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GS Paper: Indian Economy

  • Maintaining the inflation target at 4%

    On the last day of the financial year 2020-21, the Finance Ministry announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4% (+/-2 %).

    Inflation targeting in India

    • India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
    • Many developed countries had adopted an inflation-rate focus as an anchor for policy formulation for interest rates rather than past fixations with metrics like the currency exchange rate or controlling money supply growth.
    • Emerging economies have also been gradually adopting this approach.

    Try this PYQ:

    Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

    (a) Curbing imports of non-essential goods and promoting exports

    (b) Encouraging Indian borrowers to issue rupee denominated Masala Bonds

    (c) Easing conditions relating to external commercial borrowing

    (d) Following an expansionary monetary policy

    What is the rate of consumer price inflation?

    • Moody’s Analytics recently pointed out that volatile food prices and rising oil prices had already driven India’s consumer price index (CPI)-based inflation past the 6% tolerance threshold several times in 2020.
    • While inflation headwinds remain, especially with oil prices staying high, there was some speculation that the Central government may ease up on the inflation target by a percentage point or two.
    • This would have given the Reserve Bank of India (RBI) more room to cut interest rates even if inflation was a tad higher.

    What is the RBI’s position on this?

    • The RBI had, in recent months, sought a continuance of the 4% target with the flexible tolerance limits of 2%.
    • The 6% upper limit, it argued, is consistent with global experience in countries that have a large share of food items in their consumer price inflation indices.
    • Accepting inflation levels beyond 6% would hurt the country’s growth prospects, the central bank had asserted.

    Why should these concern consumers?

    • The central bank’s monetary policy and the government’s fiscal stance may not have necessarily reacted to arrest inflation pressures even if retail price rise trends would shoot past 6%.
    • As high oil prices spur retail inflation higher, the central bank is unhappy as its own credibility comes under a cloud if the target is breached.
    • If the upper threshold for the inflation target were raised to 7%, the central bank may not have felt the need to seek tax cuts (yet).
    • Thus, the inflation target makes the central bank a perennial champion for consumers vis-à-vis fiscal policies that, directly or indirectly, drive retail prices up.

    Back2Basics:

    Types of Inflation: Demand Pull, Cost Push, Stagflation, Structural Inflation, Deflation and Disinflation

  • The conundrum of financial distress and higher household savings amid covid

    The article explains the paradoxical increase in savings of Indian households during the pandemic.

    Increase in savings during lockdown

    • Counterintuitively, the financial savings of people went up in April-June 2020.
    • Data compiled by the RBI reveal that in April-June 2020, household financial savings was ₹8.16 trillion.
    • For a perspective on how big this is, in April-June 2019, household financial savings was ₹2.02 trillion.
    • In July-September 2019, it was ₹4.85 trillion and in the two following quarters, it was ₹4.2 trillion and ₹5.14 trillion, respectively.
    • As a percentage of GDP, it was 21% of GDP in April-June 2020 (the lockdown quarter) against 4% of GDP in April-June 2019.

    So, what happened to savings in the next quarter?

    • In the immediate quarter after April-June 2020, would you expect savings to move up, as things were opening up gradually?
    • Again, counter-intuitive.
    • In July-September 2020, household savings was ₹4.92 lakh crore, or 10.4% of GDP.

    What explains such saving behaviour?

    • This has got to do with the human response to an emergency situation.
    • When things are looking bleak, one does not know how worse it can get.
    • Discretionary spending was cut down.
    • One section of the population was losing jobs and opting for moratorium on loans.
    • Now we know, in hindsight, that it was not the entire population—people with access to means were rather saving than spending.
    • Household financial savings is the net of flow of financial assets minus flow of financial liabilities.
    •  In April-June 2020, flow of financial assets at ₹7.38 trillion was much higher than ₹3.83 trillion of April-June 2019.
    • The big difference was the flow of financial liabilities.
    • In April-June 2020, it was a negative ₹0.78 trillion over a positive ₹1.81 trillion in April-June 2019.
    • That is, people paid off their liabilities in April-June 2020, whereas usually they add to it.
    • Things normalized in July-September 2020.
    • The flow of financial assets rose to ₹7.47 trillion, but the flow of financial liabilities was ₹2.55 trillion i.e., people added to financial liabilities.
    • The household debt to GDP ratio rose to 37.1% in July-September 2020 from 35.4% in April-June 2020.

    What do we learn from all this?

