Subject: Economics

What are Primary Agricultural Credit Societies (PACS)?
The Union Budget has announced Rs 2,516 crore for computerization of 63,000 Primary Agricultural Credit Societies (PACS) over the next five years.

Primary Agricultural Credit Societies (PACS)
- PACS are village level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level.
- Credit from the SCBs is transferred to the district central cooperative banks, or DCCBs, that operate at the district level.
- The DCCBs work with PACS, which deal directly with farmers.
- Since these are cooperative bodies, individual farmers are members of the PACS, and office-bearers are elected from within them.
- A village can have multiple PACS.
What is its lending mechanism?
- PACS are involved in short term lending — or what is known as crop loan.
- At the start of the cropping cycle, farmers avail credit to finance their requirement of seeds, fertilisers etc.
- Banks extend this credit at 7 per cent interest, of which 3 per cent is subsidised by the Centre, and 2 per cent by the state government.
- Effectively, farmers avail the crop loans at 2 per cent interest only.
NPAs with PACS
- NABARD’s annual report of 2021-22 shows that 59.6 per cent of the loans were extended to the small and marginal farmers.
- A report published by the Reserve Bank of India on December 27, 2022 put the number of PACS at 1.02 lakh.
- At the end of March 2021, only 47,297 of them were in profit.
- The same report said PACS had reported lending worth Rs 1,43,044 crore and NPAs of Rs 72,550 crore. Maharashtra has 20,897 PACS of which 11,326 are in losses.
Why are PACS attractive?
- The attraction of the PACS lies in the last mile connectivity they offer.
- For farmers, timely access to capital is necessary at the start of their agricultural activities.
- PACS have the capacity to extend credit with minimal paperwork within a short time.
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February 8, 2023

What are White Label ATMs?

atm

The Reserve Bank of India (RBI) has extended the validity of authorization issued to Vakrangee to setup, own and operate White Label ATMs in India.

What is White Label ATM?

Usually ATMs are managed by banks. But White Label ATMs are owned and operated by non-banking entities.
ATMs operated under this business model allow customers to use them for banking transactions regardless of the bank they have an account with.
RBI approved the operation and inclusion of WLA ATM by non-banking organisations under the Payment and Settlement Systems Act of 2007.
It was introduced to expand India’s ATM network, especially in semi-urban and rural areas.

How does it work?

White Label ATM companies work with banking networks to enable bank customers to use banking services like withdrawing funds, paying bills and depositing cash.
White Label ATM (WLA) operators’ charge card-issuing bank fees to provide this facility to the bank’s clients.
The transaction process in White Label ATM operators consists of a lending bank, a sponsor bank that handles settlements and an ATM network provider.
The Sponsor bank provides the cash facility for the White ATM.

Significance of WLA: Financial Inclusion

Financial inclusion is concerned with the availability of financial services and adequate financing to low-income individuals and other vulnerable segments of society.
ATMs promote financial inclusion and provide customers with various banking services at any location and time.

White Label ATM Operators in India

Non-banks set up and operate White ATMs as per the rules laid down by RBI for using ‘other bank’ ATMs.
These ATMs accept all domestic debit cards and offer the first five or three transactions per month free of cost, depending on the location.
Below mentioned are some examples of companies that operate white label ATMs:

Indicash – India’s largest White Label ATM network responsible for ‘uberisation of ATMs.’
India1 Payments (BTI Payments Pvt. Ltd.)
Hitachi Payment Services Pvt. Ltd.
Tata Communications Payment Solutions Ltd.
Vakrangee Limited

Benefits of White Label ATMs

There are many benefits of White Label ATMs:

Customers benefit from White Label ATMs since they eliminate the need to visit a bank branch on a regular basis
ATMs are available 24 hours a day, seven days a week, including holidays
Banks benefit from this because they do not have to maintain a huge staff/office (compared to a system without ATMs). It lowers their branch-operational costs
Financial inclusion of rural, semi-urban, and low-income people
It allowed ATM cards to be issued by any bank that can be used at White Label ATMs
WLA atm also provides mobile recharge, energy bill payments, and other value-added services

