MODULE 2

1. INDIAN ECONOMY (features)

The Indian economy is characterized by a rich tapestry of sectors, demographics, and

economic policies that uniquely define it. The Indian economy showcases an
interesting study in diversity, growth potential, and global heft, underlined with
subtlety, challenges, and contributions to the global economy, considering it is among
the largest and most dynamic economies globally. With more than 1.3 billion people
and fast-changing economic scenery, India's economy has numerous dimensions.

Features of Indian Economy

These features present an all-round view of the dynamics, challenges, and potential of
the Indian economy. In the continued growth trajectory of India, therefore, addressing
these factors will become imperative for sustainable development, living standards,
and strong global economic influence.

1. Low Per Capita Real Income

Real income refers to the country's overall purchasing power in a given financial year.
Per capita real income, on the other hand, denotes the average individual's purchasing
power. Developing nations often have a low per capita real income.

2. Rapid Population Growth

A high population requires a robust infrastructure, including adequate educational and
medical facilities and ample employment opportunities with decent wages. However,
providing these resources to each citizen becomes challenging with a rapidly
growing population, often leaving the government struggling to keep up. This factor
contributes to India's status as a developing economy.

3. The Vicious Circle of Poverty

The vicious circle of poverty affects both the supply and demand side. On the supply
side, the lack of capital leads to low rates on investments, resulting in a low level of
per capita real income. On the demand side, when the country's real income is low,
goods and services become expensive, leading to a vicious circle of poverty - a
common phenomenon in developing economies.

4. Diverse Economic Sectors

India's economy is characterized by a diverse array of economic sectors, each playing
a significant role in its overall economic growth and development.
 o Agriculture: Although the contribution of agriculture to GDP has been
falling over the years, it continues to engage by far the largest share of
workforce and normally accounts for a large proportion in food security.
o Manufacturing: Representing the manufacturing industries of India, such as
traditional ones like textiles and automotive, and high-tech ones like
pharmaceuticals and aerospace.
o Services: This sector is the driver of the economy, under which fall IT
services, telecommunication, finance, health, education, and tourism. The
sector contributes a sizable part to the GDP and provides employment to
thousands of skilled professionals.

5. Demographic Dividend
India now boasts a young and rapidly growing population followed by an equally
essential demographic dividend. This youthful workforce, therefore, opens up chances
for innovation, entrepreneurship, and economic growth. This demographic dividend
will be harnessed only if sufficient investments in education, skill development, and
generating adequate productive employment opportunities for the rising working-age
population are made.

6. Economic Reforms and Liberalization

In the year 1991, India initiated economic reforms, and ever since, it has been
gradually opening its economy through trade liberalization, privatization of public
sector units, and welcoming FDI. These reforms have induced economic growth,
promoted industrialization, developed infrastructure, and increased integration with
the global economy.

7. Global Economic Player

It is generally accepted that India is one of the key economic players and an emerging
market power in the global arena. This would mean it has memberships to
international organizations such as the G20 and BRICS, influencing global economic
policies and trade dynamics.
Being strategically located in South Asia makes India crucial to regional trade and
investments, acting as a junction between the East and West.

8. Challenges of Inclusive Growth

Despite economic progress, India still faces stiff challenges: income inequality and
regional development disparities are sharply evident, access to health and education is
poor. These gaps need to be addressed for inclusive growth to be a reality so that the
benefits of economic development percolate down to every stratum of society.
9. Infrastructure Development
Infrastructure development will sustain long-term economic growth in India. This
would entail investing in transport, energy, telecommunication, and urban
infrastructure to drive industrialization through enhanced connectivity and improved
living standards.
10. Technology and Innovation
India is a leading offshore outsourcing destination for IT services and software
development; hence, the startup ecosystem, much of it found in innovation enclaves
like Bangalore, Hyderabad, and Pune, is on the rise. This technological innovation
contributes to the global competitiveness of that country, spanning digital services, e-
commerce, and biotechnology.

11. Environmental Sustainability

Air and water pollution have been joined by deforestation and climate change impacts
as the existing environmental issues in India. Balancing economic development in a
way that is environmentally sustainable is key to the long-term growth and resilience
of this nation.
 2. LOW AGRICULTURAL PRODUCTIVITY
(causes, measures)

India is an agricultural country, with nearly 60% of its land dedicated to agriculture.
However, only about 40% of this land is considered suitable for high-yield farming,
limiting the overall output. While agriculture employs a large portion of the population, it
faces challenges in productivity due to fragmented plots, outdated practices, and
inadequate access to modern tools.
Agricultural productivity, the measure of output from a given amount of land, has
remained low in India. Factors such as small land sizes, water scarcity, and limited access
to technology all play a role in keeping productivity below potential. Increasing
productivity is key to ensuring food security, improving farm income, and strengthening
the economy.

Major Causes of Low Productivity

Small Land Plots
Many farmers in India own small and separated plots of land. These small plots make it
challenging to use large modern farming machines like tractors and harvesters effectively.
Farmers on small plots often must rely on manual labour or outdated tools, which reduces
their productivity and efficiency.

