(BS) Economics by BK Singh Sir (BS)

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022
 (R.E. + C.E)– (Non Debt CR + T.R )

 (BS)ECONOMICS B.K SINGH  Introduced on 1st April 1997 on recommendation of
 SOURCES Sukhmoi Chakravarti Committee. It has brought more
transparency and accountability in budget making
 Indian economic development +2 ncert process
 Introductory macroeconomics +2 Ncert
 Sanjeev verma at the place of ncert
3. Primary deficit
 F.D. (Fiscal deficit) – Interest payment
 Choose 1 only between ncert and Sanjeev verma
 Class notes are must 4. Budget deficit
 Yellow book is must  {(Total Expenditure) T.E. – T.R. (Total Receipts) }
 (Revenue Exp.) R.E. + CE (Capital Exp.) – RR (Revenue
Sir Mobile Number 9015322506
receipt) + CR (Capital receipt)
 WHAT WE READ IN BK SINGH’S CLASS 5. Effective revenue deficit 2012
 FISCAL POLICY-  {R.D ̅ Grants to States for capital formation}
 1 to 3 are announced by government
 Fiscal responsibility budget management Act
(FRBMAct 2003 old , 2016 New ) talks about revenue
and fiscal deficit
 Before fiscal deficit budget deficit concept was in
operation. If the budget deficit was more than zero
than it was being financed by borrowing from reserve
bank or by reducing cash balances of government
with RBI. That why it was called as Monetized Deficit
because new currency equals to deficit would come
in the economy.
 FINANCE COMMISSION
 We talk about why finance commission always try to
reduce the horizontal and vertical imbalance
 INFRASTRUCTURE
 Economic infrastructure:- electricity , transportation,
communication
 Societal Infrastructure:- Education, Health , Housing
 INCLUSIVE GROWTH
 Physical Infrastructure development
 Human development
 Growth & development
 Sustainable Inclusive Growth
 Sustainable development
 STUDY OF INDEX
 HDI:- IHDI 2010 + PHDI 2020
 GII
 WHI
 GROWTH-INFLATION CONFLICT
 Demand pull inflation
 Cost push inflation
 EMPLOYMENT AND UNEMPLOYMENT
1. Cyclic Un employment
2. Structural Unemployment
3. Natural rate unemployment
4. Voluntary unemployment
5. In-voluntary unemployment
 BASIC ABOUT DEFICITS:-

1. Revenue-deficit:-
 {Revenue Expenditure– Revenue receipts}
2. Fiscal deficit1997:-
 TE – TR
NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 1



Measurement of unemployment
UPS-usual principal status TOPIC:- THE RECEIPTS
 CWS-current weekly status
 CDS-current daily status A. REVENUE RECEIPTS :-
 Unemployment before 2000 & after  Those receipts which are not created by Selling
 Labour laws public assets. Apart from this they do not
 Employment line concept given by mc-Kinsey global Increase Public liabilities, It can be divided into
institute 2013 two parts:-
 NOTE:- These topics we will Cover Now
a) Tax Revenues (Direct taxes)
 SOME FACTS b) Non-tax Revenues
 Fiscal policy announced by GOI and State Govt
at state level
1. TAX REVENUES:-
 Monetary Policy by the RBI means Money + 1) DIRECT TAXES: Paid by same person on whom
Banking it is Imposed/ levied. It is non-transferable and
 Fiscal Policy 4 feb - Budget compulsory by nature because its imposition
does not have any condition
 Example: Income Tax
 Old Slabs –
 2.5 lakh – No tax
 More than 2.5 – 5 L – 5%
 More than 5 – 10 L – 20%
 10 L – 30
 SOME EXAMPLES OF DIRECT TAXES:-

a) STT- SECURITY TRANSACTION TAX:-
 Imposed on purchasing and selling of Securities.
 It reduces the betting in Share Market.
b) SCGT – SHORT TERM CAPITAL GAINS TAX,
 Corporate Tax Wealth Tax (1957) (scrapped in
2017),
c) MAT (MINIMUM ALTERNATE TAX):-
 Imposed on profit of Small Companies and those
companies who do not pay corporate tax and
hide it on various exemptions. It is more in news
due to retrospective tax. Under it taxes are
imposed on previous years are carry forward.
d) CGT:-CAPITAL GAINS TAX:-
 It is a tax imposed on the profit obtain by Selling
of properties. Capital gains tax is imposed on
these types of benefits although it is mostly
imposed on profit gains through selling of
equities.
 In India for the capital gains from short term
equities STCG is imposed with 15% rate which in
the annual budget of 2018-19 government has
imposed 10% LTCG for the equities held for
more than 1 year and gain must be 1 lakh or
more
 SOME CONCEPTS RELATED TO DIRECT TAX
 GMCT-global minimum corporate tax
 GAAR- General Anti-avoidance Rule
 TDS- Tax Deducted at Source
 TCS- Tax Collected at Source
2) IN-DIRECT TAX
 It is not compulsory because paid only when
consumed
 It is transferable

 Imposed on one and paid by another (end  It may create liabilities and it may also be
consumer). It is imposed on both goods and obtained through selling of public properties.
services on their transactions. It is like  Disinvestment:
production tax.  Done by selling of shares of Public Sector
 It is notable that if an item has less elasticity Undertaking.
then despite having the high price its demand
would not be affected much. B. CAPITAL RECEIPTS:
 If the item is luxurious, then it is highly elastic  It may create liabilities and it may also be
which means demand fluctuates. If there is obtained through selling of public properties.
competitive environment then less tax would be  Disinvestment: Done by selling of shares of
forwarded. Public Sector Undertaking.
 E.g.: GST, Custom duty, Excise duty,  DIRECT TAXES ARE CONSIDER AS
Entertainment tax, Entry duty
BETTER THAN INDIRECT TAXES AS :-
 Custom Duty a) Direct taxes are progressive in nature which
 It is imposed on both Exportable and Importable
means it is more on higher income group people
Items.
while less on lower income group.
 According to WTO it is called as T.B. (Trade
b) While indirect taxes are regressive in nature. It
Barriers)
means its incidence is more on poor people and
 Excise Duty less on rich people.
 Imposed on production, It was imposed by c) Indirect taxes are attached with goods and
central government in terms of CEN VAT. Sales Services so it is purchased by both poor and rich.
Tax d) Direct taxes do not affect prices of goods and
 Imposed on Selling of Items by State Services, while indirect taxes do affect prices in
government. Under VAT it is called as SL VAT. the commodity. Which changes public choice
 Entry Tax which also affects the production structure.
 For the movement from one State to another, Which may disturb the ideal distribution of
one has to pay entry tax . resources and may pulls down GDP.
 Octroi Duty e) At the time of imposition of Direct tax it should
 Movement from one municipality to another always be checked that the rates should be
Municipality. payable by the people otherwise it will de-
 In Maharashtra it is called as LBT (Local body tax) motivate the people and which may force
although other states have already abolished it people to go for more rest, which can have the
 Dividend of PSU Transfer of profit by RBI, ONGC, following effects:
SBI. Etc f) Govt tax revenues decrease.
g) GDP may decrease
2. NON-TAX REVENUE
a) Fees, fines  TOPIC:- THE EXPENDITURES
b) Escheat:-If there is a death of the owner of a
property and the legal heir is minor, then govt 1. REVENUES EXPENDITURE:-
will take the control of the property and after  Those expenditures which do not create public
attaining the age of 18 years government hands assets and also do not decrease public liabilities
over the property to the legal heir and charge a) Developmental Revenue expenditure:-
some amount for this care taking work called as  Providing day to day services by the government
Escheat. in order to run the economy like health ,
c) Special Assessment:-It is imposed by the education services, transport services,
government on the people of a particular area communication services, irrigation , food control
for the developmental activities done by the services, research and development services.
government in that area. Example:- Toll Tax on  Export services, a host of services, which govt.
highway Provides in a day to day basis to industry ,
 Dividend of PSU agriculture, various other sectors
 Transfer of profit by RBI, ONGC, SBI. etc b) Non-developmental revenue expenditure:- It
 Revenue Receipts: comprises of the expenditure on defence , law
 Does not create liabilities also not obtained and order , interest payment, pensions, civil
through selling of public properties. administration, subsidies, grants to states etc.
 Capital Receipts:

2. CAPITAL EXPENDITURES B. DEMERITS OF DIRECT TAX
 These expenditures create public assets and also a) It appears burden on some because paid in lump
reduce public liabilities. sum amount
 Example:- Repayment of loans, construction of b) Tax evasion is possible means people hide their
public properties like Metro, National Highway, income while paying cash or doing transaction in
Airports
cash and do not involve in any bill or salary slip
 NOTE:- during transaction
 During 1987-88 there was a new classification of
c) Tax avoidance is also possible as people show
government expenditures:
a) Plan expenditure there income but avoid paying taxes through
b) None plan expenditure various loop holes in the tax structure
d) It may restrain investments in the equity
through capital gains tax
 Note- share market has 10% tax on gains so
people search other options to invest because
this tax discourage people to invest
THE INDIRECT TAX

A. MERITS OF INDIRECT TAX
a) It gives more tax revenue because all citizens pay this
tax
 Tax revenue= tax × quantity
 Before 1997 service sector was not under tax so
quantity was increased by bringing this under, people
feel less burden of it because it is paid in small
amounts over the year for example paying Indirect
Tax by purchasing biscuits
b) It is convenient to pay because attached with goods
and services tax
 Following Institution and Commissions have
suggested to Remove Difference between Plan B. DEMERITS OF INDIRECT TAX
and Non Plan Expenditure. a) It is an regressive tax means burden seems to be
 Rangarajan Committee on the analysis of more on poor than rich
classification of Public Expenditure. b) It makes prices of goods and services more expensive
 Bimal Jalan Commission on Efficiency in Public c) Government increases indirect tax to compensate
Expenditure 14th Finance Commission revenue shortages or shortfalls that occurs due to
 Planning Commission. reduction in a direct taxes
 After the formulation of Niti Ayog. The entire
work under plan expenditure is operated under  CLASSIFICATION OF TAXES
the finance ministry. 1. Direct tax and indirect tax
………1st class ended,2nd started……… 2. Progressive tax and regressive tax
3. Specific tax and Ad Valorem tax
THE DIRECT TAX:- A. SPECIFIC TAX
A. MERITS OF DIRECT TAX  It is imposed in lump sum amount not in percentage
a) It curbs the inflation because it reduces money
 Nothing to do with the prices of goods only
available in the hands of consumers  For example on purchasing a pencil of rs 10 sometimes you
b) It is equitable in nature because it is a progressive tax are giving two rupees as a specific tax so it is not in the
(means lower to poor and more on those who are form of percentage
capable)  So either prices 10 rupees or 100 rupees you have to pay
c) It reduces inequality by providing welfare schemes only to at additional to price as a specific tax on a single
like subsidies, old age pensions etc government pencil
collects SUR charges from super rich and distributes B. AD VALOREM TAX
among the poor in the form of welfare schemes
 It is levied in percentage on goods
 Tax amount changes with the change in price 2) Entire life you get one chance to switch to on
 For example 10% on petrol per litre is petrol is 100 slab either but service provides can shift to any
per litre then it taxes 10 rupees if a petrol is 200 per number of times
litre then a tax is 20 rupees as per 10% on petrol per
3) LTD. limited company- more than one owner
litre so it changes with the amount change
4) Corporate tax is a tax imposed on profit of the
 There are examples like VAT,GST
company for the old manufacturers it is imposed
 DIRECT TAX at 22% while for new manufacturers it is
 Personal tax imposed at the rate of 15%
OLD SLAB NEW SLAB 5) 2013 New company act comes states that if the
Up to 2.5 lakh not tax Up to 2.5 lakh not tax company is owned by one man then he only
2.5 lakh -5 lakh 5% tax 2.5 lakh - 5 lakh 5% tax
5 lakh to 10 lakh 20% 5L -7.5 lakh 10% tax
pays personal income tax however if a company
++ 10 lakh 30% tax 7.5 L -10 lakh 15% tax has many owners then they have to pay
10 L- 12.5 lakh 20% tax corporate profit tax and personal income tax of
12.5 L-15 lakh 25% tax the owners
++15 lakh 30% tax
6) MAT-minimum alternate tax at least 15% of
 If income is up to 500000 then there is tax rebate of
12500 - Under income tax Act 1961 section 87A
your profit it is to limit tax exemptions availed by
 But up to 5 lakh your full tax is rebated companies so that they pay at least a minimum
 But movement it crosses the 5 lakh you need to pay amount of income tax Act present it is 15%
from 2.5 lakh and even the 12500 rupees  TAX REVENUE CONTRIBUTION
 In old slabs under income tax Act 1961 section 80c-
1. GST 16%
LIC policy PF pension fund up to 10 lakh your whole
tax was rebated
2. Income tax and corporate tax both 15-15%
 But more than 10 lakh if in medical policy then it 3. Excise duty
25000 rebated under income tax Act 1961 section  GLOBAL MINIMUM CORPORATE TAX
80D
(GMCT)
 Understand by example
 It is to ensure minimum required tax amount
1) New slabs
 An outcome of G20 summit
 Ratified by OECD
 132 + Nations agreed
 It may stop BEPS
 1 globe one corporate tax
 BEPS- Base erosion and profit shifting- tax planning
strategies used by multinational companies
CAPITAL GAINS TAX

A. EQUITY
15% For Short term and 10% long term for 12
less than 12 months months and more
B. IMMOVABLE PROPORTION
According to Income Tax Flat 20% long term- 24
slabs Short term-less than months and more
24 months Example
Example Land= 1 cr
Land= 1 cr Sold= 1.5 cr
Sold= 1.5 cr Salary = 12 lakh
Salary = 12 lakh Gain = 50 lakh
Gain = 50 lakh Tax
Tax on = 62 lakh according Flat 20% = 50 lakh
to income tax slab 12lakh= according to
income tax slab

C. JEWELLERIES  May 2007 – Vodafone acquired 67% stake in
Hutchison Essar $ 11.2 billion.
According to Income Tax Flat 20% long term- 36
 Vodafone International hording bought the
slabs Short term-less than 36 months and more
months Example stake of Hutchison Telecommunications
Example Gold Purchased= 1 cr International Ltd. In Hutchison Essar.
Gold purchased= 1 cr Sold= 1.5 cr  Deal between companies based overseas:
Sold= 1.5 cr Salary = 12 lakh executed in Cayman Islands.
Salary = 12 lakh Gain = 50 lakh e) October 30, 2009 – Income tax department
Gain = 50 lakh
Tax served notice to Vodafone International
Flat 20% = 50 lakh Holdings for non-deduction of tax at source on
Tax on = 62 lakh according to
income tax slab
12lakh= according to the $ 11.2 billion transaction.
income tax slab f) October 30, 2010 – IT department ordered
Vodafone to furnish Rupees 11,218 crore under
A. SHORT TERM CAPITAL GAINS section 201 of IT Act.
TAX(STCGT) g) April 29, 2011 – Rupees 7, 900 cr. Penalty was
 15% on equity imposed. LITIGATION:
 September 8, 2010 – The Bombay High Court
B. LONG TERM CAPITAL GAINS upheld the tax-authorities decision.
TAX(LTCGT)  Department raised tax demand in the
 It is a tax levied on the long term investment in subsequent months.
equity on the gain exceeding Rs 1 lakh . it was  January 20, 2012 – Supreme Court set aside
introduced in 2018 before that there was no tax Bombay High Court decision, quash tax &
on long term gain for equities interest demand.
 10% now on equity  It (SC) said transaction was between two
Invested = 1 lac for equity Invested = 1 lac overseas entities and Indian tax authorities
Sold = 3lakh long term Sold = 1.5lakh had no territorial tax jurisdiction.
Time 14 months capital gain Time = 14 months h) Feb 17, 2012 – Government filed review
Gain = 3-1= 2lac text Gain = 1.5-1= 50000 petition.
In 2 lac gain 1 You can In 2 lac gain 1 lax has  March 20, 2012 – Supreme Court dismissed
lac has no tax apply same no tax so the review petition
so example on 50000is under 1 lac
Left = 2-1 = 1lac others acc.. gain tax exemption  THE RETROSPECTIVE AMENDMENT
Tax=10% Tax here is zero  2012 Indian Government amended the Income
Tax = 10,000 Tax act retrospectively.
 Section 119 of the Finance Act validations the
 RELATED CONCEPTS TO CAPITAL tax levied on Vodafone.
GAINS TAX:-  Government said the amendment was only a
1. RETROSPECTIVE TAX :- clarification to remove ambiguity and provide
certainty.
 one that is charged for transactions in the long
past. It can be a new or additional charge on a) Tax Demand Back on Table
transactions done in the past.  January 3, 2013 – IT department raised a fresh
demand for rupees 11, 218crore.
 ਿਜਦਾ ਅੱਜ ਲਾਗੂ ਕੀ ਮਾਸਕ ਨਾ ਲਾਉਣ ਤੇ 500
b) Arbitration
ਜੁ ਰਮਾਨਾ ਅੱਜ ਤ 300 ਿਦਨਾਂ ਬਾਅਦ ਤੁ ਸੀ ਫੜੇ ਜਾਣੇ ਹੋ
 April 2014 – Vodafone saved arbitration notices
ਤਾਂ ਦੇਿਖਆ ਜਾਓ ਿਪਛਲੇ ਿਕੰਨੇ ਿਦੰਨੇ ਤਾਂ 500× 300 ਪੈਸੇ under the India-Netherlands treaty.
ਦੇਣੇ ਪੈਣਗੇ  New government did not roll back demand but
 Scrapped last year August 2021
said no fresh action under retrospective tax.
HAND-OUT MATERIAL OF RETROSPECTIVE TAX  A fresh demand was issued in Feb 12, 2016
a) It allows the government to tax certain products, rupees 22,100 crore tax.
deals or transactions that happened behind the  September 25, 2020 – The Hague based
date on which the law is passed. arbitration court ruled in favour of Vodafone.
b) On August 9, the Rajya Sabha approved the  December 21, 2020 – India challenges
Taxation Laws (Amendment) Bill 2020. The arbitration award at Singapore.
decision will help the center project India as  CAIRN ENERGY CASE
investor friendly nation. 1) In 2006 – Cairn UK had transferred its shares in
c) It was introduced by P. Mukherjee in 2012. Cairn India holding to Cairn India.
d) Vodafone Case –  In 2011, Cairn energy sold nearly its entire
holding in the India unit to Vedanta resources, critical analysis of GST in India and also the role of
owned by Anil Agarwal (except 9.8% share). GST Council as a fiscal Council.
2) In 2014, tax, tax department issued a tax notice Q2. Do you think that retrospective tax was out-
to Cairn Energy and sought to levy CGT on the dated in the present scenario. In the light of
2006 transactions armed with a retrospective Vodafone and Cairn energy case discuss the adverse
amendment enacted in 2012. impact of this tax on the Indian Economy.
 NOTE: The change in the tax provision meant Q3. DTAA and Round Tripping help in avoiding
that all transactions over the previous five money laundering in India. Discuss
decades could be brought under the tax net. Q4. BEPS is an international collaboration to end tax
3) This Act (2012) brought nearly a dozen avoidance. Explain.
transactions under the IT departments taxable
net.
2. ROUND TRIPPING 2013:-
 a process in which the money returns back to
4) Cairn India had a residual 9.8% stake in the
Indian Unit after its sale to Vedanta. the same place from where it had originated.
 In 2014, the IT department went on to freeze the
This is basically done to avoid paying taxes and
remaining shares of Cairn Energy as part of its escaping other legal essentialities.
efforts to recover the tax dues.  DTAA- Double Tax Avoidance Agreement- is a
5) Subsequently after Cairn India’s merger with tax treaty signed between two or more countries
Vedanta in 2017, Cairn Energy held 95% stake in to help taxpayers avoid paying double taxes.
Vedanta Ltd along with some preference share Means where is the source of income tax is
valued at over billion $ 1. imposed there
 But this holding was soon taken away by IT  Treaty Shopping:- “situation where a person
department. who is not entitled to benefits of a tax treaty
 Cairn Energy’s 4.95% shares in Vedanta as of makes use
December 2017 were transferred to Tax …..2nd class ended,3rd started…
Recovery office. New Delhi in the Jan March
2018 period.  THE GAAR- GENERAL ANTI-
 The tax department then started selling
these shares as part of its efforts to recover
AVOIDANCE RULE:-
 refers to a concept which generally empowers
its dues.
the revenue authority in a country to Deny tax
 It also withheld tax refunds amounting to $
benefits of transactions or arrangements which
222.8 million due to Cairn UK in another
do not have any commercial substance and the
matter.
only purpose of such a transaction is achieving
 It also seized dividends amounting to $ 159.8
the tax benefit
million and seized proceed due to the
 It applies where tax payers enter into a scheme
company from redemption of preference
for the sole and dominant purpose of obtaining
shares as part of its efforts to recover the
tax benefits
dues.
 In simple words GAAR is a set of general rules
 Cairn Energy decided to initiate internal
enacted so as to check tax avoidance
Arbitration against India in 2015 in Hague.
 Before GAAR the SAAR was operational specific
 The Permanent court of Arbitration ruled in
anti avoidance rule
Cairn Energy’s favour in December 2020,
 SAAR was targeting some specific individuals and
hands it an award of $ 1.7B.
also some specific business man
 However, earlier this month, Cairn successfully
 But GAAR is applicable on all
managed to freeze residential real estate owned
by the Indian Government in Paris, impacting A. MERITS OF GAAR
around 20 Centrally located properties valued at  It will increase tax revenue
more than $ 20 million.  Increase investment and employment economy
 Although Cairn Energy told that it prefers an  It will ensure proper utilisation of local resources
amicable settlement with the Indian  It will curb money laundering
Government.  It will work as deterrent for tax defaulters
So, after these international reverses Modi B. CRITICISM OF GAAR
government abolished it in August 2021.
 Considered to be harsh in nature and there is a
 PROBABLE QUESTIONS - fear that tax authorities will apply these
Q1. “GST is considered as one of the biggest indirect provisions regularly to torture the general
tax reforms”. In the light of the statement do the honest tax payers
 Many experts feel that the provision would give putting it into ola or uber so there is no any kind of
unlimited powers to tax officers , allowing them TCS on it
to question any tax saving deal  Tax collected at source is collected by sellers while
selling something to buyers
 SECURITIES TRANSACTION TAX STT
 If a goods are utilized for the purpose of
 There is a debate about is it direct tax or indirect
manufacturing processing and producing further
tax
thanks then there is no TCS payable
 Supported as directed tax by
 If the same goods are utilized for final consumption
 Angel broking organisation
then TCS is payable
 Clear tax organisation  Somewhere it is 1% 2% or 5%
 Supported as indirect tax  Car I lakh
 Economic Times newspaper  TCS 1%
 Ministry of statistics and program  Bullion value 2lakh TCS 1%

implementation MOSPI
We have to accept it as indirect tax as in
 CESS TAX
 It is tax on tax
India due to MOSPI
 Temporary in nature and has a specific purpose
 So it is a tax payable in India on value of
 For example krishi Kalyan cess , health and
securities transaction through the recognized
education cess ,she CESS
stock exchange
 If it is collected then it is used only for that
 In simple words it is a tax levied on every
purpose for which it is collected
purchase and sell of securities that are listed on
 For example if government is taking this tax on
the recognized stock exchange in India
swachh Bharat Abhiyan CESS then the money
 TDS-TAX DEDUCTED AT SOURCE collected by this is only used for swachh Bharat
 It is a lump sum deduction by the government Abhiyan not for any other purpose
 Sources can be salaries  Therefore government cannot deviate this
 It can be monthly basis money
 In TDS person responsible for making payment  It is levied on income Tax amount
for specified services such as commission
 SUR CHARGE
brokerage professional consultancy are required
It is also tax on tax
to deduct a fixed percentage from the amount
 It is long term in nature and can be used for any
such a deducted amount has to be deposited to
purpose even government can David this money
the government by the deductor on the behalf
for any purpose
of deducee which he can claim as income tax
 It is particular case based like the following
paid at the time of filing his income tax return
 Based on income
 Whenever you are getting money there is TDS
 50 lakh to 1 crore it is 10%
got either monthly or annually
 1 crore to 2 crore it is 15%
 For example
 2 crore to 5 crore it is 25%
 Your income is 10 lakh
 + 5 crore income it is 37% surcharge
 TDS is 10%
 Suppose you have income up to 1 lakh and
 So only 90000 you get a salary
there is a surcharge on one percent therefore
 10000 is TDS on 10 lakh as per 10%
 Income 1 lakh
 12×10000= 1.2 lakh TDS
 Income tax 10%
 TCS-TAX COLLECTED AT SOURCE  Tax amount= 10000
 It is applied on few examples used as final products  Sur Charge = 1% of 10000
 TCS when you use it for final consumption but if a  Sur Charge amount= 1000
source is further used for further manufacturing then  Total tax paid = 10000+1000=11000
not TCS on it  Note -CESS+ SURCHARGE are not returned to
 For example I bought a car for myself so there is TCS States by the centre but all other taxes paid by
on it but if I bought a car for earning money by the state of them 42% is a returned back to the
state by the central government except these 2. Borrowing from reserve Bank of India
two taxes  On the recommendation of shubhmoi
 GOVERNMENT ANNOUNCES THREE Chakraverti committee 1997:- government