Limitations of White Label ATMs

There are also a few limitations of White Label ATMs:

The issue of unsuccessful transactions is a key source of concern. In the event of a dispute, the dispute resolution method will include three entities, namely the WLA operator, the WLA operator’s sponsor bank, and the customer’s bank.
Customers will be discouraged by the cost issue, as they will be obliged to pay a price to use the White Label ATMs, as only a limited number of free transactions are permitted on the WLAs
White label ATMs’ financial viability is questioned because of their low interchange charge and hefty operational expenses
If there is a bank-managed ATM in the same area as a WLA ATM, the White Label ATMs may not be able to generate a profit

Differences Between Brown Label and White Label ATMs

The differences between Brown Label ATM and White Label ATMs are:

Brown Label ATM	White Label ATM
Brown Label ATMs have their hardware and ATM machine leased by a service provider	Non-banking entities own and operate ATMs
The sponsor bank’s brand name appears on the Brown label ATM	There is no bank logo on a white label ATM machine
The RBI is not directly involved. These outsourcing firms are bound by contracts with their respective banks	The RBI is directly involved as white label companies must obtain a license or permission from the RBI in order to conduct business

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February 8, 2023

Budget and the Rural Economy
Context
- Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24. Union budgets can be understood in two ways. The first is as a standard accounting exercise of the government’s revenues and expenditures. It is this second aspect that provides insight into the government’s assessment of the challenges facing the economy and ways to overcome them.
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First aspect: standard accounting exercise of the government’s revenues and expenditures
- Projections are less reliable: Over the years, this has ceased to be a good metric with governments failing to spend what is announced in the budget. While the practice of off-budget entries is now no longer relevant, even revenue projections are much less reliable.
- Budget a comprehensive document: However, the budget continues to remain relevant as the most important and perhaps the only comprehensive economic document of the government.
Second aspect: Government’s assessment of the economic challenges and ways to overcome
- Premature to conclude: While the fog of the pandemic has disappeared and the associated supply bottlenecks have eased, it is premature to conclude that the economy has fully recovered.
- Per capita income is low: Per capita incomes in real terms in 2021-22 are still below the 2018-19 levels and the overall growth between 2016-17 and 2021-22 is at its lowest level of 3.7 per cent for any five-year period in the last four decades.
The pandemic effect:
- Economic slowdown: The fact that the economy was slowing down before the pandemic makes it clear that Covid only exacerbated the already fragile economic situation.
- Energy towards managing the pandemic: The structural factors that led to the slowdown remain, as in the last three years the government’s efforts were directed towards managing the pandemic.
- Decline in demand: The most important of these is the decline in demand, both for consumption and investment. Private consumption accounts for almost 60 per cent of the economy and this engine of growth has failed to fire.
- The distress is far more serious in rural areas: Rural wages have stagnated for almost a decade now. Farmers’ incomes have either declined or, at best, stagnated in the last five years.
Critique: Budget and the rural economy
- Withdrawal of expenditure: What has been done is the withdrawal of expenditure on almost every head that mattered for rural economic recovery. With spiraling inflation and even the cushion of free foodgrains having been withdrawn, rural areas are likely to face an uncertain situation.
- The budget for the agricultural sector is lower than the allocation last year: In real terms, the budget has declined by 10 per cent at a time when the agricultural sector is going through its worst crisis. The rise in input costs for both energy and fertilisers is likely to get worse with the withdrawal of the fertiliser subsidy.
- Declined allocation of cash transfer: Even the nominal cash transfer that was provided as part of the PM-Kisan has seen a decline in allocation. But then, this budget is no different from others in the last five years.
- Actual investment in agriculture is declined: Public investment in agriculture declined by 0.6 per cent per annum between 2016-17 and 2020-21, the last year for which data is available. This is a period when the agrarian economy has suffered its worst crisis of profitability.
- Declined budget for non-farm sector: The non-farm sector is now greater in terms of its contribution to the rural economy but has seen a decline in budget allocations.
- For instance: The budget for the Ministry of Rural Development is 13 per cent lower than the revised expenditure last year. The National Rural Employment Guarantee Scheme (MGNREGA) has seen its budget decline in the revised estimates for 2022-23. This is the lowest amount allocated in the last five years compared to actual expenditure on the scheme.
- Only Hosing scheme has seen an increase: The only scheme that has seen an increase in allocation is the rural housing scheme, from an actual spending of Rs 48,422 crore in 2022-23 to Rs 54,487 crore.
Supply-side interventions in demand constrained economy
- Preference for supply-side interventions: The government’s preference for supply-side interventions even when there is excess capacity in a demand-constrained economy. It is this understanding that is reflected in an almost one-third increase in allocation for investment. A bulk of this is in railways and roads a much-needed boost to the infrastructure sector.
- Private sector needs to accompany: But given the small share of public investment, it is unlikely to be sufficient unless it is accompanied by the private sector increasing its investment. Unfortunately, the private sector neither responding to rising public investment nor tax subsidies, as were given in 2019.
- Overall impact: This will have a negligible impact on employment and domestic demand given the low employment elasticity of these investments. Regardless, the increase in investments is welcome.
Conclusion
- The problem with this budget is not accounting but economic policy. This was the last full budget in which government could undertake serious steps to revive the economy. That required prioritising allocations towards reviving consumption demand, spurring private investment and protecting people from the vulnerabilities of high inflation and a slowing economy.
Mains Question

