Indian Economy: Critical Milestones during 70 years

Indian Economy: Critical Milestones during 70 years

India’s economic history over the past 70 years has been marked by several critical milestones amongst which are the crisis years of 1966, 1981 and 1991 and India’s emergence from the economic crisis as the fastest growing major economy of the world.

India’s balance of payments position was under pressure throughout 1965. As the year 1966 opened, exchange reserves had already been reduced to a low level. In March 1966, a stand-by arrangement of US$ 200 million was approved by the IMF.  Rupee was devalued by 36.5 percent to bring domestic prices in line with external prices, to enhance the competitiveness of exports. The US dollar which was equivalent to Rs. 4.75 now rose to Rs. 7.50 and the pound sterling from Rs. 13.33 to Rs. 21. The Government declared a plan holiday. The fourth five-year plan was abandoned in favor of three annual plans in the wake of disruptions in the economy on account of two years of drought, two wars, and the devaluation of the rupee. The annual plans guided development with immediate focus on stimulating exports and searching for efficient uses of industrial assets. The devaluation failed; it did not achieve its objectives. The promised foreign aid did not materialize.

The balance of payments situation changed dramatically in 1979-80. Inflation soared from 3 percent in 1978-79 to 22 percent in 1979-80. The external terms of trade worsened significantly owing to higher prices for imported petroleum and fertilizers. Trade deficit zoomed. Government undertook deficit financing on an unprecedented scale. In 1981, to meet the short term cyclical imbalance, India drew SDR 266 million of the SDR 500 million approved under the compensatory financing facility (CFF) from the IMF. The main elements of the Government’s strategy for restoring the viability of balance of payments was an increase in the domestic production of petroleum and petroleum products, fertilizers, steel, edible oils and non-ferrous metals. India’s strategy for bringing balance of payments under control paid rich dividends. The Government voluntarily decided not to avail of the balance of 1.1 billion SDR under the Extended Fund Facility of the IMF.

The IMF programs of 1966 and 1981 helped tide over periods of high inflation and difficult balance of payments position faced at that point of time. That said, they were modestly successful in bringing economic reforms to the Indian economy. India entered the 1990s with structural rigidities and imbalances in the economy, pronounced macroeconomic imbalances despite a significant growth rate of 5 percent. Several adverse domestic and external developments precipitated in the balance of payments (BOP) crisis in 1991. From this crisis, emerged a comprehensive reform agenda backed by an IMF program which was effectively implemented.

On August 27, 1991, India approached the IMF for an 18-month stand-by arrangement in an amount equivalent to SDR 1656 million. The adjustment strategy entailed a set of immediate stabilization measures adopted in July 1991 most notably a 18.7 percent depreciation of the exchange rate and further tightening of monetary policy including increase in interest rates, designed to restore confidence and reverse short term capital outflow. A comprehensive program built around the twin pillars of fiscal consolidation and a radical structural reform to shift away from past policies was adopted. In many ways, the IMF program of 1991/92 ensured India’s integration into the global economy.

The global financial crisis which began in 2007 took a turn for the worse in September 2008 with the collapse of several international financial institutions. Indian stock markets witnessed a 60 percent loss in values, foreign portfolio investment slowed down and rupee lost 20 percent value against the dollar reaching Rs. 50/ dollar. Expectations that the Indian economy is ‘decoupled’ from the West were completely belied. A substantial fiscal stimulus was provided through two packages on December 7, 2008 and January 2, 2009. The Reserve Bank of India took a number of monetary easing and liquidity enhancing measures including the reduction in the cash reserve ratio, statutory liquidity ratio and key policy rates. The objective was to facilitate funds from the financial system to meet the needs of productive sectors.

India’s economy was one of the first in the world to recover after the global crisis. Prompt fiscal and monetary policy easing combined with a fiscal stimulus had brought growth to pre-crisis levels. Capital inflows were back on the rise and financial markets regained ground. Growth was projected to rise from 6 ¾ percent in 2009-10 to 8 percent in 2010-11. India faced challenges in managing capital flows and sterilized intervention was pursued to help reduce exchange rate volatility.

