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Subject: Economics

  • Start-up India, Stand up India : Wings to fly [Part II]

    We have seen first part of Action plan for Start ups, now let’s see another part in brief!

    Let’s see Funding Support and Incentives?

    #Providing Funding Support through a Fund of Funds

    1. In order to provide funding support to Startups, Government will set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) .
    2. The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.
    3. The funds of fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.

    #Credit Guarantee Fund for Startups

    • To catalyse entrepreneurship by providing credit to innovators.
    • In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general.
    • To encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System.

    #Tax Exemption to Startups for 3 years

    • With a view to stimulate the development of Startups in India and provide them a competitive platform, it is imperative that the profits of Startup initiatives are exempted from income-tax for a period of 3 years.
    • This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations.

    #Launch of Atal Innovation Mission (AIM) with SETU Program

    To serve as a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas.

    The Atal Innovation Mission (AIM) shall have 2 core functions:

    • Entrepreneurship promotion –

    Through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs and establishment of 500 Tinkering Labs.

    • Innovation promotion –

    To provide a platform where innovative ideas are generated.

    Launch of Grand Innovation Challenge Awards for finding ultra-low cost solutions to India’s pressing and intractable problems

    The main components proposed to be undertaken as part of the mission include:

    #1. Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras

    • To propel successful innovation through incubation and joint R&D efforts between academia and industry
    • The IIT Madras Research Park endeavors to enable companies with a research focus to set up a base in the Park and leverage the expertise of IIT Madras.
    • Creating a collaborative environment between industry and academia through joint research projects and consulting assignments.

    #2. Promoting Startups in the Biotechnology Sector

    Department of Biotechnology endeavors to scale up the number of Startups in the sector by nurturing approximately 300-500 new Startups each year to have around 2,000 Startups by 2020.

    The Department of Biotechnology shall be implementing the following measures along with its PSU Biotechnology Research Assistance Council (BIRAC) :

    • Biotech Equity Fund – BIRAC AcE Fund in partnership with National and Global Equity Funds (Bharat Fund, India Aspiration Fund amongst others) will provide financial assistance to young Biotech Startups.
    • Bengaluru-Boston Biotech Gateway to India has been formed.
    • Letter of Intent has been signed between DBT, GoI and Department of IT, Government of Karnataka for the same.

    Finally, can we expect Startup India will be the real boost for Make in India and Digital India Mission ? Let us know!

    Would you like to give answer of this question!

    #Q.Will the Start-up India campaign end up making India the start-up hub of the world? Critically comment.

     

    Published with inputs from Arun

  • A brief history of the Greek crisis: A ppt format

    Hi All,

    I have been talking about the issues involved in the Greek public debt crisis at various fora and this is a baseline ppt I had prepared for my talks. A lot of the material on this presentation is collated from different sites and articles that I’ve been reading whilst preparing; the ppt is of value primarily to students or researchers looking for a quick reference on the crisis. The presentation covers main issues upto 15th July 2015.

    There is a lot of action that happens around this ppt when I support it with the talk, so in that sense, a new reader may find some gaps in it. If you want to know more about a particular issue, just write in and I’ll try to send you some material around it. Here it is..

    A brief History of Greece Crisis

    These are the main themes covered in the presentation:

    1. History on the formation of the European common market

    2. Maastricht treaty entry level criteria and movement towards convergence

    3. Problems associated with the Maastricht: Connection to Greece

    4. Euro launch in 1999

    5. Why Greece wanted to enter the Euro: Benefits from having a common currency

    6. Change in the growth profile of Greece post-entry

    7. How the yield spreads, fiscal deficits, CAD and other indicators for Greece moved pre and post entry

    8. Tipping point for the crisis in 2009

    9. Reaction of core group in the EU

    10. Bailout by the Troika

    11. Greek elections and effects of Tsipras coming into power

    12. Suspension of bailout and near-collapse of Greek banks

    13. The crazy referendum held on July 5th

    14. Why Tsipras HAD to accept bailout

    15. The new bailout terms by IMF, EU and ECB

    Hope you enjoy this study material!

  • Organic Farming – Paramparagat Krishi Vikas Yojna (PKVY), NPOF etc.

    The market for organic food in this country is likely to treble in the next four years, according to a report from business chamber Assocham and TechSci Research, a non-government body.

    source
    • What is organic farming?
    • Need for organic farming in India
    • Key characteristics of organic farming
    • Steps taken by the Government to promote organic farming in India
    • Key features of PKVY
    • Status of Organic farming in India
    • Why demand for organic products are increasing in recent years?
    • Challenges and constraints faced by Organic farming in India

    What is organic farming?

    Organic farming system in India is not new and is being followed from ancient time.

