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Subject: Economics

Why India needs a fresh Fertilizer Policy?
The government is expected to come out with a new fertilizer policy.

What is the news?
- A task force to examine the production and promotion of bio-fertilizer and organic fertilizers has already been set up under the NITI Aayog.
How much fertilizer does India consume?
- Total consumption of fertilizers between April and mid-December 2022 was 40.146 million metric tonnes (mmt), with production of 32.076 mmt and imports of 12.839 mmt.
- The gap between demand and production is met through timely imports.
How is fertilizers availability monitored?
- Some steps undertaken by the government to improve the availability of fertilizers include:
1. Assessment of state-wise requirements every month;
2. 100% neem coating of urea, which increases nutrient efficiency;
3. Monitoring of crop yield and soil health; and
4. Online monitoring of the movement of fertilizers through the integrated Fertilizer Monitoring System.
Impact of the current policy
- Heavy subsidies: This has prompted many farmers to use chemical fertilizers like urea, which leads to higher productivity, but affects soil fertility in the long run.
- Excessive and inefficient use of fertilizers: This leads to nutrient losses to the environment and could also result in drinking water contamination and impact human lives as a result of unsafe storage practices, as per a UN report.
- Emission causing: With the subsidy being released directly to companies, technology-inefficient companies are being protected causing carbon emission.
While attempts have been made to reform the fertilizer policy, they had to be rolled back after pressure from various quarters.

Trend in government expenditure
- Food subsidy: The government has spiked spending on food, fertilizer and fuel subsidy by nearly 70%.
- Increased expenditure: For 2023-24, the fertilizer ministry might seek budgetary support of ₹2.5 trillion subsidy – outgo for FY23 has already crossed ₹2 trillion.
- Increased import bill: Russia being a major exporter of liquefied natural gas -critical input for manufacturing of urea – has also led to higher prices.
Steps taken in 2022
- Implementation of DBT: The department of fertilizers disbursed subsidies for urea and nutrient-based subsidy, and implemented direct benefit transfer.
- One Nation One Fertilizers Scheme: It also implemented the ONOF scheme which aims to ensure timely supply of fertilizers.
- Model fertilizer retail outlets: The existing village, block/sub district/taluk and district level fertilizer retail outlets are being converted into model fertilizer retail outlets.
Way forward
- Promoting local fertilizers: Lower duty on imported phosphoric acid to raise the competitiveness of local fertilizer manufactures, and an incentive for promoting organic fertilizers, could be proposed.
- Bio-fertilizer and organic fertilizers: A task force on bio-fertilizer and organic fertilizers has already been set up under NITI Aayog.
- Curbing hefty subsidies: Considering the long-term interests of agriculture and the effects of using inorganic fertilizers, saving a huge amount on account of subsidy support is a step in the right direction.
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January 19, 2023
What is National Coal Index (NCI)?
The Ministry of Coal has launched the sixth round of commercial coal mines’ auction for 141 coal mines.

What is the news?
- As per the provisions of the tender document, the Performance Bank Guarantee (PBG) to be submitted for each successfully auctioned coal mine is to be revised annually based on the National Coal Index (NCI).
What is National Coal Index (NCI)?
- Ministry of Coal has started commercial auction of coal mines on revenue share basis.
- In order to arrive at the revenue share based on market prices of coal, one National Coal Index (NCI) is conceptualized.
- The NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.
- The base year for the NCI is FY 2017-18.
- NCI is a price index combining the prices of coal from all the sales channels- Notified Prices, Auction Prices and Import Prices.
- It is released every month.
Components of NCI
- The concept and design of the Index as well as the Representative Prices have been developed by the Indian Statistical Institute, Kolkata.
- NCI is composed of a set of five sub-indices: three for Non-Coking Coal and two for Coking Coal.
- The three sub-indices for Non-Coking Coal are combined to arrive at the Index for Non-Coking Coal and the two sub-indices for Coking Coal are combined to arrive at the Index for Coking Coal.
- Thus, indices are separate for Non-coking and Coking Coal.
- As per the grade of coal pertaining to a mine, the appropriate sub-index is used to arrive at the revenue share.
Implementation of NCI
- The amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of a defined formula.
- The Index is meant to encompass all transactions of raw coal in the Indian market.
- This includes coking and non-coking of various grades transacted in the regulated (power and fertilizer) and non-regulated sectors.
- Washed coal and coal products are not included.
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January 19, 2023
UPI for NRIs: What it means for India and Indians abroad
The National Payments Corp. of India (NPCI) has allowed Indians abroad to use fast payments network UPI, if their domestic bank accounts are linked to their foreign mobile numbers.