Q. Discuss the impact of pandemic on Indian economy. Highlight governments supply side interventions in demand constrained economy.

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February 7, 2023
Wealth Tax: Does It Distort the Economy Too Much?
Context
- There is a good reason we do not tax wealth directly. Actually, there are many good reasons. But that’s not stopping some states from giving it a try. There are much more effective options for targeting wealthy people for tax revenue that are better for the economy. Some the US is already doing, such as state property taxes, federal capital gains taxes and estate taxes on inheritances.
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What is wealth tax?
- Wealth tax 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.
- It aims to reduce the inequalities of wealth.
- It is based on the market value of assets owned by a taxpayer and charged on the net wealth of super rich individuals.
Why in news?
- The new bills this week by California and Washington propose taxing their richest residents 1% to 1.5% each year.
- Four other states including New York and Illinois propose taxing unrealized capital gains, or taxing wealth based on how much it grew in the last year whether or not you sold any assets.
Crafting good tax policy starts with a question: How much will it distort economic behaviour?
- Creates distortions: Many economists say that wealth taxes create the most distortions, followed by income and consumption taxes.
- Wealth taxes discourage saving and investment: A 1% or 2% wealth tax may sound small, but it’s very large compared with current tax rates. Since it’s levied each year, it’s better compared to current taxes on realized capital income. These plans drastically reduce the return on risky investment, and rewarding risk is important for economic growth.
- Unrealized capital gains, are much harder to measure: Income is relatively easy to measure. Your employer sends you money that is well documented and has an objective value. Overall wealth, especially unrealized capital gains, are much harder to measure.
- Mostly rich people hold Wealth in assets: Very rich people also tend to hold a lot of their wealth in assets that aren’t publicly traded, either in private equity, in their own businesses, fine art, gold bars or other possessions.
- Hard to implement effectively: Most jurisdictions have abandoned wealth taxes. They are very hard to implement at the federal level, let alone by states with fewer resources to collect and assess data on wealth holdings.
- Example of Switzerland: A possible model is Switzerland, where individual cantons have their own wealth tax, but the tax accounts for a trivial share of tax revenue.
- A wealth tax is a bad policy based on the economics and feasibility: Collecting it will require tremendous resources that states don’t have and it won’t produce the revenue they’re counting on.
Wealth Tax in India
- Abolished wealth tax: The government abolished wealth tax as announced in the budget 2015. In its place, the government decided to increase the surcharge levied on the ‘super rich’ class by 2% to 12%. (Super rich are persons with incomes of Rs.1 crore or higher and companies that earn Rs.10 crores or higher).
- Abolished to simplify tax structure and discourage tax evasion: The abolition was a move to do away with high costs of collection and also to simplify the existing tax structure thereby discouraging tax evasion.
- No wealth tax at present: India presently does not have any wealth tax i.e., a tax levied on one’s entire property in all forms. It did not impose a one-time ‘solidarity tax’ on wealth in post-covid budgets that could have generated resources for essential public investment.
Way ahead
- Promising that a few wealthy people can pick up the public tab is bad economics.
- States would be better off making their consumption taxes larger and more progressive.
- They can tax luxury goods like designer clothes, private jet travel or second homes heavily.
- Governments can better enforce our existing wealth taxes by eliminating loopholes in capital gains and estate levies.
Conclusion
- Wealth taxes will continue to be in the conversation as states and the federal government need more revenue and are reluctant to raise taxes on anyone who earns more than $400,000 a year. Many economists say that wealth taxes create the most distortions, followed by income and consumption taxes. Wealth taxes need to studied not only from the lens of fiscal challenges that the states face but also market economies and probable distortions.
Mains question