    It is a method of farming system which primarily aimed at cultivating the land and raising crops in such a way, as to keep the soil alive and in good health by use of organic wastes (crop, animal and farm wastes, aquatic wastes) and other biological materials along with beneficial microbes (biofertilizers) to release nutrients to crops for increased sustainable production in an eco friendly pollution free environment.

    Need for organic farming in India

    With the increase in population our compulsion would be not only to stabilize agricultural production but to increase it further in sustainable manner.

    The scientists have realized that the ‘Green Revolution’ with high input use has reached a plateau and is now sustained with diminishing return of falling dividends.

    Thus, a natural balance needs to be maintained at all cost for existence of life and property. The obvious choice for that would be more relevant in the present era, when these agrochemicals which are produced from fossil fuel and are not renewable and are diminishing in availability. It may also cost heavily on our foreign exchange in future.

    The key characteristics of organic farming include

    • Protecting the long term fertility of soils by maintaining organic matter levels, encouraging soil biological activity, and careful mechanical intervention
    • Providing crop nutrients indirectly using relatively insoluble nutrient sources which are made available to the plant by the action of soil micro-organisms
    • Nitrogen self-sufficiency through the use of legumes and biological nitrogen fixation, as well as effective recycling of organic materials including crop residues and livestock manures
    • Weed, disease and pest control relying primarily on crop rotations, natural predators, diversity, organic manuring, resistant varieties and limited (preferably minimal) thermal, biological and chemical intervention
    • The extensive management of livestock, paying full regard to their evolutionary adaptations, behavioral needs and animal welfare issues with respect to nutrition, housing, health, breeding and rearing
    • Careful attention to the impact of the farming system on the wider environment and the conservation of wildlife and natural habitats

    Steps taken by the Government to promote organic farming in India

    Government is promoting Organic farming through various schÚmes

    1. National Project on Organic Farming (NPOF)
    2. National Horticulture Mission (NHM)
    3. Horticulture Mission for North East and Himalyan States (HMNEH)
    4. Rashtriya Krishi Vikas Yojana (RKVY)
    5. Network Project on Organic Farming of Indian Council Agricultural Research (ICAR).
    6. In addition to this, Government is implementing  a Cluster based programme   to encourage the farmer for promoting organic farming called Paramparagat Krishi Vikas Yojana (PKVY)

    Key features of PKVY

    • Groups of farmers would be motivated to take up organic farming under Paramparagat Krishi Vikas Yojana (PKVY). Fifty or more farmers will form a cluster having 50 acre land to take up the organic farming under the scheme.
    • In this way during three years 10,000 clusters will be formed covering 5.0 lakh acre area under organic farming. There will be no liability on the farmers for expenditure on certification.
    • Every farmer will be provided Rs. 20,000 per acre in three years for seed to harvesting of crops and to transport produce to the market.
    • Organic farming will be promoted by using traditional resources and the organic products will be linked with the market.
    • It will increase domestic production and certification of organic produce by involving farmers

    Status of Organic farming in India

    source
    • The current market (pulses and foodgrain the bulk) of organic food is at $500 million (about Rs 3,350 crore). It was $360 million (Rs 2,400 crore) in 2014.
    • Although nascent, the Indian organic food market has begun growing rapidly in last few years. A report by Yes Bank in 2014 said that the organic food sector is growing at about 20% in India, with more than 100 retail organic outlets in Mumbai and about 60 in Bangalore.
    • Total area under organic certification in India in 2013-14 is estimated to be 4.72 million ha with 15 per cent are certified and the rest under forest area. India has the highest number of organic producers in the world (5,97,873), mainly due to small holdings.
    • During 2013-14, India exported 135 products, realisation from which was to the tune of $403, million including $183 million contributed by exports of organic textile. Major destinations for organic products from India are the US, EU, Canada, Switzerland, Australia, New Zealand, South-East Asian countries, West Asia, South Africa, etc.
    • Soyabean (70 per cent) lead among the products exported followed by cereals and millets other than basmati (six per cent), processed food products (five per cent), basmati rice (four per cent), sugar (three per cent), tea (two per cent), pulses and lentils (one per cent), dry fruits (one per cent), spices (one per cent).

    Why is the demand for organic products increasing in recent years

    source

    Challenges and constraints faced by Organic farming in India

    • The most important issue facing organic farming is its failure to raise the productivity to keep pace with the growing population. Studies, according to a latest report in The Wall Street Journal, have shown that organic yields are far less than yields of conventional farming. As per the 2011 survey data of National Agricultural Statistics Service, a branch of the US organic farming would require 14.5 million acres more to equal conventional farming’s production of 14 staple (human-focused food crops).
    • There is a wide gap in scientific validation and research compared to the progress in the same for general agriculture. Also, there is a need to aid farmers with advisory services (technical and managerial support to form cluster and adopt best management practices).
    • Due to lack of government support, the courage needed to convert inorganic land into organic land is missing also there is  absence of globally recognized consultancy for timely guidance to farmers. Thus, huge support from states and the Centre is required.
    • Key problems faced by organic farmers during the transition phase are non-realisation of premium.