replaced budget deficit with the fiscal deficit and
TYPE OF DEFICITS
 Deficit is= expenditure - receipts also stopped the financing of a deficit through
 Purpose of announcing deficits
printing of new currencies and borrowing from
1. To understand these deficits which reflect RBI
borrowings of the government and burden of  Now government finances deficit through
interest payment due to these deficits borrowing from banks and financial institutions
2. Also to understand composition of the union  It is announced at the last of the financial year
budget deficits related to the budget
C. THE FISCAL DEFICIT
A.THE REVENUE DEFICIT  announced before the financial year
 Revenue expenditure - Revenue receipt  = Total expenditure - total receipts ( RR + CR
 Revenue expenditure= developmental revenue except borrowings)
expenditure and non development revenue  Fiscal deficit is high but revenue deficit is zero
expenditure then it will not cause panic as this borrowing is
 Revenue receipt= tax revenue and non tax used for productive purposes
revenue  Implications of financing physical deficient
 Government is trying to make 80 by increasing through borrowings
the revenue receipt 1. It may lead to crowding out-as government
 High revenue deficit of the government is mainly borrows from Bank so banks would have less
due to non development revenue expenditure money they can increase the rate of interest
 Government finds its difficult to reduce because because of financing fiscal deficit therefore
most of it may have social and political many small investors would leave the market
implications and also major chunk of it is used to and hesitate to invest called crowding out. As
ensure security and defence of the country for government borrows more largely from banks
example Pradhan mantri Garib Kalyan Yojana in and financial institutions against Government
corona pandemics now becoming problem security it crowds out private sector in the sense
because government find its difficult to reduce it that banks are left with the lesser funds to land
 To meet revenue deficit government has to private sector
borrow which is not only unproductive and also 2. It may lead to inflation- small investors now
put huge burden of interest on the government stopped therefore the price of the things will
 If a revenue deficit is zero then deficit in the economy hike. It is due to the borrowing rate of interest
would be because of capital expenditure capital would increase and these high cost maybe
expenditure is on construction of roads and railways passed on to consumers by way of higher prices
and infrastructure would further generate 3. It may further lead to inflation- people get free
employment in the economy money but raised demand therefore no supply is
maintained ultimately inflation Hike can be seen
B. THE BUDGET DEFICIT 4. As high borrowings are largely on account of
 Total expenditure (R.E+C.E) - total receipt (R.R+C.R)
non-development revenue expenditure. It
 In 1997 which changed budget deficit to fiscal deficit
implies that while income and demand is
that is modern budget deficit type
generated on an account of this expenditure
 Before 1997 government was following the path of
making budget deficit zero
then there is no corresponding output which
may also have the potential to cause inflation
 Through following ways
5. It may wide revenue deficit-borrowing-further
1. Printing of new currencies that is also called
expenditure increase because now interest has
monetized deficit it is the most inflationary
to be paid on the money that was borrowed.
measure to finance deficit
High borrowing implies that high interest burden
and interest is paid out of the current expenditure on one hand and increasing its
receipts/revenue receipt due to which the gap revenue on the other
between revenue expenditure and revenue  Such Act aimed at making the Govt. responsible ,
receipts widens accountable and transparent in its fiscal exercise
6. It may lead to downgrading of the ratings- as that is in managing its expenditure and revenue
government borrows more its credit rating  Some rules were led down under the act to be
suffers a blow at the global level by various followed by the Government to achieve fiscal
credit rating agencies due to which the consolidation
borrowings abroad may now come at high rate  Features Of FRBM 2003:-
of interest because people show lack of trust on 1. Beginning 2004-05 and ending 2008-09 GOI should
you. It may also discourage foreign investors bring down its revenue deficit by 0.5 % of the GDP
rd th each year so that by 2008-09 revenue deficit would
………3 class ended,4 started……..
 PRIMARY DEFICIT = {F.D-Interest payment } fall to zero.
 Suppose P.D= 5%-0.5% = 4.5% 2. Beginning 2004-05 and ending 2008-09 GOI should
 Fiscal deficit :- Total expenditure – total receipt bring down its fiscal deficit each year by 0.3% of GDP
 F.D= TE-TR so that by 2008-09 its fiscal deficit would not be more
 Suppose = F.D = 5% -4.5%= 0.5% than 3% of the GDP
 Primary deficit shows direction of the fiscal deficit  However , these targets would not be achieved
 Low primary deficit is not a healthy sign as it shows  2012 = effective revenue deficit concept introduced
that most of the fiscal deficit may be on account of but scraped later on
interest payments of loans taken in the past B. FRBM Act 2016
 2012 concept of effective revenue deficit  based on NK (Nand Kishore) Committee
evolved  Implementation period 2016-2023
 Effective revenue deficit = {Revenue deficit –  To review old FRMB NK committee submitted its
grants given to states for productive purposes report in early 2017
and asset creation}  Recommendations
 It shows the exact amount of the adverse a) Revenue deficit should be 0.8% by bringing
impact of the revenue deficit on the down from 2.1% (2017 ) of GDP by 2022-23 by
economy 0.25% each year so that 2022-23
 was introduced in 2012 but scraped in 2016 b) Fiscal deficit should be reduced to 3% by 2017-
 GOI thought fiscal deficit is the prime one 18 and should remained at 3% for next three
 1997 budget deficit was replaced by fiscal years and thereafter it should be reduced by
deficit 0.2% each year so that by 2022-23 Fiscal deficit
 But it only showing deficit of the centre not should be 2.5% of GDP by 2022-23
states c) should be a scope of an escape route of ± 0.5%
 So PSBR is in suggestion phase (Public sector fluctuations in fiscal deficit target which means if
borrowing requirement )introduced economy does not perform well fiscal deficit
 PSBR= FD of central Govt. + Gross F.D of target may be increased by 0.5% and if economy
states + Independent borrowings by PSUs performs well than it can be reduced by 0.5%. it
 2003= Fiscal responsibility and budget will give more freedom to the policy makers to
management act (FRBM Act 2003) have more practical feasible policies :-
 { FD= TE –TR (except borrowings) }
A. TOPIC:- FRBM Act 2003 = d) Formation of fiscal council:- There should be a
 could not achieved targets of it formation of one autonomous body called as
 based on VK (vijay kelkar) committee Fiscal council:- which would ensure better co-
 Implementation period 2003-2009 ordination between centre and state
 Target up to 31 march 2009 governments and also between fiscal and
 Passed in 2003 monetary policies in all kind of tax
 Principle objective = GOVT. should adopt a path implementation
of fiscal consolidation by rationalizing its
e) To have a better Debt management:- debt  Once the circle rate is determined it is applicable for
management should be the prime focus because the minimum period of 5 years and maximum of 10
credit rating agencies give more importance to it years
 Rate of tax varies from 0.5-1% depending on value of
 one Suggestion is debt : GDP should not be more
land
than 20% for states and many states has more
 Seller pays
than it
 Note stamp duty is paid by buyer of land not
f) reduction in total outstanding debt:- GOI should
seller , seller pays land revenue tax
bring down its total outstanding debt from 70%
Circle rate is the lowest price, or minimum price, at
of GDP is total outstanding debt ( centre 49% which the sale or transfer of a residential or commercial
and states 21% ) to 60% of the GDP (centre 40% , property can be registered before being sold or
states 20% ) (external and internal also ) transferred, whether it is a plot of land, an apartment, or
a built-up house.
 SOME FACTS
 India = Tax: GDP = 11.7 % D. PROFESSIONAL TAX
 Denmark it is 45%  Levied by state Govt on professionals like doctors
 Pakistan = 4.8%
 Sri Lanka = 7.10% ,advocates , CA etc in lump sum amount
 OECD= tax : GDP = 32%  vary depending on the state you live in.
 More tax : GDP ratio more would be the development  The maximum limit of which you can be charged is Rs
 2016= lower tax to GDP ratio result in less development ,
2500yearly
salary less, welfare schemes would be less
 currently impose a professional tax in India are West
 So fiscal matters should be managed in
Bengal, Maharashtra, Gujarat, Andhra Pradesh,
responsible way so FRBM Acts were introduced
Kerala, Tamil Nadu, Karnataka, Bihar, Assam, Madhya
SOME NEW DIRECT TAXES Pradesh etc.
INTRODUCED (INDIA):- E. EQUALIZATION LEVY (GOOGLE

A. WINDFALL TAX:- TAX (2016)
 Till 31 march 2016 license to provide platform
 Is a Sur tax (an extra amount of money that you
for content creators
have to pay for something) imposed by Govt on
 After 1 April 2016 google-youtue etc if adds are
businesses or economic sectors that have
there and revenue is more than 1 lakh they pay
benefited from economic expansion
google tax at rate of 6%
 Purpose is to redistribute the excess profit in
 Equalization levy is aimed at taxing foreign
one area for the social good
companies which have a significant local client
 India Levied Special additional excise duty on the
but are billing them their off-shore units
sale of locally produced crude oil and also on the
effectively escaping the countries tax system .
exports of petrol diesel and aviation turbine fuel
 In simple words , it is levied on the revenue
 It has also been mandated the exporters to meet
generated by google , twitter , you-tube , face
the requirements of the domestic demand
book etc for the advertisements in India
 Note:- additional revenue will help to offset the
 Levied at rate of 6% , has been enforced since
relative impact of a reduction in excise duty for
2016 {proposed in 2016-17 budget}, on
petrol and diesel announced in may 2022
payments exceeding 1 lakh rupees/year to a
 Example – refining sector of India
non-resident service provider for online
B. LAND TAX advertisements
 Also called property tax, house tax or building  Outcome of the OECD nations
tax  Only on Non-resident service providers like you-tube but
 Imposed by Municipality or municipal not on Indian service providers but if there is permanent
establishments of outsiders then not applied
corporation in lump sum amount ( lump sum:-
an amount of money that is paid at one time )  IMPACTS OF EQUALIZATION LEVY
1. Role of international organizations/forms :-
C. LAND REVENUE TAX
idea of this comes from OECD nations BEPS
 By state Govt
action plan. The action plan considers
 Based upon circle rate of the land
equalization levy as an option to tax digital b) Changing economic world order:-
transactions proliferation of GST is symptom of changing
2. Prevent shifting of profits:- tax levy will prevent international economic order . countries
the technology companies from shifting profits such as India which provides large markets
off-shore to tax heavens (several nations like for digital corporations seek a greater right
Ireland , Singapore where direct taxes are almost to tax income
zero or negligible).Levy will against the base c) May adversely affect online buyers and
erosion and profit shifting and will prevent sellers:- the taxation of digitalized economy
shifting of profits from high tax countries to turned out to be relatively contentious. Online e-
lower tax rate jurisdiction . off late levy has commerce firms may stop their economic
become an attractive tool for Govt around the activities in the country due to lesser profit
margin and online buyers may be discouraged
world
due to lesser discounts offered by the
3. To ensure tax payments by online companies:-
companies.
to make sure that the global online businesses
……4th class ended,5th started….
are taxed for the considerable income they
generate from India  FACE LESS ASSESSMENT SYSTEM
4. Incentive to have permanent establishment in  It was for the direct tax and introduced to provide
India:- levy will act as an incentive for the greater transparency , efficiency and accountability in
income tax assessments
companies to have permanent establishments in
 It is an attempt to remove individual tax officials
India and to get taxed on to their net income
discretion and potential harassment for income tax
made here . it will also discourage the practice of payers
avoiding taxes by exploiting businesses in the  All provisions introduced under this , under
international taxation rules income tax Act 1961 are :-
 Now it is levied on e-commerce firms also
a. To eliminate the interface b/w tax officers
(Amazon, flipchart )at 2%, who are allowing and the income tax payers
advertisements from 1st April 2021 in the form of b. To optimize the utilization of the resources
digital service tax through economies of scale & functional
F. DIGITAL SERVICE TAX specialization
 Equalization levy is now applicable for e-
commerce companies that are sourcing revenue
 TOPIC:- TAX RELATED DISPUTES
from India customers without having tangible AND SCHEMES FOR SOLUTION
presence here in the country 1. VIVAD SE VISHVAS TAK (D-TAX)
 The amendment to the finance Act 2020, has  From controversy to trust
expanded the ambit of the equalization levy for  Objective:- to settle pending disputes of direct
Non-residents e-commerce operators involving taxes
in supply of services including online selling of  This will benefit the Govt by generating timely
goods and provision of services with the levy at revenue and also to tax payers by bringing down
the rate of 2% effecting from 1st April 2020. mounting litigation cost
Note:- this is Changing economic world order as in past 2. SABKA VISHVAS SCHEME (IT)
developed countries were putting these taxes but now
developing nations are putting these taxes on e-  For IT:- indirect tax
commerce firms  Objective:- settling pending disputes of service
 IMPACT :- tax and central excise duty which are now
a) Pro launched international tax law subsumed under GST
negotiations:- the agenda to reform  Two main components of scheme are
international tax law so that digital a. Dispute resolution
companies are taxed where economic  This component is aimed at liquidating the
activities are carried out , was formally legacy (old) cases of central excise duty and
framed within OECD’’s BEPS program service tax which are now subsumed under
GST & are pending in litigation at various  BAT is a fiscal measure that imposes a charge
forums on goods or services in accordance with the
b. Amnesty destination principle of taxation
 Amnesty component offers an opportunity to tax  Under this principle a Govt taxes product based
payers to pay the outstanding tax and be free of on location of their sell to the final consumer
any other consequences under the tax rather than on the location of their production
 Under it there will be total waiver of interest, or origin
penalties , and immunity from prosecution
 IMPACTS OF BAT
 TOPIC:- ANTI-DUMPING DUTY & 1) At macro level with imports reduced a
country can cut or reduce its trade deficit
COUNTER VAILING DUTY
2) If a country is major export market , for
 These two are for indirect taxes
many developed countries , Tax plan will
A. ANTI-DUMPING DUTY have serious adverse effects on them after
 It is imposed on the excessively produced implementation
imported items to neutralize its adverse impact 3) However, BAT may render some firms less
on domestic producers profitable if prices are forced upwards , they
 Under it importers sell their products in may lose competitiveness with substitute
domestic country at the price even lower than products or locally made similar products
their own domestic price  Note:- it is just proposal not accepted yet.
 An anti-dumping duty is a protectionist tariff
that a domestic government imposes on foreign  e-BKRAY PLATFORM
imports that it believes are priced below fair  launched by Ministry of Finance
market value  it is an e-auction platform , which provides single
 As it Results to Trade discrimination through window access to Information on properties up
tariff barriers by putting higher taxes on for e-auction as well as facility for comparison of
imported items so that people only buy similar properties
domestic items rather than imported (not  it is for those mortgage properties whose loans
leaving people free to choose = Trade become NP
discrimination)  The eBkray platform provides navigational links
 Therefore to ensure level playing field for both to all PSB e-auction sites, property search
domestic and imported items ,NITI AYOG feature and presents single-window access to
suggested BAT information on properties up for e-auction,
B. COUNTER VAILING DUTY comparison of similar properties, and also
 It is imposed on the excessively subsidized imported contains videos and photographs of the
items to neutralize its adverse impact on domestic uploaded properties and google map address
producers  The platform also helps the buyers to easily
 Countervailing duty (CVD) is a specific form of duty navigate to the banks e-auction sites after a
that the government imposes in order to protect notified property is selected
domestic producers by countering the negative  It also helps the users to search properties using state
impact of import subsidies wise , district wise and bank wise details
 Now it has been subsumed under GST  The e-auction platform is now linked on Indian Banks
 BAT: BORDER ADJUSTMENT TAX Auctions Mortgaged Properties Information (IBAPI)
portal and guidelines have been made available
 NITI Aayog member has favoured imposing which will help banks in the release of cash trapped in
a Border Adjustment Tax (BAT) on imports to mortgaged assets. It will also bring transparency in
the process
provide a level-playing field to domestic
 Indian Banks Auctions Mortgaged Properties
industries. Information (IBAPI) portal:- It is an initiative of Indian
 Simply BAT is a duty that is proposed to be Banks Association under the policy of the Department
imposed on imported goods in addition to of Financial Services, Ministry of Finance to provide a
platform to provide details of mortgaged properties
custom duty to be auctioned online by Banks, starting with PSBs.
 In other words, the GST rate paid on purchases
INDIRECT TAX:- “VAT” :- is more than the GST rate payable on sales.
 Value Added Tax  SLVAT OR SVAT:- state level VAT
 Common form of indirect tax levied on goods
(not on services ) GST AND NEED OF GST
 Paid to the Govt by the procedures at every  Despite having the VAT people were paying several
stage In supply chain other taxes like service tax , entertainment tax ,
 It levied only on those goods sold within a counter vailing duty, entry tax, octroi duty etc
 Both central and state govt. levied taxes separately
particular state which means that the buyer and
under the VAT i.e. why it was realized that a national
the seller need to be in the same state
level VAT in the form of GST is needed , on that basis
 VAT IN INDIA it was introduced in July 2017.
 VAT is the tax which is charged on the gross  GST IS OR HAS:-
margin at every stage in the sell of goods.
1. A national level VAT:- one nation one tax
 Tax is assessed and collected at each point ,
2. Dual structure :-
starting from the manufacturers until the
 CGST+ SGST/UTGST:- when goods & services
product reaches the retailer
are produced and consumed in same state
 Introduced in India 1986 on the
 IGST :- if goods and services are produced in
recommendation of Laxmikant Jha committee
one state and consumed / sold in other state
 Initial Suggestion was to introduce in the form of
IGST collected by GST council first and later
MANVAT (MAN-Manufacturing VAT) ,but
on divided equally in CGST and SGST. SGST
introduced in the form of MODVAT (Modified
amount is only shared with consumer state.
VAT) with rates MDDVAT 8% , 16%, 24%
 Note:- GST is not on exported items
 In 2000year :- Yashwant Sinha was finance
minister and subsumed all VATs and changed it 3. Slabs:- 5%,12%,18%,28%
to CENVAT (16% only) (CEN-Central) 4. Destination based:- always consumer state
gets the revenue share (SGST) not producer
 ITC :- INPUT TAX CREDIT state
 Output tax amount > input tax amount
5. e-way bill:- items costing 50,000rs+ , e-way bill
 It is the tax that a business pays on a purchase
can be carried while travelling (now everywhere
and that it can use to reduce its tax liability
is applicable)
when it makes a sale.
 an electronic document generated on the
 It means at the time of paying tax on output,
GST portal , GST app, even through SMS
one can reduce the tax that has already been
evidencing movement of goods valued
paid on inputs and pay the balance amount
50,000 rs or more
 Refers to the tax already paid by a person at
6. No cascading effect:-
time of purchase of goods or services and which
is available as deduction from tax payable . For 7. Composition scheme:-can be opted by those
e.g- A trader purchases good worth rs 100 and manufacturers or traders whose annual turnover
pay tax of 10% on it is upto 1.5 crore and also by those service
providers whose turnover is upto 50 lakh.
 INVERTED DUTY STRUCTURE Instead of monthly GST return filing they can do
 Output tax amount < input tax amount it on quarterly basis , tax rate is 1% for
 It arises when the taxes on output is lower than manufacturers and traders , 5% for restaurants
the taxes on inputs not servicing alcohol and 6% for other services
 Creates an inverse accumulation of input tax providers , these are on turnovers
credit which has to refunded back 8. Zero rated status :- on the exportable items
 Inverted duty structure indicates a situation GST is not levied but exporters are eligible for
when the rate of tax on inward supply is higher input tax credit but IGST is levied on imported
than rate of tax on outward supply. items

9. GST Compensation fund:- As per Section 18 of the  NAA ensures the benefit of tax reduction to people
Constitution (101st) Act, 2016, Parliament “shall, by and also ensures the timely distribution of input tax
law, on the recommendation of the GST credit to the beneficiaries.
Council, provide compensation to States for loss of  It was constituted by the GOI to analyse weather
revenue arising on account of implementation of the Input Tax Credit (ITC) availed by any registered
Goods and Services Tax for a period of five years from person or the reduction in tax is passed on to the
the date of its implementation.” consumer and he/she is protected from random price
 It ended in July 2022 AND increase for self interest in the name of GST
 now states are demanding to extend it so GST Input Tax Credit (ITC) Input Tax Credit refers to the tax
compensation CESS is introduced for extension of already paid by a person at time of purchase of goods &
services and which is available as deduction from tax
GST Compensation from 2022-2027 payable . For eg- A trader purchases good worth rs 100 and
 RNR: Revenue neutral rate:- pay tax of 10% on it
 Before the introduction of GST states suggested that  Items still under the VAT not under the GST
the GST should be introduced with the single rate of 1) Five petroleum products
27% so that their entire perspective , future revenue a) Crude oil
loss would be neutralized b) Petrol (motor spirit)
 but central govt did not accept this proposal but c) Diesel (high-speed diesel not a bio-diesel as
assured state govts that their entire future revenue bio diesel comes under GST f 18%))
perspective loss would be compensated by the d) Aviation turbine fuel
central govt for the next 5 years (2017-2022) even e) Natural gas
with some increment 2) Alcohol for human consumption
 last year (2021) 2.35 lakh crore was demanded by 3) Electricity
states as a demand for GST compensation from  Taxes subsumed under GST
center out of which 1.10 lakh crore rs is revenue a) CEN VAT
deficit due to GST implementation b) SL VAT
 Centre said no it is only 97000crore loss due to GST c) Service tax
implementation and remaining is because of d) Additional excise duty
Pandemic and center will not pay through GST e) Additional duty of customs (counter vailing duty
compensation fund = CVD)
 GOI instructed state govts to borrow GST related f) Special additional duty (SAD) of customs
deficit amount from RBI and from market but that g) Luxury tax
would not be reflected into states debt account h) Purchased tax
i) Entertainment tax
 GOI will pay the entire principal along with interest in
j) Entry tax (on the state boundaries)
future through GST compensation CESS
k) Octroi duty ( under the municipality or municipal
 Later on central govt also allowed the states to
corporation boundaries)
borrow even pandemic related deficit amount from
l) Tax on lottery and gambling
the market and RBI for which central govt will pay the

principal but interest will have to be paid by states
Revenue Neutral Rate is a rate of GST at which the
TOPIC:-THE GST COUNCIL
amount of taxes currently collected by the MEMBER POST
government and the amount expected to be 1) UNION finance minister 1) Chairman
collected after GST remains the same 2) Union minister of state 2) Another member
…....5th class ended, 6th class started……. for finance 3) Another member
3) One selected member 4) Vice-chairman
 NATIONAL ANTI-PROFITEERING from each state who 5) Another member
should be minister of 6) Ex-officio secretary
AUTHORITY {NAA}:- finance or taxation or
 GOI introduced GST and later on decreased tax on may be another minister
certain items like earlier tax was 18% on restaurants 4) One elected member by
for consumers and GOI reduced it to 5% but all the state
restaurants still charging 18% instead of 5% {charging representatives
5) CBIC chairman (Central
more the consumers}, therefore GOI came up with
Board of Indirect Taxes
NAA & Customs (CBIC)
6) Revenue secretary
 VOTING RIGHT IN GST COUNCIL:- unnecessary burden on businesses for TDS paper
work, processes and compliance
 States have :- 2/3rd of voting right c) It is the failure of GST council to not include a
 Central govt :- 1/3rd of voting right petroleum and some other items inside the GST
 To take any decision there is a need of 75% because of that people are paying heavy taxes
voting support on them that is reducing their demand which
may further adversely affect GDP of the country
 So states have more voting rights (they can get
d) In the initial phase of GST implementation,
petrol or any products under GST:- note it while people phase several difficulties because of
any controversy) improper training of tax officers and another
 Members who don’t have the voting rights employees given to them and because of this
 CBIC chairman :- another member of GST council they were unable to handle GST software and
 Revenue secretary :- ex-officio secretary of GST systems
council  CONCLUSION
 Govt has introduced a GST system to smoothen
A. MERITS OF GST tax processes and bring businesses into formal
a) It removes cascading effect because of the economy
refund of taxes paid on inputs in the form of ITC  Being GST compliant, businesses can experience
(input tax credit) the merits of having a unified tax system & easy
b) It saves us from tax on tax (Saved people from input credits
multiple taxes)
c) It reduces the manufacturing cost through 1. ZERO GST:-
return of ITC (input tax credit).in this way it  For on external trade.
promotes programme like “make in India” and  ITC can be availed
“PLI-production linked incentive schemes” 2. NIL GST
d) It promotes exports because Govt does not levy  For internal trade
GST on exportable items but exporters are  On the output= zero % GST
eligible for ITC benefits  But ITC cannot be claimed
e) It also reduced the price of final goods because 3. EXEMPTED GST
of removal of cascading effect  Comes under higher GST rates but exempted at
f) It creates a national common market means present
Developed entire nation into a one national  Means on the output = 0% GST
common market with principle “one nation one  But ITC cannot be claimed
tax”  Check list from internet
g) It promotes ease of doing business from
registration to return filing, indirect tax payment  ITC {INPUT TAX CREDIT}:-
burden has been reduced
 Input Tax Credit refers to the tax already paid
h) It boosts productivity of logistics. Earlier (pre-
GST period), the logistics industry in India had to by a person at time of purchase of goods &
maintain various warehouses across states to services and which is available as deduction
avoid tax on inter-state movement. Since entry from tax payable . For eg- A trader purchases
tax and octroi duty have been subsumed inside good worth rs 100 and pay tax of 10% on it.
the GST, so there is no need of such warehouses  Output tax amount > input tax amount
near the state boundaries { Ensured a proper  It is the tax that a business pays on a purchase
supply chain management}
and that it can use to reduce its tax liability
i) It tackles corruption and tax leakages. With the
online facility to directly register, file returns, when it makes a sale.
and make payment of taxes online, the whole  It means at the time of paying tax on output,
tax mechanism has become transparent one can reduce the tax that has already been
paid on inputs and pay the balance amount
B. DE-MERITS OF GST  Refers to the tax already paid by a person at
a) It has increased operating cost due to additional
cost of purchasing software time of purchase of goods or services and which
b) The new GST regime states that companies have is available as deduction from tax payable . For
to get GST registered in all the states, in which e.g- A trader purchases good worth rs 100 and
they operate their business. This leads to an pay tax of 10% on it

