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Gs3 > 5. Economic Growth > Flashcards

5. Economic Growth Flashcards

1
Q

GDP an effective measure of growth

A

Simon Kuznets - Gdp should never be confused with well being

  1. War, accidents - leads to an increases in gdp
  2. Env - not included
  3. Inequality
  4. informal - house work, volunteering
  5. Creative destruction- flight booking app led to job loss for travel agents

Case study — commission established in France to explore alternatives to GDP (which included members like Stieglitz and Sen) — recommended an expanded dashboard of multiple indicators unique to each country

Abhijeet Banerjee- GDP is a means and not an end ( inclusive growth, quality of life )

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2
Q

Uses of gdp

A
  1. Comparison - ex: imf uses gdp /gnp to compare
  2. Business investment choices
  3. Indicates where the economy is possibly headed
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3
Q

Benefits of internationalisation of rupee

A
  1. Appreciate currency value : increased convenience and reduced transaction costs of business
  2. Access to international financial markets and transactions not affected by exchange rate risk
  3. Opportunities for financial institutions - trade financing, currency hedging, settlement services
  4. reduced requirement of forex
  5. Can enhance India’s geopolitical advantage - increase its attractiveness as a reserve currency
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4
Q

Constraints in internationalisation of rupee

A
  1. india still doesn’t have capital account convertibility
  2. Current status - daily avg share of rupee in global forex hovers around 1.6%
  3. Infrastructure and settlement system completely dominated by west
  4. India’s low sovereign credit rating
  5. Usa on several occasions have placed india in the list of currency manipulator

Post internationalisation issue
1.Amplified impact of global economy — huge impact on domestic economy

  1. Triffin rating - conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.
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5
Q

Budget 23-24 envisions to reach the last mile . How does it propose to do it

A
  1. Aspirational blocks prog
  2. PM PVTG development mission
  3. Ekalavya model residential schools - 38000 new teachers and staff
  4. BHARATH SHRI - digitise 1 lakh ancient inscriptions
  5. Support for poor prisoners
  6. Water for drought prone area
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6
Q

Budget 23-24 puts forth the idea of green growth. What’s it ? How does it aim to achieve it

A

Climate change stands afront the global ploycrisis ( other being war, global slowdown ) as per the recent economic survey

Gg - green farming, green mobility and green jobs - growth thats environmentally sustainable

  1. Gobhardhan scheme - waste to weath CBG plants
  2. Amrit Darohar ( optimal use of wetlands) - ecotourism
  3. Mishti - mangrove plantation- linking it to MNREGA
  4. 35000 cr towards priority capital investment in energy transition project - electric vehicle
  5. Green credit - to incentivise envt sustainable action by individuals, companies and local bodies
  6. Pm Pranam
  7. Bharathiya Prakritik Kheri bio input resource centers
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7
Q

Do you think sovereign credit rating accurately portray India’s economic abilities

A

S&P BBB-, Moody’s - Baa3,
Economic factors and institutional factors

Es 2021 - not an accurate picture
1. India’s history of zero sovereign default
2. IMF world economic outlook report 2023 - bright spot
3. 3rd largest economy in ppp
4. Majorly dominated by domestic debt - less interest rate risk
5. Forex - 600 bn§$
6. Remittance - 89127- FY 22
7. IBC, GST
7. Instn - worlds largest democracy

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8
Q

Inspite of global poly crisis, IMF sees India as a bright spot. What are India’s growth drivers

A
  1. Strength of demography - domestic private consumption
  2. Remittance - 89127 mn in FY 22
  3. Increase in capex - 13 lakh crore ( 4.5% of GDP )
  4. Tax buoyancy - widening tax net ( digitisation+ gst), more TAX compliance due to faceless assessment
  5. Strong corporate balance sheet and banking sector ( 10 year low of 3.9%— RBIs financial stability report
  6. Digital infrastructure
  7. Investment destination ( China+ 1, derisking supply chain)
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9
Q

What are the major reforms that have been made in the union budget

A
  1. Improved transparency - ex: off budget expenditure
  2. Discontinued plan and non plan classification- which was leading to skewed distribution, lack of prioritisation and neglecting maintenance
  3. Merger of rail budget with general budget
    - better overall picture
    - prevented populism via railway
  4. Shifting date of budget to February 1st
    - no need of vote on account
    - better planning and efficient resource utilisation
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10
Q

How do you interpret the low FLPR Of india ?

