India’s Preparedness for 5G

Standing Committee Report Summary

  • The Departmentally Related Standing Committee on Information Technology (Chairperson: Dr. Shashi Tharoor) submitted its report on India’s preparedness for 5G in February 2021.  The Committee made the following observations and recommendations:
  • Status of 5G deployment: The Committee noted that 118 operators across 59 countries (including USA, China, and UK) have deployed 5G network.  5G has mostly been launched at a limited scale so far.  In India, the commercial rollout of 5G is yet to happen.  As of January 2021, 5G trials by Telecom Service Providers (TSPs) have not been permitted by the Department of Telecommunications.  The Committee noted that sufficient preparatory work has not been undertaken for the launch of 5G services in India. It highlighted the following as key challenges with the adoption of 5G: (i) inadequate availability of spectrum, (ii) high spectrum prices, (iii) poor development of use cases for 5G, (iv) low fiberisation (connectivity with optical fibre), and (v) deficient backhaul capacity.
     
  • Allocation of spectrum for 5G: Allocation of new bands of spectrum is crucial for the rollout of 5G. However, the auction of 5G spectrum is still pending. The Committee noted the concerns of the telecom companies that the reserve price set by the Telecom Regulatory Authority of India for 5G spectrum (Rs 492 crore per MHz) is exorbitantly high. The Committee observed that considering the financial stress in the sector and that the 5G ecosystem is yet to be developed, a high reserve price may adversely impact the ability of service providers to roll out 5G.
     
  • The Committee further noted that based on the current availability of spectrum, approximately 50 MHz spectrum per operator can be ensured. This is substantially lower than the global average of about 100 MHz per operator.  It noted that in case of 4G too, the average spectrum per operator in India is around one-fourth of the global average. The Committee observed that there is an urgent need for an audit of all allocated spectrum for detecting underutilisation and subsequently rationalising the allocation of spectrum. 
     
  • The Committee noted that apart from enhanced mobile broadband, Industry 4.0 is expected to drive the adoption of 5GIndustry 4.0 refers to the trend of automation and digitalisation of manufacturing processes by leveraging information and communication technologies.  It observed the licensing policy for spectrum for industry and captive uses needs to be streamlined.  This will aid in attracting manufacturers to set up a base in India.
     
  • 5G standards:  A variant of the global standard for 5G (3GPP) has been developed in India known as TDSI-RIT.  TDSI-RIT offers enhanced rural coverage and reduces costs to cover a certain defined area.  The Committee noted the concerns of the stakeholders that TDSI-RIT standards are not globally harmonised.  This could lead to increased cost for network and customer devices, and interoperability issues.
     
  • Promotion of domestic manufacturing and indigenous technology: The Committee observed that India is greatly dependent on the import of telecom equipment.  5G presents an opportunity for the promotion of domestic manufacturing as well as indigenous technology due to the changed nature of network components as compared to 3G and 4G.  There will also be a multi-fold increase in demand for telecom equipment to provide ubiquitous connectivity.  Further, the focus on the softwarisation of network components in 5G (software running on off-the-shelf hardware) provides an opportunity to leverage India’s capacity in software.  It observed that the promotion of research and development is necessary for the success of telecom manufacturing in the country.  An ecosystem must be developed for complete manufacturing rather than just assembly, as manufacturing gives higher value addition.
     
  • Fibre as a national asset:  The Committee noted that connectivity through the fibre is an important requirement for the rollout of 5G services.  However, only about 30% of the towers are fiberised and less than 7% of households are connected through fibre.  The Committee recommended that fibre should be accorded the status of essential national infrastructure.  It observed that delays and costs associated with the right of way permissions need to reduce to support fiberisation. Sharing of fibre infrastructure across government and private players should be promoted.  A single window clearance of grant of permission for fibre laying should be considered.
     
  • Setting up of 5G use case labs: The Committee noted that sufficient use cases for 5G have not been developed in India.  It recommended that the development of use case labs should be expedited.  It also recommended that the digital readiness of various sectors should be monitored by a cross-sectoral entity like NITI Aayog.

 

 

DISCLAIMER: This document is being furnished to you for your information.  You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (“PRS”).  The opinions expressed herein are entirely those of the author(s).  PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete.  PRS is an independent, not-for-profit group.  This document has been prepared without regard to the objectives or opinions of those who may receive it.

 

 

Attracting investment in post-Covid Economy: Challenges and Opportunities for India

Standing Committee Report Summary

  • The Standing Committee on Commerce (Chair: Mr. V. Vijayasai Reddy) submitted its report on Attracting investment in post-Covid Economy: Challenges and Opportunities for India on February 10, 2021.  There are key challenges in attracting investment, including: (i) administrative and regulatory hurdles, (ii) inadequate and costly credit, (iii) tedious procedure of land acquisition, and (iv) inadequate infrastructural facilities.  The Committee noted issues faced in sectors such as logistics, automobile, pharmaceuticals, electronics, and steel and recommended solutions.  Across sectors, there is a concern regarding the trade deficit with China.  However, the post-Covid world presents opportunities for attracting investment in India as companies diversify their supply chain.  Key observations and recommendations of the Committee include:
     
  • Ease of doing business: The Committee noted that the centre has taken several initiatives (such as introduction of web-based forms for starting a business) to improve ease of doing business.  It recommended that state and district level administrators should be sensitised to the need to expedite implementation of the initiatives. 
     
