💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • Millimeter Wave band in 5G auctions

    The Telecom Regulatory Authority of India (TRAI) has asked for views on band plan, block size, and conditions for auction of spectrum in 5G bands, which includes Millimetre (mm) Wave band of 24.25-28.5 GHz.

    Must read:

    Status of 5G Rollout in India

    What is 5G technology?

    • 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
    • It’s a unified platform that is much more capable than previous mobile services with more capacity, lower latency, faster data delivery rate and better utilisation of spectrum.

    5G spectrum

    5G mainly works in 3 bands, namely low, mid and high-frequency spectrum — all of which have their own uses as well as limitations.

    (1) Low band spectrum

    • It has a great promise in terms of coverage and speed of internet and data exchange but the maximum speed is limited to 100 Mbps (Megabits per second).
    • So Telcos can use and install it for commercial cell phone users who may not have specific demands for very high speed internet, the low band spectrum may not be optimal for specialized needs of the industry.

    (2) Mid-band spectrum

    • It offers higher speeds compared to the low band, but has limitations in terms of coverage area and penetration of signals.
    • This band may be used by industries and specialized factory units for building captive networks that can be moulded into the needs of that particular industry.

    (3) High-band spectrum

    • It offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.
    • Internet speeds in the high-band spectrum of 5G has been tested to be as high as 20 Gbps (giga bits per second), while, in most cases, the maximum internet data speed in 4G has been recorded at 1 Gbps.

    What is Millimetre (mm) Wave Band?

    • Millimetre Wave band or mmWave is a particular segment of radio frequency spectrum that range between 24 GHz and 100 GHz.
    • This spectrum, as the name suggests, has a short wavelength, and is apt to deliver greater speeds and lower latencies.
    • This in turn makes data transfer efficient and seamless as the current available networks work optimally only on lower frequency bandwidths.

    Significance of this mm band

    • 5G services can be deployed using lower frequency bands.
    • They can cover greater distances and are proven to work efficiently even in urban environments, which are prone to interference.
    • But, when it comes to data speeds, these bands fail to hit peak potential needed for a true 5G experience.
    • So, mmWave is that quintessential piece in the 5G jigsaw puzzle for mobile service providers.

    Concerns with inclusion of mm-band

    • The mm bands have been preserved for satellite-based broadband services as per the decision taken by the International Telecommunication Union (ITU).
    • Providing excess spectrum could pose a downside risk of the bands going unsold, or even worse, underutilised by terrestrial players at the expense of satellite-based service providers.
    • Offering excessive spectrum will result in Indian citizens being denied the benefits of high-demand, advanced satellite broadband services.
    • In addition to this, it will result in a massive loss to the Indian economy of up to $184.6 billion by 2030, along with the loss of foreign direct investment (FDI) and employment generation benefits.

    How could this disrupt the satellite communication industry?

    • Internet has largely been provided to users via fibre-optic based broadband connectivity or mobile network.
    • Of late, another class of Internet vendors is showing up. These are satellite-based communication service providers.
    • For example, SpaceX’s Starlink and Bharti Airtel’s OneWeb are some of the players in this market.
    • This segment uses Low-Earth Orbit (LEO) satellites to provide broadband to both urban and rural users. Their service could also be used for weather predictions.
    • The mm band had been the subject of controversy due to out-of-band emissions into the passive satellite band used for weather satellites at 23.6-24 GHz.

    HeaWay ahead

    • The allocation of mmWave band is critical to the satellite communication industry, which needs a stronger regulatory support to ensure that 5G operations don’t interfere with their existing operations.
    • The industry body pointed to Europe’s “5G Roadmap”, which is built on the ITU’s decision to hold these bands for satellite-based broadband services.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Dravidian Model of Development

    The Chief Minister of Tamil Nadu is pushing for a ‘Dravidian Model’ where economic development is inclusive.

    What is the Dravidian Model?

    • The goal is equal economic development that will be in tune with social justice.
    • It has taken root since the days of the Justice Party government [in pre-Independent India].
    • TN polity has divided the task into short-term and long-term, and travels with the objective of improving the economy by implementing them within the time frame.