    • In a pandemic-induced financial distress phase, a majority of the people preferred to save.
    • One basic tenet of financial planning is that you have an emergency fund equivalent to, say, six months of expenses.
    • People usually follow the principle of Income – Expenses = Savings/Investments.
    • Ideally, it should be Income – Savings/Investments = Expenses.

    Consider the question “What explains the increased saving of Indian households during the quarter of lockdown? What lessons we can draw from this for reliance on the demand-led recovery from the pandemic?”

    Conclusion

    The data from the RBI attest to the well-established fact that people tend to save in emergencies. This also suggests that the demand-led recovery path during emergencies faces the risk of failure.

  • What are Small Savings Instruments?

    The government has sharply slashed the rates on all small savings instruments for the first quarter of 2021-22 (Update: The order has been slashed now)

    What is the news?

    • The government has sharply slashed the rates of return on the Public Provident Fund down from 7.1% to 6.4% and effecting cuts ranging from 40 basis points (0.4%) to 110 basis points (1.1%).

    What are Small Savings Instruments?

    • Saving schemes are instruments that help individuals achieve their financial goals over a particular period.
    • These schemes are launched by the Government of India, public/private sector banks, and financial institutions.
    • The government or banks decide the interest rate for these schemes and are periodically updated.
    • You can use the savings you make through these schemes for emergencies, retirement, higher education, children’s education, marriage, at the time of job loss, to reduce debts and more.

    Why are they significant?

    Saving schemes are important for individuals of a country and, in turn, for an economy because of the following reasons:

    • Safety: Depositing your hard-earned excess money in saving schemes will help secure it for your future needs. Holding on to liquid money may not be safe.
    • Retirement Funds: Periodically, depositing money in long-term saving schemes can help you build a retirement corpus..
    • Tax Savings: Many saving schemes offer one or the other kind of tax benefits—may it be tax deductions, exemption, or both.
    • Avoid Unwanted Expenses: When you have all the money at hand, you may end up spending it on unwanted items.

  • [pib] Emergency Credit Line Guarantee Scheme (ECLGS) 3.0

    The Government has extended the scope of Emergency Credit Line Guarantee Scheme (ECLGS) through introduction of ECLGS 3.0 to cover business enterprises in Hospitality, Travel & Tourism, Leisure & Sporting sectors.

    ECGL Scheme

    • Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
    • The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
    • The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

    Aims and objectives

    • The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
    • The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
    • It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

    Salient features

    • The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
    • Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
    • No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
    • Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

    ECLGS 3.0

    • It would involve extension of credit of upto 40% of total credit outstanding across all lending institutions.
    • The tenor of loans granted under ECLGS 3.0 shall be 6 years including moratorium period of 2 years.
    • Further, the validity of ECLGS i.e. ECLGS 1.0, ECLGS 2.0 & ECLGS 3.0 have been extended upto 30.06.2021 or till guarantees for an amount of Rs. 3 lakh crore are issued.
    • The revised operational guidelines in this regard shall be issued by National Credit Guarantee Trustee Company Ltd (NCGTC).

     

  • Lessons from past for the new financial institutions

    The article explains the factors that resulted in the failure of several financial institutions created by the government.

    Establishment of Development Finance Institution

    • As promised in the Budget, the Lok Sabha recently passed The National Bank for Financing Infrastructure and Development (NBFID) Bill, 2021.
    • The Bill seeks to establish a development finance institution (DFI) to fund infrastructure.

    Providing finance to NBFID

    • The government will initially own 100% of the proposed NBFID’s ₹20,000-crore share capital.
    • The government’s stake will be reduced later to 26%.
    • The government will also support NBFID in raising cheap, long-term finance.
    • Apart from the initial share capital, the government will also provide a ₹5,000-crore grant at the end of its first financial year, presumably to defray initial costs.
    • The government has also committed to guarantee NBFID’s borrowings and bond issuances in the domestic and overseas markets.
    • In addition, the government will underwrite NBFID’s foreign exchange hedging costs.

    Concerns and lessons from the past

    • Studying the performance of IL&FS Ltd and IDFC Ltd, two infrastructure financing institutions, set up in the public sector, will be instructive.
    • IL&FS had borrowed short-term loans to finance long-term infrastructure assets.
    • Sustaining this became difficult when a slowing economy and political interference forced infrastructure borrowers to stop repaying loans.
    • Also, it had grown unwieldy, was mismanaged, and escaped scrutiny for too long by handing out plum postings to select bureaucrats.
    • Similarly, 1996 budget speech announced the setting up of IDFC to address the lack of long-term infrastructure financing.
    • In 2004, interference by the bureaucrats to tackle slow growth of loan led to the resignation of several senior executives in IDFC.
    • IDFC, created originally to finance infrastructure projects, has since then wound down its project finance book.
    • 2021-22 Budget speech also mentioned the creation of another institution that will acquire the banking sector’s stressed assets.
    • On the similar lines, Industrial Reconstruction Corporation of India was create in 1971.
    • Mandated with nursing sick and weak companies, it collapsed under this onerous burden.
    • The institution was eventually shut down in 2012.