What is UPI?
- UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
- The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.
What exactly has NPCI allowed on UPI?
- NPCI issued a circular that paved the way for wider adoption of homegrown payments platform UPI.
- So far, only Indian phone numbers were allowed on UPI, leaving out non-resident bank accounts linked to their phone numbers abroad.
- In the first phase, phone numbers from 10 countries including Singapore, Australia, Canada, Hong Kong, Oman, Qatar, the US, Saudi Arabia, United Arab Emirates, and the UK have been allowed to be used on UPI.
- NPCI said it could extend this to other nations as well.
How will it benefit Indians abroad?
- Once the systems are in place, non-resident Indians will be able to transact using UPI, irrespective of whether they are in India or abroad.
- To use UPI, non-residents need to have either a non-resident external (NRE) account or a non-resident ordinary (NRO) account in India.
- It would, of course, be more useful when account holders visit India, given the scale of UPI merchant infrastructure in India.
- While abroad, they can use UPI to transfer funds to families in India and use it on e-commerce portals that allow such payments.
What are the prerequisites for this facility?
- NPCI has asked banks to onboard only those accounts that meet the Foreign Exchange Management Act guidelines and instructions issued by the departments of the Reserve Bank of India (RBI).
- Apart, the remitter, as well as beneficiary banks, will have to ensure they comply with anti-money laundering (AML) and combating of financial terrorism (CFT) checks.
Does it help the plan to take UPI global?
- NPCI has been attempting to make UPI a global phenomenon and the idea to tap NRIs is a step towards that.
- 10 countries are just to begin with and the list will expand in future.
- NPCI has been trying to push homegrown payment systems in other countries through NPCI International Payments Ltd, a subsidiary it set up in 2020.
- It has already tied up with payment system operators in Nepal, UAE, France, UK and others to allow UPI usage there.
- There is also a plan to link UPI with Singapore’s Paynow.
How will it help the UPI ecosystem?
- UPI is almost synonymous with digital payments in India, clocking over ₹12.8 trillion worth of transactions in December.
- After a slow start in 2016, UPI payments have grown at a rapid pace. Given there are over 13.5 million NRIs, the availability of UPI is expected to raise transaction volumes.
- Industry experts said that just like resident Indians do not have to pay for UPI, it will also be available to NRIs at no extra cost.
- That said, it might be off to a slow start as the acceptance infrastructure abroad is still being developed.
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January 18, 2023
Making The Case for Wealth Tax
Context
- The discourse on efficient, effective and equitable public spending often takes us into the realm of limited resources facing competing demands. India definitely needs to widen its revenue collection as well as base. In this context, it is important to discuss the need for levying a wealth tax, and levying it now.
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Why wealth needs to be taxed?
- Accumulation of wealth: The most compelling reason stems from evidence that there has been massive accumulation of wealth in a few hands. A small section of people has access to a large share of economic assets and resources that remain almost completely untaxed and thus unavailable for public allocation.