Dependence on Rain
Most Indian farmers depend heavily on seasonal rains for watering their crops. While
around 40% of farmland has irrigation facilities, the remaining 60% relies entirely on
rainfall. This dependence means that in dry years or droughts, crops fail or produce lower
yields. Additionally, without consistent water sources, farmers cannot plant multiple
crops in a year, reducing overall production.

Old Farming Techniques

Many farmers continue to use traditional tools and methods passed down over
generations. Without access to modern farming techniques, high-quality seeds, or
effective fertilizers, these farmers struggle to increase their productivity. Advanced
machinery like rice transplanters or harvesters is either unavailable or unaffordable,
making it difficult for farmers to improve their crop yields.

Lack of Loans and Credit Access

Access to loans and financial support is essential for farmers to invest in good-quality
seeds, fertilizers, and farming tools. Unfortunately, many farmers do not have easy access
to credit or loans due to complex bank requirements or high interest rates. This lack of
funds prevents them from improving their farming practices and infrastructure, ultimately
limiting productivity.
Soil Degradation
Continuous farming without replenishing the soil’s nutrients can degrade soil quality over
time. This means that even with the same amount of effort, crop yields decline. Overuse
of certain fertilizers and pesticides also harms the soil. Healthy soil is essential for
productive farming, and without proper care, soil degradation becomes a significant issue.

Limited Research and Support

India has limited funding for agricultural research and advisory services, which means
farmers have less access to new and effective farming techniques. Without support in
terms of research or practical advice, farmers may not learn about more efficient ways to
farm, which could improve their yields and make their practices more sustainable.

Solutions to Low Productivity

1. Decreasing the pressure of population on agricultural sector - The productivity of

agricultural sector can be increased by creating job opportunities in non- agricultural
sector and the reducing the pressure on the agricultural sector
2. Mass Education - Expansion of education will help to eradicate the ignorance and
prejudices among the peasants. If along with the general education the agricultural
knowledge can be given there will be quality enhancement of the farmer and it will
help to increase the productivity of Indian agriculture

3. Adequate Supply of Loan - The lending process of the financial institutions should
be easier. Otherwise, the farmers will remain in the grip of the greedy rural money
lenders. A rural cooperative society can be formed by the coordination of all lending
institution. So that this society can meet up the financial needs of the farmers

4. Program for enhancement of skills - Such programs help to improve the standard of
living of the farmers. Through the formation of a good and efficient managerial
infrastructure helpful suggestion can be given to the farmers for different purposes of
their lives. This will also help them to get rid of the prejudices. Their skill will be
enhanced. Consequently, it will help to increase the productivity of the Indian
agriculture

5. Formation of Economic Holding – If the scattered and fragmented lands can be

united and cultivated under cooperative farming system then the farmers may be
encouraged and the productivity will increase.

6. Proper Implementation of Land Reform - If the farmers get ownership of the land,
they will be encouraged in agriculture and productivity will increase

7. Necessary Changes in the Organization of Agriculture - In India, farming is done

on a family basis, but the amount of investment needs to be increased by attracting
 experienced people in the field of agriculture. Cooperative farming system and private
investment should be encouraged. Moreover, agriculture should be business oriented.

8. Creating Improved Infrastructure - Agricultural productivity will increase if rural

farmers can get the fair price for their produce and loans from various institutions can
be properly utilised for the development.

9. Application of Modern Agricultural Techniques - Use of modern chemical

fertilizers, use of HYV (high yield variety) seeds, use of pesticides for protection of
the crops, application of improved agricultural machinery and production of different
crops on the same land etc. can increase the agricultural productivity in our country

10. Improving Irrigation System - Agricultural productivity can be increased by

expanding and utilising small- scale and large-scale irrigation.

11. Proper Functioning of Agricultural Laboratories- The Indian Council of

Agricultural Research, the agricultural universities of state and other research
Institutions are engaged in agricultural research. If the successful results of these
research institutions can be reached to the farmers, then the agricultural productivity
of the country can increase.
 3. POVERTY
(poverty line, causes and its alleviation strategies)

According to the World Bank, Poverty is a pronounced deprivation in well-being and

comprises many dimensions. It includes low incomes and the inability to acquire the basic
goods and services necessary for survival with dignity. Poverty also encompasses low
levels of health and education, poor access to clean water and sanitation, inadequate
physical security, lack of voice, and insufficient capacity and opportunity to better one’s
life.
Poverty Line refers to the minimum income, consumption, or, more generally access to
goods and services below which individuals are poor. The poverty line in India is the
expenditure level at which a minimum calorie intake and indispensable non-food
purchases are assured. It may be noted that even among the poor, there are differences in
the degrees of poverty. So, the focus of the government policies should be on the poorest
of the poor.

