Indian Economy, 5th edition (114 page)

(ii)
It will not only give the Government a real time picture of development, but allow enough time to intervene without waiting for the plan completion;

(iii)
The move would also address the issue of regional and sub-regional inequalities;

(iv)
It will increase governmental efficiency in going for more ‘inclusive growth’;

(v)
The idea will promote the cause of ‘performance budgeting’ in a more timely and transparent way;

(vi)
It will increase the element of ‘governance’ among the states as their performance on the 13 easy-to-monitor targets will be key to timely release of Centre’s budgetary allocations to them (the Centre and the Planning
c
ommission have been highly critical about the issue of governance at the state level). As the states control the main services (i.e., health, education, drinking water, nutrition, etc.) on which people’s standard of living depends directly, it has become essential to make the states more equipped and accountable regarding delivery of these services.

Q. 23 ‘Leakages are the cause by which food subsidies fail to reach the target population adequately’. Comment.

Ans.
As the country headed for the Green Revolution in 1965, a proper method of food distribution also began with the commencement of the Public Distribution System (PDS). The PDS will become the main route to pass food subsidies to the needful population due to the lower level purchasing capacity of a big section of India. The expenditure on the heads of food subsidies went on increasing even after restructuring of the this PDS. There was a general criticism that these subsidies leak and do not reach the target population. In recent years, several measures were taken to stop the subsidies from going outside the target population, but things do not seem improving. The situation of leakage in the food subsidies through PDS may be seen via two studies, released recently–

(i)
In 2001-02, 18.2 per cent of PDS rice and 67 per cent of wheat was diversted from the ration shops to the open market – it means over 40 per cent of all foodgrains with subsidies missed the poor masses (Reetika Khera, 211, as cited in the Eco. Survey 2010-11).

(ii)
In 2004-05, there was an overall diversion of 55 per cent of the grain meant for the poor (Sikha Jha & Bharat Ramaswami, 2010, as cited by Economy Survey 2010-11).

No matter where the exact figure of leakage lies between 40-55 per cent, once legal rights to food is given using the PDS delivery system, it will double the offtake and food subsidies – increasing expenditure hugely, with no guarantee of a fool proof delivery! This is why the Unique Identification Number (Aadhar) is proposed to be used by the government so that the food subsidies are not diverted and become leakage-proof. The cash delivery will deburden the country of leakage of subsidies.

Q. 24 Write a short note on India’s policy steps regarding harnessing the ‘demographic dividend’.

Ans.
There has been a marked decline in the dependency ratio (ratio of dependent to working age population) in India. The ratio fell down from 0.8 in 1991 to 0.73 in 2001 and is expected to further decline sharply to 0.59 by 2014. This decline sharply contrasts with the demographic trend in the industrialised countries and also in China, where the ratio is rising. It is projected that the proportion of population in the working age group (i.e., 15–64 years) in India will increase from 62.9 per cent (2006) to 68.4 per cent in 2026.

Low dependency ratio and a high proportion of the working population gives India a comparative cost advantage, and a progressively lower dependency ratio will result in improving India’s competitiveness in the global economy. The Government of India seems fully aware of this advantage and that is why the Eleventh Plan (2007–12) is implementing a
three-pronged strategy
to tap demographic dividend:

(i)
Ensuring proper healthcare to all,

(ii)
Emphasis on skill development (knowledge industry), and

(iii)
Encouragement of labour intensive industries.

The Eleventh Plan document also suggests a word of caution—’if we get our skill development act right, we will be harnessing a demographic dividend, however, if we fail to create skills, we could be facing a demographic nightmare.’

Q. 25 Write a short note on the recently launched National
f
ood Security Mission.

Ans.
India’s food secruity scenario has been a matter of concern for the important national and international agencies in the recent times—so has it been for the Government of India. The issue was discussed in a constructive way at the 53
rd
meeting of the National Development Council (NDC) early 2007. In pursuance of the resolution of the NDC, the Department of Agriculture & Cooperation, Ministry of Agriculture launched a Centrally - sponsored scheme on National
f
ood Security Mission (NFSM) starting with the Eleventh Plan. The
objective
of the Mission is to increase the production of rice, wheat and pulses by 10, 8 and 2 million tonnes, respectively, over the benchmark levels of production, by the end of the Eleventh Plan. The Mission
aims
to do the same through the following
measures:

(i)
Area expansion and productivity enhancement;

(ii)
Restoring soil fertility and productivity;

(iii)
Creating employment opportunities, and

(iv)
Enhancing farm level economy to restore confidence of farmers of targeted districts.

The implementation of the NFSM relates to
various activities
pointed by the Government as given below:

(i)
Demonstration of improved production technology;

(ii)
Distribution of quality seeds of high yielding varieties (HYVs) and hybrids;

(iii)
Popularisation of newly released varieties, support for micro-nutrients; and

(iv)
Training and mass media compaign including awards for best performing districts.

The Mission gives flexibility to the identified districts to adopt any local area specific interventions as are included in the
s
trategic Research and Extension Plan (SREP) prepared for the agriculture development of the district. During the Eleventh Plan period, the total outlay of NFSM is Rs. 4,882.5 crore.

Q. 26 Write a concise note on the recently launched Rashtriya Krishi Vikas Yojana.

Ans.
There has been a declining trend in the governments’ share of investment in the agriculture sector for the past few decades due to various reasons. The issue has been a matter of great concern for the governments in recent times. It was highly contemporary that the National Development Council (NDC) in its 53
rd
meeting (early 2007) decided to launch a programme to incentivise the states to increase the share of investment in agriculture in their state plans. Accordingly, on August 16, 2007 the Government approved the
Rashtriya Krishi Vikas Yojana
(RKVY) with an allocation of Rs. 5,000 crore for the Eleventh Plan period.