Q. What is wealth tax? Highlight the present status of Wealth tax in India. It is said that Wealth tax distorts economic behaviour. Discuss in the context of States in the US proposes taxing the rich.

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February 6, 2023
Micro hydro systems: An alternative source of energy
Context
- The crisis unfolding in Joshimath for over a month has led to conversations on the relevance of hydropower in the Himalayan region. Two years ago, a glacier burst led to question marks over the Rishiganga hydroelectric project in Uttarakhand.
What is hydropower
- Hydropower generates electricity from the natural flow of water without releasing any emissions or pollutants. It also does not rely on fossil fuels. Therefore, it is often considered green energy.
Hydropower Projects in Himalayan region
- The Himalaya are a major water source for much of South Asia: Most countries in the region, including India, China, Nepal, Bhutan, and Pakistan, have built or are planning to build hydropower projects in the Himalaya.
- Hydropower one of the key renewable energy sources of India: In India, the government has identified hydropower as a key renewable energy source. Many hydropower projects are under construction or in the planning stages in the Indian Himalaya, including the Subansiri Lower Hydroelectric Project in Arunachal Pradesh and the Teesta Low Dam Hydroelectric Project in Sikkim.
- Nepal has also identified hydropower as a major source of energy: Nepal has many hydropower projects in the planning and development stages, including the Arun III Hydroelectric Project and the West Seti Hydroelectric Project.
- Main source of revenue for Bhutan: In Bhutan, hydropower is the main source of revenue, and the government has set a target to export surplus electricity to India. The country has built several hydropower projects, including the Chukha Hydropower Project and the Tala Hydropower Project.
Concerns about the potential conflicts over water resources in the region
- Fragile ecosystem of Himalaya already under stress: The Himalaya is a fragile ecosystem and home to a diverse range of flora and fauna. It is already threatened by deforestation, overgrazing, and construction activities that harm the environment and local communities that depend on it.
- Construction of dams can disrupt the characteristics of river flow: The construction of dams can disrupt the flow of rivers, leading to changes in water temperature and chemistry. It can also cause erosion, landslides, and sedimentation which can have a negative impact on the local environment.
- Construction disrupts well-being of the local population: Dams also disrupt the migration patterns of fish and other aquatic species and impact the local wildlife, particularly if the dam’s construction leads to habitat loss. Large-scale hydroelectric dams displace local communities, affecting their livelihoods and cultural heritage and impacting the overall well-being of the local population.
Micro hydro systems as an alternative to hydropower
- Micro hydro system of 100 kilowatts (kW): It is a small-scale hydroelectric power generation system that typically generates up to 100 kilowatts (kW) of electricity.
- Applications: These systems use the energy of falling water to turn a turbine, which, in turn, generates electricity. They can be used for various applications, including powering homes, businesses, and small communities.
- Less expensive and smaller environmental footprint: They are typically less expensive to build and maintain than large hydroelectric dams and have a smaller environmental footprint.
- Can be located at inaccessible areas: They can be located even in inaccessible areas where it is difficult to transmit electricity from larger power stations, and they can provide a reliable source of energy to communities that are not connected to the grid.
- Two types : Micro hydro systems can be classified into two main types i.e., run-of-river and storage systems. 1. Run-of-river systems use the natural flow of water in a stream or river to generate electricity. 2. In contrast, storage systems use a reservoir to store water and release it as needed to generate electricity.
Conclusion