  • Logistics: There is a high cost to logistics due to heavy reliance on road transport, poor quality of road and port infrastructure, fragmented storage infrastructure, and the presence of multiple stakeholders.  Further, logistics cost is higher for low value or bulk items such as those in the agricultural sector.
     
  • The Committee recommended: (i) implementation of steps to consolidate and formalise the logistics sector, (ii) improvement in the railway and inland waterway infrastructure, and (iii) finalisation of the National Logistics Policy for effective development of the sector.
     
  • Automobile: The automobile sector recorded negative growth in 2019-20 and 2020-21.  The Committee recognised a need to boost demand, promote exports, and improve ease of doing business.  It was recommended that: (i) rate of GST on vehicles be reduced from 28% to 18%, (ii) agreements to promote exports in new markets such as in African and Asian countries be signed, and (iii) single window facility be provided to obtain all required approvals for setting up and starting manufacturing.  The Committee also noted that the uptake of electric vehicles (EVs) has been lower than expected.  It was recommended that installation of charging stations be expedited.
     
  • Pharmaceuticals: The Committee expressed concern about the dependence on China for import of active pharmaceutical ingredients (APIs) which is a key ingredient in medicine.  It was recommended that the production linked incentive (PLI) scheme to promote domestic manufacturing of APIs be extended to benefit existing API plants.  Currently, the PLI scheme provides financial incentive for investment made in a new production facility or a new plant in an existing facility.
     
  • The pharmaceutical industry is one of the most polluting industries, and is subject to environmental restrictions.  The Committee recommended relaxing certain norms.  These include allowing a 15% increase in approved pollution limit during a month of high demand without requirement of environmental clearance (unless increase in pollution persists for six consecutive months).
     
  • Medical devices: Certain medical devices have price controls that fix the price of sale or restrict the maker from increasing its price by more than a certain threshold.  The Committee recommended that pricing of medical devices must be separated from the pricing of drugs and a separate regulatory body should be created to monitor the same.  It was further recommended that a Medical Devices Regulatory Act should be enacted.  Currently, the pricing of drugs and medical devices is regulated by the Drug (Prices) Control Order, 2013.
     
  • Electronics: India is the second-largest manufacturer of mobile phones. However, most of the mobile phones are assembled in India with parts imported from elsewhere.  The Committee recommended that any investment by a foreign entity in electronics manufacturing must require investment in infrastructure and a promise of transfer of technology.  It also recommended that the government consider imposing import duty to protect the domestic electronics manufacturing industry from cheap imports.
     
  • Steel: Challenges facing the steel industry include: (i) large trade deficit, especially with China, (ii) large financing requirement, (iii) high logistics cost, and (iv) regulatory delays.  The Committee recommended: (i) elimination of tariffs on the import of input materials for steel, (ii) grant of infrastructure status to the steel sector for ease of availing financing, and (iii) formulation of time-bound process for clearing regulatory requirements (which would reduce the time to set up a steel plant from more than three years to less than one year).

 

DISCLAIMER: This document is being furnished to you for your information.  You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (“PRS”).  The opinions expressed herein are entirely those of the author(s).  PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete.  PRS is an independent, not-for-profit group.  This document has been prepared without regard to the objectives or opinions of those who may receive it.

Social Security and Welfare Measures for Inter-state Migrant Workers

Standing Committee Report Summary

  • The Standing Committee on Labour (Chair: Mr. Bhartruhari Mahtab) submitted its report on social security and welfare measures for inter-state migrant workers on February 11, 2021.  The Committee assessed the efficacy of various schemes launched for providing relief to the migrant workers during COVID-19 pandemic.  Note that the lockdown imposed in March 2020 to contain the spread of COVID-19 had left millions of migrants stranded in different states without food, livelihood, and shelter.
     
  • Identification of migrant labours: The Committee noted that several steps were taken for identification of migrant workers across India.  These include: (i) the modification in the definition of migrant workers to include workers voluntarily moving to another state for employment, and (ii) setting up a portal for creating a database of migrant workers.  However, there is no credible database with information on the number of inter-state migrant workers.  This has led to an adverse impact on the implementation of relief and rehabilitation measures for the workers.  For example, in some states (such as Punjab) the distribution of food under Pradhan Mantri Garib Kalyan Ann Yojna was lower than the total allocation.  This defeated the objective to provide timely food to the targeted beneficiaries (especially the migrant labours).  The Committee reiterated the creation of a credible real-time database of inter-state migrant workers (especially unorganised migrant workers).
     