    Consider the question “Examine the role the National Bank for Financing Infrastructure and Development will play in the infrastructure development in the country. Also, examine the factors that led to the failure of development finance institutions in the past.”

    Conclusion

    The short lesson is this: Fix the distorted demand side before increasing supply. Any number of institutions can be launched, but cannot be expected to work miracles in a corroded system.

  • Suez Shows Civilization Is More Vulnerable Than We Think

    The recent closure of the Suez Canal highlights the inherent flaw in the global supply chains. Choking of one of the many such points leads to disruption in the global trade.

    Points of vulnerability

    • Suez Canal was blocked this week by a container ship named Ever Given when a gust of wind moved the ship out of the course and grounded it.
    • Egypt has expanded parts of the canal to enable two-way traffic and accommodate larger carriers.
    • The Ever Given ship went off course and got stuck in a part of the waterway that’s still narrow.
    • But it’s also a reminder that even an advanced civilization like ours has points of acute vulnerability. 

    Avoiding single points of failures

    • Systems designers strive to avoid these single points of failure, so that transport, energy and communication networks are able to withstand attacks or unexpected calamities.
    • Technological advances and globalization were also supposed to make us less susceptible to this type of problem.
    • The internet, for example, was conceived as a decentralized system that’s pretty difficult to break, as was Bitcoin.
    • But global infrastructure, defined broadly, still has a surprising number of pinch points.
    • These can be difficult to remedy, as creating back-up options is expensive and counteracts economies of scale.
    • In some cases, the problem is even getting worse:
    • Industries are becoming more concentrated due to corporate takeovers.
    • Big chunks of our lives are now mediated by a just handful of technology companies.
    • The governments are now more cognizant of the political and economic power held by those who control choke points.

    How canal can disrupt the global trade

    • The Panama Canal, the Suez Canal and the Strait of Hormuz are places where container ships and oil tankers are forced to navigate narrow passages.
    • The alternative is a long detour or more expensive air freight.
    • For decades these waterways have been recognized as areas of huge strategic importance and as being susceptible to military or terror attacks.
    • Various back-up routes have been mooted but most haven’t materialized.

    Vulnerabilities in economic sphere

    • In seeking to rid itself of one pinch point — pipelines that traverse Ukraine provides gas to Europ — Germany has created another: the twin Nord Stream gas pipelines that connect Russia and Germany under the Baltic Sea.
    • The U.S. worries these will weaken eastern Europe and increase Germany’s dependence on Russia.
    • In the realm of finance, trillions of dollars of financial instruments are tied to the London interbank offered rate.
    • This rate was easy to manipulate until they were exposed in the years following the 2008 financial crisis.
    • Libor is now being replaced.
    • Similarly, Europe has long relied on the Swift payments system and the U.S. dollar, but that dependence came into question in 2018 as it disagreed with the U.S. over Iran sanctions.
    • In technology, people have warned for years that the U.S. needs a back-up for the Global Positioning System.
    • The system can be spoofed or otherwise disrupted.
    • Semiconductors are where the clearest pinch points are emerging.
    • A global computer chip shortage during Covid has forced auto manufacturers to tear up production plans.
    • Very few companies are able to produce the most advanced chips, due to the technical challenges and vast cost of constructing foundries.
    • The most important of these, Taiwan Semiconductor Manufacturing Co., is based on an island that’s under constant threat of invasion by Beijing.
    • ASML Holding NV of the Netherlands has a monopoly on the machines needed to fabricate the best chips.
    • Now China’s inability to buy the most cutting edge gear from ASML is holding back its own semiconductor ambitions.

    Way forward

    • None of these choke-point problems are easy to resolve.
    • Not only are there geopolitical ambitions at work here but there are also usually trade-offs between building greater resilience and efficiency.
    • But because redundancy offers protection and is therefore a public good, there’s an argument that governments should play a role in providing it.
    • Antitrust polies can be used to challenge monopolies and foster more competition.

    Consider the question “What are the threat emanating from the various forms of choke points to the global trade? Suggest the ways to deal with it.”