- Wealth without hard work: Wealth, much less than even income, has little to do with one’s education, merit or efforts; it is largely dependent on inheritance and opportunities that come with the advantages associated with belonging to one of India’s privileged classes and castes.
- Income inequality: India’s top 10% population owns 65% of the country’s wealth, while the bottom 10% owns only 6%, according to the World Inequality Database, 2022.
- Wealth of rich doubled in pandemic: An Oxfam report has highlighted how India’s richest doubled their wealth during the pandemic. This happened for a variety of reasons, including profits made on vaccines and commodity and asset price movements.
- Wealth doesn’t translate into productive resources: But the fact remains that India, despite facing grave financial and economic challenges, has no means to convert any of this growing wealth into productive resources that can generate employment opportunities and push up the incomes of multitudes, which in turn can drive demand for goods something that is needed to counter an economic drag-down.
What is the government’s attitude towards wealthy?
- Rich knows how to invest: One may argue and it is common to hear this that wealth is better left to the wealthy, as they know best how to invest. This has not been in sufficient evidence, at least in India.
- Corporate tax lowered: The government lowered the corporate tax rate significantly from 30% to 22% in 2019-20, which has continued despite the economic crises caused by the pandemic. However, this did not elicit much private investment.
History of Wealth taxation in India
- Wealth tax: Wealth tax, which is a direct tax unlike the goods and services tax or value-added tax, can take several forms, such as property tax, inheritance or gift tax and capital gains tax.
- Capital gains tax: Capital Gains tax exists in India, but applies only to transactions and hence is limited in its base.
- Estate duty: India scrapped its estate duty in 1985 and has no inheritance tax. Although the receipt of gifts is subject to income tax in the beneficiary’s hands, it has various exemptions; it is almost entirely exempt if received from within the family, including the extended family of self and spouse.
- Exemption leads to accumulation: These exemptions shrink the base significantly, as most accumulated wealth is acquired through family, and that remains outside the gift tax’s ambit. Given the cultural context of wealth inheritance, some exemptions make sense, but upper thresholds can be easily added to make it more effective.
Present status of wealth taxation
- No wealth tax: India presently does not have any wealth tax i.e., a tax levied on one’s entire property in all forms.
- One time solidarity tax: It did not impose a one-time ‘solidarity tax’ on wealth in post-covid budgets that could have generated resources for essential public investment.
- Example of developing countries: A number of Latin American countries, including Argentina, Peru and Bolivia, have either introduced or are introducing a progressive annual wealth tax levied on the wealth gains of each year or a one-time covid ‘solidarity’ tax.
Conclusion
- Idea of wealth tax appear good on paper however; it may negatively impact the domestic and foreign investment in the country. Direct tax slab for superrich in India is already among the highest in the world. The idea of wealth taxation needs careful deliberation before implementation.
Mains Question