 INVERTED DUTY STRUCTURE 
doesn’t take loan
Valuation = 100crore
 Output tax amount < input tax amount  Planned to sell % of Shares = 10% = 10 crore = called
 It arises when the taxes on output is lower than as FMV {fare market value}
 Let three companies want to purchase these 10%
the taxes on inputs share are A,B,C= these companies are called as angel
 Creates an inverse accumulation of input tax investors
credit which has to refunded back  So Angel investors are= A,B,C
 A if offering 11 crore more than 10 crore , by having
 Inverted duty structure indicates a situation
an expectation of profit in future after investing
when the rate of tax on inward supply is higher  B if offering 10.5 crore more than 10 crore , by having
than rate of tax on outward supply. an expectation of profit in future
 In other words, the GST rate paid on purchases  C if offering 10.25 crore more than 10 crore , by
having an expectation of profit in future
is more than the GST rate payable
 So without any problem, the OLA sells his 10% shares
 Ordinarily, taxation involves payment of tax at to company A as it is getting more investment (of 1
lower rates on inputs and a relatively higher rate crore)
of tax on the final product / output.  So sold amount= 11 crore
 FMV= 10crore
 In contrast, however, as the name suggests,  OLA= gets= 1 crore additional
inverted duty structure indicates a situation  GOI says this extra 1 crore is your income and you
when the rate of tax on inward supply is higher have to pay tax and rate is 30%
 And this tax is called as “Angel tax” , so it is on
than rate of tax on outward supply
whatever is got above the FMV
 An inverted duty structure comes up in a  Now, several startups companies started complaining
situation where import duties on input goods
are higher than on finished goods.  FACTS FOR EXPENDITURE (note)
 In other words, the GST rate paid on purchases is  Before 2017-18, whatever the govt had the total
money, govt was dividing it into two parts
more than the GST rate payable on sales.
a) Planned expenditure
TOPIC: THE ANGEL TAX:- 

b) Non-planed expenditure
As because till that time there was “planning
 Introduced by PRANAB MUKHERJEE in 2012-13 commission”. Now NITI AYOG has come
budget  Now Govt divided Public expenditure divided
 Levied on un-registered start-up companies if they into two parts
sell their shares at the price higher than their fair a) Schemes expenditure
market value b) No-schemes expenditure
 Recently govt has exempted registered start-up A. Schemes expenditure
companies from this tax to promote them further a) Centrally sponsored schemes
 Angel tax essentially derives its genesis from section  Central + state Govt share in expenditure in
56(2) (viib) of the Income Tax Act, 1961. The finance proportion
act, 2012 introduced section 56(2) (viib) in the IT act b) Central sector schemes
which taxes any investment, received by any unlisted  100% central govt share
Indian company, valued above the fair market value B. No-schemes expenditure
by treating it as income a) Salaries
 In simple words, Angel tax is the tax charged on the b) Pensions
closely held company when it issues shares to a c) Subsidies
resident person at a price which is more than its fair d) Defence expenditure
market value. e) Grants to states
 Angel tax is essentially the tax that unlisted f) State’s revenue share
companies (read-startups) are liable to pay on the  On the basis of recommendations of
capital they raise through issue of shares.
C.rangarajan committee and Bimal jalan
committee, in union budget of 2017-18, GOI
 UNDERSTAND BY EXAMPLE :-ANGEL TAX announced to remove classification of its
 Suppose a company “X” with overall valuation of
expenditure into “plan” and “non-plan
100crores (suppose OLA) and wants to starts a new
expenditure” and replace it through another
business even having already an existing business
(transport) way of classification with names “Schemes” and
 Company will sell its shares and start new venture, “non-schemes”

 TECHNIQUES OF BUDGETING 3. LINE ITEMS TECHNIQUE
 This technique implies that the annual budget of
1. ZERO-BASED BUDGETING a ministry and a department is prepared while
 This technique implies that annual budget of a
considering allocations of the previous year’s
ministry or a department is prepared assuming
budget
that there was no budget in the previous years
 Line item budgeting: Emphasizes on items of
to refer to i.e the base was zero.
expenditure without highlighting its purpose and
 This technique helps in allocating expenditure on
conceives budget in financial terms. Amount
each item in the budget on its merit rather than granted by legislature on an item should be
on the basis of what was allocated in the
spent on that item only.
previous years
 Hence, this technique helps in rationalizing 4. GENDER BUDGETING
expenditure and may weed out non-essential  It was introduced in India in 2004-2005, while
Australia was the first country to introduce it in1984
expenditures
 Gender budgeting implies that each
 Countries like Britain, Sweden and several others
department/ministry has been given direction that
adopted this technique
while preparing their annual budget they must keep
 Zero-based budgeting (ZBB) is a budgeting
in mind the gender sensitivities of the budget.
technique in which all expenses must be justified
 This implies that whatever proposals they have in the
for a new period or year starting from zero,
versus starting with the previous budget and budget it must be keeping in view the impact , these
adjusting it as needed. proposals will have on improving and uplifting female
 With zero-based budgeting, the budget is started gender in their country
from scratch or a “zero base” each year. Using  For example:- programs like “Beti Bachao Beti
this approach, every line of business within an rd
Padhao” as well as “1/3 of the jobs to be set aside
organization is analyzed for its needs and costs
for women in MGNREGA” and also maternity leave
while ignoring historic spending
with pay are al part of gender budgeting in India.
2. THE OUTCOME / PERFORMANCE  Gender budgeting allows governments to promote
equality through fiscal policies by taking analyses
BUDGETING of a budget's differing impacts on the sexes as well
 Micro-level budgeting as setting goals or targets for equality and
allocating funds to support those goals.
 This technique implies that each department or
 Examples: Reallocate education expenditure to
ministry while preparing its annual budget, has promote measures to increase gender equality in
to analyse the qualitative impact of budget access to primary school (e.g. scholarships);
allocation also apart from the quantitative Improve targeting of health resources according to
the different illnesses of men and women;
impact, so that each penny spent on various
Increase number of female extension staff; etc
items in the budget can be justified in terms of  Government Budget, Union Budget, In 2005, India
the qualitative impact started releasing a gender budget along with its
 In India, outcome budgeting technique was Union budget. The gender budget is an exercise
that applies a gendered-lens to the allocation and
adopted in 2004-2005 under which every tracking of public funds. The focus is on improving
minister prepares outcome budget women's welfare through government policies
 Ministry of finance prepares “performance  Gender Budgeting is concerned with gender-
budgeting” as such, it can be said outcome sensitive laws, programs, and schemes; resource
allocation; implementation and execution;
budgeting is micro & performance budgeting is program and scheme audit and impact
macro assessment; and follow-up remedial action to
 A performance budget is a budget that reflects alleviate gender inequities
the input of resources and the output of services  Status of gender budgeting
for each unit of the government. This type of  It is not very encouraging even after a decade
 Only 57 ministries/departments so far have
budget is commonly used by government bodies
established GBC (gender budgeting cell).
to show the link between taxpayer funds and the
 Over the last one decade, the allocation for women
outcome of services provided by federal, state,
as proportion of total budget has remained constant
or local governments at 5.5 percent.
 Only about 30% of all the demands for grants tax revenue collection. This type of fiscal
presented to Union Govt are reported in gender imbalance arises due to differences in the
budgeting statement availability of natural resources given the
 About 85% of the budget of women & child
uniform revenue powers and expenditure
development, is allocated to ICDS (integrated child
responsibilities
development and services), leaving only 15% for
other schemes meant for women  INTERNET MATERIAL FOR F. COMMISSION
 Finance Commission is a constitutional body for the
 Domestic violence act that aims at preventing crime
purpose of allocation of certain revenue resources
against women was not allocated fund in 2013-14
between the Union and the State Governments. It
budget & a very small amount was allocated in the was established under Article 280 of the Indian
next budget. Constitution by the Indian President. It was created
 National commission for women have budget to define the financial relations between the Centre
allocation sufficient enough to meet just revenue and the states. It was formed in 1951
 Shri Ajay Narayan Jha recently joined the Fifteenth
expenditure.
Finance Commission as its member. The 15th Finance
 Although, a positive trend over the past couple of
Commission has released a report titled ‘Finance
years has been the pre-budget consultation organised Commission in COVID Times’ on 1st February 2021
by ministry of finance, aimed at ensuring that the  Article 280 of the Indian Constitution
voices of women are also heard in the budged making  President after two years of the commencement of
process Indian Constitution and thereafter every 5 years, has
 Recent publication of increment in sex ration in the to constitute a Finance Commission of India.
NFHS-5 is also a positive outcome in this direction  It shall be the duty of the Commission to make
 Equal mortality rate recently achieved for infants recommendations to the President in relation to the:
 the distribution between the Union and the States of
(both male and female IMR) is a win for the
the net proceeds of taxes which are to be, or maybe,
programme “Beti Bachao”. divided between them and the allocation between
……6th class ended,7th started……… the States of the respective shares of such proceeds;
 the principles which should govern the grants in aid
 THE FINANCE COMMISSION:- of the revenues of the States out of the Consolidated
Fund of India;
 It talks about removal of two type of imbalances
 any other matter referred to the Commission by the
(removing inequalities in terms of tax revenue President in the interests of sound finance
collections)  The Commission shall determine their procedure and
 Finance commission comes under Art 280 of the shall have such powers in the performance of their
constitution. functions as Parliament may by law confer on them
 The president shall within 2 years from the  Note: President can also constitute Finance
Commission before the expiry of five years as he
commencement of this constitution and thereafter
th considers necessary
and the expiration of every 5 year at such earlier
 Article 281 of the Indian Constitution
time as the president considers necessary by order
 It is related to the recommendations of the Finance
constitute a finance commission which shall consist of Commission:
a Chairman, and 4 other members to be appointed  The President has to lay the recommendation made
by the president. by Finance Commission and its explanatory
 It shall be the duty of the commission to make a memorandum before each house of Parliament
recommendations to the president for:-  Who Constitutes Finance Commission of
a) Tax devolution from center to state India?
b) Non-specific grants For states and local  President of India constitutes the Finance
governing bodies Commission every five years or on time
 There are two different types of imbalances exist b/w considered necessary by him.
center and state govts regarding fiscal power. So  WHAT IS THE COMPOSITION OF FINANCE
finance commission talks about two imbalances in COMMISSION OF INDIA?
economic perspective  Finance Commission Chairman & Members
a) Vertical imbalance:- when there is an  Chairman: Heads the Commission and presides over
the activities. He should have had public affairs
imbalance b/w center govt and state in
experience.
terms of tax revenue collection  Four Members.
b) Horizontal imbalance:- it is an imbalance of  The Parliament determines legally the qualifications
tax revenue collection among the states in of the members of the Commission and their
selection methods
 Qualifications of Finance Commission recommendations on granting money to the states.
 To put it in other words, ‘It is nowhere laid down in
Chairman and Members
 The 4 members should be or have been qualified as the Constitution that the recommendations of the
High Court judges, or be knowledgeable in finance or commission shall be binding upon the Government of
experienced in financial matters and are in India or that it would amount to a legal right
administration, or possess knowledge in economics. favouring the recipient states to receive the money
 All the appointments are made by the President of recommended to be provided to them by the
the country. Commission
 Grounds of disqualification of members:  Who is the current chairman of the Finance
 found to be of unsound mind, involved in a vile act, if Commission?
there is a conflict of interest  The commission’s chairman is Nand Kishore Singh,
 The tenure of the office of the Member of the with its full-time members being Ajay Narayan Jha,
Finance Commission is specified by the President of Ashok Lahiri and Anoop Singh.
India and in some cases, the members are also re-  What are the key recommendations of the
appointed. Finance Commission
 The members shall give part-time or service to the  For horizontal devolution, the15th Finance
Commission as scheduled by the President. Commission has suggested 12.5% weightage to
 The salary of the members is as per the provisions demographic performance, 45% to income, 15% each
laid down by the Constitution. to population and area, 10% to forest and ecology
 Functions of the Finance Commission of and 2.5% to tax and fiscal efforts.
India?  Who appoints the Finance Commissioner
 Functions of Finance Commission for a State?
a) The Finance Commission makes recommendations to  Under Article 243-I of the Constitution of India, the
the president of India on the following issues: governor of a state is required to constitute a Finance
b) The net tax proceeds distribution to be divided Commission every five years
between the Centre and the states, and the allocation
of the same between states.
 Some extra example type material
 According to finance commission, 42% of total tax
c) The principles governing the grants-in-aid to the
states by the Centre out of the consolidated fund of revenue collection of central govt gets returned to
India. state govts by central govts except sur charge and
d) The steps required to extend the consolidated fund of cess charge.
 This entire money (42%) is distributed on some
a state to boost the resources of the panchayats and
the municipalities of the state on the basis of the indicator among states
 Population :- like for example keep 50% of this
recommendations made by the state Finance
Commission. returning amount (42% ) for population
 Forest cover:- keep 10%
e) Any other matter referred to it by the president in
 This share is distributed among states on basis of
the interests of sound finance.
f) The Commission decides the basis for sharing the different indicators like on basis of population and
divisible taxes by the centre and the states and the forest cover and many more.
 Land is also an institution for farmers to earn the
principles that govern the grants-in-aid to the states
every five years. money. Similarly in Mains examination if question
g) Any matter in the interest of sound finance may be comes about finance commission we have to write in
referred to the Commission by the President. economic perspective .
h) The Commission’s recommendations along with an A. 14TH FINANCE COMMISSION AND
explanatory memorandum with regard to the actions
done by the government on them are laid before the VERTICAL IMBALANCE:-
Houses of the Parliament.  States share in the net proceeds of union tax revenue
i) The FC evaluates the rise in the Consolidated Fund of increased to 42% from 32% earlier. This is the largest
a state in order to affix the resources of the state ever jump in %age of devolution
Panchayats and Municipalities.
 8 centrally sponsored schemes delinked from the
j) The FC has sufficient powers to exercise its functions
within its activity domain. support of the center , although finance commission
k) As per the Code of Civil Procedure 1908, the FC has identified over 30 CSS (central sponsored schemes)
all the powers of a Civil Court. It can call witnesses, schemes to be delinked from centres support .
ask for the production of a public document or record examples are JNNURM, BGC etc
from any office or court.  Sharing pattern for the rest CSS to undergo a change
 Advisory Role of Finance Commission with the states’ sharing higher fiscal responsibility for
 The recommendations made by the Finance a scheme implementation
Commission are of an advisory nature only and
 Revenue compensation to states under GST should
therefore, not binding upon the government.
 It is up to the Government to implement its be for 5 years:-

a) 100% in the first three years ,
th
A. MERITS
b) 75% in the 4 year ,
th
c) 50% in the 5 year  With enough fiscal space, states can
 Although central govt made it 100% for the meaningfully contribute to the overall growth
entire 5 years eve with some increments. and development in their regions thereby adding
 Create an autonomous and independent GST to the aggregate growth of the nation
compensation fund through legislative actions to  States will now have the flexibility to implement
facilitate the compensation process delinked CSS schemes as per local needs. This
th
 Suggesting a fiscal consolidation road map. 14 should ideally ensure the efficient utilisation of
finance commission puts a ceiling on fiscal deficit 3%
govt resources.
of GDP from 2016-17 onwards
 Some flexible provisions for states’ borrowings over B. DEMERITS
and above the annual limit of fiscal deficit at 3% of  Huge tax devolution could put some strain on
GSDP (gross state domestic product) centre’s finances especially until major CSS
 Establish an independent fiscal council to ensure for a schemes get delinked and almost all the items
proper coordination b/w central govt and state govts would come under the GST.
and also b/w fiscal policy and monetary policy  With greater discretionary funds with the states
 Suitably amend electricity Act 2003 to facilitate levy
there is a risk of wastage of funds by some states
of penalties for delays in payment of subsidies by the
towards populists and non-productive ends
state govts th
 Have independent regulator for road sector, for tariff  INTERNET MATERIAL FOR 14 F.C
setting, quality regulation among other functions  The Finance Commission is a Constitutional body
 Several recommendations made for evaluating govts formulated under Article 280 of the Indian
Constitution. It is constituted every five years by the
ownership and disinvestment in central public sector
President of India to review the state of finances of
undertakings the Union and the States and suggest measures for
B. 14TH FINANCE COMMISSION AND maintaining a stable and sustainable fiscal
environment. It also makes recommendations
HORIZONTAL IMBALANCE:- regarding the devolution of taxes between the Center
 There are several indicators suggested for this , the and the States from the divisible pool which includes
new one added is forest cover in this finance all central taxes excluding surcharges and cess which
commission the Centre is constitutionally mandated to share with
the States.
INDICATORS Wright (%)  The FFC has submitted its recommendations for
Population (1971) 17.5%
the period 2015-16 to 2020-21.
Demographic change (1971-2011) 10%
PCI distance (from Haryana) 50%
 Some of the major recommendations are as
Area 15% follows:
Forest cover 7.5% 1) The FFC has radically enhanced the share of the
PCI: - per capita income = {national income ÷ population}. states in the central divisible pool from the current 32
percent to 42 per cent which is the biggest ever
Haryana is taken as a reference state for PCI for comparison.
increase in vertical tax devolution. The last two
Note:- So some states complain like Haryana for less Finance Commissions viz. Twelfth (period 2005-10)
share given and some states like south Indian states who and Thirteenth (period 2010-15) had recommended a
reduced their population for just 10% share (from 1971- state share of 30.5 per cent (increase of 1 percent)
2011) and 32 per cent (increase of 1.5 percent), respectively
in the central divisible pool.
To solve the complaints of the states the 15th FC
th 2) The FFC has also proposed a new horizontal formula
15 finance commission recommended the following and for the distribution of the states’ share in divisible
a new indicator also has been created pool among the states. Relative to the Thirteenth
INDICATORS Wright (%) Finance Commission, the FFC has incorporated two
Population (2011) 15% new variables: 2011 population and forest cover; and
Demographic change (1971-2011) 12.5% excluded the fiscal discipline variable.
PCI distance (from Haryana) 45% 3) The FFC has not made any recommendation
Area 15% concerning sector specific-grants unlike the
Forest cover & ecology 10% Thirteenth Finance Commission.
Tax & fiscal efforts 2.5% 4) Grants: Should be distributed to states for local
PCI: - per capita income = {national income ÷ population}. bodies on the basis of the 2011 population data; the
Haryana is taken as a reference state for PCI for grants be divided into two broad categories on the
comparison. basis of rural and urban population — constituting
gram panchayats, and constituting municipal bodies  Nevertheless, all the states stand to gain from FFC
respectively. transfers in absolute terms.
5) Types of grants: A basic grant and a performance grant 3. Changed Equations
— the ratio of basic to performance grant be 90:10, with  The FFC seeks to fundamentally alter the Centre-
respect to panchayats; and 80:20 in the case of State funding patterns to give boost to the idea of
municipalities.
"cooperative federalism". For instance Central
6) Rail Tariff Authority: Replacement of the advisory assistance for critical developmental programmes
body with the statutory through required being implemented by states relating to health, child
amendments to the Railways Act 1989 development, education, rural drinking water,
7) Delinking of schemes: Eight centrally sponsored housing etc has been reduced drastically by about Rs
schemes (CSS) will be delinked from support from the 75,000 crore in the budget for 2015-16..
Centre; various CSS will now see a change in sharing  However, the union government has argued that the
pattern, with states sharing a higher fiscal reduction of Rs 75,000 crore in the central funding of
responsibility development programmes is more than compensated
with the States receiving an additional Rs1,85,000
crore from the total taxes and duties collected by the
Centre. The States will get an additional Rs1,00,000
crore on a net basis every year.
 The States will have to show results on the ground
while implementing their own exclusively designed
development programmes in health, education,
agriculture, sanitation, housing and drinking water. In
future they cannot really complain that the Centre is
not giving enough funds for these programmes.
 One apprehension is what if regional leaders resort to
wasteful expenditures like laptops distributed by the
UP government some years ago. Another argument is
crony capitalism and corruption is far more rampant
in State politics which does not even get captured by
1. The nature of shift the CAG which is mostly focused on big cases of
 The shift, however, as the distinguished chairman of Central corruption.
the commission Y. V. Reddy has himself admitted, is 4. Case of Bihar in the post FFC scenario
qualitative and not quantitative.  Bihar’s inter se share in the FFC award, compared to
 In the aggregate, states have not gained and overall the Thirteenth Finance commission, has declined, the
resources transferred to them by the Centre have not flow of resources to that extent would be lower for
increased. Bihar during the FFC award period. However, there
 The seminal shift is in terms of composition of has been an absolute increase in tax devolution to
transfer. This means that states will have more Bihar to the tune of more than Rs 12,600 crore in the
“untied” funds at their disposal and will be free to fiscal year 2015–16 due to the increase in vertical
deploy them in the manner they deem appropriate to devolution to 42%.
their needs and concerns. 5. Restructuring of Centrally sponsored
 Planning within states now assumes even greater
schemes(CSS)
importance even if the Planning Commission has
 In the last decade, the proliferation of big-ticket CSS
been abolished.
has emerged as the key fiscal strategy to transfer
2. Which states will gain? grants to States. The States having to fund these
 States normally compare their shares with previous schemes with a higher matching contribution. And,
Finance Commissions to judge whether they have they may have to bear the same burden of CSS
gained or lost. Strictly speaking, this is not right conditionalities, reducing fiscal autonomy and the
because different Finance Commissions have used available untied fiscal space.
different formulae to allocate the share of states to  Restructuring is not only important from the
each individual state. perspective of State finances. It is also about getting
 The formula used in the Fourteenth Finance the expenditure priorities right for both the Union
Commission is not the same as that used by its and the State governments. Therefore FFC
predecessor and so the share of individual states recommend Eight centrally sponsored schemes (CSS)
cannot really be compared. to be delinked from support from the Centre and
 Reddy’s Commission, for instance, has given 7.5% various CSS will now see a change in sharing pattern,
weightage to forest cover, which had not been done with states sharing a higher fiscal responsibility.
by the Thirteenth Finance Commission. As a result,  As articulated in the 14th commission’s report,
some large states with low forest cover like Uttar “between 2002-05 and 2005-11, revenue expenditure
Pradesh and Bihar are complaining that their share in by the Union Government on State List subjects
tax devolution has decreased. It has, but the basis for increased from an average of 14 per cent to 20 per
calculations has itself undergone a change.
cent, and on Concurrent List subjects from an average provision of penalties for delays in the payment of
of 13 per cent to 17 per cent. This implies a reduction subsidies by State Governments. Therefore, the Act
in expenditure, in percentage terms, on Union List be suitably amended to facilitate levy of such
subjects. penalties.
 The Union government should move its focus from  In order to provide financial autonomy to the SERCs,
spending on overlapping functional domain to the Electricity Act, 2003, provides for the
subjects that squarely fall in the functional domain of establishment of a State Electricity Regulatory
the Union, as in the Union List, and limit its Commission Fund by State Governments.The FFC
intervention on the ‘State List’ and ‘Concurrent List’ reiterated the importance of financial independence
on subjects of national priority having a consideration of the SERCs and suggested all States to constitute a
of externality. SERC Fund, as statutorily provided for.
6. FFC and Local Government  It endorse the initiative to set up a Rail Tariff
 The FFC has given the refreshing title “local Authority (RTA) .The RTA is expected to lead an era of
governments” as against local bodies used by the rationalisation of fares and freight structures for
previous commissions to the chapter dealing with improving the fare-freight ratio and gradually brining
grants to the third tier of government. down cross subsidisation between different
 The 14th FC has given due consideration to the fiscal segments.
federalism framework in India by devolving a larger  It recommend the setting up of independent
amount to local governments. The 14th FC has regulators for the passenger road sector whose key
recommended a grant-in aid for local governments functions should include tariff setting, regulation of
that is equal to an e service quality, assessment of concessionaire claims,
 Equity is and should be the overarching concern of collection and dissemination of sector information,
any federal polity worth the name. It is the underlying service-level benchmarks and monitoring compliance
rationale for federalism. For inter se distribution of of concession agreements.
local government grants to the states, the FFC uses  It endorsed that all States, irrespective of whether
the 2011 population with weight of 90% and area Water Regulatory Authorities (WRAs) are in place or
10%. The choice of 2011 population has adversely not, consider full volumetric measurement of the use
affected states like Kerala, Tamil Nadu etc. who have of irrigation water. FFC reiterated the
undertaken family planning to contain population. recommendations of the FC-XIII and urge States
 The effort of the Thirteenth Finance Commission to which have not set up WRAs to consider setting up a
divide local government grants into basic statutory WRA, so that the pricing of water for
unconditional grants and conditional performance domestic, irrigation and other uses can be
grants was meant to incentivise the “laggards”. To determined independently and in a judicious manner.
avail of performance grants, the PRIs had to fulfill six 9. Balancing Fiscal Autonomy and Fiscal Space
conditionalities and urban local bodies nine. The FFC  The spirit behind the FFC recommendations is to
has not only reduced the share of performance grants increase the automatic transfers to the states to give
to 10% from 34%, the conditionalities are also made them more fiscal autonomy .There is concern that
less demanding. fiscal space or fiscal consolidation path of the Centre
7. Amending FRBM (Fiscal Responsibility and would be adversely affected. However, to ensure that
Budget Management) Act the Centre’s fiscal space is secured, the suggestion is
 FFC recommended that the Union Government that there will be commensurate reductions in the
should consider making an amendment to the FRBM Central Assistance to States (CAS) known as “plan
Act to omit the definition of effective revenue deficit transfers.”
 The Economic Survey 2014-15 notes that CAS
from 1 April 2015.
 It recommended an amendment to the FRBM Act transfers per capita are only mildly progressive. This
inserting a new section mandating the establishment is a consequence of plan transfers moving away from
of an independent fiscal council to undertake ex-ante being Gadgil formula-based to being more
assessment of the fiscal policy implications of budget discretionary in the last few years. Greater central
proposals and their consistency with fiscal policy and discretion evidently reduced progressivity. A corollary
Rules. In addition, the Union Government take is that implementing the FFC recommendations
expeditious action to bring into effect Section 7A of would increase progressivity because progressive tax
the FRBM Act for the purposes of ex-post transfers would increase and discretionary and less
assessment. progressive plan transfers would decline.
 FFC recommended that the State Governments may 10. Conclusion
amend their FRBM Acts to provide for the statutory  The FFC has made far-reaching changes in tax
flexible limits on fiscal deficit. devolution that will move the country toward greater
8. Pricing of Public Utilities fiscal federalism, conferring more fiscal autonomy on
 FFC recommended that 100 per cent metering be the states. This will be enhanced by the FFC-induced
achieved in a time-bound manner for all electricity imperative of having to reduce the scale of other
consumers as already prescribed statutorily. The central transfers to the states. In other words, states
Electricity Act, 2003, currently does not have any will now have greater autonomy on the revenue and
expenditure fronts.
 MAINS QUESTION States will get autonomy in deciding their
 How have the recommendations of the expenditure priority, which will enhance the spirit of
“balancing wheel of fiscal federalism”.
14th Finance Commission of India enabled
the States to improve their fiscal position?  15TH FINANCE COMMISSION
(150 Words)  Due to corona there are:-
A. Approach a) 2020-21 and
a) Introduce the finance commission and
b) 2021-2026
constitutional provision related to it.
th  Thanks to corona pandemic some recommendations
b) Discuss how 14 Finance Commission enabled
the States to improve their fiscal position. for just 2020-21:- 42% = {41% to other states + 1% to
c) Conclude suitably. the UTs of J&K and Ladakh}
th
B. Introduction  15 FC was constituted by the president in Nov 2017
 The Fourteenth Finance Commission was constituted under the chairmanship of NK singh
by the President under Article 280 of the Constitution  Its recommendations will cover a period of a five
in 2013 to make recommendations for the period years (2021-2026)
2015-20. Dr. Y. V. Reddy was appointed the Chairman
 Although some separate recommendations were also
of the Commission. Finance Commission is a
constitutional body created to address issues of made for a year 2020-21 because of corona pandemic
vertical and horizontal imbalances of federal finances  FEATURES OF 15TH FC
in India.
a) It has recommended maintaining the vertical
C. Body
th devolution at 41%. it is at the same level of 42% , the
 The 14 Finance Commission enabled the States to th
improve their fiscal position in the following ways: divisible pool as recommended by 14 finance
 Share in Centre’s Divisible Pool: The commission commission
recommended an increase in the share of States in b) It has made the required adjustment of 1% due to the
the Center's divisible tax pool to 42% from 32% at changed status of the state of J&K into the new union
present. This will enhance the states autonomy in territories of J&K and Ladakh.
deciding their expenditure priorities. th
c) Some of its recommendations of 14 FC like
 Centrally Sponsored Schemes: The Commission also
withdrawal from the CSS , change in the revenue
recommended eight centrally sponsored schemes
(CSS) to be delinked from support from the Centre. sharing pattern b/w center and states, appointment
Thus, States will be sharing a higher fiscal of independent regulator for road sector ,
th
responsibility and autonomy to implement disinvestments of PSU’s will also continue in 15
development initiatives. finance commission
 Taxation: The Commission has recommended that
 15TH FINANCE COMMISSION & HORIZONTAL
tax devolution should be the primary source of
transfer of funds to States. This would increase the IMBALANCE:-
flow of unconditional transfers and give States more To solve the complaints of the states the 15th FC
flexibility in their spending INDICATORS Wright (%)
 Grants: Transfers were proposed including grants to
Population (2011) 15%
rural and urban local bodies, a performance grant
along with grants for disaster relief and revenue Demographic change (1971-2011) 12.5%
deficit. These transfers total to approximately 5.3 PCI distance (from Haryana) 45%
lakh crore for the period 2015-20. Area 15%
 Compensation: The commission recommended Forest cover & ecology 10%
compensating States fully for three years in case of Tax & fiscal efforts 2.5%
revenue loss after GST implementation. The  Tax & fiscal efforts is added as a new indicator in
Commission suggested that 100% compensation be
paid to the States in the first, second and third years, 15th finance commission.
75% compensation in the fourth year and 50% A. MERITS
compensation in the fifth and final year. It also
recommended the creation of an autonomous and  With enough fiscal space states can meaningfully
independent GST compensation fund through contribute to the overall growth and
legislative actions development I their regions thereby adding to
D. Conclusion the aggregate growth of the nation
 The Finance Commission recommendations will
reform the State finances which will assume greater  Fiscal space for center:- total 15th finance
significance for macroeconomic management as the commission transfers (devolution + grants) ,
fiscal deficit of State governments reached constitutes about 34% of estimated gross
unsustainable levels. After the recommendations,
revenue receipts of the union leaving adequate
fiscal space to meet its resource requirements
and spending obligations over National
 KEY POINTS
A. Vertical Devolution (Devolution Of Taxes Of
development priorities
The Union To States,
 Grants to local governments:- along with grants a) It has recommended maintaining the vertical
for municipal services , local govt bodies, it devolution at 41% - the same as in its interim report
includes performance based grants , incubation for 2020-21.
 It is at the same level of 42% of the divisible
of new cities and health grants to local govts to th
pool as recommended by the 14 Finance
support human resource Commission.
 In grants for urban local bodies:- basic grants b) It has made the required adjustment of about 1% due
are proposed for cities/ towns having a to the changed status of the erstwhile State of
Jammu and Kashmir into the new Union Territories of
population of less than 1 million. For million +
Ladakh and Jammu and Kashmir.
cities, 100% of the grants are performance B. Horizontal Devolution (Allocation Between
linked through the Million plus cities challenge The States):
funds (MCF).  For horizontal devolution, it has suggested 12.5%
 MCF amounts: - is linked to the performance of weightage to demographic performance, 45% to
these cities in improving their air quality, income, 15% each to population and area, 10% to
forest and ecology and 2.5% to tax and fiscal efforts.
meeting the service level benchmark for urban
C. Revenue Deficit Grants To States:
drinking water supply, sanitation and solid waste  Revenue deficit grants emanate from the
management. requirement to meet the fiscal needs of the States on
their revenue accounts that remain to be met, even
B. POSSIBLE DEMERITS after considering their own tax and non-tax resources
 Performance based incentives (allocations) may and tax devolution to them.
dis-incentivise independent decision making.  Revenue Deficit is defined as the difference between
spending only by the states in case of un-tied revenue or current expenditure and revenue receipts
that includes tax and non-tax.
funds would undermine cooperative fiscal  It has recommended post-devolution revenue deficit
federalism and states now cannot hold union grants amounting to about Rs. 3 trillion over the five-
govt accountable for their own fiscal year period ending FY26.
 The number of states qualifying for the revenue
imprudence
deficit grants decreases from 17 in FY22, the first
 This may dilute the joint responsibility that the year of the award period to 6 in FY26, the last
union and the states have. year.
 INTERNET MATERIAL FOR 15th F.C D. Performance Based Incentives And Grants
 Recently, the government accepted the To States:
 These grants revolve around four main themes.
15th Finance Commission’s recommendation to
 The first is the social sector, where it has focused
maintain the States’ share in the divisible pool
on health and education.
of taxes to 41% for the five-year period starting  Second is the rural economy, where it has focused
2021-22 on agriculture and the maintenance of rural roads.
 The Commission’s Report was tabled in the  The rural economy plays a significant role in the
Parliament country as it encompasses two-thirds of the
 15TH FINANCE COMMISSION country's population, 70% of the total
 The Finance Commission (FC) is a constitutional workforce and 46% of national income.
 Third, governance and administrative reforms under
body, that determines the method and formula
for distributing the tax proceeds between the Centre which it has recommended grants for judiciary,
and states, and among the states as per the statistics and aspirational districts and blocks.
 Fourth, it has developed a performance-based
constitutional arrangement and present
requirements. incentive system for the power sector, which is not
 Under Article 280 of the Constitution, the President linked to grants but provides an important, additional
of India is required to constitute a Finance borrowing window for States.
Commission at an interval of five years or earlier. E. Fiscal Space For Centre:
th