  • Affordable housing facilities: The Committee noted that migrants are not categorised as a separate category under the scheme for affordable rental housing complexes (ARHCs).  The scheme is aimed at providing housing at an affordable rent to migrants near their workplace.  Currently, migrants are covered under the economically weaker section (EWS) or low-income group (LIG).  Thus, to ensure the protection of migrants’ interest, the Committee recommended prioritising migrant workers in the ARHC scheme.
     
  • The Committee emphasised establishing a transparent allotment process for migrant workers under ARHC scheme.  It was suggested that a grievance redressal system be set up to address grievances of migrants on allotment related matters.
     
  • Livelihood: The Committee noted that Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is the best scheme for providing sustainable livelihoods to unskilled workers (including migrant workers).  It recommended that the process of issuing job cards by state governments be made more transparent to ensure that no migrant labourer is deprived of employment.  Note that job cards are essential for any individual demanding work under MGNREGS.
     
  • Skill development and training: Garib Kalyan Rojgar Abhiyan (GKRA) provides employment to returnee migrants affected by COVID-19 pandemic in 116 selected districts across six states (Bihar, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, and Uttar Pradesh).  The Committee noted that the data of 60 lakh migrant workers have been collected from 116 selected districts under GKRA.  Out of these, 2.64 lakh workers have been shortlisted in 93 districts for training.  The Committee recommended that the shortlisting process in remaining 23 districts be expedited to ensure sustainable livelihood to the migrants at the earliest.
     
  • The Committee noted that there are certain challenges in providing training to migrant workers, which include: (i) low demand for skilled workers, (ii) increasing contract employment with no provision for skill development, and (iii) difficulties in mapping skill requirements.  Further, the Committee noted that out of 5.5 lakh candidates looking for a job, 3.2 lakh candidates have been offered a job.  The Committee recommended the Ministry of Skill Development and Entrepreneurship to take required corrective measures to ensure skill development and placement of poor people (including migrants).

 

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राज्यों की वित्तीय स्थिति : 2020-21

2021-26 के लिए 15वें वित्त आयोग की रिपोर्ट

Report of the 15th Finance Commission for 2021-26

The Finance Commission is a constitutional body formed by the President of India to give suggestions on centre-state financial relations.  The 15th Finance Commission (Chair: Mr. N. K. Singh) was required to submit two reports.  The first report, consisting of recommendations for the financial year 2020-21, was tabled in Parliament in February 2020.  The final report with recommendations for the 2021-26 period was tabled in Parliament on February 1, 2021.  Key recommendations in the report for 2021-26 include:

Share of states in central taxes

The share of states in the central taxes for the 2021-26 period is recommended to be 41%, same as that for 2020-21.  This is less than the 42% share recommended by the 14th Finance Commission for 2015-20 period.  The adjustment of 1% is to provide for the newly formed union territories of Jammu and Kashmir, and Ladakh from the resources of the centre. 

Criteria for devolution

Table 1 below shows the criteria used by the Commission to determine each state’s share in central taxes, and the weight assigned to each criterion.  The criteria for distribution of central taxes among states for 2021-26 period is same as that for 2020-21.  However, the reference period for computing income distance and tax efforts are different (2015-18 for 2020-21 and 2016-19 for 2021-26), hence, the individual share of states may still change.  The individual share of states in the taxes devolved by the centre is provided in Table 2 in the annexure.  We explain some indicators below. 

Table

1 : Criteria for devolution

Criteria

14th FC

2015-20

15th FC

2020-21

15th FC

2021-26

Income Distance

50.0

45.0

45.0

Area

15.0

15.0

15.0

Population (1971)

17.5

-

-

Population (2011)#

10.0

15.0

15.0

Demographic Performance

-

12.5

12.5

Forest Cover

7.5

-

-

Forest and Ecology

-

10.0

10.0

Tax and fiscal efforts*

-

2.5

2.5

Total

100

100

100

Note: #14th FC used the term “demographic change” which was defined as Population in 2011.  *The report for 2020-21 used the term “tax effort”, the definition of the criterion is same.
Sources: Reports of the 14th and 15th Finance Commissions; PRS.

  • Income distance: Income distance is the distance of a state’s income from the state with the highest income.  Income of a state has been computed as average per capita GSDP during the three-year period between 2016-17 and 2018-19.  A state with lower per capita income will have a higher share to maintain equity among states.
  • Demographic performance: The Terms of Reference of the Commission required it to use the population data of 2011 while making recommendations.  Accordingly, the Commission used 2011 population data for its recommendations. The demographic performance criterion has been used to reward efforts made by states in controlling their population.  States with a lower fertility ratio will be scored higher on this criterion. 
  • Forest and ecology: This criterion has been arrived at by calculating the share of the dense forest of each state in the total dense forest of all the states.
  • Tax and fiscal efforts: This criterion has been used to reward states with higher tax collection efficiency.  It is measured as the ratio of the average per capita own tax revenue and the average per capita state GDP during the three years between 2016-17 and 2018-19.