Q. Comment on history of wealth tax in India. why wealth tax is necessary in India? elaborate.

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January 17, 2023
RBI proposes Expected Loss-based Approach for Loan Provisioning
The Reserve Bank of India (RBI) has proposed a framework for the adoption of an expected loss-based approach for loan provisioning by banks.

What is Loan-Loss Provision?
- The RBI defines a loan loss provision as an expense that banks set aside for defaulted loans.
- Banks set aside a portion of the expected loan repayments from all loans in their portfolio to cover the losses either completely or partially.
- In the event of a loss, instead of taking a loss in its cash flows, the bank can use its loan loss reserves to cover the loss.
- Since the bank does not expect all loans to become impaired, there is usually enough in the loan loss reserves to cover the full loss for any one or a small number of loans when needed.
- An increase in the balance of reserves is called loan loss provision.
- The level of loan loss provision is determined based on the level expected to protect the safety and soundness of the bank.
And what is the expected loss-based approach?
- Under this practice, a bank is required to estimate expected credit losses based on forward-looking estimations, rather than wait for credit losses to be actually incurred before making corresponding loss provisions.
- As per the proposed framework, banks will need to classify financial assets (primarily loans, including irrevocable loan commitments, and investments classified as held-to-maturity or available-for-sale) into one of three categories — Stage 1, Stage 2, or Stage 3.
- This depends upon the assessed credit losses on them, at the time of initial recognition as well as on each subsequent reporting date, and make necessary provisions.
1. Stage 1 assets are financial assets that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses are recognised and interest revenue is calculated on the gross carrying amount of the asset.
2. Stage 2 assets are financial instruments that have had a significant increase in credit risk since initial recognition, but there is no objective evidence of impairment. For these assets, lifetime expected credit losses are recognised, but interest revenue is still calculated on the gross carrying amount of the asset.
3. Stage 3 assets include financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime expected credit loss is recognised, and interest revenue is calculated on the net carrying amount.
What are the benefits of this approach?
- The forward-looking expected credit losses approach will further enhance the resilience of the banking system in line with globally accepted norms.
- It is likely to result in excess provisions as compared to shortfall in provisions as seen in the incurred loss approach.
What is the problem with the incurred loss-based approach?
- The incurred loss approach requires banks to provide for losses that have already occurred or been incurred.
- The delay in recognising expected losses under an “incurred loss” approach was found to exacerbate the downswing during the financial crisis of 2007-09.
- Faced with a systemic increase in defaults, the delay in recognising loan losses resulted in banks having to make higher levels of provisions which ate into the capital maintained precisely at a time when banks needed to shore up their capital.
- This affected banks’ resilience and posed systemic risks.
- Further, the delays in recognising loan losses overstated the income generated by the banks which, coupled with dividend payouts, impacted their capital base
Which banks are covered under this approach?
- The proposed norms are for all scheduled commercial banks, excluding regional rural banks.
- Regional rural banks and smaller cooperative banks (based on a threshold to be decided based on comments) are proposed to be kept out of the framework.
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January 17, 2023
A Bumpy Ride for India’s Economy in 2023: A perspective
Context
- India’s general elections, scheduled for 2024, will also bring in their wake high-pitched rhetoric and spin-doctoring to further muddy the waters. In short, buckle up because the next 12 months promise a flurry of conflicting signals and a rather bumpy ride. A perspective on Indian economy in 2023.
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Turbulent global situation