The RKVY
aims
at achieving the 4 per cent annual growth rate in the agriculture sector during the Eleventh
p
lan by ensuring a holistic development of agriculture and allied sectors.

This is a State Plan Scheme and the eligibility for assistance under the scheme would depend upon the amount provided in the
s
tate Budgets for agriculture and allied sectors, over and above the baseline—percentage expenditure incurred on the sectors. The funds under the scheme would be provided to the states as
100 per cent grant
by the Central government. The main objectives of the scheme are as given below:

(i)
Incentivising the states to increase public investment in the agriculture and allied sectors;

(ii)
Providing flexibility and autonomy to the states in planning and executing schemes for the sectors;

(iii)
Ensuring the preparation of plans for the districts and the states based on agro-climatic conditions, availability of technology and natural resources;

(iv)
Ensuring that the local needs, crops and priorities are better reflected in the states plans;

(v)
Achieving the goal of reducing the yield gaps in important crops, through focused interventions; and

(vi)
Maximising returns to the farmers.

Q. 27 Write a short note on the relationship between stock market and the economy.

Ans.
After the Government of India started initiatives in the direction of an organised stock market by late 1980s, too much water has flown since then in this sector. Indian stock market has been making waves throughout the last decade. Today, it is in the headlines due to two paradoxical reasons. Firstly, the pessimism ensuing from the subdued performance of the major stock indices for the last many weeks and secondly, the international opinions and surveys putting Indian stock market among the fastest growing markets of the world. It is right time to analyse the relationship of the stock market to the economy at large. Though experts lack a complete consensus on the issue, we may point out the broader contours of the relationship in the following way:

(i)
The equity prices can affect the household income. By their rise, households feel richer as the value of their equity holdings rises, and this ‘wealth effect’ then spills over into higher consumption ultimately boosting both demand and investment in the economy. The opposite can induce slowdown and even recession as well as sluggish investment.

(ii)
Equity prices have a direct impact on the business confidence in an economy.

(iii)
A strong and vibrant stock market increases borrowing capacity by raising the value of assets to put as collateral into the banks and the financial institutions.

(iv)
Equity price rises raise the market capitalisation of a listed company relative to the replacement cost of its current assets (a factor known as
Tobin’s q
) which induces entrepreneurs to add capacity.

There are many real life examples from around the world which validate the point that a vibrant and rising stock index has been resulting into higher growth rates for the concerned economies between 1951–2005.

Q. 28 Write the main reason of price rise in recent times and discuss the steps taken by the GoI & the RBI to check it.

Ans.
1
Rising prices continued to remain in news throughout the financial year 2012-13. Price rise was basically led by the food products, chiefly the common protein-suppliers like milk, milk products, meat, egg and fishes. To contain the price rise the steps taken by the GoI/RBI were as given below (as per the latest
Economic Survey 2012-13,
p. 93) –

(i)
Fiscal Measures

(a)
Import duties for wheat, onions, pulses, and crude palmolein were reduced to zero and 7.5 per cent for refined vegetable & hydrogenated oils.

(b)
Duty-free import of white/raw sugar was extended up to 30 June 2012; presently the import duty has been fixed at 10 per cent.

(ii)
Administrative Measures

(a)
Ban on exports of onions was imposed for short periods of time whenever required. Exports of onions were calibrated through the mechanism of minimum export prices (MEP).

(b)
Futures trading in rice,
urad, tur,
guar gum and guar seed was suspended.

(c)
Exports of edible oils (except coconut oil and forest-based oil) and edible oils in blended consumer packs up to 5 kg with a capacity of 20,000 tons per annum and pulses (except
Kabuli chana
and organic pulses and lentils up to a maximum of 10,000 tonnes per annum) were banned.

(d)
Stock limits were imposed from time to time in the case of select essential commodities such as pulses, edible oil, and edible oilseeds and in respect of paddy and rice up to November 30, 2013.

(iii)
Measures to Insulate the Vulnerable Sections

(a)
The central issue prices (CIP) for rice (at Rs. 5.65 per kg for below poverty line [BPL] and Rs 3 per kg for Antodaya Anna Yojana [AAY] families) and wheat (at Rs 4.15 per kg for BPL and Rs 2 per kg for AAY families) have been maintained since 2002.

(b)
Under the targeted PDS (TPDS) allocation of foodgrains is being made to 6.52 crore AAY and BPL families at 35 kg per family per month at a highly CIP.

(c)
The government has allocated rice and wheat under the Open Market Sales Scheme (OMSS).

(d)
The scheme for imports of pulses which envisaged imports for distribution to BPL households through the PDS with a subsidy of Rs 10 per kg operated from November 2008 to June 2012. The government has decided to implement a varied form with a subsidy element of Rs. 20 per kg per month for BPL cardholders for the residual part of the current year. The targeted BPL cardholders will be as estimated by the Department of Food and Public Distribution.

(e)
The Scheme for Distribution of Subsidised Imported Edible Oils has been implemented since 2008-09 through state/union territory (UT) governments for distribution of 1 litre per ration card per month with a central subsidy of Rs. 15 per kg. The scheme has been extended up to 30 September 2013.

(iv)
Budgetary and other Measures

(a)
A number of measures were announced in Union Budget 2012-13 to augment supply and improve storage and warehousing facilities. The government launched a National Mission for Protein supplements in 2011-12 with an allocation of Rs. 300 crore. To broaden the scope of production of fish to coastal aquaculture, apart from fresh water aquaculture, the outlay in 2012-13 was stepped up to Rs. 500 crore. Recently, the government permitted FDI in multibrand retail trading. This will help consumers and farmers as it will improve the selling and purchasing facilities.