th
The 15 Finance Commission was constituted by the  Total 15 Finance Commission transfers (devolution +
President of India in November 2017, under the grants) constitutes about 34% of estimated Gross
chairmanship of NK Singh. Its recommendations will Revenue Receipts to the Union, leaving adequate
cover a period of five years from the year 2021-22 to fiscal space to meet its resource requirements and
2025-26. spending obligations on national development
priorities.
F. Grants To Local Governments: defined as the total number of children that
 Along with grants for municipal services and local would be born to each woman if she/they were
government bodies, it includes performance-based to pass through the childbearing years bearing
grants for incubation of new cities and health children according to a current schedule of age-
grants to local governments. specific fertility rates.
 In grants for Urban local bodies, basic grants are 6. Tax Effort:
proposed only for cities/towns having a population of  This criterion has been used to reward states with
less than a million. For Million-Plus cities, 100% of the higher tax collection efficiency.
grants are performance-linked through the Million-  It has been computed as the ratio of the average per
Plus Cities Challenge Fund (MCF). capita own tax revenue and the average per capita
 MCF amount is linked to the performance of state GDP during the three-year period between
these cities in improving their air quality and 2016-17 and 2018-19.
meeting the service level benchmarks for urban
drinking water supply, sanitation and solid waste
management.
G. Criticism
 Performance based incentives disincentivizes
independent decision-making. Any conditions on the
state's ability to borrow will have an adverse effect
on the spending by the state, particularly on
development thus, undermines cooperative fiscal
federalism.
 It does not hold the Union government accountable
for its own fiscal prudence and dilutes the joint
responsibility that the Union and States have.
 HORIZONTAL DEVOLUTION CRITERIA
1. Population:
The population of a State represents the needs of the
State to undertake expenditure for providing services
to its residents.
 It is also a simple and transparent indicator that has a  TAX EXPENDITURE OR TAX PREFERENCE OR
significant equalising impact. REVENUE FOREGONE:-
2. Area:  It indicates how much more revenue could have
 The larger the area, greater is the expenditure
been collected by the government if tax be
requirement for providing comparable services.
3. Forest and Ecology: levied.
 By taking into account the share of dense forest of  It is also called as revenue foregone or Tax
each state in the aggregate dense forest of all the preference.
states, the share on this criteria is determined.  It accounts for a major loss of revenue due to
4. Income Distance: rebates & exemptions.
 Income distance is the distance of the Gross State
Domestic Product (GSDP) of a particular state from  Tax Expenditure in Housing Sector:-
the state with the highest GSDP. a) Exemptions allowed for HRA (income Tax) &
 To maintain interstate equity, the states with lower Mediclaim.
per capita income would be given a higher share.
b) Exemptions allowed for interest payment & principal
5. Demographic Performance:
repayment for housing loans (CLSS).
 It rewards efforts made by states in controlling their
c) For PM Awas Yojana, very high interest and tax break
population.
 This criterion has been computed by using the have been provided.
reciprocal of the total fertility ratio of each d) Exemption of rental income.
state, scaled by 1971 population data. …7th Class ended,8th started………
 This has been done to assuage the fears of
southern States about losing some share in tax  TOPIC:- INCLUSIVE GROWTH
transfers due to the reliance on the 2011 Census
data instead of the 1971 census, which could  THE INCLUSIVE GROWTH:-
penalise States that did better on managing
demographics. A. PHYSICAL DEVELOPMENT
 States with a lower fertility ratio will be scored  Physical infrastructure development
higher on this criterion.  Developing civic amenities
 The Total Fertility Ratio in a specific year is  Financial inclusion
B. HUMAN DEVELOPMENT b) Growth :-
 Education  DEFINITION OF GROWTH
 Health  Growth is a quantitative concept which relates to
 THE INFRASTRUCTURE :- increase in flow variables to keep accumulating stock
variables which can further contribute to higher
A. ECONOMIC INFRASTRUCTURE
output, production and standard of living. It includes
 Electricity
increased commercialisation, industrialisation and
 Transportation
urbanisation, all of which can increase the
 communication
productivity for everyone in the economy which will
B. SOCIAL INFRASTRUCTURE result in uplifting the everyone’s standard of living
 Education including the lowest income growth of the economy.
 Health
 Housing
 DEFINITION OF INCLUSIVE GROWTH
 It is a qualitative concept which is based on not only
 SOME BASIC THINGS TO KNOW
the amount of GDP but also on the inclusion of all
 We study the growth in terms of GDP
 GDP = P×Q + P×S sections of society and minimization of deprivation
 When we talk quantity with quality , it is along with providing equal opportunities to all
development or called as inclusive growth geographical economic areas for further
 Development or the better quality of life , better development.
standard of living, better income the following things
are needed
 Commercialisation and
 urbanisation and
 industrialisation = leads to trickle-down effect
 STOCK VARIABLES:- POINT OF TIME
 Stock is defined as a variable that is measured at a
particular point in time.
 A stock variable is a quantified variable that is
measured at a particular point of time. Since, stock
of capital, total money supply, and number of
persons employed are a quantities measured at a
particular point of time, these are stock variables
 FLOW VARIABLES:- PERIOD OF TIME
 Flow is defined as a variable which is measurable
 Its main features are:- The inclusive growth
over a period of time
 A variable whose value depends on a period of time means the growth that ensures
rather than an instant, example being the gross a) Equitable distribution of resources
domestic product ➡ It can be ensured by proper distribution of
 Note:- There must be a continuous flow for the
subsidies like:-
better stock.
 Note:- With consumption = tax ↑, income ↑,  through input subsidies in agriculture , the
production ↑, GDP ↑ inclusive cultivation can be promoted.
 GDP↑ = Primary sector ↑ + S.S ↑ + T.S ↑= GDP↑  Through sarv Shiksha Abhiyaan, mid-day meal
scheme, free education, the inclusive education
can be promoted
 Through Ayushman Bharat scheme, inclusive
health can be promoted and
 These all will ultimately lead to inclusive growth
b) Poverty alleviation
 It can be ensured through proper poverty
 Note:- Availability of any resource without any elimination programmes
discrimination is also a form of democracy. It is c) Sustainable development
democratic  Economic growth with environmental protection
 ECONOMIC WELFARE & GROWTH would save natural resources for the next
 After the great depression period of America, two generation
terms emerged:  Development but in an environmentally
a) Economic welfare :- responsible manner
d) Removing capability deprivation (by Amartya  It also makes the people more skilful as
Sen) many machines run on electricity
 This removal can be done through proper c) Communication:-
skill development training [programmes, By  Development of communication reduces
schemes like search cost (real expenditure in finding best
 PM Kaushal Yojana Project (for opportunities), improving business
capability the training is given under knowledge, quick transmission of
this), information w.r.t any new opportunity. It
 Deen Dayal upadhaiya skill makes information more democratic and can
development programmes be used as the tool to spread technical
 We can train people by education to earn inclusion to increase productivity in far off
more by increasing capability regions.
 Like by TVE (ownship and village enterprises)  Note:-Availability of any resource without
model is followed in China any discrimination is also a form of
 POLICIES :-INCLUSIVE GROWTH democracy. It is democratic
2. DEVELOPING CIVIC AMENITIES:-
A. THE PHYSICAL DEVELOPMENT:-
 Note:- Disposable income :- income remaining
1. PHYSICAL INFRASTRUCTURE DEVEL. after deduction of taxes and social security charges,
 Physical infrastructure creation has high available to be spent or saved as one wishes
potential to reduce inequality.  D.I = Y-Tax+TR-Medical bill-Transportation cost
 For example:- development of transportation  Development of civic amenities like treated
links like rods or railways can reduce water , better drainage system, public
segmentation of markets resulting in opening transportation etc will help in reducing cost of
new business opportunities, more employment living for all and increases disposable income,
opportunities and better standard of living of which can be used to improve standard of living
poor in deprived regions. 3. THE FINANCIAL INCLUSION:-
 Roads or railways, electricity and communication  Financial inclusion consists of
are very important for this development. a. Banking inclusion means accessibility to a
a) Roads :- bank account for all
 Roads do end to end management and b. Credit inclusion:- means accessibility to
 Ensure the proper supply chain cheaper loans from formal sector like banks ,
management, non-banking financial company etc
 Promote business opportunities c. Insurance inclusion :- means getting
 Markets linkages can be done, segmentation insurance support to protect from sudden
of markets can be removed events outside the control of producer
 All of this will help in encouraging the poor
to take a calculative risk, develop new
business opportunities, and increase their
earning capacity through institutional
mechanism without any discretion of an
individual.
 Concept was given by Committee on Financial
b) Electricity:- Inclusion - Chairman: Dr C Rangarajan, RBI,
 Development of electricity can result in 2008) and Raghuram Rajan.
improving the production capacity by  The concept of financial inclusion was first
mechanisation, increasing hours of work, introduced in India in 2005 by the Reserve Bank of
improving training techniques. India. The objectives of financial inclusion are to
 It increases the working hours of people provide the following: A basic no-frills banking

account for making and receiving payments. Saving along with laptop and internet connection to do
products (including investment and pension) necessary updation.
 Financial inclusion has been defined as “the process  One passport printing machine is also be given
of ensuring access to financial services, timely and
to business correspondents
adequate credit for vulnerable groups such as weaker
 One locker would also be given to business
sections and low-income groups at an affordable
correspondents to keep the cash and other
cost”. (Committee on Financial Inclusion - Chairman:
Dr C Rangarajan, RBI, 2008) valuable documents safe.
THE FINANCIAL INCLUSION  FIP:FINANCIAL INCLUSION PLAN 2010
BEFORE 2014 2014 ONWARDS  Under it, RBI instructed commercial banks to
 No frills A/C  PM Jan Dhan Yoj. (×) prepare a plan to spread financial inclusion to
 GCC  Payment banks (×) their respective areas during the period of 2010-
 B.C Model (×)  Small Finance Banks (×)
2013 and submit it into the RBI so that RBI can
 USB  PM Mundra Yojana
 50 minutes loan .com take further necessary steps on that bases.
 FIP
 Swabhiman Yojana  Offline cashless  SWABHIMAN YOJANA 2011
payments
 CRISIL inclusix  Under it, RBI instructed commercial banks to
 DBT provide the banking facilities in 74000 villages
(×) means शाम sir की ास म हो गया ही cross वाला सो वहा से
through B.C Model (business correspondent
पड़े . Look the sham sunder sir class for (×) marked
model)
 No-Frills A/C:-
 CRISIL INCLUSIX 2013
 It was a zero balance account , but due to the
 CRISIL INCLUSIX full form :- Credit rating
lack of information and less banking habit
information services India Limited. Financial
among the people it was not so successful .
inclusion index 2013
 So in 2012, RBI instructed the commercial banks
 Score is 0-100 under this index
to convert it into BASIC SAVING BANKS DEPOSIT
 India’s score was 47 in 2014
Account with some basic facilities like
 India’s score is 56 in 2021
permission of transaction upto 1lakh/month,
debit card facility. No cheque book facility was  There are 4 different parameters on which
given (note it) the rank is given
a) Deposit penetration
 GCC:- GENERAL CREDIT CARD 2005
b) Branch penetration
 It is for rural and semi-urban areas . under it , a
c) Credit penetration
person can take loan upto 25,000 Rs without any
d) Insurance penetration
collateral.
 All are calculated per 1lakh people. And the
 It will reduce people (especially farmers)
rank is given from 0-100.
dependency on non-institutional money lenders
 All Credit Card (e.g. Artisan Credit Card, Laghu  DBT-DIRECT BENEFIT TRANSFER 2013
Udyami Card, Swarojgar Credit Card, and  Under this, subsidy amount is directly
Weaver’s Card etc.) catering to the non-farm transferred in the real/genuine beneficiary’s
entrepreneurial credit needs of individuals are account.
covered by General Credit Card Scheme. As the  It stops the leakages.
GCC is intended to cover all entrepreneurial  It hands over money in the hands of real
credit, the consumption credit extended to beneficiaries, using this they can raise their
individuals is not be reported under GCC.in FIP quality of life.
reports to RBI  It was introduced with JAM trinity (JAN-DHAN
AADHAR MOBILE TRINITY).
 USB:-ULTRA SMALL BRANCH 2012
 PAHAL Scheme:- CBT in Hindi called Pratyksh
 Under it, some new features had been added
hastenterit Lab
with business Correspondent model (B.C
Model) like one bank employee would come  PMMY:- PM MUDRA YOJANA
once in a week to a business correspondent MUDRA:- Micro Units Development Refinance