    Note: The Government of India Act 1919 implemented the Montagu-Chelmsford reforms, instituting a Diarchy in Madras Presidency. The diarchial period extended from 1920 to 1937, encompassing five elections. Justice party was in power for 13 of 17 years.

    Unique features of this developmental approach

    (1) Financial planning

    • TN has constituted an Economic Advisory Council comprising internationally renowned economists since there is a need to evolve an economic development to suit the current situation.
    • It has emerged out higher as comparatively high levels of human development with economic dynamism.

    (2) Health and education

    • It sought and ensured opportunity-equalizing policies in the expanding modern sectors through affirmative action policies and investments in education and health.
    • Tamil Nadu has been a pioneer in broad-basing entry into school education through a slew of incentives, the noon meal scheme being the most well-known.

    (3) Social Harmony

    • It also succeeded in building a bloc of lower caste groups under a Dravidian-Tamil identity that subsumed and sought to transcend individual caste identities.
    • It has distinct political mobilization against caste-based inequalities in the state.
    • Mobilization built an ethos that questioned the privileges of caste elites and the naturalness of merit in a caste society.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Reaping India’s demographic dividend

    Context

    Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped to achieve incredible economic growth by adopting forward-looking policies and programmes.

    The window of demographic opportunity

    • With falling fertility (currently 2.0), rising median age (from 24 years in 2011, 29 years now and expected to be 36 years by 2036), a falling dependency ratio (expected to decrease from 65% to 54% in the coming decade taking 15-59 years as the working age population), India is in the middle of a demographic transition.
    • This provides a window of opportunity towards faster economic growth. India has already begun to get the dividend.
    • As fertility declines, the share of the young population falls and that of the older, dependent population rises.
    • If the fertility decline is rapid, the increase in the population of working ages is substantial yielding the ‘demographic dividend’.
    • The smaller share of children in the population enables higher investment per child.
    • Therefore, the future entrants in the labour force can have better productivity and thus boost income.
    • With the passage of time, the share of the older population rises and that of the working age population begins to fall and hence the dividend is available for a period of time, ‘the window of demographic opportunity’.

    Need for forward-looking policies

    • Without proper policies, the increase in the working-age population may lead to rising unemployment, fueling economic and social risks.
    • This calls for forward-looking policies incorporating population dynamics, education and skills, healthcare, gender sensitivity, and providing rights and choices to the younger generation.

    Lessons for India

    • Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped.
    •  There are important lessons from these countries for India.
    • 1) NTA data: The first is to undertake an updated National Transfer Accounts (NTA) assessment.
    • Using NTA methodologies, we find that India’s per capita consumption pattern is way lower than that of other Asian countries.
    • A child in India consumes around 60% of the consumption by an adult aged between 20 and 64, while a child in China consumes about 85% of a prime-age adult’s consumption.
    • The NTA data for India needs to be updated to capture the progress made on such investments since 2011-12.
    • 2) Invest more in children and adolescents: India ranks poorly in Asia in terms of private and public human capital spending.
    • It needs to invest more in children and adolescents, particularly in nutrition and learning during early childhood.
    • 3) Make health investments: Health spending has not kept pace with India’s economic growth.
    • The public spending on health has remained flat at around 1% of GDP.
    • Evidence suggests that better health facilitates improved economic production.
    • Hence, it is important to draft policies to promote health during the demographic dividend.
    • 4) Make reproductive healthcare services accessible on a rights-based approach: We need to provide universal access to high-quality primary education and basic healthcare.
    • The unmet need for family planning in India at 9.4% as per the latest National Family Health Survey-5 (2019-21) is high as compared to 3.3% in China and 6.6% in South Korea, which needs to be bridged.
    •  5) Bridge gender differentials in education: The gender inequality of education is a concern.
    • In India, boys are more likely to be enrolled in secondary and tertiary school than girls. This needs to be reversed.
    • 6) Increase female workforce participation: As of 2019, 20.3% of women were working or looking for work, down from 34.1% in 2003-04.
    • New skills and opportunities for women and girls befitting their participation in a $3 trillion economy is urgently needed.
    • It is predicted that if all women engaged in domestic duties in India who are willing to work had a job, female labour force participation would increase by about 20%.
    • 7) Address the diversity between StatesWhile India is a young country, the status and pace of population ageing vary among States.
    • Southern States, which are advanced in demographic transition, already have a higher percentage of older people.
    • These differences in age structure reflect differences in economic development and health – and remind us of States’ very different starting points at the outset of the 2030 Sustainable Development Goals Agenda.
    • But this also offers boundless opportunities for States to work together, especially on demographic transition, with the north-central region as the reservoir of India’s workforce.
    • 8) Governance reform: A new federal approach to governance reforms for demographic dividend will need to be put in place for policy coordination between States on various emerging population issues such as migration, ageing, skiling, female workforce participation and urbanisation.