- The environmental impact of hydropower can vary depending on projects and the ways in which they are implemented. Micro hydro systems can be tailored to minimize the ecosystem’s negative impact and provide sustainable energy solutions. However, it also can have some impact on the environment and local communities. A detailed assessment should be carried out to evaluate the potential impact before proceeding with the project.
February 6, 2023
Budget and the Urban planning
Context
- Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24. It has been marked by areas of continuity over the past three years. However, we should not overlook the missed opportunities for more fundamental reforms while celebrating continuity.
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Areas of focus
- Some areas like the continued boost in capital expenditure have received wide attention. Others, such as the reform of urban development and planning processes have received less.
- As India grows, the quality of urbanisation will determine the quality of economic growth, and vice versa.
- From this perspective, the continued focus on improving urban infrastructure and land-use efficiency is welcome.
Proposals related to urban planning and urbanization
- Urban planning reforms and efficient land use: Cities will be encouraged to undertake urban planning reforms, adopting practices that use land more efficiently, creating resources for urban infrastructure, making urban land affordable, and improving inclusivity.
- Infrastructure financing: Cities will be incentivized to ring-fence user charges on infrastructure and undertake property tax governance reforms so that they are creditworthy enough to issue municipal bonds.
- Infrastructure Development fund for Tier 2 and 3 cities: A fund will be created by using shortfalls in priority sector lending to create infrastructure in Tier 2 and Tier 3 cities. Rs 10,000 crore is the expected amount to be made available for this fund. States will be expected to adopt user charges to access these resources.
- Improving sewage and waste management: Proposals on improvements in infrastructure for handling sewage and managing waste.
Proposals continued from previous budget
- The 2021-22 budget focused on providing urban infrastructure public transport, waste management and universal water supply.
- In 2020-21, the budget, like this year, proposed improvements in sewage treatment and waste management to do away with manual cleaning.
- It proposed tax concessions to encourage overseas borrowing for specified municipal bonds. In 2019, the government announced, and then formulated a model tenancy law to promote rental housing.
What more can be done?
- Shift towards market-oriented reforms in urban planning and development:
1. States and city administrators have themselves come around to the benefits of market-oriented reforms, obviating some of the necessity for the Centre to champion them. This could be driven by the emergence of cities as engines of growth, the resultant commodification of urban land markets and, therefore, the increasing focus on land-use efficiency.
2. Greater openness to new ideas of urban planning could also be driven intellectually by changes in the outlooks of professionals in the field urban planners, architects and administrators who are increasingly able to work directly with state and municipal governments.
- Lack of Political Significance for Urban Governance Reforms:
1. It could be that while cities are increasingly economically significant, they are not yet significant enough politically for politicians to look at urban governance issues more seriously.
2. While the 73rd and 74th amendments to the Constitution devolved many powers to local governments, state governments continue to hold most of the aces. This could change rapidly in the future as India transitions from rural to urban.
Conclusion
- While urban governance systems are improving, India’s cities are still plagued by issues that need fundamental changes. Our building by-laws, restrictions on land use and zoning still create inefficiencies and make our cities unaffordable, dirty and polluted. The government’s steps to increase capacity building and to create expert committees to propose reforms in these areas is commendable. However, the pace of these proposals is inadequate and need to prioritised to meet urban India’s challenges.
February 3, 2023
What is Additional Surveillance Mechanism (ASM)?
The National Stock Exchange (NSE) placed very famous enterprises of business tycoons under the additional surveillance mechanism (ASM).