- Pandemic plus Ukraine war: One conflicting signal is already staring us in the face, the seemingly doomed future of globalization. Post-Brexit, the covid pandemic and Russia-Ukraine conflict, there are multiple signs indicating retrenchment of globalization.
- Collapse of Supply chains: The collapse of global supply chains due to economic lockdowns has refocused attention towards near-shoring or on-shoring.
- Trade barriers: In an associated move, nations have erected protective trade barriers; both the US and EU are using climate plans to renege on free-trade promises. The end result, reduced global trade.
What are the prospects from international institute?
- BlackRock Investment Institute’s 2023 Global Outlook: Various financial institutions across the globe are trying to wrap their heads around the phenomenon. According to BlackRock Investment Institute’s 2023 Global Outlook, “We see geopolitical cooperation and globalization evolving into a fragmented world with competing blocs.
- Citi’s wealth outlook for 2023: Citi’s wealth outlook for 2023 intoned ominously, as a less globalized, more polarized world presents challenges for investors.
Effect of globalization and policy change by developed economies
- Rising federal rates: As US employment numbers and demand data continue to stay elevated (despite, paradoxically, slowing growth), the Federal Reserve is likely to be unrelenting in its endeavor to bring the inflation rate back to 2%.
- Rise in domestic interest rates: The Fed’s actions will undoubtedly strengthen the dollar further, forcing many central banks across the global economy to raise interest rates in tandem. Interestingly, central banks in emerging economies today face threats to their independence from an external agency and not from the political dispensation at home.
- Increase in food and fuel cost: Beyond interest rates, inflation also travels easily across national boundaries, especially through food and fuel trade. The fractured supply chains and war in Europe have ensured that inflation’s harmful impact might sustain through 2023.
- Omicron variant and travel restrictions: The other undesirable effect of globalization could be the persisting effect of the Omicron variant that has travelled seamlessly from one corner of the world to another. The Indian government has been forced to resume random screening of passengers arriving from different parts of the world to test for the numerous Omicron variants that have witnessed a resurgence in recent times.
Impact on Indian Economy
- Over-priced equity markets: Indian equity markets have been soaring since early 2020, once the initial shock of the covid pandemic was negotiated. Cross-country comparisons across emerging markets by various valuation indices show the Indian market to be considerably over-priced currently, both relative to its own past performance as well as compared with the rest of the world.
- High retail investors: Interestingly, the market held its own despite foreign portfolio investors (FPI) pulling out money over the past few months. Domestic investment institutions and retail investors are believed to have kept the market valuation up. But below this cheery visage lies a grim reality.
- Worrisome credit records: Sectoral credit deployment data from the Reserve Bank of India (RBI) shows credit growth in commercial banks in recent months has been driven by only two segments: non-bank financial companies (NBFCs) and consumer loans.
- High retail borrowings: A large chunk of the NBFC borrowing was also for on-lending to retail borrowers, given tepid industrial credit demand. RBI data for commercial banks shows consumer loans in four categories advances against fixed deposits, advances against shares or bonds, loans against gold jwellery and other personal loans grew by almost 71% between April 2020 and November 2022.
- Loans for equity investments: It is quite likely that a large proportion of these loans have found their way into stock markets; the Nifty-50 index gained close to 118% between April 2020 and November 2022, at a time when FPI investments during the same period witnessed a net inflow of only ₹1,464 crore.
Conclusion
- The year 2023 appears to be very bumpy for economy in general and credit growth and recovery in particular. SEBI and RBI need to protect the retail investors from Ponzi scheme and fake promises of guaranteed returns.
Mains Question