Agency
 Upto 10 lakh can be taken as loan without b) Steps by govt to promote inclusive
collateral education
a) Shishu loan :- upto Rs50,000  Initiating total literacy mission govt launched
b) Kishore loan :- Rs2.5 lakh-Rs5 lakh Sarva Shiksha Abhiyan, or SSA, under it govt
c) Tarun loan:- Rs 5lakh-10lakh provides compulsory education to the children
 According to the latest economic survey, more aged 6-14 years
than 21crore people took loan under it and out  Initiating national secondary school literacy
of them more than 70% were women. In this mission, and national higher school literacy
way it is also promoting entrepreneurship mission to reduce dropout rates from schools
among the women. through better sustainability in education.
 59 minutes Loan.Com  To promote skill development, govt launched
 If you have a good CIBIL score (more than 750 PM Kaushal vikas Yojana tor Deen Dayal
out of 900) , you can take loan upto 5crore as a Upadhyaya skill development programme
business loan, car loan, home loan etc. (DDUSDP), these programmes not only provide
 The Credit Information Bureau (India) Limited (CIBIL) training but also provide placement
is the most popular of the four credit information opportunities to all
companies licensed by Reserve Bank of India. There  Ministry of Education launched NIPUN Bharat
are three other companies also licensed by the RBI to Programme i.e is the National Initiative for
function as credit information companies. They are
Proficiency in Reading with Understanding and
Experian, Equifax and Highmark
Numeracy Bharat Programme for ensuring that
 OFFLINE CASHLESS PAYMENT every child in the country necessarily attains
 Problems were like not having internet foundational literacy and numeracy by 2026-27.
connection and smart phones faced by many  Govt facilitates publishing of annual status of
people while making online payments. So govt education report (ASER) which is Published by
came up with offline cashless payment method. the NGO Pratham since 2005.
 *99# is the number to dial to make offline  Note:- ASER survey 2020 was the first ever
payments. phone based education survey
 Started by RBI in March-2022
 SARVA SHIKSHA ABHIYAN
…8th Class ended,9th started……… a) Govt launched Sarva Shiksha Abhiyan, or SSA, is an
B. THE HUMAN DEVELOPMENT:- Indian Government programme aimed at the
universalisation of Elementary education "in a time
 Human development is an approach focusing on the bound manner", the 86th Amendment to the
people themselves and the opportunities they have. Constitution of India making free and compulsory
With the finding that the economic growth does not education to children between the ages of 6 to 14 a
bring automatic growth in wealth for everyone, fundamental right.
human development focuses on the role of the b) It is a flagship programme of the government of India,
that was started in 2001, to achieve the
people themselves in bringing human life to a better
Universalisation of Elementary Education (UEE). The
condition legal backing to SSA was provided when free and
1. EDUCATION compulsory education for the children in the age
 Health is also divided into three parts group of 6-14 was made a fundamental right in the
Indian Constitution under Article 21 A. SSA aims to
a) Definition meet the expectations of this fundamental right in a
 Education promotes inclusive growth through time-bound manner.
following ways:- c) Ministry of Human Resource Development (MHRD),
 It increases information which results in improving Government of India (GoI) anchors the SSA
choice of opportunities , creating better earnings Programme and it has been operational since 2000-
2001
prospects, it improves productivity which results in
 NATIONAL LITERACY MISSION WAS
improving earnings opportunities and even
developing new business opportunities
ESTABLISHED IN THE YEAR
 The National Literacy Mission was established in the
 It increases capability to adapt which results in more
year 1988 and launched by the Government of India
stability of occupation especially in world with fast on May 5, 1988 with the goal of eradicating illiteracy
changes in technology from the country by catering to the section of the
society that requires education the most and will  Millennium sustainable goals (MDGs) and
benefit from it. Thus, the National Literacy Mission sustainable development goals (SDGs) also
was established not with the only motive of making
every individual of the country self-reliant in the three
focus on health and education
R's - Reading, Writing, and Arithmetic but so by  MDGs focus on developing nations, they are 8 in
making them aware of the developmental issues that numbers
cause hurdles to the growth of the society. The target a. Eradicate extreme poverty and Hunger
group for this mission was set between the age group
b. Achieve universal primary education
of 15 to 35. This Mission worked under the
c. Promote gender equality & empower women
administration of the National Literacy Mission
Authority which was an independent wing of the through wage employment & political
Department of Education participation
 The two flagship programmes of the National Literacy d. Reduce child mortality {according to the census
Mission (NLM) include: committee report 2022, India witnessed a drop
a) Total Literacy Programmes and in female infant mortality rate from 32/1000 live
b) Post Literacy Programme
births to 28/1000 live births, which is equal to
 PM KAUSHAL VIKAS YOJANA male infant mortality rate. It endorses govt
 The Vision of DDU-GKY is to “Transform rural poor
programme “Beti Bachao Beti Padhao”}
youth into an economically independent and
globally relevant workforce”. e. Improve maternal health
 It aims to target youth, in the age group of 15–35 f. Combat HIV/AIDS, Malaria and other diseases
years. g. Ensure environmental sustainability
 DDU-GKY is a part of the National Rural Livelihood h. Develop a Global Partnership for development
Mission (NRLM), tasked with the dual objectives of  SDGs: Sustainable Development goals, total are
adding diversity to the incomes of rural poor families
and cater to the career aspirations of rural youth. 17 in number:-they are applied to all countries. The
SDGs are also nationally owned and country led,
c) Our suggestions to make education more wherein each country is given the freedom to
inclusive establish a national framework in achieving the SDGs.
 Improving basic infrastructure in schools and making First 7 SDGs are an extension of MDGs, rest 10 cover
it more accessible at primary level aspects such as :-
 Reducing absenteeism from the teachers to promote  Inclusiveness and jobs
sustainable education  Infrastructure and industrialisation
 To create a dedicate cadre of teachers to promote  Equitable distribution of income and resources
health educational development b) Govt steps to Promote Inclusive health
 Give proper rewards to those dedicated teachers on  Initiating national health mission by combining
the regular basis for their outstanding work National urban health mission and national Rural
 Increase the speed of quality recognition of colleges, health Mission (NRHM) to provide universal health
universities and educational institutions to help support
students in getting quality education .In India it is  Initiating mission Indradhanush from 25Dec 2014 to
done by NAAC provide vaccination to children
 NAAC:- National Assessment and Accreditation  Making appointments of ASHA {Accredited Social
Council (established by UGC in 1994 ay Health Activist (ASHA)} to provide nutritional support
Bangalore)conducts assessment and accreditation of for pregnant and lactating women and vulnerable
higher education institutions to derive an groups in the population (old age people, children)
understanding of the quality status of the institution.  Initiating Ayushman Bharat under PM Jan Arogya
2. HEALTH Yojana to provide treatment upto 5 lakh rupees
 It also further divided into three parts:- without any payment to the poorest of the Poor.
 Initiating swachh bharat mission to make India open
a) Definition
defecation free by oct 2019.
 WHO measures four accessibility to assess better
 Govt has initiated national drinking programme both
health:- in rural and urban areas to provide free drinking
a. Accessibility to clean drinking water water to all by 2024.
b. Accessibility to sanitation c) Our suggestions to make health More
c. Accessibility to Nutrition
inclusive:-
d. Availability of trained medical staff  Increasing the number of trained medical
professionals. This can be done through three ways
a. Opening more training institutions areas by March 2020.
b. More concentration of doctors  Ensure that every adult had access to a financial
c. Increasing nursing career growth :{According service provider through a mobile device by
to WHO report India’s has 1.79 nurses/1000 march 2024.
 Strengthen eco-system for various modes of
population which is 46% less than WHO norms}
digital financial services in all the Tier 2 to Tier 6
 Ensuring the proper supply of medicine.
centers to create the necessary infrastructure by
 Spreading awareness and information to the March 2022.
people about deadly diseases associated with  Enroll every willing and eligible adult enrolled
consumption of dirty water and open defecation under PM Jan Dhan Yojana under an insurance
 CONCLUSION:- scheme (PMJJBY, PMSBY, etc.), Pension scheme
(NPS, APY, etc.) by March 2020.
a) Health care expenditure in India is still mostly
 Make Public Credit Registry (database of credit
privately financed.
information of borrowers) fully operational by
b) 67% of the total health care expenditure was
March 2022 so that organized financial entities
through out of pocket expenses till 2020. could leverage it for assessing credit proposals
c) According to latest NFHS-5 report, it has reduced from all citizens.
to 49% which shows a positive improvement  NSFI has been organized and approved by the
towards providing affordable health care Financial Stability Development Council.
facilities to the people . but this should be  Impact
improved further and public health care facilities  The strategy is in line with steps needed to
should become quantitatively and qualitatively strengthen the digital financial services’ ecosystem
more stronger i.e. not only the amount of including increased awareness on usage of digital
expenditure should increase but also better modes of transactions, increased acceptance
infrastructure and a safe environment incorporating
targeting and fixing of accountability in the case
the principles of consent and privacy.
of poor delivery of services
 The strategy also envisions to make the Public Credit
HAND-OUT MATERIAL OF INCLUSIVE GROWTH Registry (PCR) fully operational by March 2022 so
 Inclusion/Inclusive policy refers to the practice or that authorized financial entities could leverage it for
policy of providing equal access to opportunities and assessing credit proposals from all citizens.
resources for people who might otherwise be  FINANCIAL STABILITY DEVELOPMENT COUNCIL
excluded or marginalized, such as those having  It is apex level autonomous body constituted in 2010
physical or mental disabilities or belonging to other to ensure financial stability, regulate the entire
minority groups or other gender etc. financial sector of the country and enhance
 OBJECTIVES OF INCLUSION coordination between various financial regulatory
a) It aims for ensuring access to essential services in bodies.
 It is headed by the finance minister and heads of
health and education by the poor.
b) It includes providing equality of opportunity, financial sector regulatory authorities are its member
empowering people through education and skill (RBI, SEBI, IRDA)
development. 2. National Strategy for Financial Education
c) It also encompasses a growth process that is  The Reserve Bank of India (RBI) has released the
environment friendly growth, aims for good National Strategy for Financial Education (NSFE)-
governance and helps in creation of a gender 2020-2025 document for creating a financially aware
sensitive society. and empowered India.
 It emphasizes a multi-stakeholder -led approach for
 EMPOWERING/ SOCIAL SECTOR empowering various sections of the population to
POLICIES FOR WOMEN, SC/ STS, develop adequate knowledge, skill, attitudes and
behaviour which are needed to manage their money
AND MINORITIES:- better and to plan for the future i.e., ensuring their
1. National strategy for financial Inclusion financial well- being.
 Recently, Reserve Bank of India released  It recommends ‘5C’ approach for dissemination of
National Strategy for Financial Inclusion (NSFI) financial education, which includes-
for the period 2019-2024 to set forth the vision  Content: Financial Literacy content for various
in expanding and sustaining the financial sections of population.
 Capacity: Develop the capacity and ‘Code of
inclusion process at national level through a
Conduct’ for financial education providers.
broad convergence of action.  Community: Evolve community led approaches
 Key recommendations for disseminating financial literacy in a
 Provide banking access to every village within a sustainable manner.
5km radius/hamlet of 500 households in hilly  Communication: Use technology, media and
innovative ways of communication for spite of high rate of savings and capital formation is:
dissemination of financial education messages. [1995]
 Collaboration: Streamline efforts of other  (a) High birth rate (b) Low level of foreign and (c) Low
stakeholders for financial literacy. capital output ratio (d) High capital output ratio
 Impact  Ans: (d)
 It will inculcate financial literacy concepts among the  Q2. Human development index comprises literacy
various sections of the population through financial rates, life expectancy at birth and [1997]
education to make it an important life skill.  (a) Gross National Product per head in the US dollars
 It will encourage active savings behaviour. (b) Gross Domestic Product per head at real
 It will encourage participation in financial markets to purchasing power (c) Gross National Product in US
meet financial goals and objectives. dollars (d) National Income per head in US dollars
3. Reforms for Migrants: Occupational Safety,  Ans: (d)
Health and Working Conditions Code, 2020  Q3. Human Poverty Index was introduced in the
Human Development Report of the year: [1998]
(OSHC) and the Code on Social Security (CSS)
 1994 (b) 1995 (c) 1996 (d) 1997
2020  Ans: (d)
 Both OSHS and CSS have increased the scope of who  Q4. The first Indian state to have its Human
qualifies as an interstate migrant worker by including Development Report prepared and released by
persons who move from one state to another for Amartya Kumar Sen in Delhi is: [1999]
employment on their own in addition to those  (a) West Bengal (b) Kerala (c) Madhya Pradesh (d)
workers who are recruited by contractors from one Andhra Pradesh
state to another for employment.  Ans: (c)
 The provision in the OSCH provides that while  Q5. Indian Human Development Report does not
migrant workers will be registered by the states give for each sample village: [2000]
themselves, they can also do so themselves with  (a) Infrastructure and Amenities Index (b) Education
Aadhaar and a telephone authentication. Related Index (c) Health Related Index (d)
 Other provisions including the setting up of a social Unemployment Related Index
security fund, toll free call centers, and helplines are  Ans: (d)
also part of the new codes.  Q6. Consider the following statements:
 INTER/INTRA-STATE MIGRANTS IN INDIA  Most international agencies which find Development
 Internal migrant flows can be classified on the basis Program in India on intergovernmental bilateral
of origin and destination. agreements, mainly provide: [1996]
 One way to classify migration is: (1) intra-state, and  (1) Technical assistance
(2) inter-state.  (2) Soft loans which are required to be paid back with
interest
 In 2011, intra state movement accounted for almost
 (3) Grants, not required to be paid back
88% of all internal migration (39.6 crore persons).
 (4) Food assistance to be paid back
 According to the 2011 Census, there were 5.4 crore  (a) 2 and 4 are correct
inter-state migrants.  (b) 1, 2, and 3 are correct
 As of 2011, Uttar Pradesh and Bihar were the largest  (c) 1, 2, and 4 are correct
source of inter-state migrants while Maharashtra and  (d) 3 and 4 are correct
Delhi were the largest receiver states.  Ans: (b)
 Another kind of classification is: (1) rural-rural, (2)  Q8. “…instil into the vast millions of workers, men,
rural-urban, (3) urban-rural, and (4) urban-urban. and women, who actually do the job, a sense of
 As per the 2011 census, there were 21 crore rural- partnership and of cooperative performance….” The
rural migrants which formed 54% of classifiable above passage relates to: [2000]
internal migration.  (a) Planned development (b) Community
 Rural-urban and urban-urban movement accounted Development (c) Panchayati Raj System (d) Integrated
for around 8 crore migrants each. Development Programme
 There were around 3 crore urban-rural migrants (7%  Ans: (b)
of classifiable internal migration).  Q9. Inclusive growth as enunciated in the Eleventh
 Reasons for Internal Migration Five Year Plan does not include one of the following:
 As of 2011, majority (70%) of intra-state migration [2010]
was due to reasons of marriage and family.  (a) Reduction of poverty (b) Extension of employment
 While 83% of females moved for marriage and family, opportunities (c) Strengthening of capital market (d)
the corresponding figure for males was 39%. Reduction of gender inequality
 Overall, 8% of people moved within a state for work  Ans: (c)
(21% of male migrants and 2% of female migrants).  Q10. Which of the following can aid in furthering the
 Movement for work was higher among inter-state Government’s objective of inclusive growth? [2011-
migrants- 50% of male and 5% of female inter-state 1]
migrants  1. Promoting Self-Help Groups. 2. Promoting Micro
Small and Medium Enterprises. 3. Implementing the
 PYQS ON GROWTH AND DEVELOPMENT
Right to Education Act.
 Q1. The main reason for low growth rate in India, in
 Select the correct answer using the codes given in the country.
below:  These include the Pradhan Mantri Mudra
 (a) 1 only (b) 1 and 2 only (c) 2 and 3 only (d) 1, 2 and Yojana, Stand-Up India Scheme, Pradhan Mantri
3 only Jeevan Jyoti Bima Yojana, Pradhan Mantri
 Ans: (d) Suraksha Bima Yojana, and Atal Pension Yojana.
 Q11. Economic growth is usually coupled with [ 2. Expansion of financial services in Rural and
2011-01] Semi-Urban Areas
 (a) Deflation (b) Inflation (c) Stagflation (d)  Reserve Bank of India (RBI) and National Bank for
Hyperinflation Agriculture and Rural Development (NABARD) have
 Ans: (b) taken initiatives to promote financial inclusion in
 Q12. Economic growth in country X will necessarily rural areas.
have to occur if [2013-01]  These include the opening of bank branches in
 (a) There is technical progress in the world economy remote areas.
(b) There is population growth in X (c) There is capital  Issuing Kisan Credit Cards (KCC)
formation of X (d) The volume of trade grows in the  Linkage of self-help groups (SHGs) with banks.
world economy  Increasing the number of automated teller
 Ans: (c) machines (ATMs)
 Q13. Increase in absolute and per capita real GNP do  Business correspondents model of Banking, etc.
not connote a higher level of economic 3. Promotion of Digital Payments
development, if [2018-01]  With the strengthening of the Unified Payment
 (a) Industrial output fails to keep pace with Interface (UPI) by NPCI, digital payments have been
agriculture output (b) Agriculture output fails to keep made secure, compared to the past.
pace with industrial output (c) Poverty and  The Aadhar-enabled payment system (AEPS) enables
unemployment increase. (d) Imports grow faster than an Aadhar enabled bank account (AEBA) to be used at
exports. any place and at any time, using micro ATMs.
 Ans: (c)  The payment system has been made more accessible
 DRISTI IAS ON FINANCIAL INCLUSION due to offline transaction-enabling platforms,
 Financial inclusion may be defined as the process of like Unstructured Supplementary Service Data
ensuring access to financial services and timely and (USSD), which makes it possible to use mobile
adequate credit where needed by vulnerable groups banking services without internet, even on a basic
such as weaker sections and low income groups at an mobile handset.
affordable cost. 4. Enhancing Financial Literacy
 In a diverse country like India, financial inclusion is a  The Reserve Bank of India has undertaken a project
critical part of the development process. Since titled "Project Financial Literacy".
independence, the combined efforts of successive  The Objective of the project is to disseminate
governments, regulatory institutions, and the civil information regarding the central bank and
society have helped in increasing the financial- general banking concepts to various target
inclusion net in the country. groups, including, school and college going
 The state of financial inclusion has improved children, women, rural and urban poor, defence
considerably over time. However, the financial personnel and senior citizens.
inclusion hasn’t reached the poorest of the poor and  Pocket Money is Securities and Exchange Board of
there exist many bottlenecks and challenges which India (SEBI) and National Institute of Securities
need immediate attention. Markets (NISM’s) flagship programme aimed at
 Thus, there exists both a great need and the potential increasing financial literacy among school students.
to tap into the unbanked population and bring them  The objective is to help school students
into the financial net understand the value of money and the
 FINANCIAL INCLUSION INITIATIVES importance of saving, investing and financial
planning.
1. Jan Dhan-Aadhar-Mobile (JAM) Trinity
 The combination of Aadhaar, PMJDY, and a surge in
 FINANCIAL INCLUSION: SUCCESS STORY
mobile communication has reshaped the way citizens 1) Increased Access to Banks
access government services.  According to the World Bank’s Global Financial
 As per the estimates in March 2020, the total number Inclusion Database or Global Findex report (2017),
of beneficiaries under Jan Dhan scheme have been 80% Indian adults have a bank account against the
more than 380 million. 53% estimated in 2014.
 By significantly changing the concept of individual  The Findex 2017 report also estimates that 77%
identity, Aadhaar has not only brought about a secure Indian women have bank accounts, against 43% in
and easily verifiable system but also easy to obtain as 2014.
well to help in the financial inclusion process. 2) Multiplier Effect
 The government has also launched many flagship  These initiatives have brought about major changes
schemes to promote financial inclusion and provide to increase the last-mile connectivity of financial
financial security to empower the poor and unbanked services to its people.

 By providing access to financial resources to females.
underprivileged and marginalised sections of society,  This is attributed to socio-economic factors, including
financial inclusion has the potential to reduce the availability of mobile handset and internet data
poverty, create jobs, among others. facility being higher among men than women.
3) Enhancing Active Participation of Citizenry 6) Lack of Credit Penetration
 Earlier, private institutions did not engage with the  One of the main constraints in providing credit to
poor as customers on a significant scale. low-income households and informal businesses is
 This has now changed, and there has been an active the lack of information available with formal creditors
participation of the private players (payment banks to determine their credit worthiness. This results in a
like paytm, airtel money and jio money), as they have high cost of credit.
also realised that bringing the poor into the financial  Due to this, in 2016, the number of loan accounts per
net is beneficial to their business models as well. 1,000 adults was 154 in India. This is quite low when
4) Integration of Financial Services compared to similarly placed economies like BRICS
 The convergence of JAM trinity with the Direct nations.
Benefit Transfer (DBT) scheme has largely been  STEPS TO BE TAKEN
successful. 1) Reviving Banking Correspondent Model
 Due to this, there has been a significant improvement  Given the infeasibility of locating branches in every
in terms of targeted and accurate payments. nook and corner of the country, bank correspondents
 It has also helped in weeding out duplication of are used to reach out to prospective clients.
entries, and bringing down the reliance on cash mode However, an inadequate compensation structure
of payments. makes correspondent banking unattractive.
 ASSOCIATED CHALLENGES  Thus, there is a need to create better monetary
1) Non-Universal Access to Bank Accounts incentives for banking correspondents as well as to
 Bank accounts are a gateway to all financial services. provide them better training.
But, according to a report by the World Bank, about 2) Leveraging JAM Trinity
190 million adults in India do not have a bank  Technology should be used to improve the
account, making India the world’s second largest assessment of credit-worthiness for households and
nation in terms of unbanked population after China. informal businesses.
2) Digital Divide  With the adoption of appropriate technology a new
 The most common barriers to the adoption of digital data-sharing framework (using Jan Dhan and Aadhaar
technology which may promote financial inclusion: platforms), to enable easier access to credit, with
 Non-availability of suitable financial products adequate safeguards for maintaining data privacy.
 Lack of skills among the stakeholders to use digital 3) Need For Data Protection Regime
services  In addition to greater digitization, there is also a need
 Infrastructural issues to strengthen cyber security and data protection
 Low-income consumers who are not able to afford regime in the country.
the technology required to access digital services 4) Leveraging Differentiated Banks
3) Implement Deficit  Differentiated Banks like Payment banks and small
 For instance, the Jan Dhan scheme has resulted in the finance banks can be leveraged to scale up payments
opening of many dormant accounts which never saw systems in underserved areas.
actual banking transactions. 5) Promoting USSD for Rural Areas
 All such activities incur costs on the institutions, and  Payments through the USSD channel should be
thus, huge operative costs only proved to be promoted (by reimbursing the charges incurred in the
detrimental to the actual objective. USSD process), as they have an advantage over the
 To avoid these counterproductive outcomes, it is internet in that it can also cover a large proportion of
important that all stakeholders participate in such non-smartphone users.
programmes with proper intent and not just for the  In India, USSD can be particularly useful in rural areas
sake of it. where some segments still do not have reliable
4) Informal and Cash-Dominated Economy access to the internet.
 India is the heavily dominated cash economy, this  CONCLUSION
poses a challenge for digital payment adoption.  For the success of financial inclusion in India, there
 Also, according to the International Labour has to be a multidimensional approach through which
Organization (ILO), about 81% of the employed existing digital platforms, infrastructure, human
persons in India work in the informal sector. resources, and policy frameworks are strengthened
 The combination of a huge informal sector along with and new technological innovations should be
a high dependence on cash mode of transaction promoted.
poses an impediment to digital financial inclusion  If adequate measures are taken to tide over the
5) Gender Gap in Financial Inclusion existing problems, financial inclusion has the
 According to the 2017 Global Findex database, 83% of potential to amplify the benefits of economic growth
males above 15 years of age in India held accounts at to the poor.
a financial institution in 2017 compared to 77%

th
HDI AND OTHER INDEXs:- 35

52
nd
Saudi Arabia (OPEC)
Russia (BRICS)
0.875
0.822
 According to the Human Development Report 2021- 63rd Mauritius (India suspended its 0.802
22, India’s rank on the Human Development Index DTA from it)
rd
73 Sri lanka 0.782
(HDI) has slipped from 130 in 2020 to 132 in 2022, in th nd
79 China (2 largest economy in 0.768
line with a global fall in HDI scores in the wake of st
terms of Nominal GDP, 1 rank
the Covid-19 pandemic in terms of PPP based GDP)
 HDI is given by United Nations development (BRICS Member)
th
Programme 87 Brazil (BRICS) 0.754
th
 UNDP GIVES 5 HDRS 109
120
th
South Africa (BRICS)
Venezuela (OPEC), 2015
0.713
0.691
A. HDI = introduced in 1990 inflation was around 756%
st
B. IHDI/PHDI = 2010(IHDI), 2020 (PHDI) 121 Iraq (OPEC) 0.686
th
C. GDI = 1995 (some addition in 2014) 127 Bhutan (Gross national 0.666
D. GII = 2011 happiness concept gave, later
E. MPI =2010 world happiness index was
developed)
A. HUMAN DEVELOPMENT INDEX (HDI) 129
th
Bangladesh 0.661
 The human development concept was developed by 132th India 0.633
Pakistani economist Mahbub ul Haq in 1990 later on 143rd Nepal 0.602
th
149 Myanmar 0.585
supported by Indian economist Amartya sen. Since st
161 Pakistan 0.544
development is a qualitative concept so it cannot be th
180 Afghanistan 0.478
measured through mathematical formula 191
st
South Sudan (last) 0.385
 HDI has various dimensions and to measure them  BRICS:- 87, 52, 132, 79, 109 {understand the
various indicators are there.
India’s Position}
DIMENSIONS INDICATORS
 Most developed countries have HDI score of 0.8
1. Longevity 1. Life expectancy at birth {LEI}
2. Education 2. Education has two indicators or above because of
3. Standard of a) Average mean years of schooling a) stable Govts,
living {EAI} b) wide spread affordable education and
b) Expected years of schooling
c) health care,
3. Per capita income or GNI per
capita {GNI Index) d) High life expectancy
 HDI VALUES:-  WHAT IS HUMAN DEVELOPMENT REPORT?

 About:
a) 0-0.54 = Low developed
 Human Development Reports (HDRs) have been
b) 0.55-0.69= Medium developed released since 1990 and have explored different
c) 0.70-0.79=Highly developed themes through the human development
d) 0.80-1.0 =very highly developed approach.
Indian is in medium developed nations
  It's published by the Human Development
Report Office for the United Nations
category
Development Programme (UNDP).
RANKS COUNTRY HDI VALUE  Goal:
st
1 Switzerland 0.962  The goal is to contribute toward the expansion of
nd
2 Norway 0.961 opportunities, choice and freedom.
rd
3 Iceland 0.959  Theme:
th
4 hongkong 0.952  The theme for Human Development Report
th
5 Australia 0.951 2021-22 is Uncertain Times, Unsettled Lives:
th
9 Germany 0.942 Shaping our Future in a World in
th
(4 largest economy ) Transformation.
th
12 Singapore (tax heaven nation) 0.939  What is the Human Development Index?
th th
18 UK (6 largest economy) 0.929  HDI is a composite index that measures average
th rd
19 Japan (3 largest economy) + 0.925 achievement in human development taking into
South Korea (best demographic account four indicators:
dividend , best industrial  Life expectancy at birth (Sustainable
production) Development Goal 3),
st
21 USA 0.921  Expected years of schooling (Sustainable
th
26 UAE (OPEC nation) 0.911 Development Goal 4.3),
th
28 France 0.903  Mean years of schooling (Sustainable
Development Goal 4.4), as a geometric mean of inequality-adjusted
 Gross national income (GNI) (Sustainable dimensional indices. The IHDI accounts for
Development Goal 8.5). inequalities in HDI dimensions by “discounting” each
 INDIAN PERSPECTIVE:2021-2022 dimension’s average value according to its level of
 Human Development Index: India’s HDI value inequality. The IHDI value equals the HDI value when
stood at 0.633 in 2021, which was lower than the there is no inequality across people but falls below
world average of 0.732. In 2020, too, India the HDI value as inequality rises. In this sense, the
recorded a decline in its HDI value (0.642) in IHDI measures the level of human development when
comparison to the pre-Covid level of 2019 inequality is accounted for.
(0.645).  PHDI:-
 Life expectancy (LEI) : In 2021, India’s life  PHDI is the level of human development adjusted by
expectancy at birth was recorded at 67.2 years. carbon dioxide emissions per person (production-
 Schooling (EAI): Expected years of schooling at based) and material footprint per capita to account
11.9 years, mean years of schooling at 6.7 years, for the excessive human pressure on the planet. It
 Gross National Income (GNI) : The gross national should be seen as an incentive for transformation
income per capita stood at USD 6,590.  The planetary pressures-adjusted HDI is the product
 Gender Inequality Index (GII) : India has been of the HDI and the adjustment factor A: PHDI = HDI *
ranked 122 on the Gender Inequality Index. A, or, equivalently, PHDI = HDI * (1-P)
……..9th Class ended,10th started………
B. INEQUALITY ADJUSTED HDI (IHDI)
 Introduced in 2010. From 2010 UNDP also publishes C. GDI: GENDER DEVELOPMENT INDEX
IHDI, under which a country is penalised for the  1995 (some addition in 2014)
presence of inequality by reducing its value.  Developed by UNDP in 1995
 IHDI shows the actual level of Human development ,  It shows gender sensitivities in HDI measurement
while HDI can be viewed as an Index of potential  It talks about well-being of both the genders
Human development or the maximum level of HDI  GDI measures gender gap in Human development
that could be achieved if there was no inequality achievements in three basic dimensions
 The loss in potential Human development is given by a) Male & female life expectancy at birth
the difference b/w the HDI and the IHDI b) Education,
 PHDI:- PLANETARY PRESSURES ADJUSTED c) Command over economic resources
HDI-2020 D. GII:- GENDER INEQUALITY INDEX