    Conclusion

    In India, the benefit to the GDP from demographic transition has been lower than its peers in Asia and is already tapering. Hence, there is an urgency to take appropriate policy measures.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • India improves position in Henley Passport Index, 2021

    India now ranks at 83rd position in the Henley Passport Index, climbing seven places from 90th rank last year.

    Henley Passport Index

    • The Henley & Partners publishes the ranking and the Index of the world’s passports according to the number of destinations their holders can access without a prior visa.
    • It was launched in 2005.
    • The ranking is based on data from the IATA (International Air Transport Association), a trade association of some 290 airlines, including all major carriers.
    • The index includes 199 different passports and 227 different travel destinations.
    • The data are updated in real time as and when visa policy changes come into effect.

    India’s performance this year

    • India is ranked at 83rd position and shares the rank with Sao Tome and Principe in Central Africa, behind Rwanda and Uganda.
    • It now has visa-free access to 60 destinations worldwide with Oman and Armenia being the latest additions.
    • It has added 35 more destinations since 2006.

    Global performance

    • Japan and Singapore has topped the list.
    • The US and the UK passports regained some of their previous strength after falling all the way to eighth place in 2020.
    • The passport of the Maldives is the most powerful in South Asia (58th) enabling visa-free entry to 88 countries.
    • In South Asia, Bangladesh (103rd) is ahead of Pakistan (108th) and Nepal (105th).
    • Afghanistan undoubtedly stands at the last rank.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Extending GST compensation as a reform catalyst

    Context

    In 2020-21, the compensation payment episode plunged the Union-State relationship to a new low, creating humongous mistrust.

    Background of the compensation to the States

    • To allay the fears of States of possible revenue loss by implementing GST in the short term, the Union government promised to pay compensation for any loss of revenue in the evolutionary phase of five years.
    • This was estimated by taking the revenue from the merged taxes in 2015-16 as the base and applying the growth rate of 14% every year.
    •  To finance the compensation requirements, a GST compensation cess was levied on certain items such as tobacco products, automobiles.
    • Period of five years: The agreement to pay compensation for the loss of revenue was for a period of five years which will come to an end by June 2022.
    • Mistrust between Centre and the State: In 2020-21, due to the most severe lockdown following the novel coronavirus pandemic, the loss of revenue to States was estimated at ₹3 lakh-crore of which ₹65,000 crore was expected to accrue from the compensation cess.
    • Of the remaining ₹2.35 lakh-crore, the Union government decided to pay ₹1.1 lakh-crore by borrowing from the Reserve Bank of India.
    • The entire compensation payment episode plunged the Union-State relationship to a new low, creating humongous mistrust.

    GST reform is still in transition

    • Misuse of input tax credit: The technology platform could not be firmed up for a long time due to which the initially planned returns could not be filed.
    • This led to large-scale misuse of input tax credit using fake invoices.
    • Revenue uncertainty faced by the States: This is the only major source of revenue for the States.
    • Considering their increased spending commitments to protect the lives and livelihoods of people, they would like to mitigate revenue uncertainty to the extent they can.
    • They have no means to cushion this uncertainty for the Finance Commission which is supposed to take into account the States’ capacities and needs in its recommendations has already submitted its recommendations.
    • Changes needed: More importantly, the structure of GST needs significant changes and the cooperation of States is necessary to carry out the required reforms.