Q. How policy changes in developed economies affects the India’s decision making? Assess the effect of turbulent global situation on credit growth in India.

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January 16, 2023
Ganga Vilas: A boost to riverine tourism
Context
- The travel-tourism-hospitality sector got a symbolic boost on Friday, with the Prime Minister launching the MV Ganga Vilas from Varanasi. The luxury 51-day cruise operated in partnership with private players by the Inland Waterways Authority will traverse several states, two countries and make stops at about 50 tourist and heritage sites along the Ganga and Brahmaputra River systems.
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All you need to know about MV Ganga Vilas
- MV Ganga Vilas is the first indigenously made and the world’s longest river cruise
- The Ministry of Ports, Shipping and Waterways is the coordinator of this ship tourism project.
- The cruise has three decks, 18 suites on board with a capacity of 36 tourists, with all the modern amenities and avoids river pollution.
- It has its own sewage treatment plant besides a water treatment plant that lifts water from the river for daily use.
- The cruise has a gymnasium, a spa, restaurant, sunbath deck and other amenities on board to entertain the tourists and also to provide them a comfortable experience.
Journey of MV Ganga Vilas
- From Varanasi to Dibrugarh: Set to sail from Varanasi, the cruise ship, MV Ganga Vilas, will cover 3,200 km over 51 days, crossing 27 river systems and several states before ending its journey at Dibrugarh.
- It will cover World heritage sites: The voyage is packed with visits to 50 tourist spots, including World Heritage spots, national parks, river ghats, and major cities like Patna in Bihar, Sahibganj in Jharkhand, Kolkata in West Bengal, Dhaka in Bangladesh and Guwahati in Assam.
- Pilgrimage plus environmental tourism: It will make pit-stops to cover the famous Ganga Arti in Varanasi, the Buddhist site of Sarnath; and even Majuli, the largest river island in Assam.
What are the concerns highlighted?
- Silting and pollution of rives must be addressed on priority: Two of the greatest threats to India’s rivers silting and pollution must be addressed.
- Employment generation must go hand-in-hand with ecological repair: Both the PM and Shipping & Ports Minister Sarbananda Sonowal have cited the jobs that riverine tourism could bring to states like Uttar Pradesh, West Bengal, Bihar and Assam. But employment generation must go hand-in-hand with ecological repair.
Way ahead
- Involve local communities: For the government to realise its goal to increase cruise passenger traffic from 4 lakh people to nearly 10 times that figure. But this growth, to be sustainable, must involve local communities.
- Smaller vessels could be involved: While there is potential for larger, luxury liners, riverine tourism could also expand and cater to travellers from different economic strata. Also, smaller vessels may pose less of an ecological challenge.
- Lesson to be learnt from Kerala: While the Centre’s push in the sector, with the PM as the face, is welcome, states and the private sector too must be brought on board. There is, for example, much that east Indian states can learn from how Kerala monetizes and maintains its backwaters.
- Further expansion with worlds best practices: The Ganga cruise, though, should be just a beginning in tapping the unrealized potential of India’s numerous and diverse river systems for tourism. At the same time, the expansion must take into account the best practices from around India and the world, while ensuring local communities and the environment are not given short shrift.
Conclusion
- The hospitality sector is labor-intensive and can provide some of the formal jobs that a transitioning Indian economy so desperately needs. And given the growing global market for ecologically-conscious travel, India can if it is meticulous and enterprising in its planning protect its rivers and create jobs at the same time.
Mains question