On October 8, 2016 the Indian Finance Minister addressed the International Monetary and Financial Committee (IMFC) during the Fund-Bank Annual Meetings presented India as the fastest growing major economy globally with GDP growth at 7.2 percent, foreign exchange reserves of USD 372 billion, current account deficit of (-) 1.1 percent and CPI inflation at 5.05 percent. The Government showed deep commitment to fiscal consolidation, lowering the cost of credit to private sector and help price stability. Subsidy reforms were undertaken with better targeting of subsidies by linking oil subsidies with aadhar. Government constituted an empowered monetary policy committee and fixed an inflation target of 4 percent with a tolerance level of +/- 2 percent for the period 2016-2021. The GST represents a major milestone in tax reforms. The economic transformation from an IMF program country to the world’s fastest growing major economy represents a significant success story for the Indian economy at 70.

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India, emerging as super economic power

India, emerging as super economic power

India’s economic advancement in the past 70 years is one of the most fascinating success stories. Faced with multiple woes, ranging from near absence of infrastructure to almost everything needed for economic enhancement, India’s odyssey towards economic independence was dotted with challenges. It was the determination of our founding fathers who did not give up and build the country brick by brick. The concept of Five-Year-Plan was a great beginning in the right direction, with an emphasis on eradication of poverty and woes of farmers.

There were multiple problems which had crept into the system over the years in the system and the ease of doing business was never encouraging. Foreign reserves were never assuring, while the flow of foreign direct investments (FDI) was minimal. As a result, the demand for the opening up economy began gaining momentum when Rajiv Gandhi was the country’s Prime Minister. Due to political turmoil there was not much happening till PV Narasimha Rao became the country’s Prime Minister and he opened the gate for foreign investors by liberalising norms, thus beginning the era of economic liberalisation. The pace of foreign as well as domestic investment remained sluggish during 1996 to 1999 due to political instability and Kargil War.

However, Indian economy bounced back post-Kargil War, thanks to the visionary leadership of the then Prime Minister Atal Bihari Vajpayee. In fact, the ‘feel good factor’ of liberalisation became explicit and the flow of investment and disinvestment of PSUs to fund major infrastructure projects including roads and power plants picked up momentum.Since then Indian economy has not looked back. In fact, even during the global economic crisis in 2008, Indian economy showed resurgence and maintained an upward growth rate, emerging as a bright spot for the world investors.

Now under the leadership of Prime Minister Narendra Modi, India has become the fastest growing economy in the world, leaving behind China. A series of reforms initiated by Prime Minister Modi has significantly increased the ease of doing business in the country. That is why India is today one of the most sought after investment destination of world’s leading firms. It is, perhaps, for the first time in the history of independent India that the world’s top CEOs are committing huge investments in India on their own, a rare phenomenon indeed!

Prime Minister Modi’s demonetisation decision has created a solid ground for the formalization of Indian economy. Indian economy has suffered a lot due to its over dependence on informal or unorganised sector, which could be a major source of employment but in the process end up causing huge losses to the economy by way of tax evasion and violation of labour laws, which have negative bearing on the final output of workforce. Similarly, the landmark Goods and Services Tax (GST) is all set to give a new boost to the country’s economy. It will have long term positive impact on investment and growth.According to the International Monetary Fund (IMF), “this tax reform and the elimination of targeted subsidies are needed to widen the revenue base and expand the fiscal envelope to support investment in infrastructure, education, and healthcare.”

Targeted Delivery of Financial and Other Subsidies(Benefits and Services) Act 2016, rationalisation of subsidies, enactment of Insolvency and Bankruptcy Code 2016 and operationalisation of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) for new corporate insolvency framework are some other measures which will add lot of resilience to the country’s economy.

