• High transaction cost due to monitoring,diligence
• How to evaluate impact>right framework
• Definition of social entreprise
• -No proper records: Most NGOs are not good at keeping records and maintaining a
paper trail. This could affect channelisation and tracking of funds particularly in case
of smaller players.
• Limited to registered companies only:- other unregistered entities doing good work in
health, education and policy advocacy.
• Accreditation: The biggest issue is still accreditation at all levels

Way forward:-
• Common minimum standards for reporting on social impact
• Tax benefits: Need to synchronise tax laws relating to social sector
• Rigorous regulatory scrutiny:To ensure that only bonafide FPEs/NPO are able to associate with
SSE, SEBIshould work out a mechanism for assessing credentials of the social impact dimensions
self-declared bysuch organisations.
• Awareness campaigns: for social enterprises to list on the SSE

INFLATION TARGETING:-

CHALLENGES:-

• Narrow objective: Some experts argue that RBI has objectives to take care of other
parameters likeeconomic growth, stable exchange rate and financial stability, and cannot
restrict itself to the singleobjective of inflation
• Issue of accuracy and limited availability of data:indicators of financial stability like
estimates of foreign investment etc
 • IT Designed for demand driven inflation systems:whereas in India, it is the supply side
factors whichare causing inflation.

What can be done to overcome these challenges and further strengthen the IT regime?

• Coordination between Monetary Policy and Fiscal Policy:A government non-voting member is a
way to coordinate and yet not interfere like in UK.
• Improving data collection and analysis framework: Reforming the data collection
methodologies andframework on lines of draft National Statistical Commission Bill, 2019 can be
envisaged.

INDIA’S FOREX RESERVES:-

Why in News? Recently, Indian Foreign Exchange reserves hit new lifetime high of around US$ 612
billion, making India the fourth largest Forex reserve holder after China, Japan, and Switzerland.

Some of the major reasons for this sudden rise includes:

• o High Foreign Capital Flow in terms of Rising FDI & FPI due to its large market size, growing
startups, corporate tax cut, higher returns etc
• o Reduced Capital outflow due to reduced consumptions under Covid-19 and curbs on foreign
travel. E.g., In 2020-21, India’s BoP was at record surplus of $87 billion.
• Record remittances from its Diaspora in last two years (above US$80billion),
• Massive Liquidity injection in USA s against economic impact of Covid-19 pandemic. E.g. US$2.3
trillion

Arguments for maintaining High Forex Reserves:-

• Reduced risk from External Vulnerabilities:- Volatile Oil Prices,,outflow of hot money
• Exchange Rate Management:- high Forex allows occasional RBI intervention
• Generate Investors Confidence:- Helping to finance India’s Current Account Deficit • Minimize
impact of just above Junk Category rating and a net international investment position of -12.9% of
GDP
• Emerge as Regional Leader:- India started currency swap mechanism for SAARC
• Overcome domestic financial system crisis like High NPAs, o IL&FS payment default, risks of AGR
• Cushion against monetary stimulus withdrawal:- In 2013, Fed tapering created external sector crisis
with over 10% currency fluctuation and only Japan as help via currency swap

Arguments against maintaining High Forex Reserves:-

• Low returns on Forex reserves- usually around 1% or less due to near zero interest rates in
advanced economies
• Large infrastructure financing needs
 • High Forex reserves shows lack of confidence from government on: Resilience of its economy;
Measures to raise capital (e.g. Disinvestments) or exports (Atmanirbhar Bharat); and Soundness
of macroeconomic management.

REGULATION OF NBFCS:-increased regulation by RBI

A NBFC is a company registered under the Companies Act, 1956 engaged in the business of loans and
advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local
authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit
business etc. • Status: In the recent times, the NBFC sector has seen tremendous growth

Significance of NBFCs:- role in the banking sector by increasing the penetration of financial products to
unbanked areas, providing innovative products for both rural and urban customers, catering to the
need of infrastructure lending and to other areas where long term financing is needed.

. ASSET QUALITY AND RESTRUCTURING:-

• 9/10th of NPAs are advanced from PSBs

• Sectoral-1st infrastructure 2nd metals 3rd textiles sector

Challenges:-

NPA:-
WHAT TO DO

INSOLVENCY AND BANKRUPTCY CODE (IBC):-completed 5 years

Achievements
• Reducing the bankruptcy resolution time:- from 4.3 years in 2017 to 1.6 years in 2020
• Behavioural change:- forcing many corporate defaulters to pay off their debt
• Improvement in India’s ‘EASE OF DOING BUSINESS’ and ‘GETTING CREDIT’ RANK
• rescued 348 corporate debtors through resolution plans
• Continuous updation of the Code: IBC has undergone six amendment
• Resolution of cases around 60%