Q. Recently government launched MV Ganga Vilas cruise. Discuss how it will change the face of tourism in India?

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January 16, 2023
Hospitality Industry in India: Adhering to the principle of Atithi Devo Bhava
“To other Country, I may go as a tourist. But to India I come as a pilgrim”-Martin Luther King

Context
- As the world moves on, the service sector travel and tourism business included is emerging as a major growth engine for the Indian economy. People are once again flying in great numbers, airports are crowded, hotels are well booked, and travellers want to explore, connect and feel alive through the exhilarating emotion of travel. Despite several difficulties and challenging infrastructure in hospitality, the industry has fared extremely well.
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What is mean by Hospitality?
- Hospitality refers to the friendly and generous treatment of guests or strangers.
- It involves making guests feel welcome, comfortable, and attended to during their stay or visit.
- The goal of hospitality is to create a positive experience for the guest and to ensure that they have everything they need to feel at home and enjoy their time.
Hospitality Industry in India
- Hospitality contributes to the economy: The hospitality industry in India is a growing industry which contributes significantly to the country’s economy.
- India a choiced tourist destination: India is home to number of popular destinations for tourists, due to its diverse culture, ancient civilization, art and architecture, spiritual knowledge centre and the paradise of natural beauty.
- Infrastructure upgraded with time: The hospitality industry in India has undergone significant growth in recent years, fueled by an increase in domestic and international tourism, as well as the development of new infrastructure, such as airports and roads.
- Hospitality companies determined to offer diverse experience: Hospitality companies have consistently added supply across all segments budget, business and luxury hotels, homestays, villas and so forth by developing new circuits and offerings that tap into the diverse and myriad potential of Incredible India.
How Hospitality Industry contributes to the Economy?
- Tourism a driving force: Tourism is seen as a major driving force for any economy. It has a multiplier effect on associated industries like hospitality.
- Spillover earning: Not only improves economic condition but also enhances standard of living: The spillover of earnings from tourism into other industries not only improves economic conditions but also enhances the standards of living of the local population.
- For instance, GDP and employment in Goa: This is most apparent at the popular beach destination of Goa. Contributing over 16 per cent to the GDP and 35 per cent to direct employment within the state as per the IBEF Report 2022, the domino effect of the sector on indirect job creation is unrivalled. Today, led by tourism, Goa leads the nation in per capita NSDP (Net State Domestic Product) as per the RBI.
- Significant impact on high employability: As per trends, every hotel room generates five to seven jobs, both directly and indirectly, further leading to a significant impact on other high-employability sectors such as real estate and infrastructure.
- Will generate more than 100 million jobs globally: In fact, according to the latest World Travel and Tourism Council (WTTC) report, the sector is expected to create nearly 126 million new jobs globally within the next decade with at least 20 per cent of these from the Indian subcontinent. However, government support will be instrumental in achieving this.
- Will augment the Indian economy to reach $1 trillion by 2047: With Indian companies reporting positive earnings this fiscal, the sector is poised to potentially grow three times compared to the pre-pandemic levels to touch $250 billion by 2030 and further accelerate to reach $1 trillion by 2047.
Way ahead
- Upgrading the infrastructure to cater new consumer demands well: The travel and tourism industry is constantly evolving, catering to rapidly changing consumer demands. A capital-intensive industry, the hospitality sector needs to continually plough back to keep the ball rolling.
- Attracting more investments: A good start will be the Centre according infrastructure status to the sector, which will boost the industry, incorporating required incentives including regulatory ease, cheaper loans, tax concessions and contributing to a cycle of attracting more investments.
- Augmenting the infrastructure growth: In addition, industry status at the state and Union territories-level and augmenting the infrastructure growth will also have a much-needed positive impact. States like Maharashtra, Karnataka, Assam, Goa, Gujarat, Madhya Pradesh and Rajasthan have taken the lead, and more should follow suit.
India’s G20 presidency an opportunity for India
- Challenge to provide world class experience to visiting dignitaries: As India takes on the G20 presidency and starts preparing for the summit in 2023, positioning the country as a safe, tourist-friendly destination hinges on how the government can work together with the industry and provide world-class experiences to visiting dignitaries.
- Meeting mostly be hosted in hotels: Around 300 plus meetings are expected to take place during the summit, most of which will be hosted within the corridors of the finest hotels across the country.
- Adhering to the principle of Aithi Devo Bhava: Hospitality companies are leaving no stone unturned to showcase India’s cultural essence, and the inherent warmth of Atithi Devo Bhava in our service philosophy.
- India can set an impression: Using the summit to highlight the country’s unique and differentiated travel offerings, India can claim its position on the world tourism stage.
Conclusion
- India’s growth story remains immensely encouraging. On the back of strong consumer demand, travel and tourism offers promising growth and are at an important inflection point. Through collective action between industry stakeholders and government, we can undoubtedly shape an even more thriving future for the industry one that can have a positive impact on the economy and society at large.
Mains question

Q. Tourism and Hospitality is a growing industry in India. In light of this discuss how this industry contributes to the economy? Illustrate with an example.

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January 16, 2023
Rise in government CAPEX pushes investments up by 53%
A sharp 61.2% sequential rise in capital expenditure (capex) by the Central and State governments lifted fresh investment plans announced in the third quarter (Q3) of 2022-23 to ₹7.1 lakh crore, even though private sector investments dropped 41% from ₹6.31 lakh crore in Q2 to ₹3.71 lakh crore.

What is Capital Expenditure (CAPEX)?
- Capital expenditure refers to investments in upgrading existing or building new physical assets by the government or private businesses.
- As businesses expand, capex has a multiplier effect on the economy, creating demand and unleashing animal spirits.
Types of CAPEX