    Conclusion

    Having a back-up is a good idea. We learn that when the roof falls in, or when a ship called the Ever Given snarls up the Suez Canal.

  • Learning economic lessons from Bangladesh

    The article examines the key driving factors of Bangladesh’s stellar economic progress and draws lessons for India.

    Overview of Bangladesh’s economic achievements

    • Bangladesh’s GDP growth in 2019 was an enviable 8.4 per cent — twice that of India’s during that year.
    • It is one of the few countries to have maintained a positive growth rate during the COVID-19 pandemic.
    • Its GDP per capita is just under $2,000 — almost the same as India’s.
    • In five years, by 2026, Bangladesh will drop its least developed country tag, and move into the league of developing countries — on a par with India.

    Parallels between Vietnam and Bangladesh’s progress

    • Vietnam instituted market and economic reforms in 1986, which enabled it to achieve rapid economic growth and industrialisation.
    • It began with the manufacturing of textiles and garments and moved into making mobiles and electronics.
    • As supply chains diversify from China, Vietnam is a beneficiary.
    • It is now the “+1” in the “China +1” strategy of multinationals.
    • Vietnam has signed trade agreements and inserting itself into global supply chains.
    • Bangladesh has followed a similar strategy.
    • Its rise is directly connected with the textiles and garments industry, which accounts for 80 per cent of the country’s exports.
    • Bangladesh also enjoys preferential trade treatments with the European Union, Canada, Australia, and Japan with negligible or zero tax.
    • With India too, Dhaka has a zero-export duty on key products like readymade garments.
    • Like Vietnam, its foreign investment regime is investor-friendly.
    • For instance, Bangladesh’s liberal FDI policy allows 100 per cent equity in local companies and no limits on repatriation of profits in most sectors. 
    • Indian companies are increasingly present in Bangladesh, and Indian products are popular — an outcome of a strong cultural affinity.

    Women in workforce and microfinance

    • The world’s most successful and pioneering microfinance organisations like Grameen and BRAC have aided small businesses in the country, and regionally.
    • Many of these schemes, over the years, were directed at women.
    • This has paid dividends not just in financial independence, but also in encouraging them to work outside the home.
    • Consequently, Bangladesh’s workforce in its textiles sector is almost all women — 95 per cent women in an industry which is 80 per cent of Bangladesh’s exports.

    Role of government schemes

    • This, along with government schemes like Pushti Apas (Nutrition Sisters) and community health clinics has helped Bangladesh in the development indices.
    • Bangladesh fares better on infant mortality, sanitation, hunger and gender equality than many countries including India.

    Key lessons for India

    • Increasing women in the workforce, liberalising internal and external trade, and making micro lending accessible, are some of the lessons.
    • But so is the goal of being a global hub for the sub region, building special economic zones which requires infrastructure, connectivity and a welcoming environment for investors both domestic and foreign.
    • both countries have suffered since 1947, without connectivity, at huge cost.
    • It is time to integrate our power systems, think about free trade, liberalise the visa regime.

    Conclusion

    India need not always carry the burden of South Asia’s development alone. It now has a partner with whom to collaborate effectively towards achieving that goal.

  • How fiscal stimulus in the U.S. will impact emerging economies

    The article highlights how the faster recovery of the U.S. economy aided by the faster vaccination and stimulus packages may pose a policy challenge to the emerging economies.

    About the fiscal stimulus in the U.S.

    • With the recent passage of Biden’s $1.9 trillion coronavirus relief package, the cumulative fiscal stimulus amounts to 25 per cent of GDP. 
    • This reliance on fiscal stimulus is in sharp contrast to the policy response in the aftermath of the 2008 global financial crisis (GFC) when monetary policy was the main tool.
    • The over reliance on fiscal measures is because of the “liquidity trap” — interest rates are already treading close to zero.

    So, what does this mean for the US and emerging economies?

    • From the US perspective, this is good news.
    • The U.S. economy is expected to converge to the pre-pandemic GDP projection after the third quarter of 2021, exceeding it by 1 per cent in the fourth quarter.
    • The impact on emerging economies is less certain.
    • A booming US economy generally bodes well for global growth as higher demand “spills over” to the rest of the world.
    • However, the sectoral contribution to US growth presents a different picture this time.
    • Private consumption of goods (tradable) is already back to pre-pandemic levels, while consumption of services remains significantly below pre-pandemic levels.
    • As the vaccination drive gathers pace in the US and the economy slowly opens up, it should be fair to assume that the non-tradable sector would be driving growth.
    • But given the expected nature of the underlying growth, the positive impact on emerging economies will perhaps be softer.
    • With smaller fiscal stimulus in emerging economies and the slower vaccine roll, the US recovery largely being led by the non-tradable sector will result in a divergence in growth between the US and emerging countries.