A

Societal
1. Education- USAID report - 23 million girls drop out annually from schools due to period poverty
2. Early marraige - unicef report - one in three worlds child brides lives in india
3. Double burden - DELOITTE WOMEN AT WORK REPORT - 85% of women bear household responsibility alone while performing task of being a bread winner
4.Motherhood penalty

Workplace related
1. Discrimination in recruitment ( ex: small and medium firm reduced women recruitment after passing of maternity benefit act)
2. Wage discrimination- ILO 34% less than men
3. Harassment and micro aggression at workplace
4. Glass ceiling and glass cliff
5. Leaking pipe syndrome - 35% judges in lower judiciary, while only 11% in SC

Economic
1. U - hypothesis

However economic survey 2023 also points
1. Overly broad categories
2. Single question approach
3. Narrow approach to measuring work

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11
Q

Steps taken by govt to improve FLFPR

A
  1. Code of social security 2020
    - paid maternity leave of 26 weeks
    - mandatory crèche facility > 50 employees
    - permitting women workers in night shift with adequate safety measures
  2. Code on occupational safety and health
    - provisions to allow women work in above and below ground mines with adequate safety measures
  3. Code on wages
    - prohibits gender discrimination in wages and recruitment
  4. Training via network of vocational training institutes
  5. Standup india
  6. NABARD SHG- bank linkage

Wf
1. Crèches
2. Career counselling
3. Safe workspaces- POSH awareness

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12
Q

Analyze the implications of increased capex in budget 23-24

A

Positive

According to RBI long run multiplier of capital outlay on GDP is 2.45
1. Imf world outlook report 2015
2. Reduce unemployment rate
3. reduce logistics cost - eodb
4. More exports

Negative
1. John KEynes ( who formally introduced the concept of expenditure multiplier) - in the long run we are all dead— unexpected outcomes - jobless growth, inflation due to global crisis

  1. Ricardian equivalence
  2. If weak banking structure

Wf
1. golden rule of fiscal policy es 2015 — borrow to fund capex not revenue exp
2. Center and state should work together as team india

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13
Q

Changes that GST brought

A
  1. Tax change
    - 1.4 trillion April 2022
    - more registered tax payers - 66, 1.38
  2. Business
    - eway bill - logistical efficiency
    - formalisation
  3. Behavioural
    - invoicing, regular filing
    - voluntary complaints
  4. Fiscal federalism
    279A- pooled sovereignty , cooperative fedralism
  5. Technology
    - gstn
    - single centralized registration
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14
Q

What are some of the issues with GST

A
  1. Economy
    - tax revenue mobilisation— falling short of targets
    - post gst inflation - clothin, footwear, housing etc
    - inverted duty structure Ex: led lamps
  2. GST rate
    - multiple slabs ( 0,5, 12, 18, 28)
    - exemptions - petroleum, alcohol, electricity
    - gst rate increase - packaged food items
  3. Fiscal fedralism
    - gst compensation
    - loss of revenue to producing states like TN
    - Mohit minerals case
  4. Small business
    - increased complaince cost
    - if not gst registered - big companies may not buy from them
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15
Q

Wf for gst

A
  1. Aravind Subramanian panel - RNR - 15-15.5%
  2. Report by GoM
    - correct inverted duty structure
    - withdraw exemptions
  3. Report by GOM on system reforms
    - physical verification ; to prevent shell companies for claiming tax credit
    - biometric authentication

India value chain

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16
Q

Rbi report on internationalization of rupee

A
  1. Short term
    - use existing clearing mechanism like ACU
    - non residents - rupee accounts
    - FPI regime rationalisation
  2. Medium term
    - exp of RTGS
    - rupee in continuous linked system
  3. Long term
    - SDR basket
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17
Q

Features of India’s trade policy 2023

A
  1. Process re-engineering and autonomTion
  2. Towns of excellence - Varanasi , Mirzapur ( carpet weaving )
  3. Districts as export hubs
  4. SCOMET policy
  5. E- commerce
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18
Q

Challenges to India’s exports

A

India’s current account deficit was > 3 % in 22-23. India’s good exports form just 2% of the global goods trade

  1. Incentives vs quality
  2. Policy short fall - ex: remission rate of cotton is only 4% under RoDtep - not enough to make it competitive
  3. Access to trade finance and export credit
  4. Lack of basic infra - eodb
  5. R&D - 0.7% of gdp
  6. Es 2018- India’s export egalitarian exceptionalism - top 1% accounts for 38% of exports
  7. Rising protectionism, de globalisation and weaponisation of supply chain
19
Q

E commerce benefits

A
  1. Customer
    - vast choice at competitive price
    - ease of living
  2. Seller
    - vast market access
    - platforms providing efficient supply chain
    - can produce optimally owing to better market intelligence

Vulnerable groups - Jharkhand online ‘deoghar markets’ to sell tribal products

  1. Economy
    - more production
    - technology and innovations - ex: Amazon prime air
    - jobs , gig economy
    - warehousing and logistics - rise of huge companies like Delhivery
  2. Govt
    - more taxes
    - push to digital india - ex: ONDC
20
Q