Many different types of assets can attribute long-term value to a company. Therefore, there are generalized types of purchases that may be considered CAPEX.
- Buildings may be used for office space, manufacturing of goods, storage of inventory, or other purposes.
- Land may be used for further development. Accounting treatment may different for land specifically held as a speculative long-term investment.
- Equipment and machinery may be used to manufacture goods and convert raw materials into final products for sale.
- Computers or servers may be used to support the operational aspects of a company including the logistics, reporting, and communication of operations. Software may also be treated as CapEx in certain circumstances.
- Vehicles may be used to transport goods, pick up clients, or used by staff for business purposes.
- Patents may hold long-term value should the right to own an idea come to fruition through product development.
Why need CAPEX?
- Asset creation: Capex is generally made to acquire fixed assets with a useful life of more than one accounting period.
- Infra upgrade: It may sometimes add value to an asset by incurring upgrading and maintenance expenditures, thereby increasing the shell life of an investment.
- Business sustainability: CAPEX increases the profit earning capacity of the business in the long term.
India’s Capital spending
- India’s budgets have seen an increase in allocations for the infrastructure segment, essentially roads and railways.
- In the last Budget, FM announced a big jump in the government’s planned capex.
- In 2022-23, the government will have a capex spend of ₹7.5 lakh crore (even more if we add grants-in-aid for capital assets including MGNREGA) — a spike of 27% over the estimates for the previous year (2021-22).
- Also, the government has ambitious plans to exponentially ramp up spending on expressways, logistics parks, metro systems and housing — much of this work will be sourced out to private contractors.
Challenges of Capital Expenditure

The following are the challenges faced due to CAPEX –
- Substantial funds: Normally, huge funds are required for processing a capital expenditure, and the availability of funds may be an issue. Therefore, organizations must wisely make capex decisions.
- Long term burden on exchequer: The amount of Capex is charged as an expense in more than one accounting period.
- Irreversible: Once a CAPEX is incurred, the decision cannot be changed easily. Reversing the capex decision may prove to be significantly costlier for any entity.
- Uncertainty: It becomes difficult to foresight expenses that may occur in the future. CAPEX involves huge costs and results that may be extended to the future. Hence, characterizing the exact decision regarding CAPEX is uncertain, which affects future expenses.
- Measurement Issue: The cost and benefits of CAPEX are challenging to identify and measure
- Temporal Spread: Decisions made regarding CAPEX are consistent over a long time, and investments it includes are called long-term investments. These long-term investments create problems in getting the exact discount rates and maintaining their equivalence in the coming period.
Why India focuses on CAPEX?
- Demand push: A thrust on capex eases supply-chain bottlenecks and revives demand.
- Job creation: So, while capex adds to the productive capacities of the economy, boosting long-term growth, it also spurs job creation and consumption.
Way forward
- Timely implementation: Emphasis must also be provided on timely implementation of projects within the earmarked outlay by strengthening monitoring, redressal mechanisms and processes for controlling project delays.
- Project management: The solution lies in optimising project management processes of all the key stakeholders, including implementation agencies, state governments, vendors and others.
- Ensuring quality control: This would also help in ensuring quality control, which, in turn, will result in capital assets providing benefits over a longer term following the multiplier effect.
- Revenue saving: The government should also aim to cut down on inefficient revenue expenditure and focus on creating a balanced and stable virtuous cycle, which can have positive knock-on effects over the long term.
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PM flags off world’s longest river cruise MV Ganga Vilas
Prime Minister has flagged off the world’s longest river cruise – MV Ganga Vilas – and inaugurated the tent city at Varanasi.

About Ganga Vilas
- MV Ganga Vilas is the first indigenously made cruise vessel to be made in India.
- The Ministry of Ports, Shipping and Waterways is the coordinator of this ship tourism project.
- The cruise has three decks, 18 suites on board with a capacity of 36 tourists, with all the modern amenities.
- It will cover a distance of 3,200 km in roughly 51 days reaching Assam’s Dibrugarh through Bangladesh.
Destinations covered
- Set to sail from Varanasi, the cruise ship, MV Ganga Vilas, will cover 3,200 km over 51 days, crossing 27 river systems and several states before ending its journey at Dibrugarh.
- The voyage is packed with visits to 50 tourist spots, including World Heritage spots, national parks, river ghats, and major cities like Patna in Bihar, Sahibganj in Jharkhand, Kolkata in West Bengal, Dhaka in Bangladesh and Guwahati in Assam.
- It will make pit-stops to cover the famous Ganga Arti in Varanasi, the Buddhist site of Sarnath; and even Majuli, the largest river island in Assam.
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