Why in news?
- The Adani Group has shed $108 billion in market value since Hindenburg Research accused it of stock manipulation and accounting fraud.
What is Additional Surveillance Mechanism (ASM)?
- 2018 saw the establishment of the Additional Surveillance Measure (ASM), a measure by SEBI and recognised stock exchanges to control the incredibly volatile stocks on the Indian stock market.
- ASM in the stock market functions as a control measure for speculative trading to safeguard the interests of retail investors and keep them out of potentially dangerous trading situations.
- There are two parts of additional margins:
1. Long-term ASM
2. Short-term ASM
What is ASM list in the stock market?
- ASM list means a collection of securities currently under observation owing to variables like price volatility, volume variation, etc.
- Investors are alerted to unexpected price movement by stocks that have been shortlisted for the ASM list.
- These equities are subject to various trading restrictions to halt any speculation.
- The regulations that apply to stocks on the ASM list are more stringent.
- They are prohibited from being pledged and using intraday leverages like bracket and cover orders, among others.
How does it work?
- For instance, the stock will be moved to a 5% price band the day it joins the ASM list; from then on, it may only move 5% up or down from the previous day’s closing level.
- As a result of this limit violation, the stock can no longer trade on the market once this limit is violated.
- In addition, the investor ought to have 100% margin money to trade the stock as of the fifth day.
- The selected securities will be monitored further, based on predetermined criteria and transferred into Trade to Trade settlement once the criterion is met.
Criteria to determine ASM list stocks

The following criteria are used to select stocks for inclusion in ASM and were mutually decided upon by SEBI and Exchanges:
- Close-to-Close Price Variation
- Market Capitalisation
- Volume Variation
- Delivery Percentage
- High Low Variation
- Client Concentration
- of Unique PANs
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February 3, 2023
What are Lab-Grown Diamonds?
During her Budget speech, Finance Minister announced the government’s move to focus on lab-grown diamonds (LGDs).

What did the FM announce?
- Customs duty on the seeds used in lab-grown diamond manufacturing will be reduced, announced the finance minister.
- She also announced a grant to IITs to facilitate the growth of LGDs in India.
What are Lab-Grown Diamonds (LGD)?
- Lab-grown diamonds are diamonds that are produced using specific technology which mimics the geological processes that grow natural diamonds.
- They are not the same as “diamond simulants” – LGDs are chemically, physically and optically diamond and thus are difficult to identify as “lab-grown.”
- While materials such as Moissanite, Cubic Zirconia (CZ), White Sapphire, YAG, etc. are “diamond simulants” that simply attempt to “look” like a diamond.
- LGDs have basic properties similar to natural diamonds, including their optical dispersion, which provide them the signature diamond sheen.
- They lack the sparkle and durability of a diamond and are thus easily identifiable.
- However, differentiating between an LGD and an Earth Mined Diamond is hard, with advanced equipment required for the purpose.
How are LGDs produced?

There are multiple ways in which LGDs can be produced.
- High pressure, high temperature (HPHT) method: This method requires extremely high pressure, high temperature presses that can produce up to 730,000 psi of pressure under extremely high temperatures (at least 1500 Celsius). Usually graphite is used as the “diamond seed” and when subjected to these extreme conditions, the relatively inexpensive form of carbon turns into one of the most expensive carbon forms.
- Other processes: These include “Chemical Vapor Deposition” (CVD) and explosive formation that creates what are known as “detonation nano-diamonds”.
What are LGDs used for?