Grants

Over the 2021-26 period, the following grants will be provided from the centre’s resources (see Table 3 and 4 in the annexure for more details):

  • Revenue deficit grants: 17 states will receive grants worth Rs 2.9 lakh crore to eliminate revenue deficit.
  • Sector-specific grants: Sector-specific grants of Rs 1.3 lakh crore will be given to states for eight sectors: (i) health, (ii) school education, (iii) higher education, (iv) implementation of agricultural reforms, (v) maintenance of PMGSY roads, (vi) judiciary, (vii) statistics, and (viii) aspirational districts and blocks.  A portion of these grants will be performance-linked.
  • State-specific grants: The Commission recommended state-specific grants of Rs 49,599 crore.  These will be given in the areas of: (i) social needs, (ii) administrative governance and infrastructure, (iii) water and sanitation, (iv) preservation of culture and historical monuments, (v) high-cost physical infrastructure, and (vi) tourism.  The Commission recommended a high-level committee at state-level to review and monitor utilisation of state-specific and sector-specific grants.
  • Grants to local bodies: The total grants to local bodies will be Rs 4.36 lakh crore (a portion of grants to be performance-linked) including: (i) Rs 2.4 lakh crore for rural local bodies, (ii) Rs 1.2 lakh crore for urban local bodies, and (iii) Rs 70,051 crore for health grants through local governments.  The grants to local bodies will be made available to all three tiers of Panchayat- village, block, and district.  The health grants will be provided for: (i) conversion of rural sub-centres and primary healthcare centres (PHCs) to health and wellness centres (HWCs), (ii) support for diagnostic infrastructure for primary healthcare activities, and (iii) support for urban HWCs, sub-centres, PHCs, and public health units at the block level. 
  • Grants to local bodies (other than health grants) will be distributed among states based on population and area, with 90% and 10% weightage, respectively.  The Commission has prescribed certain conditions for availing these grants (except health grants).  The entry-level criteria include: (i) publishing provisional and audited accounts in the public domain and (ii) fixation of minimum floor rates for property taxes by states and improvement in the collection of property taxes (an additional requirement after 2021-22 for urban bodies).  No grants will be released to local bodies of a state after March 2024 if the state does not constitute State Finance Commission and act upon its recommendations by then.
  • Disaster risk management:  The Commission recommended retaining the existing cost-sharing patterns between the centre and states for disaster management funds.  The cost-sharing pattern between centre and states is: (i) 90:10 for north-eastern and Himalayan states, and (ii) 75:25 for all other states.  State disaster management funds will have a corpus of Rs 1.6 lakh crore (centre’s share is Rs 1.2 lakh crore).

Fiscal roadmap

  • Fiscal deficit and debt levels: The Commission suggested that the centre bring down fiscal deficit to 4% of GDP by 2025-26.  For states, it recommended the fiscal deficit limit (as % of GSDP) of: (i) 4% in 2021-22, (ii) 3.5% in 2022-23, and (iii) 3% during 2023-26.  If a state is unable to fully utilise the sanctioned borrowing limit as specified above during the first four years (2021-25), it can avail the unutilised borrowing amount (calculated in rupees) in subsequent years (within the 2021-26 period). 
  • Extra annual borrowing worth 0.5% of GSDP will be allowed to states during first four years (2021-25) upon undertaking power sector reforms including: (i) reduction in operational losses, (ii) reduction in revenue gap, (iii) reduction in payment of cash subsidy by adopting direct benefit transfer, and (iv) reduction in tariff subsidy as a percentage of revenue.
  • The Commission observed that the recommended path for fiscal deficit for the centre and states will result in a reduction of total liabilities of: (i) the centre from 62.9% of GDP in 2020-21 to 56.6% in 2025-26, and (ii) the states on aggregate from 33.1% of GDP in 2020-21 to 32.5% by 2025-26.  It recommended forming a high-powered inter-governmental group to: (i) review the Fiscal Responsibility and Budget Management Act (FRBM), (ii) recommend a new FRBM framework for centre as well as states, and oversee its implementation.
  • Revenue mobilisation:  Income and asset-based taxation should be strengthened.  To reduce excessive dependence on income tax on salaried incomes, the coverage of provisions related to tax deduction and collection at source (TDS/TCS) should be expanded.  Stamp duty and registration fees at the state level have large untapped potential.  Computerised property records should be integrated with the registration of transactions, and the market value of properties should be captured.  State governments should streamline the methodology of property valuation.
  • GST: The inverted duty structure between intermediate inputs and final outputs present in GST needs to be resolved.  Revenue neutrality of GST rate should be restored which has been compromised by multiple rate structure and several downward adjustments.  Rate structure should be rationalised by merging the rates of 12% and 18%.  States need to step up field efforts for expanding the GST base and for ensuring compliance.
  • Financial management practices: A comprehensive framework for public financial management should be developed.  An independent Fiscal Council should be established with powers to assess records from the centre as well as states.  The Council will only have an advisory role.  A time-bound plan for phased adoption of standard-based accounting and financial reporting for both centre and states should be prepared while eventual adoption of accrual-based accounting is being considered.  The centre as well as states should not resort to off-budget financing or any other non-transparent means of financing for any expenditure.  A standardised framework for reporting of contingent liabilities should be devised.  Both centre and states should strive to improve the accuracy and consistency of macroeconomic and fiscal forecasting. 
  • States should amend their fiscal responsibility legislation to ensure consistency with the centre’s legislation, in particular, with the definition of debt.  States should have more avenues for short-term borrowings other than the ways and means advances, and overdraft facility from the Reserve Bank of India.  States may form an independent debt management cell to manage their borrowing programmes efficiently. 