The World Bank has predicted India’s growth at 7.7 per cent during 2017-18, which reinforces the fact that fundamentals of Indian economy remain quite strong and are capable of absorbing the aftershocks of policy ‘disruptions’. India has all the potential to grow at a much higher pace if the Centre takes care of industrial and manufacturing sectors. IMF too has underlined the need for removing long-standing structural bottlenecks so that market efficiency improves.Indian economy had grown at 7.6 per cent in 2015-16. According to the World Bank, India’s gross domestic product (GDP) could grow at 7.7 per cent in 2017, supported by “expectations of a rebound in agriculture, civil service pay reforms supporting consumption, increasingly positive contributions from exports and a recovery of private investment in the medium term.” India’s recent growth rate of more than 7 percent annually has been the strongest among G-20 countries.

The latest OECD Economic Survey of India 2017 finds that the acceleration of structural reforms and the move toward a rule-based macroeconomic policy framework are sustaining the country’s longstanding rapid economic expansion. Liberalising norms for a wide range of FDIs will lead to a kind of surge in job and employment creation. Barring the small negative list, Prime Minister Modi has ensured that all sectors get FDIs through the automatic approval route. According to an estimate, net FDI inflows during April-December 2016-17 increased to US $ 31.18 billion from US $ 27.22 billionduring the last corresponding period. India’s foreign exchange reserves stood at US $ 367.93 billion on March 24, 2017 with the current account deficit (CAD) at sustainable level of 1.3 percent and 1.1 percent in 2014-15 and 2015-16.

If we go by other economic indicators, there are many more things to cheer about. India’s Gross Fiscal Deficit (GFD) was restricted at 3.5 percent in 2016-17.The GFD for the year 2017-18 has been pegged at 3.2 percent with a commitment to achieve three per cent next year. With the Central government under the leadership of Prime Minister Narendra Modi committed to enhance fiscal resilience through sustained focus on quality expenditure and higher tax realizations, India looks all set to script many more successes in the economic area, moving towards achieving the goal of economic supremacy.

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Inter-Linking of Rivers

Inter-Linking of Rivers

The National Perspective Plan (NPP) was prepared by the then Ministry of Irrigation, now Ministry of Water Resources, RD & GR for water resources development through inter basin transfer of water, for transferring water from water surplus basins to water-deficit basins. Under the NPP, the National Water Development Agency (NWDA) has identified 30 links (16 under Peninsular Component & 14 under Himalayan Component) for preparation of Feasibility Reports. The pre-feasibility report of the all 30 links have been prepared and circulated to the concerned State Governments by the NWDA. After survey and investigations, Feasibility Reports of 14 links under Peninsular Component and Feasibility Reports of 2 links and draft Feasibility Reports of 7 links (Indian portion) under Himalayan Component have been completed.
Four priority links under Peninsular Rivers Component have been identified for preparation of Detailed Project Reports (DPR) viz; Ken-Betwa Link, Phase –I & II, Damanganga-Pinjal Link, Par-Tapi-Narmada link and Mahanadi-Godavari link. The preparation of DPR of a project is taken up only after consent of concerned State Governments. Based on the concurrence of the concerned States, DPRs of Ken-Betwa link project Phase-I & Phase-II, Damanganga-Pinjal link and Par-Tapi-Narmada link have been completed. The techno-economic clearance and various statutory clearances of the Ken-Betwa link project Phase-I have been accorded. The techno-economic clearance of the Damanganga-Pinjal link project has also been accorded subject to statutory clearances. The DPR of Par-Tapi-Narmada link is under technical appraisal in the Central Water Commission.
The implementation of Inter linking of Rivers (ILR) projects involves various steps such as preparation of Pre-feasibility Reports(PFRs) /Feasibility Reports (FRs) of links, negotiation and consensus among concerned States, agreement with neighboring countries if link involves area lying in those countries, preparation of DPRs of the projects, clearance from appraisal agencies which includes clearance by Ministry of Environment & Forests and Climate Change (MoEF&CC) and Ministry of Tribal Affairs (MoTA), techno-economic clearance by Advisory Committee on Irrigation, Flood Control & Multipurpose Projects of MoWR, RD & GR, investment clearance and the construction time required for the completion of the project as per the DPR.
The stage of implementation of a project would be reached after its DPR is prepared with the consensus of concerned States and the requisite statutory clearances are obtained. Thus the implementation of the projects will take varying periods of time.
No State except Kerala is opposing the Interlinking of Rivers (ILR) Programme. Further Kerala Government is opposing only Pamba-Achankovil-Vaippar link which concerns the State.
Interlinking of Rivers (ILR) programme has been taken up on high priority. The Government is pursuing the ILR program in a consultative manner.
As directed by the Hon’ble Supreme Court vide its judgment dated 27.02.2012 in the Writ Petition (Civil) No. 512 of 2002 on ‘Networking of Rivers’ alongwith Writ Petition No. 668 of 2002 a committee called “Special Committee on Interlinking of Rivers” vide Gazette Notification dated 23rd September, 2014 has been constituted.
The Special Committee on Interlinking of Rivers chaired by Hon’ble Union Minister (WR, RD & GR) as per the direction of the Hon’ble Supreme Court is expediting the progress and effective implementation in the ILR projects. Thirteen meetings of the Special Committee for ILR have been held so far and the last meeting was held on July 27, 2017 at New Delhi. Views and observations on the ILR programme have been received from various State Govts, experts and other stakeholders in the meetings of the Special Committee for Interlinking of Rivers (ILR). The Special Committee would consider all such observations appropriately while planning and formulating the ILR projects.
The Committee, after considering the views of all the stakeholders, is proceeding ahead to expedite the objectives of the interlinking of rivers as per terms of reference. Vigorous efforts have been taken up for generating consensus with development of alternative plans and also setting out road maps for implementation of mature projects.