a) 2020 UNDP introduced PHDI for the first time .  The Gender Inequality Index is a composite measure
b) PHDI is an experimental matric that adjusted HDI reflecting inequality in achievements between The
for planetary pressures. GII is a composite measure, reflecting inequality in
c) PHDI shows the level of human development achievements between women and men in three
adjusted for ecological and environmental dimensions: reproductive health, empowerment and
factors like CO2 emission per person and material the labour market
foot print in India.  Includes
d) Material foot print is :- is fossil fuels, metals, and a) Maternal health
other resources consumed by a country to  MMR
produce required goods and services  AMR:- adolescent fertility rate
e) In an ideal scenario where there is no pressure b) Gender empowerment
on the planet, the PHDI equals HDI, however, all  Proportion of women in parliament
countries of the world have substantial pressure  Proportion of women in higher studies
from their part c) Participation of women in workforce
f) If the new matric is taken into account Ireland  World economic forum checks this
tops the list, while India’s rank is 111 with 0.626 participation and gives ranks
value.  WEF form publishes global gender report
th
 INTERNET ADDITION:- since 2006, India’s rank is 135 out of 156
 IHDI nations (last years it was 140/156)
 IHDI adjusts the Human Development Index (HDI) for  MMR:-MATERNAL MORTALITY RATE
inequality in the distribution of each dimension  Shows number of maternal deaths on per 1-lakh live
across the population.
births
 IHDI is based on a distribution-sensitive class of
composite indices proposed by Foster, Lopez-Calva  AMR:- ADOLESCENT FERTILITY RATE
and Szekely (2005), which draws on the Atkinson  Defined as the number of births per 1000 women
(1970) family of inequality measures. It is computed ages 15-19
 It exposes adolescent women to higher risks entrepreneurs/ SHGs/NGOs), Entrepreneurship and
INTERNET ADDITION FOR GII Skill Development Programme (ESSDP).
 Recently, the World Economic Forum g) Kasturba Gandhi Balika Vidyalaya: They have been
(WEF) ranked India at 135 out of 146 countries in opened in Educationally Backward Blocks (EBBs).
its Global Gender Gap (GGG) Index for 2022.  Political Reservation: Government has reserved
 India’s overall score has improved from 0.625 (in 33% of the seats in Panchayati Raj Institutions for
2021) to 0.629, which is its seventh-highest score in women.
the last 16 years.  Capacity Building of Elected Women
 In 2021, India was ranked 140 out of 156 countries. Representatives: It is conducted with a view to
empowering women to participate effectively in
 The gender gap is the difference between women
the governance processes.
and men as reflected in social, political, intellectual,
cultural, or economic attainments or attitudes  WHAT IS WORLD ECONOMIC FORUM?
 WHAT IS THE GLOBAL GENDER GAP  About:
 The World Economic Forum is the International
INDEX? Organization for Public-Private Cooperation.
 About:
 It was established in 1971 as a not-for-profit
 It benchmarks countries on their progress towards
foundation and is headquartered in Geneva,
gender parity in four Key dimensions with Sub Switzerland.
Metrices.
 Major Reports:
 Economic Participation and Opportunity
1) Energy Transition Index.
 Educational Attainment
2) Global Competitiveness Report.
 Health and Survival
3) Global IT Report
 Political Empowerment
 WEF along with INSEAD, and Cornell University
 On each of the four sub-indices as well as on the
publishes this report.
overall index the GGG index provides scores
4) Global Gender Gap Report
between 0 and 1, where 1 shows full gender parity
5) Global Risk Report
and 0 is complete imparity.
6) Global Travel and Tourism Report
 It is the longest-standing index, which tracks
progress towards closing these gaps over time since  GII:GLOBAL INNOVATION INDEX 2011
its inception in 2006.  The Global Innovation Index 2011: Accelerating
 Objectives:
Growth and Development is the result of a
a) To serve as a compass to track progress on
relative gaps between women and men on collaboration among INSEAD and Knowledge
health, education, economy and politics. Partners. The Global Innovation Index, like any
b) Through this annual yardstick, the stakeholders innovation project, is a collaborative effort. The
within each country are able to set priorities valuable contributions of the individuals listed below
relevant in each specific economic, political and are gratefully acknowledged
cultural context.
 WHAT ARE THE INDIAN INITIATIVES TO E. MPI: MULTIDIMENSIONAL POVERTY
REDUCE GENDER GAP IN SOCIAL, INDEX-2010
ECONOMIC AND POLITICAL LIFE?  The Global Multidimensional Poverty Index (MPI)
 Economic Participation and Health and Survival: was developed in 2010 by the Oxford Poverty &
a) Beti Bachao Beti Padhao: It ensures the protection,
Human Development Initiative (OPHI) and the United
survival and education of the girl child.
b) Mahila Shakti Kendra: Aims to empower rural Nations Development Programme and uses health,
women with opportunities for skill development education and standard of living indicators to
and employment. determine the incidence and intensity of poverty
c) Mahila Police Volunteers: It envisages engagement experienced by a population
of Mahila Police Volunteers in States/UTs who act as  Yet to be discussed in another topic
a link between police and community and facilitates
women in distress.  WORLD HAPPINESS INDEX (WHI)
d) Rashtriya Mahila Kosh: It is an apex micro-finance  Concept given by Bhutanese King J.S Wangchuk
organization that provides micro-credit at th
(1972). It was given for the first time by 4 Bhutanese
concessional terms to poor women for various
King J.S Wangchuk (1972). Its Initial name was gross
livelihood and income generating activities.
e) Sukanya Samriddhi Yojna: Under this scheme girls national happiness
have been economically empowered by opening  It was Published for the first time in 2012 by United
their bank accounts. Nations programme for sustainable solutions (UN
f) Female Entrepreneurship: To promote female Sustainable Development Solutions Network
entrepreneurship, the Government has initiated publishes the World Happiness Report)
Programmes like Stand-Up India and Mahila e-Haat
 It is a part of Global happiness report
(online marketing platform to support women
 India ranked 136th in the World Happiness Report  What about the Performance of the
2022. 139th in 2021 and 144th in World Happiness Countries?
Report 2020 a) Top Performers:
 There are 6 criterias to measure WHI  Finland has been named the world's happiest
country for the fifth year running followed
a) GDP Per Capita (on basis of purchasing power
by Denmark.
parity) (income)
 The biggest gains in happiness have taken place
b) Social support in Serbia, Bulgaria and Romania.
c) Trust and Generosity b) Worst Performers:
d) Healthy life expectancy at birth  Afghanistan was ranked as the unhappiest
e) Freedom to make life choices nation, followed by Lebanon, Zimbabwe, Rwanda and
f) Perception about corruption in government Botswana, respectively.
mechanism c) India’s Performance:
 India saw a marginal improvement in its ranking,
 WHI RANKS:- jumping three spots to 136, from 139 a year ago.
st
 1 :- Finland

nd
2 :- Denmark  INFLATION GROWTH CONFLICT:-
rd
 3 Switzerland
th
 139 :- India (out of 149 nations),
 Note:- India and some other nations complaint that
this index does not show the real condition of their
nations because this index ignores the cultural
diversity of the nations and it also takes smaller
sample sizes
Some background before starting this topic
INTERNET ADDITION FOR WHI
Just an overview as discussed earlier :-
 What is the Sustainable Development Solutions
a) DEMAND PULL INFLATION
Network?
 The SDSN, launched in 2012, mobilises global scientific and
technological expertise to promote practical problem
solving for the Sustainable Development Goals (SDGs) and
the Paris Climate Agreement.
 It was established under the auspices of the United
Nations Secretary-General.
 The SDSN and the Bertelsmann Stiftung have been
publishing the annual Sustainable Development Goals
(SDGs) Index & Dashboards Global Report since 2016.
 the World Happiness Report 2022 was published by
the United Nations Sustainable Development Solutions
Network.
th
 This year marks the 10 anniversary of the World
Happiness Report.
 What is the World Happiness Report?
 Published since 2012, the World Happiness Report is
based on two key ideas:
 Happiness or life evaluation measured through
opinion surveys and
 Identifying key elements that determine well-being
and life evaluation across countries.  Controlled by monetary policy and fiscal policy
 The report usually ranks 150 countries based on INTERNET ADDITION FOR THIS INFLATION
several factors such as real GDP per capita, social  Inflation is a general rise in the average level of
support, healthy life expectancy, freedom to make prices, sustained over time.
life choices, generosity and perceptions of  Demand-pull inflation occurs when aggregate
corruption. demand (AD) increases above the capacity of the
 This year, the report ranked 146 countries. economy to meet this demand - prices are 'pulled
 Every year, each variable measures a populated- up' by demand, rather than being 'pushed up' by
weighted average score on a scale of 0-10 that is cost increases.
tracked over a period of time and further compared  Causes of demand-pull inflation
with other countries.  Demand-pull inflation could arise from any
 This year, countries which ranked in the top 10 last increase in a component of aggregate demand,
year, moved upwards and downwards. including:

a) Increases in household incomes, including  MGNREGA :- Rs. 150 + 10 Rs additional = so final
wages and other earnings goods price also increases to compensate this
b) Lower direct tax, which increases disposable increased labor cost
income and consumption  From the govts programmes like MGNREGA are
c) An increase in public spending - especially if it
also responsible for the increment in wages
is funded by increased borrowing
d) An increase in export demand, placing because MGNREGA increased wage but there
pressure on domestic firms was no increment in the production of labor
e) An increase in the money supply* which results in increment in final goods price.
f) Lower interest rates After observing the rise in final goods price
b) COST-PULL INFLATION (Also called as labours demand increment in wages
SUPPLY SIDE CONSTRAINTS)
 Controlled by fiscal policy only
 Cost pull inflation occurs when aggregate demand
remains the same but there is a decline in aggregate
supply due to external factors that cause rise in
price levels
 IMPACTS OF SUPPLY SIDE CONSTRAINTS:-

a) Hyper inflation
1. If economic growth is driven by demand side of GDP  Inflation in 2-3 digits (like 20%, 30% , 100%,
particularly due to consumption expenditure then it 150%, 750% etc)
will lead to inflation and this phenomenon is called as  Hyperinflation is when the prices of goods and
inflation growth conflict services rise more than 50% per month. It is the
2. Growth is good but associated with inflation which last stage of inflation. Examples: Germany in the
beyond a limit (4% ± 2% fluctuations) is not good for 1920s, Zimbabwe in the 2000s, American Civil
the economy. War, and Venezuela in 2018. Price rise at a very
3. If inflation is more than 6% then it will reduce the high rate (20% to 100%)
purchasing power of consumers and if inflation is less b) Stagflation in economy
than 2% then it will not provide appropriate  Means stagnation + inflation
compensation to the producer or seller  Stagnation:- Means
4. SUPPLY SIDE CONSTRAINTS  no growth in the economy
 is related to increment in overall cost of  no production
 high unemployment
production in an economy. for example
 no income
 Higher prices of crucial inputs like
 Low demand
 Crude oil :- shows fuel dependency
 Producers have less incentives they go for
 Coal:- needed for power generation further production
 Iron ore:- needed for steel production &  Inflation here means
majority of the sectors cannot survive  Hyperinflation (Inflation in 2-3 digits)
without steel  It may further lead to cost-push inflation
 Obsolete technology  SOLUTIONS
 Increase the running cost which reduces a) Contractionary monetary policy can only tackle
production and further employment demand pull-inflation not cost push inflation
 Lower agricultural production b) In case of cost push inflation monetary policy is
 It increases food inflation & even wage inflation in-effective and only fiscal policy would be
 Earlier Rs.100 labor available at rural areas + 10 effective
Rs additional cost = final goods price c) Appropriate policy needed to decrease overall
cost of production & this may lead to investment
led growth in the economy
d) There is a need to ensure better availability of well on its path to become a $ 5 trillion dollar economy,
crucial inputs economic inequalities are still a reality in India, much like
many countries globally.
e) Govt should put more focus on agricultural
 REASONS WHY INDIA HAS NOT BEEN ABLE TO
productions as it helps in keeping food prices and ACHIEVE INCLUSIVE GROWTH IN THE ECONOMY:-
wages lower a) Growth vs. Development
f) There is a need to have a technological reforms  Over a period since economic reforms, India’s
across all economic sectors to increase economic growth has witnessed a mixed effect
productivity on the real development.
A contractionary monetary policy is a type of monetary policy  GDP is considered the key parameter of
that is intended to reduce the rate of monetary expansion to economic growth. In reality, the increasing GDP
fight inflation. A rise in inflation is considered the primary growth rate has not trickled down to the bottom
indicator of an overheated economy, which can be the result of pyramid.
of extended periods of economic growth  A research study carried by Indira Gandhi
5. INDIA’S GROWTH IS AN INCLUSIVE Institute of Development Research, an
autonomous think-tank under Reserve Bank of
ONE OR NOT? India find out that economic growth has “trickled
 India’s growth is not an inclusive one that is down” in both rural and urban areas; it has not
been in favour of the poor.
revealed through following shortcomings
 In urban areas, growth has been “anti-poor.” BPL
a) Existence of income inequality b/w rich & poor and poor of the poor still remains marginalized.
 According to world inequality report 2022, 1% Such issues are quite fundamental in nature as
richest people have around 22% of the countries they depict the lack of clarity in the vision and
income and 50% poorest of the poor have only strategy of the policy.
 It is time, to put the Inclusive Growth as the
13% of the country’s income
central agenda of the economic growth.
 According to Credit Suisse organisation 1%
b) Defining Poor
richest people have around 45% of the country’s
 Who are poor and who should be the
wealth while 50% of the poorest of the poor beneficiaries of the welfare schemes? Without a
have only 4% of the country’s wealth proper criterion of poverty, proper policy
b) Less proportion of qualitative work framework for inclusive growth cannot be
 According to the economist GS Bhalla, the developed.
 Efforts have been put taking calorie values,
problem in India is not an unemployment but
wages etc. as criteria of defining poverty line.
quality in employment
 The lacuna of poverty definition also impacts the
c) Lower Human Development other associated areas such as employment
 According to latest HDI rankings, India’s schemes and subsidies for the poor.
ranks 132 out of 192 nations  All this have repercussions on inclusive growth.
Govt. is gung-ho on the observation the reducing
d) Higher Level of Hunger
rate of poverty which has come down to the
 According to Global Hunger Index 2022, level of 35% but the inequality has increased at
India’s rank is 107 out 121 nations the same time.
e) Lower level of agricultural productivity but c) Fiscal deficit
 Development schemes run by the govt. have
more dependency on it
created a dilemma of expanding fiscal deficit.
f) Continuous decline of agricultural share in  India’s current fiscal deficit situation has limited
national income the prospect of development schemes.
 NOTE:- India needs inclusive growth to achieve the  India has significantly high debt to GDP ratio,
overall progress of the country and attain certain targets balance of trade (negative) and current account
relating to poverty, employment, education, infrastructure, deficit (CAD).
health, women and children, gender equality, regional  Last year’s estimates were: fiscal deficit: 5.2% of
equality etc. GDP; CAD: USD 92 billion; stimulus package: Rs.
SOME POINTS FROM INTERNET ON INCLUSIVE 1.84 lakh crore (3% of GDP). The govt. has set a
GROWTH OF INDIA target of reducing fiscal deficit to the level of 3
 Poor rate of technology and innovation creates a burden per cent by 2016-17.
on capital and resource base. India's agricultural  Fiscal deficit also creates the problem of
productivity is far below to that of developed countries. inflation which in turn makes the poor even
Agriculture is mainstay of the economic growth and a more vulnerable.
source to unskilled work-force employment.  Increasing CAD is comparatively more
 The World Economic Forum's “Inclusive Development
detrimental to INCLUSIVE GROWTH than fiscal
Index”, ranks India 62nd out of the 74 emerging countries
when it comes to inclusive development. While India is
deficit.
d) Ill-effects of LPG:
 Liberalization, privatization and globalization of prominent.
Indian economy has ushered the poor to  For a case in point, Eleventh plan recognizes
vulnerability and irony. that: It is an irony that the phenomenal growth
 Liberalization and privatization have particularly in the telecom sector has also created a digital
suited to the Indian private corporate, elites and divide in terms of mobile and land line
rich. Globalization has created a question of connections and Internet and broadband
existence in-front of small and medium connections between urban and rural India.
enterprises (SMEs).  The plan also highlights the dearth of rural
 Have a look at the plight of the women electrification and observes that rural
employed in the cotton fields of northern India. electrification an important instrument to bring
Now, India’s share of textile industries in world about inclusive growth by making electricity
trade is remarkably low. available to farmers and in rural areas. 7.8 crore
 All this have limited the growth potential and rural households still remains un-electrified.
created the problem of unemployment. The g) Low technology and innovation:
malfunctioning of LPG in Indian scenario has  Indian economy is suffering from a technology-lag vis-
surmounted new issues viz. gender inequality a-vis developed economies and other industrialized
and threat to women empowerment. economies. Poor rate of technology and innovation
e) Social-injustice: creates a burden on capital and resource base.
 India’s agricultural productivity is far below to that of
 Government is gung-ho on their efforts of
developed countries. Agriculture is mainstay of the
reducing the poverty rate; even the UN’s MDG economic growth and a source to unskilled work-
report affirms that India’s poverty rate is force employment.
expected to fall to 22% by 2015 from 51% in  The rapid technological development in primary
1990. activities such as agriculture creates a question of
 At the same time, there are other chronicle economic duality in front of the policy makers of the
issues which have magnified over a period e.g. country. This means, if a high rate of technology is
child malnutrition. adopted in primary sector industry, then it may lead
to high rate of unemployment, but at the same time,
 Poor skilling and professional competencies;
without technological progress, the productivity
Lack women’s in mainstream economic
would be less to sustain the pressure on the
activities; Poor nutritional, health and economy.
educational indicators  Considering this, there is an immediate requirement
 A Hunger and Malnutrition Survey 2011 revealed of technologies such as green technology,
something shocking; in the 100 focus districts environmentally friendly technologies and renewable
with the poorest child development indicators, energy technology etc. so that the pressure on
over 40 per cent of children were underweight natural resources may be overcome.
and almost 60 per cent stunted.  Policy makers have to address the economic duality
judiciously. Apart from that, the innovation per se is
 Regional Disparities; Inadequate infrastructure;
required to be a harbinger of Inclusive Growth which
Social inequality and discrimination
is broad sense is termed as inclusive innovation.
 Citing the report, the PM lamented: the problem  Inclusive innovation means the creation and
of malnutrition a matter of national shame. Rich absorption of product and services relevant to the
have become richer and poor have become poor. In this case, SMEs, MSMEs and grass root
poorer, marginalized are even more ignored, innovation enabling agencies such as National
also, poverty has concentrated more in Innovation Foundation can play a decisive role.
backward classes, minority, SCs and STs. Finance, competency and infrastructure are the
foundation for inclusive innovation and enabler for
f) Infrastructure: Inclusive Growth.
 Infrastructure is fundamental to the economic
and inclusive growth. In budgetary allocations,  SUSTAINABLE DEVELOPMENT:-
Infrastructure is assigned the highest  BRUNDTLAND COMMISSION 1983:-
expenditure. Major proportion of this allocation  This concept was given by Brundtland commission (a
goes to large projects such as power generation, sub-organisation of the UN:- formally known as
freight corridors, and airports etc. “World commission on environment &
 While rural infrastructure is immensely development”) In its report “OUR COMMON
neglected. In many areas, the lack of proper FUTURE-1987”
infrastructure is acute.  According to the commission:- “We should use our
 Major thrust of the infrastructural development present natural resources in such a way that they
of the govt. has been from view of industrial would be available for the future generation in
development. Agriculture, for an instance, has adequate quantity”.
always lacked the focus. Infrastructure to  A similar kind of concept was also given by “Club of
support and facilitate backward linkages in Rome 1968” in its report “LIMITS TO GROWTH-1972”
agriculture e.g. cold storage houses, processing under which it was said that “unlimited growth of
facilities, rural transport is need of the hour. GDP cannot be obtained”
 Apart from that, the rural-urban divide in
infrastructure development has become
 CONCEPTS RELATED TO SUSTAINABLE  India with score of 60.7 has been placed at 121 out of
163 nations (121/163)
DEVELOPMENT:-  Finland topped the Index followed by Denmark and
a) ZERO GROWTH Sweden
 Under it, it is said that after observing the  For the first time since 2015, all countries have shown
population and country’s available resources, a a reversal in progress in achieving sustainable
certain level of GDP growth can be targeted & development goals due to the covid-19 pandemic
should be maintained for the longer period to  Status of India:-
ensure better utilisation of natural resources &  In 2022 global index of SDGs , India ranked 121/163
countries.
also reduction in the overall utilisation
 2020:- It had ranked 117
 In simple words, a situation in which there is no
 2021:- it had ranked 120
increase in the growth or development of
 India continued to face major challenges in achieving
something. 11out of 17-SDGs which has pushed down its global
b) UNECONOMIC GROWTH ranking on SDGs. The progress of around 10 of these
 This growth depends upon production of those goals is similar to those in 2021
items which are comparatively less significant to  NITI AYOG report on Sustainable
human life development (As per Budget 2022-2023)
 Example:- production of cigarettes, other  According to NITI Ayog SDGs India index 2020-21
tobacco products , alcohol etc India progressed further on achieving the SDGs.
c) REBOUND EFFECT  India’s overall score improved to 66 from 60 in 2019-
 It bursts the myth that technical advancement saves 20 and 57 in 2018-19
natural resources, in fact technical advancements  Number of front-runners (scoring more than 65)
increased productivity which further increased increased to 22-states and UTs in 2020-21 from 10 in
income, investment, and further more exploitation of 2019-2022
natural resources  Kerala + Chandigarh:- top state and UT respectively
 The rebound effect is generally expressed as a ratio of the on SDGs performance in 2020-21
lost benefit compared to the expected environmental INTERNET ADDITION
benefit when holding consumption constant. For instance,  India is not placed well to achieve the United Nations-
if a 5% improvement in vehicle fuel efficiency results in only mandated Sustainable Development Goals (SDG) and
a 2% drop in fuel use, there is a 60% rebound effect (since its preparedness has worsened over the years in
(5-2)⁄5 = 60%). comparison with other countries, a new report
……..10th Class ended,11th started……… showed.
 India’s rank in the global Sustainable Development
 SUSTAINABLE DEVELOPMENT NEED:- Report, 2022 has slipped for the third consecutive
 There is a need of the proper development and the year.
sustainable development aims at maximising the net  The country continues to face major challenges in
benefits of economic activities subject to maintaining achieving 11 of the 17 SDGs, which has pushed down
to stock of productive assets (physical, human, its global ranking on SDG preparedness.
 The progress in around 10 of these goals is similar to
environmental) over time and providing social safety
those in 2021. These include SDG 2 on ending hunger,
network to meet the basic needs of the poor
SDG 3 on good health and well being and SDG 6 on
 Sustainable development therefore attempts to clean water and sanitation.
accelerate development in an environmentally  But ensuring decent work (SDG 8) has become more
responsible manner keeping in mind the inter- challenging, the report showed.
generational equity requirements { inter-  In the 2022 Global Index of SDGs, the country ranked
generational equity means taking care of the need of 121 out of the 163 countries. It had ranked 117
in 2020 and 120 in 2021.
the present generation and also of the future
 With eight years left to meet the global goals on
generation} sustainable development, the country is off-track, the
 Sustainable development report 2022 trends indicated.
th
 Started in 2015, so 2022 is 7 edition  Since 2015, the report has been tracking and ranking
 According to this 7
th
addition of sustainable the performance of 163 UN member states on SDGs.
 It is published by a group of independent experts at
development report 2022 released by sustainable
the Sustainable Development Solutions Network
development solutions network
(SDSN).
 SDGs are not mentioned in the latest central or

federal budget documents of India, pointed out the 2. SOVEREIGN GREEN BOND (2022-23
report based on a survey conducted in February
2022. BUDGET)
 India is on track to achieving SDG 13 on climate  In 2022-23 budget Finance Minister announced that
action, the report mentioned. But another report the govt proposes to issue sovereign green bonds to
presented a grim picture.
mobilise resources to build green infrastructure
 Preparedness to deal with climate impacts is essential
 The proceeds will be deployed in Public sector
to deal with climate crisis, but the country has been
facing major challenges in this area, flagged The State projects which help in reducing the Carbon intensity
of India’s Environment in Figures, 2022 released June of the economy
2, 2022.  The announcement is in sync with India’s
 The report was based of the trends revealed in NITI commitment to Net Zero Carbon Emission by 2070.
Aayog’s index on SDGs.
 The seventh edition of CSE and DTE publication was
INTERNET ADDITION
 The budget para 103 is reproduced as below: 'As a part
released online by Sunita Narain, director-general of
the Centre for Science and Environment (CSE) and of the government's overall market borrowings in
editor of Down to Earth. 2022-23, sovereign Green Bonds will be issued for
 India’s performance on climate action — (SDG) 13 — mobilizing resources for green infrastructure.
 The plan to issue sovereign green bonds was
has slipped from 2019-2020. In 2020, the country’s
overall national score on SDG 13 was 54 (out of 100) announced by Finance Minister Nirmala Sitharaman in
— a significant dip from 60 in 2019. the 2022/2023 budget as a part of overall market
 This decline in India’s overall performance is primarily borrowing with the intention to use the funds to build
due to eight states — Bihar, Telangana, Rajasthan, green infrastructure (like to install charging port
Uttar Pradesh, Karnataka, Andhra Pradesh, Punjab stations for EVs)
and Jharkhand — whose scores have dipped under  Why in News?
SDG 13 in the two years.  Recently, the Finance Minister in the Budget
 Telangana, the state which is among the top overall 2022 announced that the government proposes to
performers (rank six) in the country, has seen a dip in issue sovereign green bonds to mobilise resources for
its score for climate action by 23 points. green infrastructure.
 It is second after Bihar, whose SDG 13 performance  The proceeds will be deployed in public sector projects
worsened the most (by 27 points). Besides this, the which help in reducing the carbon intensity of the
performance of 27 states / Union territories economy.
remained off-track in SDG 13, according to the CSE  The announcement is in sync with India’s commitment
report. to achieving net-zero carbon emissions by 2070.
 Climate action failure is the most severe global risk in  What are Green Bonds?
the short term and will also have the most severe  Green bonds are issued by companies, countries and
impact over the next decade, the global risks report multilateral organisations to exclusively fund projects
of the World Economic Forum alerted in January that have positive environmental or climate benefits
2022 and provide investors with fixed income payments.
 The projects can include renewable energy, clean
 INITIATIVES TAKEN BY THE GOVTS / transportation and green buildings, among others.
ORGANISATIONS FOR THE SUPPORT  Proceeds from these bonds are earmarked for green
projects. This is unlike standard bonds, the proceeds of
OF SUSTAINABLE DEVELOPMENT:- which can be utilised for various purposes at the
1. CARBON TAX discretion of the issuer.
 The international green bond market has seen
 India has cut subsidies and increased taxes on fossils cumulative issuance worth more than USD 1
fuels (petrol+ Diesel) turning a carbon-subsidy regime trillion since market inception in 2007.
into to one of carbon taxation  By the end of 2020, 24 national governments had
 This has significantly increased petrol + diesel price issued Sovereign Green, Social and Sustainability
while reducing annual carbon dioxide emissions bonds totalling a cumulative USD 111 billion dollars,
 Excise duty on petrol and diesel also act as an implicit according to the London-based Climate Bonds
Initiative.
carbon-tax by putting an effective price on emissions
 What is the Significance of Sovereign Guarantee
 The GOI has even revised its coal Cess (to discourage
to Green Bonds?
the use) from Rs.50/ton to Rs.100/ton  Sovereign green issuance sends a powerful signal of
INTERNET ADDITION intent around climate action and sustainable
Carbon Tax is a tax imposed on the burning of carbon- development to governments and regulators.
based fuels such as coal, oil, and gas. It is the main  It will catalyze domestic market development and
strategy for decreasing and ultimately eliminating the use provides impetus to institutional investors.
of fossil fuels, whose burning is causing instability and  It will provide benchmark pricing, liquidity and a
destruction to the climate demonstration effect for local issuers, helping to
support the growth of a local market.  If investment is as such that it reduces 1-ton Carbon
 With the IEA’s World Energy Outlook 2021, estimating dioxide from environment under Clean Development
that 70% of the additional USD 4 trillion spending to mechanism then company will get one CER (Certified
reach net-zero is required in emerging/developing emission reduction) and i.e. called as one carbon
economies, sovereign issuance can help kickstart these
credit point
large inflows of capital.
 CCPs can be traded.
 What are Other Measures on Climate Action
announced in the Budget?  In India they are traded at MCX (Multi commodity
 The budget included several measures on climate exchange)
action such as:  If a company/firm is emitting carbon dioxide more
 Battery swapping policy. than the standard set under Kyoto protocol, that
 Additional allocation under the PLI scheme for company can purchase the required CCPs from the
manufacturing high efficiency solar modules.
 The government is introducing a new bill that aims to CCPs surplus company at MCX
provide a regulatory framework for Carbon Trading in INTERNET ADDITION
India to encourage penetration of renewables in the  Why in News?
energy mix.  The Ministry for Power, New & Renewable Energy is
 Way Forward taking steps to establish a Carbon Credit Market to
 Following the French Model: India can follow the help the country meet its Nationally Determined
example of France which as part of the budgeting Contributions (NDC).
process, assigns a green coefficient to each budget line  What are the Carbon Markets?
according to how green the expenditure is relative to
 Carbon Credits:
the six environmental priorities of the European
 A carbon credit (also known as carbon offset) is
Union (climate change mitigation, climate change
a credit for greenhouse emissions reduced or
adaptation, water management, circular economy,
removed from the atmosphere by an emission
pollution, and biodiversity).
reduction project, which can be used by governments,
 Harmonising Standards: One of the foremost
industry, or private individuals to compensate for the
requirements is to harmonise international and
emissions they generate elsewhere.
domestic guidelines and standards for green bonds to
 Those that cannot easily reduce emissions can still
develop a robust green bond market.
operate, at a higher financial cost.
 Homogeneity is also required in terms of what
 Carbon credits are based on the "cap-and-
constitutes green investments, as varied taxonomies
trade" model that was used to reduce sulphur
would be antithetical to a cross-border green bond
pollution in the 1990s.
market.
 One carbon credit is equal to one metric ton of carbon
 Leveraging Private Sector: Appropriate capacity
dioxide, or in some markets, carbon dioxide equivalent
building efforts for issuers in emerging markets to
gases (CO2-eq).
spread knowledge on the benefits and related
 Negotiators at the Glasgow COP26 climate change
processes and procedures pertaining to green bonds
summit in November 2021 agreed to create a global
would help in addressing the institutional barriers to
carbon credit offset trading market.
entry into this market.
 The Kyoto Protocol provides for three
3. GREEN ACCOUNTING mechanisms that enable countries, or operators in
 It is focused on addressing deficiencies in conventional developed countries, to acquire greenhouse gas
accounts with respect to the environment. reduction credits:
 Integrated environment and economic accounting known  Under Joint Implementation (JI), a developed
as (Green Accounting), therefore attempts at accounting country with relatively high costs of domestic
for both socio-economic performance and its
greenhouse reduction would set up a project in
environmental effects and integrating environmental
another developed country.
 Under the Clean Development Mechanism
concerns into mainstream economic planning and policies
(CDM), a developed country can “sponsor” a
 Green accounting is a type of accounting that attempts to
greenhouse gas reduction project in a developing
include environmental costs in business results. It has
country where the cost of greenhouse gas
been argued that the gross domestic product ignores the
reduction project activities is usually much lower,
environment, so policymakers need a revised model that
but the atmospheric effect is globally equivalent.
includes green accounting
The developed country would be given credits for
4. CARBON CREDIT POINTS (CCPs) meeting its emission reduction targets, while the
 Reduction of 1-ton Carbon dioxide from developing country would receive the capital
investment and clean technology or beneficial
environment represents one finance unit called as
change in land use.
Carbon Credit Point  Under International Emissions Trading
 To get that there is a need to invest in greenhouse (IET), countries can trade in the international
gas emission reduction project carbon credit market to cover their shortfall in