Other recommendations

  • Health: States should increase spending on health to more than 8% of their budget by 2022.  Primary healthcare expenditure should be two-thirds of the total health expenditure by 2022.  Centrally sponsored schemes (CSS) in health should be flexible enough to allow states to adapt and innovate.  Focus of CSS in health should be shifted from inputs to outcome.  All India Medical and Health Service should be established.
  • Funding of defence and internal security: A dedicated non-lapsable fund called the Modernisation Fund for Defence and Internal Security (MFDIS) will be constituted to primarily bridge the gap between budgetary requirements and allocation for capital outlay in defence and internal security.  The fund will have an estimated corpus of Rs 2.4 lakh crore over the five years (2021-26).  Of this, Rs 1.5 lakh crore will be transferred from the Consolidated Fund of India.  Rest of the amount will be generated from measures such as disinvestment of defence public sector enterprises, and monetisation of defence lands.
  • Centrally-sponsored schemes (CSS): A threshold should be fixed for annual allocation to CSS below which the funding for a CSS should be stopped (to phase out CSS which outlived its utility or has insignificant outlay).  Third-party evaluation of all CSS should be completed within a stipulated timeframe.  Funding pattern should be fixed upfront in a transparent manner and be kept stable.

 

Annexure  

 

Table 2: Individual share of states in the taxes devolved by the centre (out of 100)

State

14th FC
2015-20

15th FC
2020-21

15th FC
2021-26

Andhra Pradesh

4.305

4.111

4.047

Arunachal Pradesh

1.370

1.760

1.757

Assam

3.311

3.131

3.128

Bihar

9.665

10.061

10.058

Chhattisgarh

3.080

3.418

3.407

Goa

0.378

0.386

0.386

Gujarat

3.084

3.398

3.478

Haryana

1.084

1.082

1.093

Himachal Pradesh

0.713

0.799

0.830

Jammu & Kashmir

1.854

-

-

Jharkhand

3.139

3.313

3.307

Karnataka

4.713

3.646

3.647

Kerala

2.500

1.943

1.925

Madhya Pradesh

7.548

7.886

7.850

Maharashtra

5.521

6.135

6.317

Manipur

0.617

0.718

0.716

Meghalaya

0.642

0.765

0.767

Mizoram

0.460

0.506

0.500

Nagaland

0.498

0.573

0.569

Odisha

4.642

4.629

4.528

Punjab

1.577

1.788

1.807

Rajasthan

5.495

5.979

6.026

Sikkim

0.367

0.388

0.388

Tamil Nadu

4.023

4.189

4.079

Telangana

2.437

2.133

2.102

Tripura

0.642

0.709

0.708

Uttar Pradesh

17.959

17.931

17.939

Uttarakhand

1.052

1.104

1.118

West Bengal

7.324

7.519

7.523

Total

100

100

100

Sources: Reports of 14th and 15th Finance Commission; PRS.

Table 3: Grants for 2021-26 (five years) (Rs crore)

Grants

Amount

Revenue deficit grants

 2,94,514

Local governments grants

 4,36,361

Urban Local Bodies

1,21,055

Rural Local Bodies

2,36,805

Health Grants

70,051

Other Grants*

8,450

Disaster management grants

 1,22,601

Sector-specific grants

 1,29,987

Health

31,755

School Education

4,800

Higher Education

6,143

Implementation of agricultural reforms

45,000

Maintenance of PMGSY roads

27,539

Judiciary

10,425

Statistics

1,175

Aspirational districts and blocks

3,150

State-specific grants

49,599

Total

10,33,062

Note: *Other grants to local bodies comprise grants for: (i) incubation of new cities (Rs 8,000 crore), and National Data Centre (Rs 450 crore).

Source: Report of the 15th Finance Commission for 2021-26; PRS.

 

 

    

   

 

 

Table 4: State-wise details of grants-in-aid for 2021-26 (in Rs crore)