Causes of Poverty in India

1. Population Explosion: India’s population has steadily increased through the years.
During the past 45 years, it has risen at a rate of 2.2% per year, which means, on
average, about 17 million people are added to the country’s population each year.
This also increases the demand for consumption goods tremendously.
2. Low Agricultural Productivity: A major reason for poverty in the low productivity
in the agriculture sector. The reason for low productivity is manifold. Chiefly, it is
because of fragmented and subdivided land holdings, lack of capital, illiteracy about
new technologies in farming, the use of traditional methods of cultivation, wastage
during storage, etc.
3. Inefficient Resource utilisation: There is underemployment and disguised
unemployment in the country, particularly in the farming sector. This has resulted in
low agricultural output and also led to a dip in the standard of living.
4. Low Rate of Economic Development: Economic development has been low in India
especially in the first 40 years of independence before the LPG reforms in 1991.
5. Price Rise: Price rise has been steady in the country and this has added to the burden
the poor carry. Although a few people have benefited from this, the lower income
groups have suffered because of it, and are not even able to satisfy their basic
minimum wants.
6. Unemployment: Unemployment is another factor causing poverty in India. The ever-
increasing population has led to a higher number of job-seekers. However, there is not
enough expansion in opportunities to match this demand for jobs.
7. Lack of Capital and Entrepreneurship: The shortage of capital and
entrepreneurship results in low level of investment and job creation in the economy.
8. Social Factors: Apart from economic factors, there are also social factors hindering
the eradication of poverty in India. Some of the hindrances in this regard are the laws
of inheritance, caste system, certain traditions, etc.
9. Colonial Exploitation: The British colonisation and rule over India for about two
centuries de-industrialised India by ruining its traditional handicrafts and textile
industries. Colonial Policies transformed India to a mere raw-material producer for
European industries.
10. Climatic Factors: Most of India’s poor belong to the states of Bihar, UP, MP,
Chhattisgarh, Odisha, Jharkhand, etc. Natural calamities such as frequent floods,
disasters, earthquake, and cyclone cause heavy damage to agriculture in these states.

Poverty Alleviation Programs in India

Poverty Alleviation Programmes aims to reduce the rate of poverty in the country by
providing proper access to food, monetary help, and essentials to households and families
belonging to below the poverty line threshold.
Various Programmes and Schemes under the Government of India were launched to
eradicate poverty and to provide basic amenities to poor households.
1. Integrated Rural Development Programme (IRDP): It was introduced in 1978-79
and universalized from 2nd October, 1980, aimed at aiding the rural poor in the form
of subsidy and bank credit for productive employment opportunities through
successive plan periods.
2. Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana: The JRY was meant to
generate meaningful employment opportunities for the unemployed and
underemployed in rural areas through the creation of economic infrastructure and
community and social assets.
3. Rural Housing – Indira Awaas Yojana: The Indira Awaas Yojana (LAY)
programme aims at providing free housing to Below Poverty Line (BPL) families in
rural areas and main targets would be the households of SC/STs.
4. Food for Work Programme: It aims at enhancing food security through wage
employment. Food grains are supplied to states free of cost, however, the supply of
food grains from the Food Corporation of India (FCI) godowns has been slow.
5. National Old Age Pension Scheme (NOAPS): This pension is given by the central
government. The job of implementation of this scheme in states and union territories
is given to panchayats and municipalities. The states contribution may vary depending
on the state. The amount of old age pension is ₹200 per month for applicants aged 60–
79. For applicants aged above 80 years, the amount has been revised to ₹500 a month
according to the 2011–2012 Budget. It is a successful venture.
6. Annapurna Scheme: This scheme was started by the government in 1999–2000 to
provide food to senior citizens who cannot take care of themselves and are not under
the National Old Age Pension Scheme (NOAPS), and who have no one to take care of
 them in their village. This scheme would provide 10 kg of free food grains a month
for the eligible senior citizens. They mostly target groups of ‘poorest of the poor’ and
‘indigent senior citizens.
7. Sampoorna Gramin Rozgar Yojana (SGRY): The main objective of the scheme
continues to be the generation of wage employment, creation of durable economic
infrastructure in rural areas and provision of food and nutrition security for the poor.
8. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
2005: The Act provides 100 days assured employment every year to every rural
household. One-third of the proposed jobs would be reserved for women. The central
government will also establish National Employment Guarantee Funds. Similarly,
state governments will establish State Employment Guarantee Funds for
implementation of the scheme. Under the programme, if an applicant is not provided
employment within 15 days s/he will be entitled to a daily unemployment allowance.
9. National Rural Livelihood Mission: Aajeevika (2011): It evolves out the need to
diversify the needs of the rural poor and provide them jobs with regular income
monthly. Self Help groups are formed at the village level to help the needy.
10. National Urban Livelihood Mission: The NULM focuses on organizing urban poor
in Self Help Groups, creating opportunities for skill development leading to market-
based employment and helping them to set up self-employment ventures by ensuring
easy access to credit.
11. Pradhan Mantri Kaushal Vikas Yojana: It will focus on fresh entrant to the labour
market, especially labour market and class X and XII dropouts.
12. Pradhan Mantri Jan Dhan Yojana: It aimed at direct benefit transfer of subsidy,
pension, insurance etc. and attained the target of opening 1.5 crore bank accounts. The
scheme particularly targets the unbanked poor.
 4. POPULATION
(size and composition, causes of high growth and
demographic dividend)