Solar Energy Installed Capacity Touched 13652 MW

Solar Energy Installed Capacity Touched 13652 MW

               As on 31.07.2017, the cumulative Solar Energy capacity installed, as on 31.07.2017, is 13652 MW while the same at the end of 2014-15 was 3743.97 MW. This was stated by Shri Piyush Goyal, Minister of State (IC) for Power, Coal & New and Renewable Energy and Mines in a written reply to a question in the Lok Sabha today.

             The States of Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Rajasthan, Tamil Nadu and Telangana have crossed the solar installed capacity of 1 GW, as on 31.07.2017. State-wise details are as follows:-

Sr. No.	State/UT	Total cumulative capacity till 31-07-17 (MW)
1.	Andhra Pradesh	2048.82
2.	Gujarat	1262.10
3.	Karnataka	1260.58
4.	Madhya Pradesh	1116.64
5.	Rajasthan	2022.72
6.	Tamil Nadu	1697.32
7.	Telangana	1609.27

                                The Minister further stated that the Government of India has revised the National Solar Mission target of Grid Connected Solar Power projects from 20,000 MW by 2022 to 100,000 MW by 2022.  The same is sought to be achieved through rooftop solar projects (40,000 MW) and ground mounted solar projects (60,000 MW), the Minister added.

            In a written reply to another question, the Minister said that No specific ‘Solar Energy Policy’ has been formulated. However, the Government has launched following schemes to promote solar energy,:

i.      Solar Park Scheme for setting up of over 50 Solar Parks and Ultra Mega Solar Power Projects targeting over 40,000 MW of solar power projects.

ii.     Scheme for setting up 1000 MW of Grid-Connected Solar PV Power Projects by Central Public Sector Undertakings (CPSUs) and Government of India organisations with Viability Gap Funding (VGF).

iii.    Scheme for setting up 300 MW of Grid-Connected Solar PV Power Projects by Defence Establishments and Para Military Forces with VGF.

iv.    Pilot-cum-demonstration projects for development of grid connected solar PV power plants on canal banks and canal tops.

v.     Bundling Scheme - 15000 MW grid-connected solar PV power plants through NTPC Ltd./ NVVN.

vi.    VGF Scheme for setting up of 2000 MW of Grid Connected Solar PV Power Projects through SECI.

vii.   VGF Scheme for setting up of 5000 MW of Grid Connected Solar PV Power Projects through SECI.

viii.  Installation of Grid Connected Solar Rooftop Power Plants.