    References:

  • Progress in Dedicated Freight Corridor: Ministry of Railway Updates 

    Freight operations on the Indian Railways are set to witness a paradigm shift with the stage-wise completion of its 2 dedicated freight corridors, the Western Dedicated Freight Corridor (WDFC) and the Eastern Dedicated Freight Corridor (EDFC), over the next 4 years, beginning 2017-18. Let’s have some updates from Ministry of Railway!

    What are the objectives of Dedicated Freight Corridors (DFCs)?

    • To create world-class rail infrastructure with advanced technology and knowledge to carry higher throughput per train.
    • To improve overall transport efficiency.
    • To offer customer guaranteed, faster transit, energy efficient, environment-friendly transport.
    • To encourage total supply chain management.
    • Increase Rail share in the freight market.

    What’s the mandate for DFCs?

    • Effective independence in decision-making and functions with a market focus and business orientation.
    • DFCs will provide non-discriminatory access to freight trains belonging to Indian Railways and other qualified operators.
    • A Complementing Indian Railways for increasing the Rail share.

    So, that’s why Dedicated Freight Corridor Corporation of India Limited (DFCCIL) come into picture?

    • Dedicated Freight Corridor Corporation of India (DFCCIL) is a Special Purpose Vehicle set up under the administrative control of Ministry of Railways.
    • To undertake planning & development, mobilization of financial resources and construction, maintenance and operation of the DFCs.
    • DFCCIL has been set up with 100% equity by Ministry of Railways and registered as a company under the Companies Act 1956 on 30th October, 2006.

    Did you know about Golden Quadrilateral ?

    • The genesis of the Dedicated Freight Corridor is due to saturation in rail transportation capacity of Indian Railways on the Golden Quadrilateral.
    • The Indian Railways’ network linking the 4 metropolitan cities of Delhi, Mumbai, Chennai and Howrah, along with its 2 diagonals (Delhi-Chennai and Mumbai-Howrah) commonly known as the Golden Quadrilateral.
    • Adding up to a total route length of 10,122 km, carries more than 58% of its revenue earning freight traffic.

    What are the reasons that led to demand for additional capacity for rail freight transportation?

    • Growing international trade along existing Eastern and Western Routes.
    • In the first phase, the Government of India has approved construction of two corridors-the Western DFC (1504 route km) and Eastern DFC (Estimated 1856 route km)- spanning a total length of about 3360 route km.
    • The Eastern Corridor, starting from Dankuni in West Bengal will pass through the states of Jharkhand, Bihar, Uttar Pradesh and Haryana to terminate at Ludhiana in Punjab.
    • The Western Corridor connecting Dadri in Uttar Pradesh to Mumbai – Jawaharlal Nehru Port (JNPT), will traverse through NCR and the states of Haryana, Rajasthan, Gujarat and Maharashtra.

    How will these corridors helps in Industrial Growth?

    Multi Modal Logistic Hubs

    • The DFC network would attract setting up of Multimodal Logistics Parks along the corridor to facilitate value addition including packaging, retailing, labeling, pelletizing, transportation etc.
    • The last mile connectivity in terms of door to door services will be provided to the customers by 3PL service providers.

    Delhi-Mumbai Industrial Corridor (DMIC) & Amritsar-Delhi-Kolkata Industrial Corridor (ADKIC)

    • Impact of DFCCIL is visible as a driver of Industrial Growth with planning and development of DMIC & ADKIC along the DFC.
    • Industrial Corridors have been planned using the backbone of the DFC.
    •  Industrial Corridor will get benefits from the World-Class Rail Infrastructure of the DFC.
    • The traffic originating from the Industrialized Corridor will contribute significantly to traffic on the DFC.

    Let’s see progress of these 2 significant corridors –

    Western Corridor

    • Western Corridor comprising of estimated 1504 km of a double line track from Jawaharlal Nehru Port Trust to Dadri via Vadodara-Sanand-Palanpur Phulera-Rewari.
    • The Corridor will provide a boost to EXIM Trade.

    Eastern Corridor

    • The Eastern Corridor with a route length of estimated 1856 km and consisting of the some distinct segments.
    • Traffic on EDFC comprises of coal for the power plants in the northern region of India from Coalfields located in state of Bihar, Jharkhand and Bengal , finished steel, food grains, cement, fertilizer, limestone from Rajasthan to steel plants in the east and general goods.

    How will DFC aim at reducing Carbon Footprints?