    Policy challenge for emerging economies which is different from GFC

    • Post-GFC, a combination of zero interest rates and quantitative easing in advanced economies led to a significant surge in capital inflows to emerging countries in search of higher yield leading to an appreciation of their currencies.
    • Now, the situation is exactly the opposite.
    • The differential rate of recoveries has already led to capital outflow from emerging economies.
    • The rise in yield in the U.S. may further fuel capital outflows in coming days leading to tighter monetary conditions in emerging markets.

    What should be India’s policy response

    • As far as India is concerned, the macro-economic fundamentals are much stronger than during the taper-tantrum days.
    • The foreign exchange reserves remain at historically high levels, the current account situation is comfortable and the inflation rate remains within the target band of the RBI.
    • In the event of capital outflows, the RBI should let the currency depreciate as the first line of defence to preserve India’s external competitiveness and intervene only to smoothen out extreme volatility.
    • It should avoid the temptation to increase interest rates at the risk of hurting the pace of economic recovery.

    Consider the question “Uneven economic recovery on the global level poses a policy challenge to India. In this context, discuss the possible impact of uneven recovery and suggest the policy measures to deal with it.”

    Conclusion

    Uneven recovery at the global level demands an unconventional policy approach. The policy approach of India should be based on this premise.

    Back2Basics: Taper Tantrum

    • The phrase, taper tantrum, describes the 2013 surge in U.S. Treasury yields, resulting from the Federal Reserve’s (Fed) announcement of future tapering of its policy of quantitative easing.
    • The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
    • The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.

  • Why privatising public assets is poor economics

    The article highlights the issues with government expenditure driven by the selling of public sector assets.

    How public asset selling could affects private investment decisions

    • Public sector assets are not bought by reducing consumption or investment.
    • Current investment expenditure depends on decisions taken in the past and is more or less pre-determined.
    • Investment decisions that are taken today for fructification tomorrow that may be scaled down by such a purchase.
    • However, if investment decisions taken today are scaled-down, then it results in crowding out and such a strategy should be avoided anyway.
    • This implies that selling public sector assets therefore does not release any resources from private use for government spending.

    How selling public asset has same macroeconomic effect as fiscal deficit

    • In case of fiscal deficit, the government puts its bonds in private hands; in sale of a public asset, the government puts its equity held in public sector assets in private hands.
    • The macroeconomic consequences of a fiscal deficit on the economy are no different from those of selling public assets.
    • However, finance capital, and institutions like the IMF treat the sale of public assets on a different footing from a fiscal deficit, for ideological — not economic — reasons, because they ideologically favour a dismantling of the public sector.

    How fiscal deficit leads to wealth inequality

    • In a situation of demand-constraints, where unutilised capacity and unemployed workers exist aplenty, if an appropriate monetary policy is pursued, it can have no adverse effects whatsoever, except one: It increases wealth inequality.
    • The government expenditure financed by the fiscal deficit creates additional aggregate demand that increases output and incomes until the additional savings generated out of such incomes exactly match the fiscal deficit.
    • These additional savings accrue to the savers without their having to reduce their consumption, compared to the initial situation (that is, prior to government expenditure increase).
    • Since savings represent additions to wealth, this amounts to putting extra wealth into the hands of the rich.
    • Selling public assets puts into private hands public assets, and that too at prices well below the capitalised value of earnings.
    • This increases wealth inequality for two reasons:
    • First, it does so exactly as a fiscal deficit does.
    • Second, the public asset it puts in private hands is under-priced.

    Why tax financed government spending should be preferred

    • If the same government expenditure is financed by taxation, no matter who was taxed, then there would be no addition to private wealth and hence no increase in wealth inequality.
    • Which is why tax-financed government expenditure should always be preferred to fiscal-deficit-financed government expenditure.

    What alternative government have

    • The obvious one is wealth taxation.
    • Taxing away the private wealth created by a fiscal deficit leaves private wealth inequality unchanged at its initial level; it does not exacerbate it.
    • If the government is unwilling to impose higher wealth or profit taxes, it can raise GST rates on several luxury goods.

    Consider the question “How fiscal deficit financed government spending differs in its impact on weath inequality from the tax-financed government spending?”