Assigned Amount Units (AAUs). Countries with the manufacturing of polysilicon cells into modules.
surplus units can sell them to countries that are b) Clean Development Mechanism:
exceeding their emission targets under Annex B of  In India, the clean development mechanism under the
the Kyoto Protocol. Kyoto Protocol provided a primary carbon market for
 Carbon Markets: the players.
 A carbon market turns emission reductions and  The secondary carbon market is covered by
removals into tradeable assets, thus creating the perform-achieve-trade scheme (which falls under
incentives to reduce emissions or improve energy the energy efficiency category) and the renewable
efficiency. The carbon markets can be compliance and energy certificate.
voluntary. c) Energy Conservation (Amendment) Bill, 2022:
 Carbon trading started formally in 1997 under  Empowers the Centre to specify norms and standards
the United Nations’ Kyoto Protocol on climate of energy efficiency for appliances, industrial
change which had more than 150 nation signatories. equipment and buildings with a connected load over
 Parties with commitments under the agreement 100 kiloWatts (kW) or a contractual demand of more
agreed to limit or reduce their greenhouse gas than 120 kilovolt-amperes (kVA).
emissions between 2008 – 2012 to 5.4% which were  Way Forward
well below the levels of 1990.  India is on the path to establishing a carbon market at
 Emissions trading, as set out in the Kyoto Protocol, the national level beginning with the voluntary carbon
allowed countries to sell the excess capacity of market and then moving on to a compliance-based
emission units to countries that had levels well over market.
their targets.  The effects of climate change reduction should be
 What is the Significance of Carbon Markets? favorable to sectors such as renewable energy, energy
 Carbon markets will open up new avenues for efficiency, transportation, waste, afforestation and
organizations that are engaged in developing, trading reforestation.
and consulting carbon credits, while stunting the  The carbon credits market favoured by appropriate
growth of fossil-fuel generation capacities. regulations and policy will help in the creation of
 Carbon credits will help developing countries like India suitable opportunities for the next decade.
carry out economic activities, while keeping the  Prelims
country’s carbon goals in perspective.  Q. The concept of carbon credit originated from which
 In 2021, the global carbon credits market rose by one of the following? (2009)
164 % and is expected to cross USD 100 billion by (a)Earth Summit, Rio de Janeiro
2030. (b) Kyoto Protocol
 Carbon credits offer a way to reward the industries (c) Montreal Protocol
and other sectors that have developed practices (d) G-8 Summit, Heiligendamm
involving technological innovations to reduce Ans: (b)
emissions and achieve climate targets.  Q. Regarding “carbon credits”, which one of the
 Carbon markets will play a key role in the drive following statements is not correct? (2011)
towards decarbonisation, encouraging the reduction  (a) The carbon credit system was ratified in
of emissions through various schemes in the short conjunction with the Kyoto Protocol
term with an ultimate goal of achieving Net Zero in the (b) Carbon credits are awarded to countries or groups
long term. that have reduced greenhouse gases below their
 Carbon markets are one of the most effective drivers emission quota
of reducing emissions, offering the lowest-cost (c) The goal of the carbon credit system is to limit the
emission reductions and enabling India to avert a loss increase of carbon dioxide emission
of USD 35 trillion. (d) Carbon credits are traded at a price fixed from time
 What are the Indian Emission Targets? to time by the United Nations Environment
 India submitted its updated NDCs under the Paris Programme.
Agreement to the United Nations Framework Convention on Ans: (d)
Climate Change (UNFCCC) in August 2022, in which it
 Mains
stressed the fact that it is a step ahead in achieving the long-
term goal of Net Zero in 2070. a) Q. Should the pursuit of carbon credits and clean
 Under the updated NDCs, India is committed to reducing the development mechanisms set up under UNFCCC be
emissions intensity of its gross domestic products by 45 % maintained even though there has been a massive
from 2005 levels by 2030 and achieving 50 % of its slide in the value of a carbon credit? Discuss with
cumulative electric power installed capacity from non-fossil respect to India’s energy needs for economic
fuel sources of energy by 2030. growth. (2014)
 The country is working on expanding its supply chain in the b) Q. Discuss global warming and mention its effects on
solar manufacturing division. the global climate. Explain the control measures to
 What are the Related Indian Initiatives? bring down the level of greenhouse gases which cause
a) PLI Scheme: global warming, in the light of the Kyoto Protocol,
 Diversification of the supply chain by introducing a 1997. (2022)
production linked incentive scheme for

 SOME ADDITIONAL EFFORTS TO SUPPORT  The main objective of this principle is to make sure
SUSTAINABLE DEVELOPMENT:- that the rights of the future generations upon the
non-renewable resources must be ensured
a) SPV (special purpose vehicle for afforestation)
 It is a temporary company formed under New
 Intra-generational equity
 It provides a root to the principle of common but
Company Act-2013 to complete environmental/
infrastructural projects differentiated responsibility and respective
 After the completion of the projects this SPV is capabilities where states have a shared responsibility
discontinued to protect the environment and it is also the
 A Special Purpose Vehicle is being set up jointly by obligation of developed countries to take notice of
NTPC and other Central Power Sector Undertakings the needs and priorities of present generation of
as a Registered Society to take up afforestation and developing countries
environmental measures in order to reduce the INTERNET ADDITION ON SUSTAINABLE
carbon dioxide in the atmosphere DEVELOPMENT
b) Fly ash utilisation action plan:- The National Green
Tribunal (NGT) directed the constitution of a 'Fly Ash
 WHY IN NEWS
 NITI Aayog has released the second edition of the
Management and Utilisation Mission' in its order dated
Sustainable Development Goals (SDGs) India
January 18, 2022. The Mission's primary goal will be to
Index (SDG Index 2.0).
'coordinate and monitor issues relating to the handling
 The index documents the progress made by India’s
and disposal of fly ash and associated issues.
States and UTs towards achieving the 2030 SDG
c) Clean development mechanism:- The Clean targets.
Development Mechanism (CDM), defined in Article  2020 will be the 5th anniversary of the adoption of
12 of the Protocol, allows a country with an emission- SDGs by the United Nations (UN).
reduction or emission-limitation commitment under  WHAT IS SUSTAINABLE DEVELOPMENT?
the Kyoto Protocol (Annex B Party) to implement an  ‘Development which meets the needs of the present
emission-reduction project in developing countries without compromising the ability of future
generations to meet their own needs’.
 INITIATIVES FOR IMPROVING THE  This most widely accepted definition of Sustainable
ENVIRONMENTAL PERFORMANCE OF COAL Development was given by the Brundtland
BASED STATIONS Commission in its report Our Common Future (1987).
 Sustainable development (SD) calls for concerted
a) NTPC 18 stations have been accredited with ISO-
efforts towards building an inclusive, sustainable and
14001 certification resilient future for people and planet.
 ISO-14001 certification is the international standard
 SUSTAINABLE DEVELOPMENT NEED:-
that specifies requirements for an effective
a) Overexploitation of Natural Resources
environmental management system  1 million species on track for extinction.
b) Green climate fund (GCF):- was created to support  The decline of more than 60% of the world's marine
the efforts of developing countries in responding to fisheries
the challenges of climate change b) Climate Change
 GCF established by 194 govts to limit or reduce GHG  Increase in atmospheric temperature and extreme
weather events.
emission in developing nations and to help vulnerable
 Rising Sea-Levels: Extinction threat to Small Island
societies to adapt to the unavoidable impacts of
nations due to climate change.
climate change c) Scarcity of Resources
 Mains question:- Explain inter-generational  Food production needs to double over the next 40
and intra-generational perspective of years at a time when almost 23% of the world's
agricultural land has been degraded.
inclusive growth and sustainable  Nearly 2/3rd of the world's population will be living in
development. water-scarce/water- stressed areas by 2025.
 Inter-generational equity  CORE ELEMENTS OF SUSTAINABLE
 The principle of Rio-Declaration mentioned about DEVELOPMENT
the concept of inter-generational equity  Three core elements of sustainable development are
 It states that development must be done in such a economic growth, social inclusion and
manner as it equally meets the environmental and environmental protection. It is crucial to harmonize
developmental needs or the present as well as of the them.
 Sustainable economic growth, achieving sustainable
future generations
livelihood, living in harmony with
nature and appropriate technology are important for
sustainable development. South Divide)
 Environmental Sustainability:  Loss of Biodiversity: Despite mounting efforts over
a) It prevents nature from being used as an the past 20 years, the loss of the world’s biodiversity
inexhaustible source of resources and ensures continues.
its protection and rational use.  Climate Change: As a global problem, climate change
b) Aspects such as environmental requires a global solution. Within climate change,
conservation, investment in renewable energy, particular attention needs to be paid to the unique
saving water, supporting sustainable challenges facing developing countries.
mobility, and innovation in sustainable  Tackling climate change and fostering sustainable
construction and architecture, contribute to development are two mutually reinforcing issues.
achieving environmental sustainability on several  Intellectual Property Rights (IPRs): There is a need
fronts. for welfare for all rich and poor to have affordable
 Social Sustainability: access to the results of innovation that can lead to
 It can foster gender equality, development of sustainable development.
people, communities and cultures to help  GLOBAL INITIATIVES ON SUSTAINABLE
achieve a reasonable and fairly-distributed DEVELOPMENT
quality of life, healthcare and education across  The Stockholm Conference,1972: It was the first
the Globe. step towards putting environmental concerns on the
 Economic Sustainability: global agenda.
 Focuses on equal economic growth that  It resulted in the Stockholm Declaration which
generates wealth for all, without harming the contained principles and an Action Plan containing
environment. recommendations for environmental policy.
 Investment and equal distribution of economic  UNEP was set up in 1972 to serve as a catalyst in
resources. developing and coordinating an environmental focus
 Eradicating poverty in all its forms and in the programmes of other organisations.
dimensions.  The Earth Summit, 1992: This was a direct
 INTEGRATION OF SCIENTIFIC AND consequence of the Brundtland Commission’s
TRADITIONAL KNOWLEDGE Report. It was held in Rio de Janeiro. The results of
 If the people are able to contribute their local resources the Conference were the following documents:
and practices into the process of change, the development  The Framework Convention on Climate
becomes not only sustainable but also gets accelerated. Change (UNFCCC)
 Combined traditional and scientific knowledge is  The Convention on Biological Diversity
called community knowledge. Moving towards SD in many  The Statement on Forest Principles
areas will require community knowledge.  The Rio Declaration
 Indigenous knowledge is also a potential source for the  Agenda 21
conservation of biodiversity.
 Kyoto Protocol,1997
 Significance of traditional knowledge has been recognised
 Rio +10, 2002: A 10-year assessment of the Rio
in India through initiatives such as National Ayush Mission
(NAM) and the Traditional Knowledge Digital Library outcomes (Rio +10) took the shape of the World
(TKDL). Summit on Sustainable Development (WSSD) held
 GLOBAL ISSUES RELATED TO SUSTAINABLE in Johannesburg.
 Ramsar Convention, 1971
DEVELOPMENT  The World Heritage Convention, 1972: It identifies
and conserves the world’s cultural and natural
heritage. It draws up a list of ‘heritage sites’, which
are cultural, natural or mixed areas of ‘outstanding
universal value’ and therefore need to be preserved
for all humanity.
 Convention on International Trade in Endangered
Species of Wild Fauna and Flora (CITES), 1973
 Convention on the Conservation of Migratory
Species of Wild Animals (CMS), 1979
 Vienna Convention for the Protection of the Ozone
Layer, 1985
 Montreal Protocol on Substances that Deplete the
Ozone Layer, 1987
 Basel Convention, 1989
 Convention on Biological Diversity,1992
 United Nations Convention to Combat
Desertification,1994
 Rotterdam Convention,1998
 Stockholm Convention on Persistent Organic
 Inequitable growth of national economies (North- Pollutants,2001
 Global Tiger Forum,1993 interdependence and the need for concerted action.
 International Whaling Commission,1946  For ex: Overcoming the North-South divide is
 Minamata Convention,2013 one of the major hurdles facing the international
 Climate change mitigation strategies: Carbon environmental protection regime.
sequestration, Carbon sink, Carbon Credit, Carbon  The ‘North’ world has just over 20% of the world
trading, Carbon offsetting, Carbon Tax, Geo- population but consumes 80% of the world’s
engineering. energy; on the other hand,
 United Nations Environment Programme (UNEP) the ‘South’, comprising of the developing nations
 UN Commission on Sustainable Development (CSD) of the world is still struggling to provide for the
 United Nations Convention on the Law of the Sea basic needs for its population.
(UNCLOS)  Methods/ways to monitor and regulate global
 Climate Finance Architecture: Green Climate Fund commons (Oceans, Space and Antarctica). Being
(GCF), Adaptation Fund (AF) and Global Environment nobody’s property may act as a disincentive for
Facility (GEF) protection.
 Reducing Emissions from Deforestation and Forest  REGIONAL INITIATIVES
Degradation (REDD) and REDD+  Regional mechanisms are effective means for
 Paris Agreement 2015 addressing trans-boundary issues such as
 The Clean Development Mechanism is a way to atmospheric pollution and pollution of shared rivers
reduce greenhouse gases(GHGs ) emissions through and water bodies, which nations are unable to solve
efficient and sound technologies. on their own. Regional mechanisms involve fewer
 Global Alliance for Climate-Smart Agriculture transactional costs, are less time-taking and have
(GACSA) higher chances of success.
 Partnership for Action on Green Economy (PAGE)  The European Union (EU): It enforced certain
 Sustainable Development Goals (SDGs): environmental principles viz., preventive
 To bring sustainable development in the principle, subsidiarity principle, integrative
mainstream United Nations (UN) launched the principle, the polluter pays principle etc.
2030 Agenda for Sustainable Development and  ASEAN has numerous environmental legal
SDGs. instruments.
 This universal, integrated and transformative  SAARC adopted Environment Action Plan (1997):
agenda aims to spur actions that will end poverty  Comprehensive Framework on Disaster
and build a more sustainable world over the next Management 2006-2015 was adopted in
15 years. 2006 to address the specific needs of
 There are 17 goals and 169 targets specific disaster risk reduction and management in
targets to be achieved by 2030. Reaching the South Asia.
goals requires action on all fronts – governments,  SAARC Convention on Cooperation on
businesses, civil society and people everywhere Environment has been ratified by all
all have a role to play. member states and entered into force in
 SDGs are not legally binding. 2013.
 The 17 sustainable development goals (SDGs)  COMMUNITY INITIATIVES
to transform our world:  A significant initiative towards sustainable
1. GOAL 1: No Poverty development comes directly from the community
2. GOAL 2: Zero Hunger level. NGOs create linkages between global and local
3. GOAL 3: Good Health and Well-being needs and actors. They have played a role in
4. GOAL 4: Quality Education negotiation, monitoring and implementation of
5. GOAL 5: Gender Equality environmental law and policy at all levels.
6. GOAL 6: Clean Water and Sanitation  IUCN, 1948 has helped draft or has provided a
7. GOAL 7: Affordable and Clean Energy secretariat for several important international
8. GOAL 8: Decent Work and Economic Growth conventions.
9. GOAL 9: Industry, Innovation and Infrastructure  National Greenhouse Gas Inventories
10. GOAL 10: Reduced Inequality Programme (IPCC-NGGIP)
11. GOAL 11: Sustainable Cities and Communities  The WWF has played a major role in the
12. GOAL 12: Responsible Consumption and evolution of the international conservation
Production movement.
13. GOAL 13: Climate Action  TRAFFIC: The Wildlife Trade Monitoring
14. GOAL 14: Life Below Water Network,1976
15. GOAL 15: Life on Land  Wetlands International
 Greenpeace uses
16. GOAL 16: Peace and Justice Strong Institutions
research, lobbying and diplomacy as well as
17. GOAL 17: Partnerships to achieve the Goal
high-profile, ‘on-the-streets’ events, to draw
 ROADBLOCKS TO GLOBAL INITIATIVES attention to the environmental problems and to
 To reconcile the assertion of ‘sovereignty’, by the raise the level and quality of public debate.
member states with the growing environmental
 In India, Biodiversity Act, 2002 is almost  Global hunger has been on the rise after a prolonged
completely built on inputs from a network of decline.
NGOs working across the country.  Extreme poverty declined from 36% in 1990 to 8.6%
 Similarly, the Chipko Movement and Save the in 2018, but the pace of poverty reduction is starting
Silent Valley Movement were results of to decelerate as the world struggles to respond to
community efforts. entrenched deprivation, violent conflicts and
vulnerabilities to natural disasters.
 ROLE OF COOPERATIVES IN SUSTAINABLE  Extreme poverty is three times higher in rural areas
DEVELOPMENT than in urban areas.
 2018 was the fourth warmest year on record. Levels
 Cooperative societies connect the people at the
grassroots level to the highest level of the of CO2 concentrations continued to increase in 2018.
 Natural environment is deteriorating at an alarming
government.
 Cooperatives and NGOs help considerably in the rate.
 Sea levels are rising.
upliftment of the socio-economic conditions of the
 Ocean acidification is accelerating. Ocean acidity is
rural poor and also adopt environment-friendly
technologies for their functioning and generate 26% higher than in pre-industrial times.
 1 million plant and animal species are at risk
awareness among people regarding environmental
issues. of extinction.
 Land degradation continues unchecked.
 Ex: In India, AMUL became the most successful
cooperative movement for the sustainable  VARIOUS METHODOLOGIES HAVE BEEN
development of rural poor by launching EVOLVED TO MONITOR THE PROGRESS OF
the Operation Flood. SDGS.
 PROGRESS AND CHALLENGES AHEAD a) Sustainable Development Index (SDI), 2019
a) Progress  It is released by the Sustainable Development
As per the Sustainable Development Goals Report, Solutions Network (SDSN).
2019  The SDI seeks to help countries identify gaps that
Extreme poverty has declined considerably. must be closed in order to achieve SDGs by 2030 and
 The under-5 mortality rate fell by 49 % between 2000 to identify priorities for early action.
and 2017.  India ranked 115 out of 162 countries.
 Immunizations have saved millions of lives. b) Global Sustainable Development Report
 The vast majority of the world’s population now (GSDR), 2019
has access to electricity.  It is the first GSDR prepared by the United Nations. It
 Countries are taking concrete actions to protect our is entitled “The Future is Now: Science for Achieving
planet: marine protected areas have doubled since Sustainable Development”.
2010.  It evaluated progress on the 2030 Sustainable
 Countries are making concerted efforts to address Development Agenda.
illegal fishing.  The report finds that the current development model
 186 parties have ratified the Paris Agreement on is not sustainable, and the progress made is in danger
climate change, and almost all have communicated of being reversed through worsening social
their first nationally determined contributions. inequalities and potentially irreversible declines in
 About 150 countries have developed national the natural environment that sustains us.
policies to respond to the challenges of rapid  The amount of modern renewable energy in the total
urbanization, and more than 70 countries and the global energy supply has increased by an average of
European Union now have more than 300 policies approx. 5% annually over the past decade.
and instruments supporting sustainable consumption Meanwhile, since 2009 the price of renewable
and production. electricity (solar and wind) has dropped for five years
 A wide range of other actors—international in a row.
organizations, businesses, local authorities, the  WAY FORWARD
scientific community and civil society—have engaged  To make the process of sustainable development
with the SDGs in a manner that generates great hope feasible and operational, it is important to establish a
for the coming decade. common focus that can integrate the outlook and
b) Challenges efforts of various participants in
As per the Sustainable Development Goals Report, development, worldwide, realising the diversity, in
2019 terms of geography, society, economics, level of
 Increasing inequality among and within countries science and technology capabilities and capacities
requires urgent attention. and education standards/levels.
 3 out of every 4 stunted children live in Southern Asia  Developed countries need to change their
and sub-Saharan Africa. production and consumption patterns, including by
 Young people are more likely to be unemployed than limiting the use of fossil fuels and plastics, and to
adults. encourage public and private investments that align
 Barriers in achieving gender equality. with the SDGs.
 Environmental commons—such as the atmosphere,  Given Types:-
rainforests and oceans—must be safeguarded as a) Voluntary
crucial sources of ecosystem services and natural
b) Involuntary
resources. All stakeholders must work together to
conserve, restore and sustainably use natural c) Frictional
resources. d) Disguised
 The food system must undergo widespread changes e) Structural
to the infrastructure, cultural and societal norms, and f) Cyclical
policies that are supporting the current, g) NRU (Natural rate of unemployment)
unsustainable, status quo.
 The much deeper, faster and more ambitious  VOLUNTARILY UNEMPLOYMENT
response is needed to unleash the social and  Under it, works are available but people don’t do the
economic transformation needed to achieve our 2030 work, it may be because of
goals. a) Persons are unwilling to do the work
 A far more optimistic future is still attainable only by
b) Job profile is not matching with the educational
drastically changing development policies, incentives
and actions. qualification in voluntarily
 It is a situation when a person is unemployed not
 EMPLOYMENT & UNEMPLOYMENT due to unavailability of jobs in the economy, but
HANDOUT MATERIAL because of not being able to find employment of
 WHAT IS EMPLOYMENT AND his/her own choice.
UNEMPLOYMENT?  INVOLUNTARILY UNEMPLOYMENT