Trends of Population Growth

India is second most populous country in the world, next to China. According to 2001
Census, Indian population was 1027 million while according to 2011 census; India’s
population was 1210.2 million. India has 17.2% of the total world population (so one in every
six people in the world is an Indian), but in terms of land area, India stands at the seventh
place and has only 2.42% of total land area of the world, while land area of U.S.A. is about
4.8%. India’s population is about three times than that of U.S.A., twenty-one times than that
of Canada and about six times than that of Japan.

Size and Growth of Population Growth.

The size and composition of a country’s population can exert a powerful influence on a
country’s development. The population size, composition, and distribution influence the
range of industries a country can support and the pool of talent that are available in the
country.

In size of population, India is the second largest country in the world after China, constitutes
2.4 per cent of the world’s land area and supports 16.25 per cent of the world’s population.
The population growth in India has proved to be more an obstacle to its development efforts
rather than a contributory factor in economic growth.

Population Explosion
Population Explosion refers the sudden and rapid rise in the size of population, especially
human population.

It is an unchecked growth of human population caused because of increased birth rate,

decreased infant mortality rate, and Improved life expectancy.

A drastic growth in population beyond normal limits is called population explosion. It is

more prominent in under-developed and developing countries than in developed countries.
Causes of Population Explosion
1. Accelerating birthrate: Due to lack of awareness about the positive impact of using birth-
control method, there has been a steady growth in birthrate.

2. Decrease in infant mortality rate: An improvement in medical science and technology,

wide usage of preventive drugs (vaccines), has reduced the infant mortality rate. There
has been great improvement in medical and health-care facilities during the past few
decades.

3. Increase in life expectancy: Due to improved living conditions, better hygiene and
sanitation habits, better nutrition, health education, etc. the average life expectancy of
human population has improved significantly. Steady supplies of good quality food make
sure that the population is well nourished. Populations grow when they are adequately
nourished.

4. Increased immigration: An increase in immigration often contributes towards population

explosion, particularly in developed countries. It happens when a large number arrive at
an already populated place with the intention to reside permanently.

5. Less space than required: In urban cities, it is often found that there is very less scope for
making available extra space to absorb the additional population. In such cases, a large
population is seen packed into a smaller space.

Demographic Dividend
It is the potential for economic gains when the share of the working-age population (15 years
– 64 years) is higher than the non-working age group.

Demographic dividend occurs when the proportion of working people in the total population
is high because this indicates that more people have the potential to be productive and
contribute to growth of the economy.

Due to the dividend between young and old, many argue that there is great potential for
economic gains, which has been termed the “demographic gift”. In order for economic
growth to occur the younger population must have access to quality education, adequate
nutrition and health including access to sexual and reproductive health.
Demographic dividend takes place when a country undergoes a demographic transition from
a rural agrarian economy with high fertility rates to an urban industrialized economy with low
fertility and mortality rates. This article gives details on demographic dividend and
opportunities that accompany it, in the Indian context.

Demographic Dividend – Causes

Change in population structure occur due to

1. Falling birth rate

2. Lower fertility rate
3. Increased longevity
Falling birth rate and lower fertility rate will contribute to a reduction in expenditure,
increased longevity will lead to an increase in the size of the working-age population.

Demographic Dividend – Opportunities for India

1. India will have the youngest workforce in the world with a median age much lower
than China and other Developed countries.
2. The other countries will have a higher proportion of the population which is not in the
working-age group which will result in a shortage of manpower to the tune of 56
million.
3. Indian workforce can fill this gap in India and abroad and result in greater economic
growth.
4. During the period of demographic dividend, the personal savings will grow, which
means greater purchasing power, which can lead to the growth of the economy.

The Pattern of Demographic Shift in India:

• India’s working-age population is rising and stood at 68% compared with 67.3% in
2020 and 66% in 2015, according to the UNFPA’s State of World Population Report
2023.
• China, on the other hand, has a working-age population of 69%, but it is declining
from 70.3% in 2020 and 73% in 2015.
• India’s population in 2023 stood at 1,428.6 million compared to China’s 1,425.7
million, according to the UN report on world population.
• While India is a young country, the status and pace of population ageing vary among
states, according to the UNFPA. Southern states, which are advanced in demographic
transition, already have a higher percentage of older people.
• These differences in age structure reflect differences in economic development and
health, and remind us of states’ very different starting points at the outset of the 2030
Sustainable Development Goals Agenda, according to the UN report.
 • India needs to address the diversity between states, according to the UNFPA, but this
also offers boundless opportunities for states to work together, especially on
demographic transition, with the north-central region as the reservoir of India’s
workforce.