(1) Production
- For instance, LGDs are most often used for industrial purposes, in machines and tools. Their hardness and extra strength make them ideal for use as cutters.
- Furthermore, pure synthetic diamonds have high thermal conductivity, but negligible electrical conductivity.
(2) Electronics industry
- This combination is invaluable for electronics where such diamonds can be used as a heat spreader for high-power laser diodes, laser arrays and high-power transistors.
(3) Jewelleries
- Lastly, as the Earth’s reserves of natural diamonds are depleted, LGDs are slowly replacing the prized gemstone in the jewellery industry.
- Crucially, like natural diamonds, LGDs undergo similar processes of polishing and cutting that are required to provide diamonds their characteristic lustre.
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February 3, 2023
Budget 2023:Push for Digitisation and Green Growth
Context
- The Union Budget speech by Finance Minister Nirmala Sitharaman on Wednesday highlighted the government’s continuous efforts to push for digitisation in the country. Also the Finance Minister listed ‘Green Growth’ as one of the seven priorities of her Budget.
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Push for digitisation in the country: key highlights
- Digital Public Infrastructure for Agriculture: It will be an open source, open standard and interoperable public good. The platform will offer inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for the growth of the agri-tech industry and start-ups.
- National Digital Library for Children and Adolescents: This will be established for facilitating the availability of quality books in different languages, genres and at different levels. The government will also try to inculcate a culture of reading by collaborating with NGOs, which will provide age-appropriate reading material to everyone.
- Centres of Excellence for Artificial Intelligence: There is a proposal for setting up three centres of excellence for Artificial Intelligence in top educational institutions. These centres, in partnership with leading players in the industry, will conduct interdisciplinary research and develop cutting-edge applications and scalable problem solutions in the areas of agriculture, health, and sustainable cities.
- National Data Governance Policy: Government will formulate a data governance policy to enable access to anonymised data for innovation and research by start-ups and academia.
- 5G Services: A hundred labs will be established in engineering institutions for developing applications using 5G services to realise a new range of opportunities, business models, and employment potential.
- E-Courts: Government will roll out phase three of the E-Courts project to ensure the efficient administration of justice.
- Bharat Shared Repository of Inscriptions (Bharat SHRI): A digital epigraphy museum will be established and one lakh ancient inscriptions will be digitised in the first stage.
- Skill India Digital Platform: The digital ecosystem for skilling will be further expanded by launching a unified Skill India Digital platform for enabling demand-based formal skilling, linking with employers including MSMEs and facilitating access to entrepreneurship schemes.
Elements of the Budget’s Green Growth push
- Green Hydrogen Mission: The recently launched National Green Hydrogen Mission, with an outlay of Rs 19,700 crores, will facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector. India aims to reach a target of an annual production of 5 MMT of green hydrogen by 2030.
- Energy Transition: The Budget has provided Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by Ministry of Petroleum & Natural Gas.
- Energy Storage Projects: To steer the economy on the sustainable development path, Battery Energy Storage Systems with capacity of 4,000 MWH will be supported with Viability Gap Funding. A detailed framework for Pumped Storage Projects will also be formulated.
- Renewable Energy Evacuation: The Inter-state transmission system for evacuation and grid integration of 13 GW renewable energy from Ladakh will be constructed.
- Green Credit Programme: For encouraging behavioural change, a Green Credit Programme will be notified under the Environment (Protection) Act. This will incentivize environmentally sustainable and responsive actions by companies, individuals and local bodies, and help mobilize additional resources for such activities.
- PM-PRANAM: A new PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth will be launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers.
- GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme: 500 new waste to wealth plants under GOBARdhan scheme will be established for promoting circular economy.
- Bhartiya Prakritik Kheti Bio-Input Resource Centres: Proposal to facilitate over the next three years 1 crore farmers to adopt natural farming. For this, 10,000 Bio-Input Resource Centres will be set-up, creating a national-level distributed micro-fertilizer and pesticide manufacturing network.
- MISHTI: Mangrove Initiative for Shoreline Habitats & Tangible Incomes, MISHTI, will be taken up for mangrove plantation along the coastline and on salt pan lands, wherever feasible, through convergence between MGNREGS, CAMPA Fund and other sources.
- Amrit Dharohar: The government will promote their unique conservation values through Amrit Dharohar, a scheme that will be implemented over the next three years to encourage optimal use of wetlands, and enhance bio-diversity, carbon stock, eco-tourism opportunities and income generation for local communities.
- Coastal Shipping: Coastal shipping will be promoted as the energy efficient and lower cost mode of transport, both for passengers and freight, through PPP mode with viability gap funding.
- Vehicle Replacement: Replacing old polluting vehicles is an important part of greening our economy. In furtherance of the vehicle scrapping policy states will also be supported in replacing old vehicles and ambulances.
Conclusion
- The Union Budget presented by Finance Minister Nirmala Sitharaman outlines the government’s push for digitization and green growth in India. Key highlights suggests that the budget lays the foundation for a more digitally connected and environmentally sustainable India.
Mains question

Q. Recently Finance Minister Nirmala Sitharaman presented Union Budget 2023. many suggests that the budget lays the foundation for a more digitally connected and environmentally sustainable India. Discuss.