    Changes needed in GST structure

    • Reducing exemption items: Almost 50% of the consumption items included in the consumer price index are in the exemption list; broadening the base of the tax requires significant pruning of these items.
    • Bringing petroleum products, real estate etc under GST: Sooner or later, it is necessary to bring petroleum products, real estate, alcohol for human consumption and electricity into the GST fold.
    • Single rate: The present structure is far too complicated with four main rates (5%, 12%, 18% and 28%).
    • This is in addition to special rates on precious and semi-precious stones and metals and cess on ‘demerit’ and luxury items at rates varying from 15% to 96% of the tax rate applicable which have complicated the tax enormously.
    •  Multiple rates complicate the tax system, cause administrative and compliance problems, create inverted duty structure and lead to classification disputes.

    Way forward

    • Extending the compensation period: Reforming the structure to unify the rates is imperative and this cannot be done without the cooperation of States.
    • Thus, extending the compensation payment for the next five years is necessary not only because the transition to GST is still underway but also to provide comfort to States to partake in the reform.
    • Reforming the structure is important not only to enhance the buoyancy of the tax in the medium term but also to reduce administrative and compliance costs to improve ease of doing business and minimise distortions.
    • New rate of compensation: It has been pointed out by many including the Fifteenth Finance Commission that the compensation scheme of applying 14% growth on the base year revenue provided for the first five years was far too generous.
    • The issue can be revisited and the rate of growth of reference revenue for calculating compensation can be linked to the growth of GSDP in States.

    Conclusion

    The transition to GST is still in progress and an extension will provide comfort to States to help roll out crucial changes.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Issues with India’s GDP data

    Context

    There are three major reasons why the GDP data, and hence any narrative of economic recovery based on it, are questionable.

    Background

    • The NSO released the current GDP series in 2015, using 2011-12 as its base year.
    • Some have argued that the problem in the new series is the real growth rate. This is debatable.
    • Scholars have pointed to measurement problems, both in the nominal and real GDP growth rates.

    Three issues with the GDP data, and  narrative of economic recovery based on it

    [1] Double deflation problem

    • The new series entailed a shift from a volume-based measurement system to one based on nominal values, thereby making the deflator problem more critical.
    • Simply put, the NSO calculates real GDP by gathering nominal GDP data in rupees and then deflating this data using various price indices.
    • The nominal data needs to be deflated twice: Once for outputs and once for inputs.
    • But the NSO — almost uniquely amongst G20 countries — deflates the nominal data only once.
    • It does not deflate the value of inputs.
    • To see why this is a problem, consider what happens when the price of imported oil goes down.
    • In that case, input costs will fall and the profits recorded by Indian firms will rise.
    • This increase in profits is merely the result of a fall in input prices, so it needs to be deflated away.
    • But the NSO doesn’t deflate away the increase in profits.
    • Since the cost of inputs is measured by the WPI (wholesale price index), a crude measure of the overestimation caused by the absence of “double deflation” is given by the gap between the WPI and the CPI (consumer price index).
    • In the 2014-2017 period, oil prices plunged, causing the WPI to fall sharply relative to the CPI.
    • This meant that real growth was probably overstated.
    • In the last few months, the exact opposite has been happening. WPI inflation is soaring.
    • The rapid increase in the WPI relative to the CPI is imparting an upward bias to the deflator.

    [2] Sectoral weight not updated

    • When it calculates GDP, it takes a sample of activity in each sector, then aggregates the figures by using sectoral weights.
    • To make sure that the weights are reasonably accurate, the NSO normally updates them once a decade.
    • It has now been more than 10 years since the weights were changed, and there are no signs of a base year revision.
    • As a result, the sectoral weights are still based on the structure of the economy in 2010-11, when in particular the information technology sector was much smaller.