Demographic Divided – Challenges facing India

1. Skill development of the working-age population so that they can turn out to be
productive for the country’s economy. By 2031, the overall size of our vast working-
age population would have declined in 11 of the 22 major States. While Kerala’s
population is already ageing, in Bihar the working-age cohort is predicted to continue
increasing till 2051. Check out the details on Demographics of India on the page link
provided here.
2. The rate of employability among Indian graduates is on the lower side. Further details
on Unemployment in India can be seen on the given link.
3. As per the UNDP report, India ranks poorly in the Human Development Index (HDI).
You can go through the details of the Human Development Index 2023-24 on the
linked page.
4. The mean years of schooling and expected years of schooling are very low in India.
Go through the issues and challenges with the Indian education System on the linked
page.
• Also, read about Digital Education in India on the given link.
5. Unemployment rates are high in rural and urban India.
6. A huge percentage of the population is still dependent on agriculture in India, this
segment is also known for underemployment and disguised unemployment.
7. A huge majority of the workforce is employed in the unorganized sector which is
riddled with low wages and the absence of social security.
8. Fall in female labour force participation in India, as per reports from the International
Labour Organisation (ILO) and World Bank. Growing female literacy is not
translating into relevant and marketable skills. Lack of flexible entry and exit policies
for women into virtual classrooms, and modules for open digital training, and
vocational education limits access to contemporary vocations.

Way Forward to Tap India’s Demographic Dividend Window

• Investment in Health and Education: Experts suggest that the Indian government
needs to accelerate investment in health and education to improve the employability
of its workforce. The 15th Finance Commission has recommended that India’s public
expenditure on health should increase to 2.5% of GDP by 2025. Similarly, public
investment in education needs to be increased from its current level of 1% of GDP.
• Accelerating Manufacturing Activity: The potential of the manufacturing sector to
create millions of jobs needs to be tapped. This can be achieved by implementing land
and labour reforms to boost the sector’s competitiveness.
• Addressing Structural Issues: India needs to address its structural issues fast to
accelerate economic growth. This can be done by generating more jobs, investing in
health and education, and accelerating manufacturing activity.
• Collaboration Between Centre and States: The central and state governments need
to work together to accelerate manufacturing activity and harness the full potential of
India’s young population.
• Addressing Diversity Between States: The UNFPA’s State of World Population
Report 2023 highlights the need for India to address the diversity between states.
Southern states, which are advanced in demographic transition, already have a higher
percentage of older people. The north-central region is seen as the reservoir of India’s
workforce, and there are boundless opportunities for states to work together,
especially on demographic transition.
• Human Capital Investment: India needs to invest in human capital to trigger a
demographic dividend. This investment can be in the form of greater economic
productivity, health, education, and empowerment. India has a new education policy,
and the government plans to invest 6% of GDP in education. However, the actual
investment is only 2.9% of GDP.
• Focus on Sustainable Development Goals: The differences in age structure between
states reflect differences in economic development and health. Therefore, states need
to work together to achieve the 2030 Sustainable Development Goals Agenda.
 5. NITI AAYOG

STRUCTURE OF THE NITI

The Aayog will be a lean organisation, modelled as a network of expertise; focusing
on functionality, flexibility and domain knowledge with the following ‘structure’ and
‘mechanism’:

(i) Chairman: The Prime Minister of India (de-facto).

(ii) Governing Council: will comprise the Chief Ministers of all states and Lt.
Governors of union territories.
(iii) Regional Councils: will be formed to address specific issues and contingencies
impacting more than one state or region. Strategy and planning in the Aayog will
be anchored from state level; with regional councils convened by the Prime
Minister for identified priority domains, put under the joint leadership of related
sub-groups of states (grouped around commonalities which could be geographic,
economic, social, or otherwise) and central ministries. The regional councils will
have the following features:

• Will have specified tenures, with the mandate to evolve strategy and oversee
implementation.
• Will be jointly headed by one of the group Chief Ministers (on a rotational
basis or otherwise) and a corresponding Central Minister.
• Will include the sectoral central ministers and secretaries concerned, as well
as state ministers and secretaries.
• Will be linked with corresponding domain experts and academic institutions.
• Will have a dedicated support cell in the Aayog’s secretariat.

(iv) Special Invitees: It will have experts, specialists, and practitioners with relevant
domain knowledge as special invitees nominated by the Prime Minister.
(v) Full-time Organisational Framework: In addition to PM as its Chairman it will
comprise:
• Vice-Chairperson— to be appointed by the PM.
• Members: all as full-time.
• Part-time Members: maximum of 2, from leading universities, research
organisations and other relevant institutions in an ex-officio capacity. Part time
members will be on a rotational basis.
• Ex-Officio Members: maximum of 4 members of the Union Council of
Ministers to be nominated by the PM.
• Chief Executive Officer: to be appointed by the PM for a fixed tenure, in the
rank of Secretary to the Government of India.
• Secretariat: as deemed necessary.
 FUNCTIONS OF NITI AAYOG

1. To foster cooperative federalism through structured support initiatives and

mechanisms with the States on a continuous basis, recognizing that strong States
make a strong nation.

