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NITI AYOG STRATEGY FOR NEW INDIA @ 75 GROWTH (EMPLOYMENT GENERATION (THE…
NITI AYOG
STRATEGY FOR NEW INDIA @ 75
GROWTH
WHAT IS CURRENT SITUATION
BUT WHAT ARE ISSUES?
THE SHARE OF MANUFACTURING IN INDIA’S GDP IS LOW
WHAT IS IMPORTANCE OF MANUFACTURING SECTOR
MANUFACTURING SECTOR IS CRITICAL TO ABSORB OUT-MIGRATION FROM AGRICULTURE
MANUFACTURING SECTOR GROWTH WILL CREATE IMMENSE EMPLOYMENT OPPORTUNITY AND CORRESPONDING JOBS IN SERVICES SECTOR
GROWTH IN MANUFACTURING SECTOR WILL CHECK CASE OF MARKET FAILURE OF INDIAN ECONOMY
WHICH HAVE TRANSITIONED DIRECTLY FROM AGRICULTUE(PRIMARY) TO TERTIARY(SERVICES)
WHY SO?
COMPLEX LAND AND LABOUR LAWS
LARR ACT 2013
MADE COST OF AQUIRING LAND ONE OF HIGHEST IN WORLD AND PROCESS WAS MADE VERY CUMBERSOME
MULTIPLE LABOUR LAWS MAKES UNDERMINES THE INDUSTRIAL SETUP
THAT'S WHY INDIA ATTRACTS FDI IN SERVICES (NOT MUCH IN MANUFACTURING) DESPITE HAVING RICH MINERAL RESORCES
DUE TO THIS PRIVATE INVESTMENT GOT STALLED IN INDIA AND THERE BY GROWTH
INDIA'S MANUFACTURING IS CAPITAL INTENSIVE RATHER LABOUR INTENSIVE
IT HAS NOT INCREASED IN ANY SIGNIFICANT SINCE LIBERALIZATION BEGAN IN 1991.
IT IS LIKELY TO BE THE FASTEST
GROWING MAJOR ECONOMY IN THE WORLD
WHAT SHOULD INDIA DO?
1.THE INVESTMENT RATE SHOULD BE RAISED FROM 29 % TO 36 %OF GDP
WHY 36%??
HAROOD DOMAR MODEL
GDP GROWTH = INVESTMENT RATE/ ICOR
8% + GROWTH OF GDP
DURING 2018-23
REQUIRED IF INDIA IS TO CREATE SUFFICIENT JOBS FOR ITS YOUTH
AS 1 MILLION WORKFORCE ENETRS EVERY MONTH IN INDIA
HOW IT WILL BE DONE?
TO ENHANCE PUBLIC INVESTMENT,
INDIA SHOULD AIM TO INCREASE ITS TAX-GDP RATIO TO AT LEAST 22 % OF GDP BY 2022-23
CURRENTLY 17% WHICH IS HALF THE AVERAGE OF OECD COUNTRIES
HOW IT WILL BE MET?
RATIONALIZE DIRECT TAXES LIKE CORPORATE TAX AND PERSONAL INCOME TAX
EASY TAX COMPLIANCE USING TECHNOLOGY.
LIKE GST
GREATER MOBILIZATION OF TAXES SUCH AS PROPERTY TAX ETC
ALSO PROPOSED BY PREVIOUS ECONOMIC SURVEY
GOVERNMENT’S CONTRIBUTION TO FIXED CAPITAL FORMATION WAS CLOSE TO 4 PER CENT OF
GDP. THIS NEEDS TO BE INCREASED TO AT LEAST 7 PER CENT OF GDP BY 2022-23
THIS PUBLIC INVESTMENT MUST BE CHANNELISED
AFFORDABLE HOUSING
INFRASTRUCTURE
WHY THESE SECTORS?
AS THESE WILL HAVE MULTIPLIER EFFECT
TO ENHANCE PRIVATE INVESTMENT
DOMESTIC
RENEWED PUBLIC-PRIVATE PARTNERSHIP (PPP) MECHANISM ON THE LINES SUGGESTED BY THE KELKAR COMMITTEE.
KELKAR COMMITEE RECOMMENDATIONS
(TO BE COVERED IN INFRASTRUCTURE MIND MIND MAP)
EXIT OF GOVT. FROM CPSU'S WHICH ARE NOT STRATEGIC IN NATURE
PRIVATETIZATION
FORGIEN
IMPROVE EASE OF DOING BUSSINESS SO AS TO ATTRACT FDI
STRONG MACROECONOMIC FUNDAMENTALS
LIKE LOW AND STABLE RATES OF INFLATION
ACC. TO MOU SIGNED ON 20 FEBRUARY 2015, B/W THE RBI AND THE GOVERNMENT, THE MAIN OBJECTIVE OF MONETARY POLICY IS ENSURING PRICE STABILITY I.E INFLATION
WITH THE MONETARY POLICY COMMITTEE MANDATED TO FOCUS ON A SPECIFIC RETAIL INFLATION RATE OF 4%,+- 2%.
