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, ecommerce, 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.

1.2 Structure of Indian Economy

Long‐Term Growth and Structural Changes: Breaks and Turning Points Economic growth
in post‐Independence India has certainly seen several turns and twists. Accordingly,
several phases with distinctive features in terms of rates of growth and Structural changes
can be identified. It is, however, not very meaningful to highlight Short term fluctuations in
an analysis of the growth and structural changes of an Economy over a long period of
about six decades. At the same time, it is also of neither factually realistic nor analytically
meaningful to divide the entire period just in two parts, pre and post‐reforms, as is often
done in most of the recent studies and analysis of India’s economic growth. The year 1991,
 when economic reforms were introduced, is seen as the sole turnings point, providing a
break from the low growth to high growth and dividing the post‐Independence economic
history into two clear phases: the pre‐reform ‘dark’ phase and the post reform ‘bright’
phase. Such a simplistic description of India’s economic experience can easily be
questioned on the basis of historical facts. A major break in history of economic growth in
India occurred soon after Independence. An economy which had virtually stagnated over
the past half century, growing at about 0.5 per cent per annum, started growing at over
three per cent from early 1950s. State directed economic planning, presently a much
maligned Initiative (and not just
the departure of the British!) was the reason for this turning point. Growth rate averaged to
3.5 per cent euphemistically called the Hindu rate of growth, over the next three decades
though it saw a deceleration in the later part of the period, 1965‐1981. The next break in
terms of growth occurred in early 1980’s, when growth rate of GDP accelerated from
around 3 to 3.5 per cent in previous decades to between 5 and 6 per cent. In this respect,
introduction of economic reform in early 1990’s was not a ‘break’ as the growth rate in the
post–reforms 1990’s was not significantly higher than during 1980’s. Growth rate, in fact,
slowed down in the early years of 21st century, but Significantly picked up after 2004. The
period since 2004, even after accounting for slow Down during financial crisis in 2008‐09
represents a distinctive phase of high growth in the post‐reforms period.

•Structural changes in India economy:-

India has undergone significant structural changes in its economy over the years, driven by
economic liberalization policies introduced in 1991. Some of the major structural changes that
have taken place in the Indian economy include:

1. Shift towards services sector:

The services sector has become the dominant sector in India's economy, accounting for more than
50% of its GDP. The growth in the services sector has been driven by the rise of IT services,
business process outsourcing, financial services, and other related services

2. Increased industrialization:
India has witnessed a steady increase in industrialization over the years, with the share of
manufacturing in GDP rising from 15% in 1990 to over 25% in recent years. The growth in
manufacturing has been driven by the expansion of sectors such as automobiles, electronics, and
textiles.

[Link] development:
The Indian government has prioritized the development of infrastructure, such as roads, highways,
airports, and ports, to support economic growth. This has led to the establishment of new
industries and has facilitated the growth of existing ones.

[Link] direct investment (FDI):

The liberalization of FDI policies has attracted significant foreign investment in various sectors of
the Indian economy. This has led to the establishment of several multinational corporations in
India, contributing to the country's economic growth.

5. Economic liberalisation:-
India refers to the liberalisation of the country's economic policies with the goal of making the
economy more market and service-oriented and expanding the role of private and foreign
investment
•These structural changes have of the Indian economy over the years, and have also
helped to improve contributed significantly to the growth living standards and reduce
poverty.
 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 everincreasing
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 marketbased 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 birthcontrol 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.
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 workingage 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.

Functions of NITI Aayog

1) Shared National Agenda:
Evolves a shared vision of national development priorities and strategies with the active
involvement of states. This provides a framework of a “National Agenda” for the Prime
Minister and Chief Ministers to implement.

2) States’ Best Friend at the Centre:

Supports states in addressing their own challenges by building on their strengths and
comparative advantages. This is done by coordinating with ministries, championing state
ideas at the Centre, providing consultancy support, and building capacity.

3) Decentralized Planning:
Restructures the planning process into a bottom-up model, starting from village-level local
governments and moving up to the national or central government level.

4) Knowledge and Innovation Hub:

Acts as an accumulator and booster of research and best practices in good governance
through a state-of-the-art resource centre. It identifies, analyses, shares, and facilitates the
replication of successful practices.

5) Monitoring and Evaluation:

Monitors the implementation of policies and programmes and evaluates their impact
through rigorous tracking of performance metrics and comprehensive programme
evaluations. This helps identify weaknesses and bottlenecks, enables data-driven
policymaking, and improves efficiency and effectiveness.

6) Co-operative and Competitive Federalism:

Serves as the primary platform for operationalising co-operative federalism by enabling
active participation of states in national policymaking. It also promotes time-bound
achievement of qualitative and quantitative targets through joint efforts of the Prime Minister
and Chief Ministers.

7) Other Functions:
• Inter-consultancy
 • Conflict resolution
• Technological upgradation

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 collateralfree 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 selfcertification 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.