2. To develop mechanisms to formulate credible plans at the village level and aggregate
these progressively at higher levels of government.

3. To ensure, on areas that are specifically referred to it, that the interests of national
security are incorporated in economic strategy and policy.

4. To pay special attention to the sections of our society that may be at risk of not
benefitting adequately from economic progress.

5. To provide advice and encourage partnerships between key stakeholders and national
and international like-minded Think Tanks, as well as educational and policy research
institutions.

6. To create a knowledge, innovation, and entrepreneurial support system through a

collaborative community of national and international experts, practitioners, and other
partners.

7. To offer a platform for resolution of inter-sectoral and inter-departmental issues to

accelerate the implementation of the development agenda.

8. To maintain a state-of-the-art Resource Centre, be a repository of research on good

governance and best practices in sustainable and equitable development as well as
help their dissemination to stake-holders.
 6. NEW INDUSTRIAL POLICY 1991

The Government of India announced its new industrial policy 1991 on July 24, 1991, with
the goal of correcting the distortions and weaknesses in the country's industrial structure
that had developed over four decades, raising industrial efficiency to international levels,
and accelerating industrial growth. The economic reforms that were started in the early
1990s were centred on the New Industrial Policy of 1991. The new industrial policy served
as the foundation for all subsequent reform initiatives such as Liberalization, Privatization,
and Globalization.

What is New Industrial Policy 1991?

• The industrial policy is a series of standards and measures implemented by the
government to track the development of industries and related sectors to promote India’s
economic growth and development.
• The New Industrial Policy, of 1991 had the main objective of providing facilities to
market forces and increasing efficiency.
• The government undertook it to take measures to improve the competitiveness and
capabilities of various industries.
• The government undertook various measures to boost the growth of industries such as it
allowed domestic firms to import better technology to improve efficiency and to have
access to better technology.
• The Foreign Direct Investment ceiling was increased from 40% to 51% in specific sectors

Objectives of New Industrial Policy 1991

• The primary objectives of the New Industrial Policy of 1991 were to promote
efficiency and provide facilities for market forces.
• The bigger roles were played by
L – Liberalization (Reduction in Government Control.)
P – Privatization (Increasing the Private Sector's Role & Scope.)
G – Globalisation (Economic Integration between India and the rest of the world)

Features of New Industrial Policy 1991

1. Reduction in Government’s Monopoly: Government monopoly was reduced by
decreasing the number of industries reserved for the public sector from 17 (as
per 1956 policy) to 8 industries such as arms and ammunition, atomic energy,
coal, mineral oil, mining of iron ore, manganese ore, gold, silver, mining of
copper, lead, etc.
2. Abolition of Industrial Licensing: The Industrial Licensing Policy abolished the
industrial licensing given to all industries except for the 18 industries, which
was further reduced to 6 industries in 1999. These included drugs and
pharmaceuticals, hazardous chemicals, explosives such as gunpowder and
detonating fuses, etc.

3. Provision of Foreign Companies as a Major Stake: It allowed foreign companies

to have a majority stake in India. For example, in 47 high-priority industries, up
to 51% of FDI was allowed.

4. Provision to Non-Residential Indians (NRIs): Non-Resident Indians (NRIs)

were allowed 100% equity investments on a non-repatriation basis in all
activities except the negative list.

5. Internal Agreements on Foreign Technologies: Various international

agreements were made about foreign technologies. For example, permitting
high-priority industries up to a lump sum payment of Rs. 1 crore, with 5%
royalty for domestic sales and 8% for exports.

6. Restructuring of Portfolio Public Sector Investments: Restructuring the

portfolio of public sector investments, for example, the PSUs which were
unlikely to be turned around were to be referred to the Board for Industrial and
Financial Reconstruction (BIFR).

7. Removal of Prior Approval from Central Government: To remove the

requirement of prior approval of the Central Government for the establishment
of new undertakings, expansion of undertakings, merger, amalgamation, etc
MRTP act was to be amended.

8. Changes in the Standard for Small Units: The criteria for a tiny unit was changed
to a unit having an investment limit of Less than Rs. 5 Lakh.

9. Establishment of National Renewal Fund: As per this policy, the government

announced the establishment of a National Renewal Fund (NRF) to ensure a
social safety net for labor.
Impact of New Industrial Policy 1991
1. Removal of Restrictions Regarding License, Permit, And Quota Raj: It removed
the restrictions experienced during the license, permit, and quota raj. It intended
to liberalize the economy by removing bureaucratic restrictions on industrial
growth.

2. Public Sector’s Role and Disinvestment: The role of the public sector was
decreased and two sectors were reserved for the public. The process of
disinvestment was started in PSUs.

3. Entry of Multi-National Companies: By removing restrictions it enabled the

entry of multinational companies, privatization, removal of asset limits on
MRTP companies, liberal licensing policy, etc.