    [3] Measurement of unorganised sector

    • Measurement of the unorganised sector has always been difficult in India.
    • Once in a while, the NSO undertakes a survey to measure the size of the sector.
    • In the meantime, it simply assumes that the sector has been growing at the same rate as the organised sector.
    • However, starting in 2016 the unorganised sector has been disproportionately impacted by a series of shocks.
    • In 2018, the NBFC sector reported serious problems, which in turn impacted unorganised sector firms since they were heavily dependent on NBFCs for funds.
    • From 2020 onwards, the pandemic has impacted the unorganised sector more than the organised sector enterprises.
    • Despite these shocks, the NSO does not seem to have made any adjustments to its methodology for estimating the growth of the unorganised sector.

    Consider the question “Elaborate the issues with India’s GDP data. Suggest the way forward.”

    Conclusion

    There are serious problems with India’s GDP data. Any analysis of recovery or growth forecast based on this data must be taken with a handful of salt.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What is Samba Cultivation?

    Around four lakh more acres have been brought under the Crop Insurance Scheme for the Samba Cultivation season of 2021-22 in Tamil Nadu.

    What is Samba Cultivation?

    • It is a Tamil name for paddy cultivation season.
    • Other paddy seasons in Tamil Nadu include:
    1. Kuruvai: June-July
    2. Samba: August
    3. Late Samba / Thaladi: September- October
    4. Navarai: December- January

    Back2Basics: Major crop seasons

    (1) Kharif Crop

    • Kharif crops, monsoon crops, or autumn crops are cultivated and harvested in the monsoon season.
    • The farmers sow seeds at the beginning of the monsoon season and harvest them at the end of the season. i.e., between September and October.
    • Kharif crops need a lot of water and hot weather for proper growth.
    • Examples: Rice, Maize, Millet, Soybean, Arhar, Cotton. etc.

    (2) Rabi Crop

    • Rabi means spring in Arabic. Crops grown in the winter season [October to December] and harvested in the spring season [Aril-May] are called Rabi crops.
    • These crops require a warm climate for germination and maturation of seeds and need a cold environment for their growth.
    • Rain in winter spoils the Rabi crop but is good for the Kharif crop.
    • Examples: Wheat, Gram, Barley, Peas, Oats, Chickpea, Linseed, Mustard, etc.

    (3) Zaid Crop

    • Zaid crops are grown between Kharif and Rabi Seasons, i.e., between March to June.
    • They require warm, dry weather as a vital growth period and longer day length for flowering.
    • Zaid crop is significant for farmers as it gives fast cash to the farmers and is also known as gap-filler between two chief crops, Kharif and Rabi.
    • Examples: Cucumber, Pumpkin, Bitter gourd, Watermelon, Muskmelon, Sugarcane, Groundnut, Pulses, etc.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • The Bilateral Investment Treaties (BITs) to review

    Context

    The report of the Standing Committee on External Affairs on ‘India and bilateral investment treaties (BITs)’ was presented to Parliament last month.

    Factor’s that necessitated the review of India’s BITs

    • Investor’s started suing India frequently: Since 2011, when India lost its first investment treaty claim in White Industries v. India, foreign investors have sued India around 20 times for alleged BIT breaches.
    • This made India the 10th most frequent respondent-state globally in terms of investor-state dispute settlement (ISDS) claims from 1987 to 2019 (UNCTAD).
    • Adoption of new Model BIT: India adopted a new Model BIT in 2016, which marked a significant departure from its previous treaty practice.
    • Negotiating new BITs: India is in the process of negotiating new investment deals (separately or as part of free trade agreements) with important countries such as Australia and the U.K.