Survey for Quality of Education in Government Schools

Survey for Quality of Education in Government Schools

The National Council of Educational Research and Training (NCERT) conducts periodic national surveys of learning achievement of children in classes III, V, VIII and X. Four rounds of National Achievement Survey (NAS) for class V, three rounds for classes III and VIII and one round for class X, have been conducted so far. These surveys reveal improvement in learning achievement levels of pupils, in identified subjects from first round to fourth round.
As per results of third round of National Achievement Survey (NAS) in class-III 73% children achieved above 50% in language and 76% children achieved more than 50% in Maths. In class-V 36% children achieved more than 50% in language and 37% children achieved more than 50% in Mathematics. In class VIII the achievement in Maths was low as only 14% children could achieve more than 50% marks. In science similar positions persisted as only 17 % children could answer more than 50% questions correctly. In class X the 16% children achieved more than 50% marks in maths and in science 22% children achieved more than 50% scores.
From current year onwards, Government has decided to conduct Survey of Learning Outcomes as National Achievement Survey with district as the sampling unit. The Survey will assess the competencies developed in the students studying in grades III, V and VIII in government and government aided schools.
In order to focus on quality of education, the Central Rules to the RTE Act, 2009 have been amended on 20th February, 2017 to include reference on class-wise and subject-wise Learning Outcomes. The Learning Outcomes for each class in Languages (Hindi, English and Urdu), Mathematics, Environmental Studies, Science and Social Science up to the elementary level have, accordingly, been finalized and shared with all States and UTs. These would serve as a guideline for States and UTs to ensure that all children acquire appropriate learning level. The students learning assessment will be according to the Learning Outcomes developed by NCERT.

Establishment of Eight Additional Power Reactors

Establishment of Eight Additional Power Reactors

The Government has accorded ‘in principle’ approval of five sites for locating 28 nuclear power reactors with a total capacity of about 32000 MW.

In addition, there are presently nine reactors under construction with a total capacity of 6700 MW. The Government has also recently accorded administrative approval and financial sanction for twelve reactors with a total capacity of 9000 MW.

The details are as follows:

Presently, following nuclear power projects are under various stages of construction:

Project	Location & State	Capacity(MW)
KAPP-3&4	Kakrapar, Gujarat	2 x 700
RAPP-7&8	Rawatbhata, Rajasthan	2 x 700
KKNPP– 3&4	Kudankulam, Tamil Nadu	2 x 1000
PFBR	Kalpakkam, Tamil Nadu	500
GHAVP-1&2	Gorakhpur, Haryana	2 x 700

In addition, following nuclear power projects have been accorded financial sanction and administrative approval by the Government:

Project	Location & State	Capacity(MW)
Projects Accorded Administrative Approval & Financial Sanction
GHAVP-3&4	Gorakhpur, Haryana	2 x 700
Kaiga-5&6	Kaiga, Karnataka	2 x 700
Chutka-1&2	Chutka, Madhya Pradesh	2 x 700
Mahi Banswara-1 to 4	Mahi Banswara, Rajasthan	4 x 700
KKNPP-5&6	Kudankulam, Tamil Nadu	2 x 1000

               

The Government has also accorded ‘In principle’ approval of the following sites for setting up nuclear power plants in future.