4. Increment in Domestic and Foreign Investment: Domestic, as well as foreign

investment, increased in almost every sector of the economy.

5. Increment in Exports and Related Activities: Increased efforts were undertaken

to increase exports such as Export Oriented Units (EOU), Export Processing
Zones (EPZ), Agri-Export Zones (AEZ), etc emerged.

6. Establishment of A Separate Ministry: To better resolve the issues of MSMEs

in 2006 a new act and separate ministry were established.
 7. FOOD SECURITY IN INDIA

Food security in India has been a significant policy concern for many years. India’s economy
may be the one that is booming most rapidly in the world, but it is also seeing an increase in
food price inflation. Read here to understand the food insecurity in India.
The price of food began to rise rapidly in 2019 and has continued to grow ever since. Annual
inflation in July 2023 hit 11%, which was the highest level in a decade.
A portion of the population may have difficulty obtaining food with sufficient nutritional
content because of the ongoing high food price inflation.
The term “food security” refers to the availability, accessibility, and affordability of safe and
nutritious food for all individuals in a country.
India has made significant progress in improving food security, but challenges still exist.
• Food Production: India has made remarkable progress in increasing food production,
particularly in staple crops like rice and wheat. The Green Revolution of the 1960s and
1970s played a crucial role in boosting agricultural productivity.
• Buffer Stocks: India maintains strategic grain reserves, known as buffer stocks, to
stabilize food prices and meet emergencies. These stocks are managed by agencies like
the Food Corporation of India (FCI).
• Addressing Malnutrition: India has implemented programs to address malnutrition,
particularly among children and pregnant women. These programs focus on improving
nutritional intake and health outcomes.
• Containing Pandemic Impact: The COVID-19 pandemic exposed vulnerabilities in
India’s food security system, as lockdowns disrupted supply chains and livelihoods.
The government implemented relief measures, including distributing free food grains
to vulnerable populations.
• Nutrition Quality: While food availability has improved, the focus is shifting toward
improving the quality of food and addressing issues of hidden hunger, where people
lack essential vitamins and minerals in their diet.
• Sustainable Agriculture: There is a growing emphasis on sustainable agriculture
practices, including organic farming, to ensure long-term food security while protecting
the environment.
• Climate Change Resilience: Building resilience to climate change is a priority for
ensuring food security in the face of changing weather patterns and extreme events.
• Role of Technology: Technology is being increasingly harnessed for better crop
management, weather forecasting, and food distribution, which can enhance food
security efforts.
The Government of India has taken several initiatives
including:
1. The National Food Security Act, 2013
2. The Public Distribution System (PDS)
3. The Mid-Day Meal Scheme
4. The Integrated Child Development Services (ICDS)
5. The National Nutrition Strategy
6. The Pradhan Mantri Krishi Sinchai Yojana (PMKSY)
7. The Rastriya Krishi Vikas Yojana (RKVY)
8. The National Mission for Sustainable Agriculture (NMSA)

National Food Security Mission

• In 2007, the National Development Council (NDC) adopted a resolution to initiate a
Food Security Mission.
• This mission aimed to increase the annual production of rice by 10 million tonnes,
wheat by 8 million tonnes, and pulses by 2 million tonnes by the end of the Eleventh
Plan (2011-12).
• In line with this resolution, the ‘National Food Security Mission’ (NFSM), a Centrally
Sponsored Scheme, was launched in October 2007.
• The NFSM proved to be highly successful, meeting its targets and achieving the desired
additional production of rice, wheat, and pulses.

National Food Security Act (NFSA), 2013

The National Food Security Bill, which was passed in India in 2013 and subsequently
enacted as the National Food Security Act (NFSA), is a landmark legislation aimed at
ensuring food security for the population.
 9. MICRO, SMALL AND MEDIUM ENTERPRISES
(Problems and Policies)

MSMEs are entities that are involved in the production, manufacturing and processing of
goods and commodities. These are broadly classified based on their investment in plant and
machinery for manufacturing or equipment for service enterprises, as well as their annual
turnover.
MSME’s are classified as per their turnover and investment. The new classifications as per
the Aatma Nirbhar Bharat Abhiyan Scheme in 2020

Size of the Investment and Annual

Enterprise Turnover

Micro Investment less than Rs. 1 crore

Turnover less than Rs. 5 crore

Small Investment less than Rs. 10 crore

Turnover up to Rs. 50 crore

Medium Investment less than Rs. 20 crore

Turnover up to Rs. 100 crore

PROBLEMS
These enterprises often face challenges that hinder their growth and sustainability.

Skilled manpower

One of the key challenges faced by MSMEs in India is the availability of skilled manpower.
While this problem is universal, despite a large workforce in India, it is particularly acute in
the case of MSMEs. This sector often operates in niche areas and requires specialised skills.
Many MSMEs struggle to find skilled workers who can operate and maintain their
machinery, manage their finances, and handle their marketing and sales activities.
Moreover, the lack of skilled manpower makes it difficult for MSMEs to adopt new
technologies and innovate, which is crucial for their long-term growth and competitiveness.
Lack of finance

Many MSMEs struggle to secure the necessary funds to start, operate or expand their
business due to a variety of reasons. One of the primary reasons for this is the lack of
collateral or credit history. A bad credit score can make it difficult for these enterprises to
obtain loans. MSMEs also face challenges in accessing credit due to high interest rates,
complex documentation requirements and long processing times.