A FALLING FISCAL DEFICIT
REDUCE GOVERNMENT DEBT-TO-GDP RATIO
WHAT ARE BENEFITS OF IT?
REDUCE THE HIGH INTEREST
COST BURDEN ON THE GOVERNMENT BUDGET
CROWDSING OUT PRIVATE INVESTMENT BECOZ OF PUBLIC BORROWING CAN BE AVOIDED
WHAT IS LEGAL FRAMEWORK OF OF RESTRICTING FISCAL DEFICIT?
FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT (FRBM)
GOVT. ALSO APPOINTED NK SINGH PANEL TO REVIEW FRBM
BUT THERE SHOULD BALANCE B/W PUBLIC EXPENDITURE AND FISCAL CONSOLIDATION
ACC. TO BUSINESS CYCLE
WHAT IS BUSINESS CYCLE
HALLMARK OF MARKET ECONOMY
SEE DIAGRAM ON GOOGLE
AS PUBLIC EXPENDITURE IS ALSO A PROPELLER OF GROWTH
EFFECTIVE REVENUE DEFICIT MUST BE BROUGHT DOWN RAPIDLY AND CAPITAL EXPENDITURE ON SOCIAL INFRASTRUCTRE MUST BE INCRESED
MINIMIZE VOLATILITY
IN THE NOMINAL EXCHANGE RATE
EMPLOYMENT GENERATION
THE NECESSARY CONDITION FOR EMPLOYMENT
GENERATION IS ECONOMIC GROWTH
WHICH CAN BE ACHIEVED BY IMPLEMENTING ABOVE REFORMS
EMPLOYMENT MUST BE MORE GENERATED IN LMABOUR INTENSIVE SECTOR
LIKE CONSTRUCTION, MANUFACTURING SECTOR
ALSO EMPLOYBILITY OF LABOUR MUST BE ENHANCED
IN TERMS OF HEALTH, EDUCATION AND SKILLS
WHAT SHOULD INDIA DO?
3.EFFICIENT FINANCIAL INTERMEDIATION
EFFICIENT FUNCTIONING OF THE FINANCIAL MARKETS IS
CRUCIAL TO MAINTAIN HIGH GROWTH IN THE ECONOMY
WHAT ARE EFFICIENT FINANCIAL MARKETS?
DEEPER ACCESS TO CAPITAL
EFFECTIVE CHANNELIZATION OF SAVINGS INTO INVESTMENT
HOW IT CAN BE DONE?
BANKING NPA'S OF 12 LAKH CRORE MUST BE RESOLVED
GOVERNANCE REFORMS
LIKE INDRADHANUSH SCHEME FOR BANKS
FINANCIAL SECTOR LIBERALIZATION
FOR EG: GUJARAT INTERNATIONAL FINANCE AND TECH
CITY (GIFT) CITY
IT ALLOWS ONSHORE TRADING IN RUPEES
AND OTHER DERIVATIVES WHICH WERE TAKING PLACE OUTSIDE INDIA
IF GIFT SUCCEDS THAN IT CAN BE REPLICATED ALL ACROSS THE FINANCIAL SECTOR
DIVERSIFY DEBT MARKET
BOND MARKET AND EQUITY MARKETS NEEDS TO DEEPENED TO THE COMMEN MAN
FOCUS ON EXPORTS AND MANUFACTURING
WHAT REFORMS SHOULD BE TAKEN SO THAT INDIAN EXPORTS CAN REMAIN GLOBALLY COMPETETIVE ?
LOGISTICS
SECTOR REVOLUTION IS NEEDED
FOR EG: HARNESSING NATIONAL WATERWAYS, BHARATMALA PROJECT, SAGARMALA PROJECT ETC
DEDICATED INDUSTRIAL CORRIDOR LIKE DMIC
POWER TARIFF STRUCTURES MAY BE RATIONALIZED
PROVIDE PROTECTION TO PROMOTE
INDIGENOUS INDUSTRY
BY PLACING IMPORT TARIFFS
THE GOVERNMENT HAS RECENTLY ESTABLISHED A DEDICATED FUND OF INR 5,000 CRORE FOR
FOR ENHANCING 12 “CHAMPION SERVICES SECTORS
CLOSER REGIONAL INTEGRATION
THROUGH BBIN, SAARC, BIMSTEC
FOR THIS DEVELOPMENT IN NORTHEAST WILL ACT AS BRIDGE