Issues with e-cooomerce

A
  1. Unfair trade practice
    - predatory pricing - deep discounts killing brick and mortar
    - drip pricing - firms advertise only part of a product price and reveal other charges as customer goes through with buying
    - cross- selling and mis- selling
  2. Conflict of interest
    - platforms selling their own products
    - prefertial treatment to few sellers
  3. Exclusion of small players with no technical know-how
  4. Supply chain gaps - last mile problem of rural India
  5. Data protection - ex: data leak of bigbasket
21
Q

ONDC paradigm shift

A
  1. Closed platform centric - open democratisation
  2. No opportunity model - equal opportunities
  3. Exclusion - inclusion
  4. Scaling what works to what works at scale
22
Q

Challenges in national monetisation pipeline

A
  1. Govt
    - pvt sector will prefer performing assets over idle assets - key to success
    - govt unable to meet target — 26000 cr, 1.6 lakh crore, 22-23
    - problem of undervaluation
    - lack of scope of ex-ante renegotiation, dispute resolution
    - possibility of nexus
  2. Pvt sector
    - unable to identify revenue streams
    - tarrif regulated in some sector. Ex: power
    - policy uncertainty
    Es 2019- increase in policy uncertainty by 1 standard deviation above normal reduces investment by 11%
  3. Common man
    - fear of hiking user fee of non excludable public goods
    - build by tax payers money - if imposition of user fees it would be akin to double taxation
    - es 2018 pointed out — india has a problem of STIGMATISED CAPITALISM
23
Q

What are the existing problems of India’s labor market

A
  1. Regulatory cholesterol - complex and outdated laws , eodb
  2. Firms - tendency to remain dwarf - missing middle
  3. Trade union - militant trade unions
    Ex: violence at wistron iPhone facility in Karnataka
  4. Market imperfections and changes
    - capital intensive — less employee elasticity
    - emerging wc like wfh, gig economy
  5. Labor
    - no social security for the informal labor
    - gender discrimination
    - underskilled and underemployed
24
Q

What are the concerns regarding new labor codes

A
  1. No stake holder consultation- against the tripartite consultation mechanism of ILO ( convention 144)
  2. Enforcement
    - huge opposition from trade unions
    - state not actively implementing
    - hire and fire — ex: in code of industrial relation- employer have power to renew fixed term contracts
    - yet to decide a floor wage under code of wages
  3. Exclusion
    - proper definition of gig workers
    - exclusion of unpaid labor
    - ngo and charities
  4. Discretionary power given to states ( ex. Power to exempt under code on occupational safety ) nexus
25
Q

India is often considered as a political democracy but not a fiscal democracy

A

Es 2016 - india has 7 tax payers per 100 voters
Tax: gdp ~ 16% , oecd - 34%

  1. Tax avoidance and evasion remains the norm
  2. Base erosion and profit shifting
  3. Huge informal economy
  4. Missing tax payers - government constantly shifting base
  5. es 2016 - India’s precocious growth model - alienation of tax paying middle class
  6. Complex taxation regime - 6 decade old IT act
  7. Not tax the rich - corporate tax, surcharge rate on income above 5 crore
  8. Tax terrorism - illegal or extralegal taxation
  9. Aid curse of lsg bodies
26
Q

How to increase India’s tax revenue

A

Es 2016
1. Essential services
2. Corruption
3. Subsidies to the rich
4. Property taxation

Akhilesh Ranjan
1. 182–> 90 days — resident criteria for tax payer
2. Ai in tax complaince
3. Taxation based on significant economical presence

Ms Swaminathan
Taxing the top 4% rich farmers

27
Q

Benefits of CBDC

A

RBI launched CBDC on a pilot bases
Fungible legal tender in a digital form . Retail and wholesale ( for select financial institutions

  1. Monetary system
    - reduce cost of physical cash management ( printing, shredding etc)
    - push towards more digitisation
  2. Alternative to crypto assets - risk free virtual currency
  3. Payment infrastructure
    - diversified payment option especially for e-commerce
    - facilitate easier cross border transaction
  4. Financial inclusion
    - unbanked and underbanked population
    - offline functionality
28
Q

Concerns of CBDC

A
  1. Reduced ability of bank to give loans as more people will keep money in their e- wallets rather than bank accounts
  2. Some experts argue that it would give more surveillance power to RBI
  3. Elevated cyber security risks- costs of protecting firewalls
29
Q

Documents to be presented along with budget as per frbm

A

Macroeconomic Framework Statement; Medium Term Fiscal Policy Statement and; Fiscal Policy Strategy Statement.