    Conclusion

    Thus, selling public assets to finance government spending is both undesirable and unnecessary.

  • Applying the policy of self-reliance to health, infrastructure and green technologies

    The article highlights how Atmanirbhar Bharat policies can play important role in India’s post-pandemic recovery.

    Decline of trade-led catch-up growth

    • The Asian Development Bank identifies India as an outlier, with the country’s GDP growth likely to range between eight and 10 per cent — as against 7.7 per cent for China and seven per cent for the Asian region.
    • The convergence between the rich and poor countries in the 1990s and 2000s was founded on high relative growth rates driven by globalisation and export-led growth.
    • The World Bank and many international think tanks are now projecting a process of de-globalisation, reduction in exports, and reduced service exports from the tourism, travel and hospitality sector in response to COVID.
    • So, the phenomenon of trade-led catch-up growth is declining.

    How Atmanirbhar Bharat is different from past strategies

    • India’s import substituting growth strategy of the 1960s did not succeed because the high protective customs barriers led to the growth of non-competitive industries.
    • The current Atmanirbhar Bharat project is different because tariffs are low and public investment is focused on non-tradable infrastructure rather than commodity production.

    1) Atmanirbhar in heath: Atmirbhar Swasth Bharat

    • Atmanirbhar Swasth Bharat is a domestic non-trade dependent initiative which will invest over Rs 64,000 crore in setting up 17,800 rural and 11,000 urban health and wellness centres and 602 critical care hospitals in the country’s districts.
    • Today India has 29 health workers per 10,000 population, while we need 60 such professionals per 10,000 people, as per WHO norms.
    • Creating such a cadre will mean nearly four million new jobs, which can be self-paying.

    2) Infrastructure

    • China and emerging markets like Russia and Brazil have a fairly advanced transport and energy infrastructure.
    • India has a huge potential to renew its railways and highways and shift to solar energy from its current dependence on coal.
    • In fact, the country’s long-neglected fourth largest rail network in the world is undergoing rapid transformation.
    • While rail track coverage expanded by 5,000 km during 2010 to 2014-15, nearly 7,000 km of tracks were added between 2015 and 2020.
    • The Railways now aim to lay 9.5 km of track daily and have raised adequate capital for the same by leveraging domestic insurance funds.
    • Railways are also aiming for 100 per cent electrification and zero carbon footprint by 2024.
    • Electrified track has doubled from 20,000 km in 2012/13 to nearly 40,000 km in 2020.
    • The Centre’s decision to invest heavily in urban mass transit systems since 2014 has led to the rapid expansion of such services.
    • The resolution of financial problems of blocked PPP projects and smooth land acquisition process has increased the pace of construction of national highways.
    • Pace of construction of the national highway increased from 3,330 km per year during 2009-20014 to nearly 9,450 km in 2020-21.

    3) Renewable energy

    • Today over 55 per cent of India’s energy comes from coal but the share of renewable has been steadly increasing.
    • Starting with only 10 MW of solar power in 2010, India has installed nearly 35 GW of solar power by 2020.
    • This has been propelled by economic reforms which drove solar power prices down from Rs 17 per unit in 2010 to Rs 2.44 per unit in 2020.
    • The target of reaching 100 GW by 2022 can drive growth further.
    • Currently nearly 25 per cent of India’s electricity is used for pumping underground water for irrigation.
    • Providing irrigation energy from decentralised solar grids — solar power can be generated at the points on consumption.
    • This will reduce huge transmission losses and the associated carbon footprint of non-renewable energy sources.

    4) Privatising public sector outfits

    • The Centre’s shift towards privatising public sector outfits including banks, insurance companies and other PSUs can fund the growth of rail, road and energy infrastructure.
    • This will also foster efficiency in India’s credit system.
    • China achieved supernormal growth in infrastructure without access to international financing in the initial decades.
    • Recent studies have revealed that China’s financial decentralisation and commercial exploitation of state-owned lands was critical for the success.
    • In India, too, regional development authorities like the Mumbai Metropolitan Regional Development Authority and Maharashtra Industries Development Corporation have financed the metro, trans-harbour links and industrial infrastructure through a similar commercial land allocation model.
    • This model can be extended throughout the country to finance infrastructure expansion.

    Consider the question “How Atmanirbhar Bharat policies differ from the past import-substituting growth strategy? Examine the role Atmanirbhar Bharat can play in the post-pandemic recovery?” 

    Conclusion

    In such a way, Atmanirbharta with its various facets will pave the road of post-pandemic recovery.