States

Revenue deficit grants

Grants to local bodies

Disaster
management

Certain sector-specific grants

State-specific grants

Health grants

Rural local bodies

Urban

local bodies

Health

PMGSY
Roads

Statistics

Judiciary

Higher Education

Agriculture

Andhra Pradesh

30,497

2,601

10,231

5,231

6,183

877

344

19

295

250

4,209

2,300

Arunachal Pradesh

0

259

900

459

1,382

133

1,508

49

20

48

107

400

Assam

14,184

1,484

6,253

3,197

4,268

2,161

3,103

57

610

171

748

1,375

Bihar

0

6,017

19,561

9,999

7,824

3,223

1,694

77

960

483

1,720

2,267

Chhattisgarh

0

1,799

5,669

2,900

2,387

588

911

54

200

146

917

1,660

Goa

0

167

293

149

63

56

0

5

15

50

63

700

Gujarat

0

3,341

12,455

6,367

7,316

1,070

330

51

310

298

2,818

2,860

Haryana

132

1,617

4,929

2,520

2,715

695

128

40

300

146

1,696

2,003

Himachal Pradesh

37,199

521

1,673

855

2,258

377

2,222

21

50

70

247

1,420

Jharkhand

0

2,370

6,585

3,367

3,138

1,014

966

48

275

179

677

1,300

Karnataka

1,631

2,929

12,539

6,409

4,369

1,233

398

45

295

299

2,290

6,000

Kerala

37,814

2,968

6,344

3,242

1,738

607

113

20

405

181

1,086

1,100

Madhya Pradesh

0

4,902

15,527

7,938

10,059

2,340

2,109

102

690

349

4,587

1,765

Maharashtra

0

7,067

22,713

11,611

17,803

2,710

613

63

1,240

520

3,285

2,750

Manipur

9,796

234

690

353

234

191

1,193

28

30

54

101

900

Meghalaya

3,137

311

711

363

363

187

544

23

30

54

86

800

Mizoram

6,544

166

362

185

259

115

546

14

15

48

86

700

Nagaland

21,249

303

486

249

228

153

372

23

10

51

124

525

Odisha

0

2,454

8,800

4,498

8,865

962

1,949

45

425

218

1,271

1,775

Punjab

25,968

2,131

5,410

2,764

2,736

902

230

43

145

156

1,966

1,545

Rajasthan

14,740

4,423

15,053

7,696

8,186

1,186

1,618

57

460

332

3,301

2,322

Sikkim

1,267

111

165

84

279

100

484

7

5

45

41

500

Tamil Nadu

2,204

4,280

14,059

7,187

5,637

1,002

506

47

250

347

2,632

2,200

Telangana

0

2,228

7,201

3,682

2,483

624

255

46

245

189

1,665

2,362

Tripura

19,890

453

746

381

378

265

502

17

85

55

228

875

Uttar Pradesh

0

9,716

38,012

19,432

10,685

6,150

1,465

114

1,825

893

5,334

3,495

Uttarakhand

28,147

797

2,239

1,145

5,178

728

2,322

25

70

83

277

1,600

West Bengal

40,115

4,402

17,199

8,792

5,587

2,106

1,114

35

1,165

428

3,438

2,100

Total

 2,94,514

70,051

 2,36,805

 1,21,055

 1,22,601

31,755

27,539

1,175

10,425

6,143

45,000

49,599

Note: Break-up of following grants is not available in the above table: (i) Sector-specific grants for school Education (Rs 4,800 crore) and aspirational districts and blocks (Rs 3,150 crore), and (ii) grants to local bodies for incubation of new cities (Rs 8,000 crore), and National Data Centre (Rs 450 crore). 
Sources: Report of the 15th Finance Commission for 2021-26; PRS.

 

 

DISCLAIMER: This document is being furnished to you for your information.  You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (“PRS”).  The opinions expressed herein are entirely those of the author(s).  PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete.  PRS is an independent, not-for-profit group.   This document has been prepared without regard to the objectives or opinions of those who may receive it.

आर्थिक सर्वेक्षण 2020-21

Economic Survey 2020-21

Report Summary

  • The Finance Minister, Ms Nirmala Sitharaman tabled the Economic Survey 2020-21 on January 29, 2021.  Key highlights of the Survey include:
     
  • In March 2020, COVID-19 was declared a pandemic by the World Health Organisation, and a nationwide lockdown was imposed in India to contain the spread of the virus.  The survey noted that early use of intense lockdowns delayed the time taken to reach the peak and reduced the magnitude of the peak.  This led to a low mortality rate and also allowed for a sharp (V-shaped) recovery in economic activities.   

State of the economy

  • Gross Domestic Product (GDP):  The survey estimates nominal GDP growth of 15.4% and real GDP growth of 11% in 2021-22.  In 2020-21, GDP declined by 23.9% in the first quarter and by 7.5% in the second quarter.  Overall, GDP is expected to decline by 7.7% in 2020-21 as compared to the growth of 4.2% in 2019-20.
     
  • Inflation: The Consumer Price Index (CPI) based inflation was 6.6% in 2020-21 (April-December).  The inflation mainly due to food inflation which increased from 6.7% in 2019-20 to 9.1% in 2020-21 (April-December). 
     
  • Current account surplus: In the first half of 2020-21, the current account surplus was 3.1% of GDP.  The survey expects current account surplus to be at least 2% of the GDP by end of 2020-21.  If achieved, this will break a 17-year trend of current account deficits.  The surplus is due to reduction in merchandise imports and lower expense on travel services, which led to higher decline in current payments (30.8%) as compared to the decline in current receipts (15.1%).
     
  • Fiscal deficit: As of November 2020, the fiscal deficit was 135.1% of budget estimate.  In comparison, between April to November 2019, fiscal deficit was 114.8% of the budget estimate.  The survey noted that the country was fiscally strained due to the disruptions caused by the COVID-19 pandemic. 