Recently, the Ministry of Finance has conveyed its inability to release the Medium Term Expenditure Framework (MTEF) statement, mandated by the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.

The ministry had cited “unprecedented global uncertainties that may adversely affect medium-term projections” to justify not placing fiscal projections for 2024-25 and 2025-26 in Parliament at the time of presenting the Union Budget.

30
Q

Arguments for FRBM

A
  1. Macroeconomic stability -
  2. Not compressing just switching
  3. More capex — crowd in
  4. Reduced interest payment for future gen
  5. Controlled inflation- no deterioration of asset value for future gen
31
Q

Issues with IBC

A
  1. 180 day —– 614 days
  2. Haircut taken by creditors since inception- 68%
  3. Resolution plan for small assets rarely get approval
  4. Dearth of qualified IP
  5. liquidation instead of resolution is the norm
  6. recovery rate through IBC has come down in the recent past (to 24 per cent in FY22 from 46 per cent in FY20
32
Q

Positives of IBC

A
  1. Eodb
  2. 4.3 yrs to 400 days
  3. Operational creditors in the forefront
    Successful resolution of binani steels, essar cement
33
Q

Monetary policy commitee success

A

RBI act 1934. 6 member committee , repo rate for inflation targeting - 4+- 6%

  1. Remained successful- demand induced inflation
  2. Price stability
  3. Economic stabilisation during shocks - global inflation, demonisation etc
  4. Investor confidence
  5. Forex strengthening via OMO
34
Q

Issues faced by mpc

A
35
Q

Key data on poverty before and after lpg

A

From about 45 per cent of the population below the national poverty line in 1994, the rates have fallen to 21.9 per cent in 2011.

36
Q

Why recent food inflation.

A
  1. Yield
  2. Seasonal
  3. Weaponisation
  4. Msp
  5. Input cost
  6. Diseases
  7. Cob web phenomenon
37
Q

Why is India’s manufacturing sector lagging behind

A
  1. India’s peculiar growth model
    - es 2017 India’s precocious growth model
    - post independence focused on capital intensive
    - post lpg - premature deindustrialisation
  2. Human Resource
    - india skills report 2021
    - labor union
  3. Policy issues
    - inverted duty structure due to Fta
    - vocal for local failed to create quality
    - regulatory cholesterol - 1500 ( business today india @100 economy summit)
    - msme choosing to remain dwarf ( economic survey 2019)- 1mn/ 63mn in formal
  4. Lack of infrastructure
    Logistics cost ~ 14% of gdp
  5. Lack of credit availing
    Es 2018 - msme only 17% outstanding formal credit
38
Q

How to develop India’s manufacturing sector

A
  1. Priority sectors
    - pharma
    - leather and textile ( es 2017 )
    - semiconductor ( ir 4.0)
  2. Network products - assemble in india for world
  3. Anchor firms like ship building
  4. Industry skill Dev
    It skill development was led by pvt players like aptech and NIIT
  5. Sunset clause - dwarf
  6. Factory to ship - dedicated freight corridors
  7. Raghuram Rajan - facilities like certification agencies, state portal that would develop websites for msme rather than subsidies
39
Q

Issues faced by India’s msme sector

A
  1. Access to credit - es 2018 msme form 17% of outstanding formal credit
  2. Policy issue
    - dwarfism
    - 1500 laws
    - envt clearance
    - multiple registrations - udyog Aadhar portal, national small industries corp, gstn etc
  3. Lack of technology adoption, low value addition and thereby less integration with global supply chain

** Surjit Bhalla commitee - low firm level use of FTA. Msme not aware of fta **

  1. Skilled workforce
  2. Lack of social security for the informal workforce
  3. Competition from neighbors- Vietnam and Bangladesh
40
Q

Wf for msme

A
  1. Sunset clause
  2. Credit - psbloanin59minutes
  3. Ondc platform

Best practice of japans ministry of economy trade and industry-
Guide business on how to best make profits. Provide market intelligence to business

41
Q

Psc reco for IBC

A
  1. Fix benchmark for haircuts
  2. Vacancies for Nclt
  3. Akin to institute of chartered accounts for IP
  4. Flexible resolution plan, multiple companies instead on one can take over stressed assets
42
Q

Issues faced by India’s sez

A
  1. Not as large as China - prevents economies of scale in providing high quality common facilities
  2. Sale of goods in domestic markets attract customs duty on entire product ( not just imported goods )
  3. Wto has held that Indian subsidies to sez violates rules of fair trade
  4. Multiple models - nimz, costal economic zone
  5. Tax regime changed multiple times - ex: mat introduction, sunset date on direct taxes
  6. Land - returned to farmers in Kakinada sez
43
Q

Potential of india being accepted as an international currency

A

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