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February 1, 2023
Opportunity to unlock the full Potential of MSMEs
Context
- India overtook the UK as the world’s fifth-largest economy in 2022, and is on track to achieving PM Narendra Modi’s vision of a $5 trillion economy by 2026-27. Despite concerns of a looming global recession, supply disruptions and the Russia-Ukraine war, India has stood out as a bright spot, growing faster than most major emerging markets. The government’s budget for 2023 presents an opportunity to make the Indian MSMEs competitive and self-reliant.
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What are MSMEs? How are they defined?
- Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which was notified on October 2, 2006, deals with the definition of MSMEs. The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises based on:
1. The investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of and
2. The investment in equipment for enterprises engaged in providing or rendering of services.
MSMEs in India at present
- The 6.3 crore micro, small and medium enterprises which account for 30 per cent of GDP and employ nearly 11 crore people have demonstrated this spirit of resilience.
- With sales in several industries across the MSME sector reaching 90 per cent of pre-pandemic levels, India’s small businesses are scripting a turnaround.
Union budget 2023: An opportunity to make MSMEs more competitive and self-reliant
- Streamlining input tax credit for e-commerce suppliers: Currently, suppliers selling on e-commerce platforms need to procure input services like logistics, which are taxed at 18 per cent. This leads to precious working capital getting blocked without any visibility of future realisation, potentially discouraging suppliers from adopting e-marketplaces.
- Adequate working capital for small businesses: From meeting fixed expenses such as electricity, rent and employee wages to investing in future growth, adequate working capital is a must for small businesses.
- Lowering GST rates on input services: By lowering GST rates on input services availed by online sellers, the government will not only shore up their finances but also give a leg-up to their digitisation journey. Further, refunds of accumulated input tax credit will improve their cash flow situation.
- Expedited GST relaxation for small online businesses: There is also a need to expedite GST relaxation for small online businesses. In a landmark move last year, the GST Council announced a relaxation of rules for small businesses looking to go online.
- GST relaxation measures for small online vendors: Among other measures, mandatory GST registration was waived for small online vendors with a turnover of less than Rs 40 lakh and Rs 20 lakh for goods and services, respectively.
- Unlocking the potential of MSMEs through Digitization: With just 10 per cent of our MSMEs currently online, expeditious implementation of these new norms is key to unlocking their full potential. Millions of small businesses are waiting in the wings, hoping to reap the benefits of digitisation such as a much bigger addressable market, increased efficiencies and easier access to capital.
- The National Logistics Policy (NLP) can also be leveraged to make MSMEs competitive: The NLP aims to bring down logistics costs as a percentage of the GDP from 13-14 per cent to 8 per cent, on par with developed nations. While lower costs will encourage more MSMEs to use tech-powered logistics services, they will need support to tap rising e-commerce demand from smaller towns and semi-rural areas.
- Indian post and railways can be utilized for cost effective last mile delivery: The government could rope in India Post as a tech-enabled last-mile delivery partner that can facilitate cash-on-delivery transactions at competitive prices. Similarly, the unparalleled reach of Indian Railways can be synergised to ship wares to the remotest parts of the country quickly and cost-effectively.
Why the MSME sector is important especially for India?
- Employment: The Indian MSME sector provides maximum opportunities for both self-employment and wage-employment outside the agricultural sector.
- Help building inclusive and sustainable society: It contributes to building an inclusive and sustainable society in innumerable ways through the creation of non-farm livelihood at low cost, balanced regional development, gender and social balance, environmentally sustainable development, etc.
- For example: Khadi and Village industries require low per capita investment and employs a large number of women in rural areas.
- Contribution to GDP: With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.
- Exports: It contributes around 45% of the overall exports from India.
Conclusion
- With a visionary government charting out the nation’s growth path, it is anticipated that the budget would certainly deliver on the challenges for MSMEs and take us closer to the dream of an Atmanirbhar Bharat.
Mains question

Q. Highlight the significance of MSME’s for India. What more efforts can be taken to make MSMEs more competitive and self-reliant?

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February 1, 2023