Challenges that remain:-

• Low recovery rates: cumulative haircut of 61.2 per
• 71% of these cases have been pending for more than 180 days:- Delays in admission of cases in
NCLT: Delays due to unsolicited, late bids: Delays due to appeals:
• More than 50% of the sanctioned strength in NCLT is lying vacant
• Need for strengthening homebuyer rights:
• Lack of flexibility: The resolution professional does not currently have the flexibility with in the IBC
to dispose of the corporate defaulter across multiple bidders.
• Presence of multiple IPAs for regulating IPs: so appropriate standards for selection process and
conduct of the Resolution Professionals.
• Absence of provisions for cross-border insolvency resolutions
• Lack of uniformity in decision making process of the CoC.
• Need for data relating to IBC cases in granular form for researchers and analysts.
(
newspaper:-
• there are not many strategic investors>eg:- But today in power sector
• Section 29A that prevents promoters, in a lot of cases, from submitting resolution plans. Should
restrict valid ppl like willful promoters only(so ease some restrictions
• One basic difference between us and other countries is that our companies are mainly
promoter-owned and owners run the companies. In most of the developed countries,
companies are run by professionals and the ownership is widely spread> that creates a problem
in taking over the asset
• Binani Cement ot almost more than 100% because the asset was good.)
Way forward: Recommendations for reforms:-

• Setting benchmark for the quantum of haircuts allowed as per global standards.
• Formulating a professional code for the CoC, who take over a company in distress
• A single professional self-regulatory body like ICAI y be established to oversee and regulate the
functioning of RPs
• Adoption of UNCITRAL (United Nations Commission on International Trade Law) Model Law on
Cross border insolvency:
• National Law Schools should be involved in the NCLT system so that they can conduct academic
research, develop suitable case-based training materials

PRE-PACKAGED INSOLVENCY RESOLUTION involving MSMEs

NATIONAL ASSET RECONSTRUCTION CO. LTD. (NARCL):-bad bank

facilitate bad loan resolution for banks by buying the debtors of the bank at a mutually agreed value
and attempts to recover the debts or associated securities by itself; making its own profit by selling the
loan at a price higher than what it paid to acquire the loan. • In India, ARCs are incorporated under the
Companies Act and registered with RBI under section 3 of the SARFAESI act 2002.

Unrealized Potential: Despite different ways to solve problems or flexibilities in working, the potential
of ARCs is not fully realized in India due to

• lack of funding,
• limited number of qualified professionals
• Legal issues:- Regulatory ambiguity in functioning of ARCs. For ex: (IBC) has provisions for
submission of ‘resolution plans’ by financial entities (including an ARC), the SARFAESI Act does
not explicitly permit ARCs to ‘invest’ in or acquire equity in firms

HOW DIFF FROM ABOVE?

• With government-backed guarantees (for 5 years),-so assets transfer can happen freely
• Swiss challenge
• Designed on international experience like south korea etc

Potential benefits of NARCL:-

• existing ARCs not adequately capitalized to deal with huge NPA problem of banks
• NARCL can help banks in reducing NPAs, so bank > focus on normal banking functions,+ economic
recovery
• Opportunities for other ARCs at MSME’s level: NARCL will reconstruct assets only >500crore
• addressing the problem of contradictory views (lack of consensus) among different lenders
• Promote Competition: Assets allocated to NARCL will go through ‘Swiss challenge’,
Challenges with NARCL:-

• moral hazard of reckless lending

• Qualified Professionals: India lacks adequately trained manpower.
• Mere Shift of Bad Asset: With PSBs as stakeholders and at top positions, NARCL risks the mere shift
of bad loans from government owned banks book to government backed NARCL.

Way Forward:-
• Amending SARFAESI Act to close regulatory gap between it and IBC.
• Setting up of a Distressed Loan Sales Trading Platform for receiving bids for NPAs for better price
discovery.
• bringing more specialists:- Learning from international experiences like Malaysia post Asian crisis to
address crucial design imperatives like ARC manned by debt management professionals+ Fair price
for asset purchases:not too high not too low .

Challenges in digital payment ecosystem:-

• Security: Digital transactions are vulnerable to cybercrimes and risks for data theft
• Digital illiteracy
• Transaction charges for consumers and MDR for retailers
• Lack of integration of online payment systems run the across hardware and software platforms
• Infrastructure: Small Service providers don’t have enough resources to invest in POS machines

Further initiatives required to improve digital payments ecosystem:-

• Standardization:- make payments uniform across all kinds of browsers, devices, and gateways
• Awareness:- educate their customers on the security advantages
• Internet and mobile phone accessibility
• Incentives and rewards:

Various initiatives taken to promote digital payments:-

• Rationalisation of Merchant Discount Rate (MDR)
• Payments Infrastructure Development Fund (PIDF) by RBI for POS
• DigiShala: Free Doordarshan DTH educational channel for creating awareness
• Vittiya Saksharta Abhiyan:
• E-RUPI:- person-specific and purpose-specific payments system.
• Card Tokenization:

What are the challenges faced by the digital lending ecosystem in India?
• Unauthorised digital lenders:
• over-indebtedness of consumers and NPA of lenders? Why? simultaneous loans due to ease of
access, limited or no evaluation of capacity to repay,
• Unauthorised digital lending charging High interest rates+ high-handed recovery methods.
• Data privacy