    Recommendations of the Committee

    • 1] Speed of the existing negotiations: India has signed very few investment treaties after the adoption of the Model BIT.
    • It recommends that India expedite the existing negotiations and conclude the agreements at the earliest because a delay might adversely impact foreign investment.
    •  2] Sign more BIT’s in core sector: The committee recommends that India should sign more BITs in core or priority sectors to attract FDI.
    • Generally, BITs are not signed for specific sectors.
    •  It will require an overhauling of India’s extant treaty practice that focuses on safeguarding certain kinds of regulatory measures from ISDS claims rather than limiting BITs to specific sectors.
    • 3] Fine-tune Model BIT: Model BIT gives precedence to the state’s regulatory interests over the rights of foreign investors.
    • The Model BIT should be recalibrated keeping two factors in mind:
    • a) tightening the language of the existing provisions to circumscribe the discretion of ISDS arbitral tribunals.
    • b) striking a balance between the goals of investment protection and the state’s right to adopt bonafide regulatory measures for public welfare.
    • 4] Improve the capacity of government officials: The committee recommends bolstering the capacity of government officials in the area of investment treaty arbitration.
    •  While the government has taken some steps in this direction through a few training workshops, more needs to be done.
    • What is needed is an institutionalised mechanism for capacity-building through the involvement of public and private universities.
    • The government should also consider establishing chairs in universities to foster research and teaching activities in international investment law.

    Need to improve poor governance

    • A very large proportion of ISDS claims against India is due to poor governance.
    • This includes changing laws retroactively which led to Vodafone and Cairn suing India.
    • Annulling agreement in the wake of imagined scam which resulted in taking away S-band satellite spectrum from Devas.
    • The judiciary’s fragility in getting its act together (sitting on the White Industries case for enforcement of its commercial award for years).

    Suggestions

    • The Committee could have emphasised on greater regulatory coherence, policy stability, and robust governance structures to avoid ISDS claims.
    • The government should promptly assemble an expert team to review the Model BIT.

    Consider the question “India is one of the most frequent respondent-state globally in terms of investor-state dispute settlement (ISDS) claims. In context of this, examine the reasons for such frequent disputes and suggest the way forward.” 

    Conclusion

    The committee’s report on India’s BITs have novel suggestions, but it is lacking in several aspects.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

    Back2Basics: ISDS mechanism

    • Investor-state dispute settlement (ISDS) is a mechanism in a free trade agreement (FTA) or investment treaty that provides foreign investors, with the right to access an international tribunal to resolve investment disputes.
    •  ISDS promotes investor confidence and can protect against sovereign or political risk.
    • If a country does not uphold its investment obligations, an investor can have their claim determined by an independent arbitral tribunal, usually comprising three arbitrators.

  • What are the First Advance Estimates of GDP?

    The Ministry of Statistics and Programme Implementation (MoSPI) has released the First Advance Estimates (FAE) for the current financial year (2021-22 or FY22).

    Tap to read more about:

    National Income Determination, GDP, GNP, NDP, NNP, Personal Income

    What is GDP?

    • GDP measures the monetary value of all goods and services produced within the domestic boundaries of a country within a timeframe (generally, a year).
    • It is slightly different from the other commonly used statistic for national income — the GNP.
    • The Gross National Product (GNP) measures the monetary value of all goods and services by the people and companies of a country regardless of where this value was created.

    GDP estimates for FY22

    • According to MoSPI, India’s GDP will grow by 9.2 per cent in 2020-21.
    • Last financial year, FY21, the GDP had contracted by 7.3%.

    What are the First Advance Estimates of GDP?

    • The FAE, which were first introduced in 2016-17, are typically published at the end of the first week of January.
    • They are the “first” official estimates of how GDP is expected to grow in that financial year.
    • But they are also the “advance” estimates because they are published long before the financial year (April to March) is over.
    • It is important to note that even though the FAE are published soon after the end of the third quarter (October, November, December), they do not include the formal Q3 GDP data.
    • Q3 data is published at the end of February as part of the Second Advance Estimates (SAE).

    Significance of FAE

    • Budgetary calculations: Since the SAE will be published next month, the main significance of FAE lies in the fact that they are the GDP estimates that the Union Finance Ministry uses to decide the next financial year’s budget allocations.
    • Basis for nominal GDP: From the Budget-making perspective, it is important to note what has happened to nominal GDP — both absolute level and its growth rate. That’s because nominal GDP is the actual observed variable.