 There are a few technical terms needed to  Under it persons are able to do and willing to do the
understand what employment and unemployment work but works are not available
is:  Involuntary unemployment occurs when a person is
a) Workforce – The number of people who are unemployed despite being willing to work at the
willing, able and of age to work in an economy. prevailing wage. It is distinguished from voluntary
b) Employed – People who are in work
unemployment, where a person refuses to work
c) Unemployed – People who are willing, able and of
because their reservation wage is higher than the
age to work but are not currently employed.
d) The level of employment – The level of prevailing wage.
employment refers to the number of people who  FRICTIONAL UNEMPLOYMENT –
are in work.  Kind of temporarily unemployment which is caused
e) The rate of employment – The rate of due to innovation at the working place or shifting of
employment refers to the proportion of people who
Job
are working relative to the workforce of the
economy.  When a person loses their job quickly moves onto
f) The level of unemployment – The level of another job, this is known as frictional
unemployment refers to the number of people who unemployment. It is short term and there will always
are out of work be frictional unemployment in most economies, and
g) The rate of unemployment – The rate of it is not seen as a dangerous problem.
unemployment refers to the proportion of people
who are not working relative to the workforce of
 DISGUISED UNEMPLOYMENT
the economy.  Under It, people are employed more than the
 UNEMPLOYMENT VS requirement. The marginal productivity of additional
UNDEREMPLOYMENT labour is zero
 Underemployment is when individuals are  Disguised unemployment is unemployment that
employed but they are not given enough hours to does not affect aggregate economic output. It occurs
earn a wage they want/expect given their when productivity is low and too many workers are
qualifications. filling too few jobs. It can refer to any part of the
 For example, a worker running an ice-cream van
population that is not employed at full capacity
may not be able to work every day due to the
weather and therefore they might have to work  STRUCTURAL UNEMPLOYMENT –
another job to make up his income.  Unemployment caused due to shifting of structure of
 Underemployment is important because it exposes production from one sector to another for example
misleading unemployment figures.
from primary to secondary to tertiary sectors
 An example of this is during the 2008 Financial Crisis
where, although unemployment rose, it did not  It is because of lack of skills and education , the
seem as much as past recessions (Tech Bubble etc) workers of previous sectors would become
however, underemployment skyrocketed by 50%. unemployed called as structural unemployment
 Structural unemployment occurs when the demand b) Fictional unemployment – When a person loses their
of labour is less than the supply of labour in a specific job quickly moves onto another job, this is known as
frictional unemployment. It is short term and there will
labour sector. An example of this is when steel
always be frictional unemployment in most economies, and
factories were moving overseas, away from Britain, it it is not seen as a dangerous problem.
caused unemployment because the demand of c) Cyclical unemployment – Most economies and
labour was reduced. businesses go through cycles of high growth and periods of
slowdowns. During the slowdown phase, where profits and
 CYCLICAL UNEMPLOYMENT – revenues are falling firms will choose to make workers
 It Occurs due to fluctuations in trade cycle redundant to offset the losses/decrease in profits.
d) Seasonal unemployment – Many people may work in
industries which offer jobs on a seasonal basis. An example
of this is a person working at a ski resort where, for the
most part of the summer, they would have no job as the ski
resort is not open, hence they will be laid off
 DIAGRAMS TO SHOW UNEMPLOYMENT
 We can use the PPF to show unemployment. The PPF below
shows that at point B there is unemployment because there
is an inefficient allocation of resources because point B is
inside the PPF. At point A there is no unemployment as it
lies on the PPF.
 It occurs during the period of recession and

depression
 Most economies and businesses go through cycles of
high growth and periods of slowdowns. During the
slowdown phase, where profits and revenues are
falling firms will choose to make workers redundant
to offset the losses/decrease in profits.
 SEASONAL UNEMPLOYMENT –
 Many people may work in industries which offer jobs
on a seasonal basis. An example of this is a person
working at a ski resort where, for the most part of the
summer, they would have no job as the ski resort is
not open, hence they will be laid off
 EMPLOYMENT DEFINITION:-
 Engagement in an economic activity is called as
employment (this economic activity must contribute
to GDP)
 FULL EMPLOYMENT DEFINITION:-
 All those willing and able to do work Must satisfy
these two conditions
a) They get work for specified time period
b) They get wages according to their skills
 UNDER EMPLOYMENT:-
 it means lack of full employment or also either of the
above two conditions are not satisfied
HAND-OUT MATERIAL
 CAUSES OF UNEMPLOYMENT
 There are many causes of unemployment. The following are
the main reasons why people are unemployed:
a) Structural unemployment – Structural unemployment
occurs when the demand of labour is less than the supply
of labour in a specific labour sector. An example of this is
when steel factories were moving overseas, away from
Britain, it caused unemployment because the demand of
labour was reduced.
 EFFECTS OF UNEMPLOYMENT? c) Unskilled Labour:- it is because of lack of required
 Unemployment effects three different groups: skills , labours don’t get formal wages so their
a) Consumers – remuneration (payment) depends upon the
 Consumers will have lower incomes and therefore bargaining power of the employers who always wants
living standards will fall. However, there are many to pay less
other non-financial related repercussions of d) Construction as a part of tertiary sector:- many
unemployment such as a decline in morale among countries/economists incudes construction
consumers and further problems for families.
sector under secondary sector but in India it is
b) Government –
 Governments will have to pay more in benefits and included under tertiary sector because of this
will take in less tax in order to encourage spending to share of secondary sector declines and tertiary
try and stimulate the economy. However, in order to sector increases
run a deficit the government must sell bonds which
reduces the PPP in the future when they have to pay
 India witnessed shifting of occupational
back the bond owners. structure from primary sector to tertiary
c) Firms – sector while secondary sector almost
 Because people are unemployed, firms will find that
remained untouched, discuss ?
consumers will spend less. This may cause firms to
reduce prices which could reduce revenue unless the a) Most of the jobs initially were in the agricultural
increase in demand can offset the loss in revenue due sector
to lower prices.  Temporarily shifted to secondary sector but its
 In conclusion, the distinction between survival also depends upon the service sector like
unemployment and underemployment is important  For funds :- banking sector is needed
to understand because the rate of unemployment
 To carry raw materials and final goods –
may be misleading like during the 2008 Financial
Crisis. Furthermore, there many reasons why transportation service needed
unemployment can take place, some can be very  To get in information about raw materials , final
harmful to an economy and can have long-term goods market and export market –
implications, and some causes of unemployment communication service need
occur due to the natural cycle of an economy. b) Apart from the above factors, in tertiary sector there
 OCCUPATIONAL STRUCTURE is a surety of wages/ salaries / Job security along with

good reputation which is lacking in primary sector
 The occupational structure of a nation refers to the and even in the secondary sector.
percentage of its workforce employed in various economic
c) Lack of fund availability and ease of doing business
ventures.
are also responsible for not preferring secondary
sector % share in employment % share in
sector and shifted to tertiary sector
GDP
Primary 50% 15%  INDICATORS OF EMPLOYMENT &
Secondary 16% 21%
tertiary 34% 64%
UNEMPLOYMENT:-
a) Labour force
 QUESTIONS RELATED TO TABLE:-  Refers to that part of population which is willing and
 Normally the share in GDP and Share in able to do the work
employment should be correlated but it is  Labour force :- Employed + Unemployed
 Work force:- only employed
reversed in India. Why?
 Total Population:- Labour force + VU + T.P
a) Disguised unemployment:- under it, people are
employed more than the requirement. Additional
b) Labour force participation rate
 LFPR:- {(Labour force÷ total population) ×100}
contribution keeps on decreasing and becomes nil
and person’s additional contribution is zero so c) Worker population ratio
person seems employed but contributes zero to  {(Number of employed persons (WF) ÷ total
production, so his share in income (GDP) is negligible population)× 100}
b) Dependent on family labour:- especially in d) Unemployment persons ratio
agricultural sector there is more dependency on  {(Number of Unemployed persons ÷ total
family labour , less people will go for skill population)× 100}
development which reduces their productivity and e) Unemployment rate
share in income {(Number of Unemployed persons ÷ Labour

force)× 100}
 TRENDS OF EMPLOYMENT INDIA  WHY INDIA’S GROWTH IS
Phase
st
Period Employment growth rate (EGR) CONSIDERED AS A JOBLESS ONE?
1 1983-94 2.72%  {Jobless in itself means negative term, so examiner
nd
2 1995-2000 1.07% = Jobless Growth wants the question to be critically analysed}
rd
3 2000-05 2.62%
4
th
2005-10 0.40%
 Answer:- There are two dimensions of it
5
th
2011-21 0.39% A. INDIA DOESN’T NEED TO WORRY
st a) Demographic dividend:-
A. PHASE -1
 In India:- 15-59 years:- working population. 15-35
 Witnessed more employment because of more
years:- younger working population (India has this
govt expenditure which increased jobs population more). Just their skill development is
 Govt expenditures like needed, this will continue till 2030 means positive
 NREP:- National Rural Employment Programme - return will come till 2030. LFPR (labour force
1980 participation rate) decreased from 47% to 40%
representing more people are getting job. (However
 IRDP:- Integrated Rural Development
FLFPR is declining, it is 9.4%). According CMIE dec
Programme-1980 2021 report, for household activities women
 Another reason for more employment was more contribute 5 hours while male only 30 minutes
availability of labour intensive work representing MLFPR is high that is 67.4%
 Between 1998-2017, India witnessed fall in LFPR
B. PHASE-2nd JOBLESS GROWTH PERIOD (labour force participation rate) but it was
 Called as jobless period growth because of less because of decline in female LFPR (9.4% FLFPR)
govt expenditure on job creation while the male LFPR was still on rise (MLFPR=
 Economic crisis in some Asian Nations like 67.4%). According to the report of CMIE dec
Thailand also reduced investments in the 2021 (Center for monitoring Indian economy)
country but demographic dividend was positive and will
remain positive till 2030
 Also most of the govt initiatives during economic
 Positive returns from demography can be
reforms (1990) ignored agriculture sector where ensured through better education, better health
most of the jobs are created care, better skill development, creation of
 Reforms focused on “Capital intensive productive works
Production”, policies announced before 1991 b) Mechanisation of agriculture
were still working  This reduces labour requirements especially female
labours but this has increased production and GDP
 Policies announced under economic reforms which is good for the economy. Only there is a need
started showing results after the year2000 of a policy which combines both capital intensive
because every reform takes time to show a technology and labour intensive technology based
positive result production to accommodate more people
c) Decline in FLFPR (Female labour force
C. PHASE 3rd participation rate)
 New economic policies started showing positive  The proportion of FLFPR can be increased through
results. Export also increased and more foreign proper awareness and education programs
investors increased production in secondary and B. SOME GENUINE REASONS TO WORRY
tertiary sector a) Change in occupational structure
 Although Public sector role declined but private  There is a decline in employment in agriculture due to
mechanisation.
sector role inclined  There is also a decline in employment in industry
 LPG started showing positive effects on employment sector because of capital intensive technology and
 Govt expenditure in the forms of programmes like also because of less incentives given by government
MGNREGA increased and promoted jobs further b) Less share of tertiary sector
D. PHASE 4th & 5th  The tertiary sector contributes the largest to the
overall GDP of India. However, the job creation by
 India reached to its saturation point with the this sector are mostly of formal type due to which
available resources and economic policies inclusion of informal workforce in this sector is
 Now there is a need of new set of economic reforms reduced
to lift this proportion of employment again c) Non-transition to export oriented growth
 Indian did not transit itself from an import
……..11th Class ended,12th started………
substitution to an export oriented development

based nation. As a result the labour intensive b) Code on wages
component of the industrial sector didn’t experience c) Code on social security
considerable growth d) Code on occupational safety, health and working
d) Lack of credit to MSME condition (OSHC)
 Although the MSME has high labour but they are not  LIMITATION OF THESE LABOUR REFORMS
treated well in India as they have poor access to  Most reforms are industry centric. So there is need to
credit give more priority to welfare of workers
 According to economic survey of 2022-23, although  These are still heavily tilted in the favour of formal
credit to MSME sector increased by 30.5% but there sector
is a need to give more focus on micro sector  It is due to the scale of production and lack of basic
 Economic survey 2022-23 further says that the GST infrastructure like roads, electricity etc , it is quite
collection increased from 4.5lakh crore in 2019 to 5.5 difficult to shift from informal sector to formal sector
lakh crore in 2022 which shows that economic  Informal sectors have lack of credit because financial
activities have increased but the sector needs more institutions prefer giving more loans to formal sector
support in terms of credit to contribute more in then informal sector
employment  Informal sector ha slack of marketing opportunity
e) Strict labour laws because of less advertisement capability due to
 Earlier it was under the labour laws that if a contract is for shortage of funds
120 days or more then industrialist will have to provide all  These laws don’t offer any solution for the workers of
regular worker facilities as a result less than 120 days’ work unorganised sector including agriculture
at the contract based on that were being created
 Also if an industrialist unit has 100 or more workers then HAND-OUT MATERIAL
they need govt authorisation to fire them. So industrialist
use to appoint or hire less than 100 workers to avoid
 NEW LABOUR CODE
regulations  INTRODUCTION:
f) Industrial dispute Act 1947 (IDA-1947)  Ninety per cent of workers in the unorganized sector
 Any dispute b/w worker and industrialist could be did not have access to all the social securities since
settled by three ways independence. Today, the total number of workers,
a) Mutual talks comprising of organized and unorganized sectors, is
b) Labour tribunals more than 50 Crores. According to a 2002 report by
c) Judiciary the Second National Commission of Labour, India has
 Most of the ideal cases are resolved through judiciary many labour laws at the federal level. The
but most of the verdicts are in the favour of workers. Commission recommended that these various labour
Because of this employers take utmost care in laws should be consolidated and simplified into only a
employing a person which is itself promotes jobless few central laws.44 central labour laws with over
growth 1200 sections have been assimilated into just four
codes i.e. Wage Code, Social Security Code,
 WAY FORWARD: MEASURES TO Occupational Safety, Health and Working Conditions
AVOID JOBLESS GROWTH Code and Industrial Relations Code.
a) Need of start-ups  LABOUR REFORMS UNDERTAKEN
 There is a need of start-ups in both industry and SINCE-2014
service sector because start-ups are job creators and
 Prime Minister Modi has launched “Shramev Jayate”,
they have potential to accommodate more and more
a welfare program for workers that aims to put the
people
UAN system in place to let them withdraw their
b) Service employment:- provident fund securely from any location.
 Some of the assignment based workers like Gig  Through the Shram Suvidha Portal, industry members
workers, platform workers also contribute in jobs, so were able to easily file their returns.
there is a need to regularise them  In order to provide social security to old age workers
c) Creating labour intensive sector of the unorganized sector, The Pradhan Mantri Shram
 Promoting labour intensive sector such as food Yogi Maan Dhan Yojana was started, in which
processing, textiles and upper ell provision was made for pension benefit of Rs 3000
d) Removing capability deprivation per month after reaching the age of 60.
 This can be done through proper skill development  For transparency and accountability, the usage of IT-
programs. It will turn workforce from job seeking to enabled system for inspection has been made
job creating resource mandatory.
e) Labour reforms  The ceiling limit of gratuity has been increased from
 Any reform which leads to less labour rigid laws could Rs 10 Lakhs to Rs 20 Lakhs on 29.03.2018.
ensure more employment  On 16.02.2017, Payment of Wages Act enabled
payment of wages to employees by cheque or
 New labour laws
crediting it to their bank account.
 Four labour codes replaced old labour laws. They are
 The Maternity Benefit Amendment Act came into
a) Industrial relation code
effect from 01.04.2017 and increased the paid
maternity leave from 12 weeks to 26 weeks. migrant workers has been ensured.
 FOUR NEW LABOUR CODES: a) Anomalies of the Inter-State Migrant Workers Act,
1) Labour Code, 2019: Workers are entitled to a fair 1979 have been comprehensively addressed in the
minimum wage. OSH Code. Earlier only workers appointed by a
 The Union Budget for 2018-19 will give wage contractor were recognized as Inter-State Migrant
security, social security and health security to 50 Workers. However, under the new provisions of the
crore workers, whether they belong to the organized Code, workers can now register themselves as Inter-
or unorganized sectors. State Migrant Workers on the national portal. By this
 Guarantee of minimum wages.
provision, the worker would get a legal identity which
 The committee decided that during every five years
would enable them to get benefits of all social
of negotiating new agreements, there is a need to security schemes.
review the minimum wage. If a worker is not paid b) Employers to provide travelling allowance annually to
wages on time, they promise to guarantee a timely an Inter-State Migrant Worker for undertaking to and
payment and provide equal remuneration to male fro journey to his native place.
and female workers. c) Providing appointment letters to the workers has
 To remove regional disparity in minimum wages,
been made mandatory.
floor wages have been introduced. d) Mandatory, free annual health check-up of workers
 On 28th August 2017, the Payment of Wages Act was
to be provided by the employers.
amended to increase the wage ceiling from 18,000 to e) For a worker engaged in building and other
24,000. construction work in one State and moving to
2) Social Security Code, 2020: Social Security for another State, benefit from the Building and other
everyone to secure the right of workers for Construction Workers’ Cess fund will be provided.
insurance, pension, gratuity, maternity benefit etc. f) Under the “One Nation - One Ration Card”, an Inter-
 The doors of Employees' State Insurance Corporation
State Migrant Worker would get ration facility in the
(ESIC) will be standing open for the workers of all State he is working in and the remaining members of
sectors. his family would be able to avail of the ration facility
 The ESI plans to develop a network of hospitals and
in the State where they reside.
dispensaries across the country, with each facility g) Mandatory helpline facility in every State for
located in every district. This will ensure that all the resolution of Inter-State Migrant Workers’
740 districts have their own ESIC facility. grievances.
 Plantation workers and people in hazardous work
h) National database to be created for the Interstate
should be given ESIC. Workplaces that are considered Migrant Workers.
to be hazardous will be compulsorily registered with i) Instead of 240 days, now if a worker has worked 180
ESIC. days, he shall be entitled for one-day leave for every
 Opportunity to join ESIC for platform and gig workers
20 days of work done.
engaged in new technology.  Women empowerment through the Labour
 Benefit of pension scheme (Employees' Provident Codes:
Fund Organisation) to all workers. o Creation of social  Right to women workers to work in all types of
security fund for providing comprehensive social establishments.
security to the unorganized sector.  Women have been given the right to work at night
 There used to be a requirement that employees in with their consent and employer to make adequate
certain cases could not receive gratuity without arrangements to provide safety and facilities to
fulfilling the minimum service requirement. This has women workers at night.
now been changed.  Maternity Benefit Act amended in 2017
 Employees engaged on fixed term to get same social 4) Industrial relations (IR) code, 2020: towards
security benefit as permanent employees. end to disputes
 Registering workers in the unorganized sector on a
 In case of job loss, a worker will get benefit under the
nationwide database is an important step that helps Atal Bimit Vyakti Kalyan Yojna - a worker of organized
to both identify and deal with them. sector who loses his job gets financial aid from the
 o Employers employing more than 20 workers to
Government. This is a type of unemployment
mandatorily report vacancies online. allowance, the benefit of which is admissible to the
 Aadhaar based Universal Account Number (UAN) for
workers covered under the ESI Scheme.
ESIC, EPFO and Unorganized Sector workers to ensure  At the time of retrenchment a worker would be
seamless portability. provided 15 days’ wages for reskilling. The wages
3) Occupational, Safety, Health and Working would be credited directly into the bank account of
Conditions Code (OSH Code): the worker so as to enable him to learn new skills.
 to provide better and safe environment along with  Faster justice to the workers through the Tribunal.
occupational health and safety to workers at the  Workers disputes to be resolved within a year in the
work place. The security of interests of workers Tribunal.
engaged in factories, mines, plantations, motor  Industrial Tribunals to have 2 members to facilitate
transport sector, bidi and cigar workers, contract and faster disposal of cases.

 In industrial establishments, a Trade Union having 51 b) It gives a sense of security that it is a second job
per cent votes shall be recognized as the sole if the main job is not same
negotiating union which can make agreements with c) It can bring psychological benefits such as the
employers. feeling of not tied with one company only
 In industrial establishments in which no trade union
d) Taking a part time job could be a way to boost
gets 51 per cent votes, a negotiating council of trade
unions shall be constituted for making agreements entrepreneur skills
with employer. B. CONS:-
 BENEFITS OF CODIFICATION: a) It takes additional time which can physically
a) Single Registration; Single License; Single drain the workers
Statement; Minimum Forms b) Conflict of interest:- consulting a direct or
b) Common definitions indirect competitor may force your employer to
c) Reduction of Committees
claim right to your intellectual property in a fear
d) Web-based surprise inspection
e) Use of technology – Electronic registration and of insider trading
licensing. c) Performance slippage:-even if the company
f) Reduction of compliance cost and disputes allows moonlight, it may result in under
 ORGANISED (FORMAL SECTOR) performance because of improper rest and brake
to revive the body
 Any organisation/enterprise having 10 or more hired
workers along with electricity as an input or 20 or  WAY FORWARD
more hired workers if electricity is not an input or a) Pick an unrelated work or field, through this
registered with the govt or registered under any someone can reduce the risk of conflict of
taxation system like GST interest
 All conditions are independent b) Many companies have moon-light policies and if
they don’t it is wise to see if a second job might
 UNORGANISED (INFORMAL SECTOR)
be a conflict
 Not filling above conditions
c) Supplementary income is fine but it is best if a
 In 2004-05 central govt committee “Arjun sain Gupta
second job is a part of overall career plan
committee” named as –National Commission For
Enterprises in unorganised sector defined informal  MEASUREMENT OF UNEMPLOYMENT
workers as those who are employed in informal  This is done by NSO
sector + employed in formal sector but nature of A. UPS (USUALLY PRINCIPAL STATUS)
employment is informal (quality of job is poor)  182days unemployed out of 365 days
 GIG WORKERS  The usual Principal Status (UPS) approach relates to
the activity status of a person during the 365 days
 They are non-platform workers and generally causal
preceding the date of the survey. The activity status
wage workers and own account workers in the
on which a person has spent a relatively long time
conventional sector like catering events, software
(182 days or more) during the period is considered
development etc, working part-time
the usual principal activity status of the person.
 They are freelancers, independent and contractual
workers B. CWS (CURRENT WEEKLY STATUS)
 Whole week (unemployed) , not employed even for
 PLATFORM WORKERS:- one hour or any day of the week out of a week
 Those workers who work in non-traditional sector
C. CDS (CURRENT DAILY STATS)
where work is done via an online platform directly to
 Whole day (unemployed) , not employed even for
individuals or organisations
one hour or that day o out of that one day
 For example:-OLA, Uber drivers, Swiggy or zomato
delivery agents  NOTE:-
 1 hour or less than 4 hours = half day employment
 MOON LIGHTING/MOON LIGHT CHEATING
 4 hours to 8 hours = full day employment
 It is a practice of working on a second job during or
HANDOUT MATERIAL
outside of regular business hours
 It is a Kind of dual employment that is why termed as  HOW IS UNEMPLOYMENT
cheating MEASURED?
A. PROS:-  There are 2 main ways of measuring unemployment:
a) It gives extra income a) INTERNATIONAL LABOUR ORGANISATION (ILO)
 The International Labour Force uses the Labour Force
Survey. This is the official measure used in the UK and
is compulsory for every EU state to use the same  According to economist G.S. Bhalla :- problem in India
method is not unemployment but quality in employment
 The Labour Force Survey consists of surveys of 80,000
d) Lack of skill development
households every month. The survey asks questions
regarding the economic activity of the household as e) Mismatch b/w available and required skills
well as basic demographic questions such as age,  Like IT people getting lower wages and low quality
gender, and ethnic background. jobs because of not matching required skills
 To be classed as unemployed a person must be out of  Solution:- agreement b/w govt and industry to impart
work for the past 4 weeks and has not been looking
required skills among the employees would work in
for a job during the 4-week period
this favor . e.g an apprenticeship scheme would also
b) T H E C L A I M A N T C O U N T
work in this favor , it is similar to internship and it
 The claimant count measures unemployment by
counting the number of people who are claiming emphasis on learning by doing
benefits for being unemployed (known as the Job f) Rigid labour laws
Seeker’s Allowance).
 There are a few limitations with this approach to  CONCLUSION FROM ECONOMIC
measuring unemployment. For example, there is a
stigma against claiming benefits, therefore not
SURVEY 2022-23
everyone who is eligible claims them making the a) If export would grow by more than 3.4% instead of
figure smaller than it should be. 1.7% to 2.1% of today, that unemployment problem
 Also, there are very fine criteria in order to be eligible would be resolved
for the benefit; if you resigned from your job you  India aims to raise the share of its exports in global
cannot claim benefits.
trade from 2.1% to 3% by 2027 and 10% by 2047
 Furthermore, the figure is easily manipulated by the
government as they can change the way the claimant b) Half of the forex reserves we use in purchasing fossil
count is calculated in order to reduce the political fuels , so there is a need to have energy replacement
pressure that may come with a high figure of to solar energy, electric vehicles to save that forex
unemployment. reserve
 Lastly, the claimant count is not a global measure of c) Attract private investor in infrastructure , by 2030
unemployment and therefore it cannot be used to
more than 40% population will live in urban areas so
compare the unemployment levels of countries.
investment in urban infrastructure is essential
 REASONS BEHIND INDIAN …………..12 class done, All classes done………..
EMPLOYMENT PROBLEM
a) Lack of industrial growth
 b/w 1950-1980, exceptions were the steel and
iron and pharmaceuticals
 post 1980 there were two problems
a) discontinuous industrial growth due to
balance of payment crisis, east Asian crisis
(1993-1997) and also unstable industrial
economy
b) from 2003-2008 we witnessed increase in
industrial production but it was not
continuous but negligible in employment
generation
b) capital intensive industries
 there was negligible presence of labour intensive
industries
 Solutions :-industrial growth is better solution for
jobless growth, so there should be more focus on
labour intensive industry
c) Productivity v/s job creation
 Productivity should be chosen over job creation
because sacrificing productivity means lower quality
of jobs

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NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022

 (R.E. + C.E)– (Non Debt CR + T.R )

 BASIC ABOUT DEFICITS:-

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NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 2

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 3

THE INDIRECT TAX

CAPITAL GAINS TAX

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 5

 TCS-TAX COLLECTED AT SOURCE  Tax amount= 10000

 It is applied on few examples used as final products  Sur Charge = 1% of 10000

 GOVERNMENT ANNOUNCES THREE Chakraverti committee 1997:- government

INTRODUCED (INDIA):- E. EQUALIZATION LEVY (GOOGLE

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 14

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 16

TOPIC: THE ANGEL TAX:- 

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 17

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 20

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 28

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 34

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 35

HDI AND OTHER INDEXs:- 35

 HDI VALUES:-  WHAT IS HUMAN DEVELOPMENT REPORT?

HDI-2020 D. GII:- GENDER INEQUALITY INDEX

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 39

 IMPACTS OF SUPPLY SIDE CONSTRAINTS:-

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 43

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NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 46

UNEMPLOYMENT?  INVOLUNTARILY UNEMPLOYMENT

 It occurs during the period of recession and

 OCCUPATIONAL STRUCTURE is a surety of wages/ salaries / Job security along with

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 54

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 56

NOTES MADE BY AKASH 7589157201 E-5 BATCH STUDENT 2022 59

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