Sites Accorded ‘In-Principle’ Approval
Bhimpur, Units-1 to 4	Bhimpur, Madhya Pradesh	4 x 700
Jaitapur, Units-1 to 6	Jaitapur, Maharashtra	6 x 1650
Kovvada, Units-1 to 6	Kovvada, Andhra Pradesh	6 x 1208
Chhaya Mithi Virdi, Units-1 to 6	Chhaya Mithi Virdi, Gujarat	6 x 1000*
Haripur, Units-1 to 6	Haripur, West Bengal	6 x 1000*

*Nominal Capacity

On completion of the projects presently under construction and accorded financial sanction, the installed nuclear power capacity is expected to reach 10080 MW by 2020 and over 20000 MW by 2031.

Highlights of Reforms Measures in the Economic Survey 2016-17 Volume-2

Highlights of Reforms Measures in the Economic Survey 2016-17 Volume-2

Agriculture and Food Management

Reforms: Managing and reducing the various risks in agriculture activities can make the sector resilient, increase profitability and can ensure stable income flows to the farmers. The following reforms are suggested for increasing productivity in agriculture and allied sector:

·         To address the price risks in agriculture and allied sectors, marketing infrastructure along the entire value chain needs to be built and strengthened.

·         To address production risks, the share of irrigated area should be expanded by increasing the coverage of water saving irrigation systems like micro irrigation systems.

·         To increase productivity of crops, standards should be set and enforced for better quality, pest and disease resistant seeds.

·         Trade and domestic policy changes should be announced well before sowing and should stay till arrivals and procurement is over.

·         To enhance women’s involvement in the dairy projects, funds should be earmarked through appropriate mechanisms.

·         Providing timely and affordable formal and institutional credit to the small and marginal farmers is the key to inclusive growth.

·         Regime based on timely interventions needs to be adopted.

Industry and Infrastructure

·         Railways should go for more non-fare sources along with station redevelopment and commercially exploiting vacant buildings at the station, monetizing land along tracks by leasing out to promote horticulture and tree plantation, and through advertisement and parcel earnings.

·         During the last few years the non-major ports are gaining more share of cargo handling compared to major ports. It is required to develop non-major port and also enhance their efficiency and operational capacity.

·         Reforms such as privatization/ disinvestment of Air India, creation of aviation hubs and reconsidering the 0/20 rule are some suggestions to improve Indian airlines’ share in the international market.

Social Infrastructure, Employment and Human Development

·         India, is emerging as a knowledge based economy, poised for double digit growth, and needs to strengthen social infrastructure by investing in health and education.

·         The education policies need to be designed with focus on learning outcomes and remedial education with interventions which work and maximize the efficiency of expenditure. There is need for bio-metric attendance of school staff, independent setting of examination papers, neutral examination and for DBT for schools. There is need to adopt outcome measures for the education and skilling activities to ensure improvement in delivery of schemes/ programmes.

·         In order to make the labour market system dynamic and efficient, the government has taken several reforms/initiatives, both legislative as well as technological such as notification of ‘Ease of Compliance to maintain Registers under various Laws Rules, 2017’ and introduction of e-Biz Portal. These registers/forms can also be maintained in a digitized form.

·         Government has been imparting short term skill training through Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and long term training through Industrial Training Institutes (ITIs). Model Skill Centers are being set up in every district of the country under Pradhan Mantri Kaushal Kendra Scheme. The emphasis is on enhancing the quality of skill training programmes and making a competency-based framework with giving individuals an option to progress through education, training, prior learning and experiences.

·         There has to be concerted efforts by the Central and State governments to reform the health sector, by addressing quality issues, standardising rates for diagnostic tests, generating awareness about alternative health systems and introduction of punitive measures like fines on hospitals and private health providers for false claims through surgery, medicines etc. For more equitable access to health services, government should provide health benefits and risk cover to poorer sections of the society.

·         Towards addressing the challenges in health sector, the Government has formulated the National Health Policy, 2017, which aims at attaining the highest level of good health and well-being, through a preventive and promotive health care orientation in all developmental policies, and universal access to good quality health care services, without anyone having to face financial hardship as a consequence.

·         Addressing the social security of large number of vulnerable workers in the informal economy should be prioritized by the Government along with ensuring the safety and security of women to raise their participation in economic activities.

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