Agriculture and allied activities

  • In 2020-21, the growth rate of agriculture is estimated to be 3.4%.  While the contribution of the sector to Gross Value Added (GVA) declined from 18.3% to 17.8% between 2014-15 and 2019-20, it is estimated to increase to 19.9% in 2020-21.  This is because the agricultural sector faced fewer disruptions on account of the COVID-19 pandemic as compared to non-agricultural sectors. 
     
  • Under National Food Security Act, 2013, the central government provides rice and wheat at subsidised rates (called central issue price (CIP)).  The difference between the CIP and the market price gives quantum of food subsidy.  While the CIP of wheat and rice has not been revised since the introduction of the Act, the economic cost of wheat increased from Rs 1,908.32 per quintal in 2013-14 to Rs 2,683.84 in 2020-21 (an increase of 41%).  In addition, the economic cost of rice increased from Rs 2,615.51 per quintal in 2013-14 to Rs 3,723.76 per quintal in 2020-21 (an increase of 42%).  The survey observes that revision of CIP to reduce the rising expenses on food subsidy bill.

Industry and infrastructure

  • The industrial sector is estimated to decline by 9.6% in 2020-21.  Within the sector, highest decline is estimated in construction (12.6%) and mining (12.4%).  The contribution of the industrial sector to GVA has declined from 32.5% in 2011-12 to 25.8% in 2020-21. 
     
  • The Index of Industrial Production (IIP) growth declined by 15.5% between April-November 2020 as compared to growth of 0.3% during same period in 2019.  IIP is a measure of industrial performance that assigns a weight of 78% to manufacturing, 14% to mining, and 8% to electricity.  Out of 407 items in IIP, the number of items which observed growth increased from 28 in April 2020 to 171 in November 2020, thereby, indicating a sharp economy recovery.
     
  • The National Infrastructure Pipeline was launched with an investment plan of Rs 111 lakh crore over five years (2020-25).  The project is aimed at increasing growth, competitiveness, and employment.  The state governments, central government, and the private sector will invest 40%, 39%, and 21% in the project, respectively.  The major share of the funds will be given to: (i) energy sector (24%), (ii) roads (18%), (iii) urban infrastructure (17%), and (iv) railways (12%). 

Service sector

  • In 2020-21, the service sector is estimated to contract by 8.8% (with trade and hospitality contracting the most (21.4%)) as compared to 5.5% growth in 2019-20.  Software services was the only sub-sector with positive growth (3.6%) in the period of April-September 2020.
     
  • While the pandemic led to a global slowdown in trade, the Indian service sector export remained resilient.  The net services export receipts in first half of 2020-21 was USD 41.67 billion, which is 3% higher than the service export receipts in first half of 2019-20 (USD 40.47 billion).

Health

  • The survey notes that Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PM-JAY) enhanced health insurance coverage.  The proportion of health insured households between 2015-16 to 2019-20 increased by 54% in states that implemented AB-PM-JAY and decreased by 10% for states which did not implement the scheme.  During this period, infant mortality rate decreased by 20% in states that implemented AB-PM-JAY whereas in states that did not implement AB-PM-JAY, infant mortality rate declined by 12%. 
     
  • The survey further notes that better access to bare necessities (such as housing, water, sanitation, electricity, and cooking fuel) lead to an improvement in health indicators.
     
  • India has one of the highest levels of out-of-pocket expenses as a share of total health expenditure.  The survey observes that increasing the spending on public health from 1% of GDP to 2.5-3% of GDP will help in reducing the out-of-pocket expenses from 65% to 30%.
     
  • The survey noted that mitigating information asymmetry in the healthcare sector will help in achieving lower insurance premiums and better welfare of people.  It recommends setting up a regulator for the healthcare sector to prevent market failures due to information asymmetry (specifically in private healthcare sector).

Banking sector

  • During an economic crisis, adoption of regulatory forbearance could help ease stress in the financial sector.  Regulatory forbearance includes measures such as allowing banks to restructure certain loans rather than change the asset classification.  The survey suggests that such measures must be withdrawn in a timely manner.  It was noted that regulatory forbearance was adopted after the Global Financial Crisis in 2008 for seven years.  This led to an increase in non-performing assets and reduced credit growth once the measures were withdrawn.  The survey observed that withdrawal of regulatory forbearance must be followed by a review of the quality of the bank’s assets, and capitalisation to ensure growth in lending.

Credit Rating

  • The survey noted that India’s credit rating does not reflect the country’s fundamentals in terms of GDP growth, inflation, government debt as a % of GDP, among others.  It observed a bias in ratings against emerging economies like India and China.  Credit rating maps the probability of default, reflecting the willingness and ability of borrower to meet debt obligations.  India has no history of sovereign default (demonstrating willingness to pay), and the foreign exchange reserves are greater than the total external debt of the country (demonstrating ability to pay).  Poor sovereign credit ratings have adverse impact on inflow of foreign investments.