Technology

While technology is meant to be an enabler, a lack of it can cause MSMEs to miss out on its
advantages. Many MSMEs operate in traditional sectors which rely on manual labour and
outdated machinery. As a result, these enterprises struggle to keep pace with technological
advancements and are unable to adopt new technologies. The lack of technology adoption can
limit the ability of MSMEs to innovate, optimise their operations, and scale their business.
MSMEs often face challenges in accessing technology due to the high cost of investment,
lack of awareness, and limited technical expertise.

Regulatory compliances

MSMEs in India are required to comply with various regulations and laws related to labour,
environment, taxation and corporate governance. However, compliance with these
regulations can be time-consuming and expensive, especially for smaller enterprises with
limited resources. The complexity of regulatory compliance can also prevent new enterprises
from entering the market. The lack of awareness and understanding of these regulations can
expose MSMEs to legal and financial risks.

Market access

While the country has a large domestic market, accessing it can be challenging, especially for
smaller and newer enterprises. MSMEs often struggle to penetrate existing supply chains and
distribution networks dominated by larger enterprises.
Accessing international markets is also not easy for MSMEs. This is due to a lack of
information, resources, and technical expertise. Export procedures can also be complex and
time-consuming, adding to the difficulties faced by MSMEs.
POLICIES

Recent Government Schemes and Programmes:

(a) Micro and Small Enterprises Cluster Development Programme (MSF-CDP) The
Ministry of MSME has adopted the cluster development approach to promote micro and
small enterprises. A cluster is defined as the collection of enterprises producing same or
similar products or services or engaged in the same line o activities within an identifiable
area. Cluster approach is different from the Industrial Estate concept. The latter is largely
based on infrastructure development, whereas cluster development covers diverse areas like
marketing export promotion, skill upgradation and infrastructure Under the MSE-CDP, a
total of 964 clusters have been covered to carry out different forms of government
interventions to promote MSES.
(b) Credit Guarantee Trust Fund Scheme for Micro and Small Enterprises (CGTMSE)
- The Scheme was launched in 2000 by the Government of India to make available collateral-
free credit to micro and small enterprises. Both existing and new enterprises are eligible to be
covered under the scheme. The GOI, Ministry of MSME and SIDBI established a Trust
named CGTMSE to implement the scheme. The corpus of the Trust is being contributed to by
GOI and SIDBI in the ratio of 4:1 respectively. The corpus is2477.78 as of May 31, 2016.
(c) Scheme of Fund for Regeneration of Traditional Industries (SFURTI) - The Khadi
and Village Industries Commission (KVIC) and the Coir Board are implementing a scheme
called the Scheme of Fund for Regeneration of Traditional Industries (SFURTI). The scheme
has been introduced all over India to generate employment in rural areas. Under this scheme
29 khadi, 47 village industries and 21 coir clusters have been made functional by providing
them with improved equipment, common facilities centres, business development services,
training capacity building and design and marketing support, etc
(d) A Scheme for Promoting Innovation and Rural Entrepreneurs (ASPIRE) - was
launched in March 16, 2015 with the objective of setting up a network of technology centres
and incubation centres to accelerate entrepreneurship. The Scheme also promotes start-ups
for innovation and entrepreneurship in rural and agriculture-based industries.
(e) Udyog Adhar Memorandum (UAM) - The UAM scheme was notified in September
2015. The objective of the scheme is to improve the ease of doing business for the MSMEs.
Under the scheme entrepreneurs just need to file an online entrepreneurs' memorandum to
instantly get a unique Udyog Adhar Number (UAN). The information sought is on self-
certification basis and does not require supporting documents. This has resulted in saving of
time and simplification of procedures for the MSME entrepreneurs. (Credit Linked Capital
Subsidy Scheme (CLCSS) for Technology Upgradation - The scheme was launched in
October 2000 and revised in 2005. The scheme provides 15% capital subsidy (limited to
maximum Rs.15 lakhs) for purchase of plant and machinery. The maximum limit of eligible
loan for calculation of subsidy under the scheme is Rs. 100 lakhs. Presently more than 1500
well established/ improved technologies under 51 sub sectors have been approved by the
Scheme.
(8) Scheme for Market Development Assistance for MSME Exporters (MSME-MDA) -
The Scheme offers funding for participating in industrial fairs, study tours abroad, trade
delegations, publicity etc. to access and develop overseas markets.
(h) MSME SAMADHAAN - It deals with the problem of delayed payments by buyers to
MSME suppliers. In case of delayed payment beyond 45 days, MSMEs may approach the
MSME Facilitation Council.