DIGITAL CURRENCY:- china

What is a Digital currency? CHINA>In the broadest sense, a digital currency is a form of currency that is
available only in digital or electronic form, and not in physical form
• without the need of any intermediaries,
• low-cost.
• settle directly in central bank money (rather than bank deposits) significantly reduces the
concentration of liquidity and credit risk in payment systems.
• Possibility of a better directed monetary or fiscal policy: For instance, these currencies can
enable direct handouts of money that expire if not used by a particular date and can make it
easier for governments to track financial transactions to stamp out tax evasion and crackdown
on dissidents.
Challenges:-
• Privacy issue: greater insight into how people spend their money, this data can potentially affect
the privacy of the users.
• Cybersecurity threats:
• Need for large-scale digital infrastructure: Floating a digital currency requires pre-requisites such
as large scale internet penetration, reliable network infrastructure and handling capacity for
large scale data such as data centres among others.
(MCA) has made amendments to rules in the Companies Act, mandating firms to disclose their
investments in cryptocurrencies)

NEO-BANK AND ITS MECHANISM

Neo-bank is a term for ‘fintech firms’ with only a digital presence and no physical branches. They
provide banking services use such as savings accounts, instant loans, credit cards, mutual funds, and
fixed deposits. They do this via tie-ups with Reserve Bank of India (RBI)-licensed banks.
Usually, they tie-ups are with small finance banks or small scheduled commercial banks. There is no such
category of banks under the RBI rules

ACCOUNT AGGREGATOR:- launched

• An account aggregator is a financial entity, which obtains and consolidates all the financial data of an
individual, and presents the same in a manner that allows the reader to easily understand and analyse
the different financial holdings of a person.

TRADE AND INVESTMENT:-

EXPORTS:-

• India’s share in world exports has increased from 0.6% in 1991 to 1.7% in 2018 but remains
paltry compared with China’s ~13% and US’ ~9%.
• India ranked 18th on the list of the top exporting countries worldwide in 2019.
• As percentage of GDP, India’s exports are about 18 per cent of GDP.
• India’s services trade has been a major driver of exports

Reasons for India’s Underperformance in Exports:-

DETERMINANTS:-
-High Cost of Domestic Capital: The real policy rates over the last years the highest ever
- MARKET DRIVEN EXCHANGE RATE
-inverted duty structure-survey
-a low level of service link costs i.e. the costs related to transportation, communication-survey
-Labour Laws and Firm Size: hinder expansion in firm size-survey
-have Protectionist policies
-corporate tax reduced good
-· Awareness: A National Trade Facilitation Action Plan is in operation-but implementation issue
-unlike china korea where exports has major share of leading giant companies,india has small msmes
dominating exports.(SCALE ECONOMY ISSUE)
-Limited diversification of India’s export basket: The top 10 principal exports in terms of commodity
groups accounts for as much as 78 per cent of total merchandise exports.
-Regional Disparities: 70 per cent of India’s export has been dominated by five states?states don’t
promote export + the scarcity of research and quality check institutes.
-losing advantage:- India has seen its share of world trade in textiles, garments and footwear decline in
recent years while Bangladesh has almost caught up to India, and Vietnam has well overtaken it.
- Low Level of Participation in Global Value Chains (GVCs):- India is the only one with trade deficit
in NP+ NP exports accounts for 10% only(china ,japan etc 50%) in India's export basket
- indias free trade >our exporter dont benefit (japan,south korea)>dont make use of tariff but care about
non tarif

Way forward:-
• Economic survey :-so we need to integrate in GVC and upgrade to Network Products >initially :-
integrating “Assemble in India for the world” into Make in India to gradually hugh skilled NP
• Need for diversification of India’s export basket:- For instance, India's textile portfolio can be
diversified to include man-made fiber and technical textile
• The new FTP(foreign trade policy) should explore the under-tapped markets like Africa by reviving
ties with them
• Increasing Competitiveness of Made in India Products:-logistics,inverted duty,EODB more
FDI, (R&D) to improve quality of products

(INDIA VS CHINA
>Low market penetration in high income countries
>· Diversification of products VS Specialization of products)
INDIA & WTO

AGREEMENT ON AGRICULTURE:-
• India is not satisfied with the peace clause of above 10% subsidies+ want a permanent solution to
the dispute over public stockholding of foodgrains + Product coverage requires rationalisation by
including primary agricultural commodities such as rubber, primary forest produce, jute, coir,
abaca and sisal etc.
• High farm subsidies provided by developed countries> All forms of export subsidisation including
export credit, guarantees, price discounts and insurance programmes etc. in developed countries
should be added to the export subsidies.
• Market Access:- Developed country members should not be allowed to use overly stringent SPS &
TBT measures

INDIA & FTAS

FDI:-
AGRI CULTURE:-

40-45% mechanisation vs USA (95 per cent), Brazil (75 per cent) and China (57 per cent).

AGRI INPUT:-

Issue:-main quality seed material+ community reluctance for land mapping ,soil due to fertiliser,low
farm mechanisation