Innovation

  • India ranked 48 in Global Innovation Index in 2020, which makes it first among Central and South Asian countries, and third among the lower middle-income economies.  However, India’s gross domestic expenditure on research and development (GERD) is lowest amongst larger economies.  India spends 0.7% of GDP on GERD as compared to the expenditure of over 2% of GDP by China and over 2.5% of GDP in the United States of America. 
     
  • Currently, the government sector contributes 56% of the total GERD, which is higher than the contribution of the government sector (20%) in top ten economies (such as China, United Kingdom, and Japan).  The contribution by business sector to GERD in India is 37%, which is significantly lower than the contribution of the sector in other large economies (68%).  The survey observes that GERD should be increased to over 2% of GDP by enhancing research and development facilities, especially in the private sector.

 

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कृषि और मरीन उत्पाद, बागान फसलों, हल्दी और कॉयर का निर्यात

Export of Agricultural and Marine Products, Plantation Crops, Turmeric, and Coir

Standing Committee Report Summary

 

  • The Standing Committee on Commerce (Chair: Mr. V. Vijayasai Reddy) submitted its report on ‘Export of Agricultural and Marine Products, Plantation Crops, Turmeric and Coir’ on September 18, 2020.  The Committee noted the decline in exports of agricultural, marine, and plantation products over the last few years.  It also observed that while the COVID-19 pandemic has disrupted exports, it can provide India with an opportunity to emerge as a new trade centre post-COVID.  Key observations and recommendations of the Committee include:
     
  • Research: The Committee stressed the need to strengthen research facilities, and increase the funding and manpower for research across all products.  Research should focus on increasing competitiveness of exports and improving value addition.

Agricultural and dairy products

  • Compliance with international standards: The Committee noted the low share of exports of agricultural products when compared to total production (less than 2%).  It recommended that the government ensure compliance with international standards in cultivation and production of agricultural products.  Further, noting the imposition of non-tariff barriers by the European Union on dairy products, the Committee recommended that the government ensure products comply with standards of importing countries.
     
  • Private sector participation: To provide capital infusion to Farmer Producer Organisations (FPOs), the Committee recommended encouraging capital investments by the private sector in FPOs.
     
  • Fruits and vegetables: The Committee highlighted the export potential of fruits and vegetables and recommended renegotiating agreements with certain neighbouring, and African countries to reduce high rates of customs and duties.
     
  • Cereals: The Committee held that cereals that undergo primary processing, adding health and nutrition value, must be treated as processed foods.  These products should be eligible for export incentives available to processed foods.  Further, the government should undertake proactive efforts to explore new markets such as Egypt, Malaysia, and Indonesia, for export of rice.

Marine products (shrimp, tuna)

  • The Committee directed the government to undertake steps to: (i) regulate the use of antibiotics in marine farming, (ii) establish laboratories near processing centres for marine products to test for antibiotics, and (iii) strengthen export-related infrastructure. 

Plantation crops (tea, coffee, rubber)

  • Crop insurance scheme: The Committee recommended that the government should devise a crop insurance scheme for all plantation crops.
     
  • Tax treatment of income from sale of coffee: As per rules under the Income-tax Act, 1961, income derived from the sale of coffee grown and cured will be computed as business income, and 25% of this income is taxable.  The Committee observed that post-harvest processing (such as curing) of coffee, will fetch a better price for coffee growers.  It recommended that the rule treating income derived from processing coffee as business income be abolished.
     
  • Use of penalty: To improve the cost competitiveness of tea exports, the Committee recommended that the existing policy of random checking of containers should be revisited.  Instead, a penalty may be levied on defective cargo after goods reach the export destination.

Spices

  • Development Wing for chilli: The Committee noted that chilli forms 43% of exports of spices by volume.  It recommended that a Development Wing within the Spice Board be created to further develop exports of chilli.  The Development Wing would provide a forum for chilli farmers to engage with international buyers.
     
  • Promotion of turmeric: The Committee observed that the area cultivating turmeric has declined, reducing the exportable surplus.  It was recommended that the mandate of the Spices Board be expanded to monitor the production and development of turmeric in addition to its export promotion function.

Tobacco

  • FDI: The Committee recommended that the government undertake a study to analyse allowing foreign direct investment (FDI) in the tobacco sector.  Currently, 100% FDI under the automatic route is allowed in plantation crops such as coffee and tea.
     
  • Market Stabilization Fund: The government should create a Market Stabilization Fund to provide price support to tobacco farmers when the price of tobacco falls below the cost of cultivation.  It may be funded by imposing a 1% levy on the sale of cigarettes.
     
  • Inclusion in export incentive schemes: The Committee recommended the extension of export incentives under the Remission of Duties and Taxes on Exported Products scheme to tobacco.  The scheme reimburses taxes/duties/levies imposed at the central, state and local level (which are not refunded under any other scheme).

 

 

DISCLAIMER: This document is being furnished to you for your information.  You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (“PRS”).  The opinions expressed herein are entirely those of the author(s).  PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete.  PRS is an independent, not-for-profit group.  This document has been prepared without regard to the objectives or opinions of those who may receive it.