    Note: Real GDP, which is the GDP after taking away the effect of inflation, is a derived metric. All Budget calculations start with the nominal GDP.

    Real GDP = Nominal GDP — Inflation Rate

    The difference between the real and nominal GDP shows the levels of inflation in the year.

    How are the FAE arrived at before the end of the concerned financial year?

    Ans. Benchmark-Indicator method

    • The FAE are derived by extrapolating (uses ratio and proportion) the available data.
    • The approach for compiling the Advance Estimates is based on Benchmark-Indicator method.
    • In this, the estimates available for the previous year (2020-21 in this case) are extrapolated using relevant indicators reflecting the performance of sectors.”

    What are the main takeaways?

    #1 GDP Growth

    • At 9.2%, the real GDP growth rate for FY22 is slightly lower than most expectations, including RBI’s, which pegged it at 9.5%.
    • These estimates are based on data before the rise of the Omicron variant.

    #2 Role of high inflation

    • For FY22, while real GDP (with 2011-12 base prices) will grow by 9.2%, nominal GDP (calculated using current market prices) will grow by a whopping 17.6%.
    • The difference between the two growth rates — about 8.5 percentage points — is essentially a marker of inflation (or the rate at which average prices have increased in this financial year).

    #3 Private consumption continues to struggle

    • The FAE analyses the three main contributors to GDP — private consumption demand, investments in the economy, and government expenditures.
    • It shows that while the latter two are expected to claw back to the pre-Covid level, the first engine will continue to stay in a slump.

    #4 Average Indian is much worse off

    • For the bulk of the Indian population, thus, aggregate data recovering to pre-Covid levels are largely academic.
    • An average Indian has lost almost 2 years in terms of income levels and 3 years in terms of spending levels.

    Try this PYQ:

    Q. In the context of Indian economy, consider the following statements:

    1. The growth rate of GDP has steadily increased in the last five years.
    2. The growth rate in per capita income has steadily increased in the last five years.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

     

    Note: There can be no absolute answers to such questions unless the year is mentioned. Still try to substantiate your answer with the FY21 context.

     

    [wpdiscuz-feedback id=”k4u3k21e1t” question=”Please leave a feedback on this” opened=”1″]Do post it here.[/wpdiscuz-feedback]

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What are Scheduled Banks?

    The Reserve Bank of India (RBI) has informed that Airtel Payments Bank Ltd. has been categorized as a Scheduled Bank.

    Why such a move?

    • With this, the bank can now pitch for government-issued Requests for Proposals (RFP) and primary auctions.
    • It can undertake both Central and State Government businesses participating in government-operated welfare schemes.

    What are Scheduled Banks?

    • Scheduled Banks refer to those banks which have been included in the Second Schedule of Reserve Bank of India Act, 1934.
    • Reserve Bank of India (RBI) in turn includes only those banks in this Schedule which satisfy the criteria laid down vide section 42(6)(a) of the said Act.
    • Every Scheduled bank enjoys two types of principal facilities: it becomes eligible for debts/loans at the bank rate from the RBI; and, it automatically acquires the membership of clearing house.
    • Banks not under this Schedule are called Non-Scheduled Banks

    Types of Scheduled Banks

    There are two main categories of commercial banks in India namely:

    1. Scheduled Commercial banks
    2. Scheduled Co-operative banks

    Scheduled commercial Banks are further divided into 5 types as below:

    1. Nationalised Banks
    2. Development Banks
    3. Regional Rural Banks
    4. Foreign Banks
    5. Private sector Banks

    Payment bank (currently four banks Airtel Payments Bank, Fino Payments Bank, India Post Payments Bank, Paytm Payments Bank have been granted Scheduled bank status).

    Scheduled Co-operative banks are further divided into 2 types namely:

    1. Scheduled State Co-operative banks
    2. Scheduled Urban Co-operative banks

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)