    • DFC aims at to follow a low carbon path adopting various technological options which can help DFC to operate in a more energy-efficient fashion.
    • As per detailed study on a Green House Gas (GHS) emission forecasting for a 30-year period Cumulative GHG emissions over the 30-year period in the case of no-DFC scenario would have been 582 million ton CO2 while in the DFC scenario it would be 124.5 million ton CO2.
    • This demonstrates that in absence of DFC implementation approximately 4.5 times more GHG would be emitted in 30-year period for freight transportation envisaged on the Eastern and Western Corridor.

    Are there any future corridors in the list?

    Ministry of Railways has assigned DFCCIL to undertake Preliminary Engineering & Traffic Survey (PETS) for 4 additional corridors, which is in progress.

    • East-West Corridor (Kolkata-Mumbai) Approx 2330 Kms.
    • North-South Corridor (Delhi-Chennai) Approx 2343 Kms.
    • East Coast Corridor (Kharagpur-Vijayawada) 1100 Kms.
    • Southern Corridor (Chennai-Goa) Approx 899 Kms.
    Source - PIB features

  • Irrigation In India – PMKSY, AIBP, Watershed Management, Neeranchan, etc.

    Neeranchal National Watershed Project

    As a part GS-3 – Irrigation systems, We need to focus on relevant projects/schemes launched in 2015-16. We will try to bring all such important projects/schemes. One such project is, “Neeranchal” for the Watershed Component of the Pradhan Mantri Krishi Sinchayi Yojana (PMKSY), Let’s see it in brief!

    What is a watershed?

    A watershed also known as drainage basin is an extent or an area of land where surface water from rain, melting snow or ice converges to a single point at a lower elevation, usually the exit of the basin, where the waters join another waterbody, such as a river, lake etc.

     

    What is watershed management?

    • Watershed management is an adaptive, comprehensive, integrated multi-resource management planning process that seeks to balance healthy ecological, economic, and cultural/social conditions within a watershed.
    • Watershed management serves to integrate planning for land and water; it takes into account both ground and surface water flow, recognizing and planning for the interaction of water, plants, animals and human land use found within the physical boundaries of a watershed.

    What are the objectives of Neeranchal?

    • The Neeranchal Project will support PMKSY to improve watershed management practices and demonstrate measurable results in selected sub-watersheds
    • It will introduce new hydrological approaches and innovative tools for community participation with a more integrated watershed planning process
    • Pilot new field practices that will improve conservation outcomes, water availability, agricultural yields and climate resilience, and scale up a more effective monitoring and evaluation system to track performance
    • The project will be implemented by the Ministry of Rural Development over a six-year period (2016-21)

    Let’s first learn about Pradhan Mantri Krishi Sinchai Yojana (PMKSY)

    • PMKSY is a central scheme that aims at providing irrigation facilities to every village in the country by converging ongoing irrigation schemes
    • The vision of extending the coverage of irrigation ‘Har Khet Ko Paani’ and improving water use efficiency ‘More crop per drop’ in a focused manner
    • With end to end solution on source creation, distribution, management, field application and extension activities
    • A dynamic annual fund allocation methodology mandates states, to allot more funds to irrigation sectors for becoming eligible to access funds under this scheme, is being considered

    The Pradhan Mantri Krishi Sinchayee Yojana programme should concentrate on 2 important things –

    • First, it should quickly put to use 20–40 million ha of unutilised irrigation potential created in major, medium and minor irrigation projects
    • Second, it should provide better quality power rations to farmers during the time of peak irrigation demand.
    • Madhya Pradesh has done precisely this and multiplied the state’s irrigated area quickly, at small incremental cost, delivering double-digit agricultural growth

    What about funding ?

    • The Government of India and the World Bank have signed a US$ 178.50 million credit for the Neeranchal National Watershed Project to improve watershed management in rural rainfed areas
    • The credit will support the watershed activities of the PMKSY in selected states of Andhra Pradesh, Telangana, Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Maharashtra, Odisha and Rajasthan
    • It will cover about 400 sub-watersheds of about 5,000 ha each and reach approximately 482,000 farmer households and two million people
    • The credit is from the International Development Association (IDA) – the World Bank’s concessionary lending arm with a maturity of 25 years, including a 5 year grace period

    [IDA – International financial institution which offers concessional loans and grants to the world’s poorest developing countries. The IDA is a member of the World Bank Group]

    Concerns that will be addressed by Neeranchal-

    • Bring about institutional changes in watershed and rainfed agricultural management practices in India
    • Build systems that ensure watershed programmes and rainfed irrigation management practices are better focused, and more coordinated, and have quantifiable results
    • Devise strategies for the sustainability of improved watershed. management practices in programme areas, even after the withdrawal of project support
    • Through the watershed plus approach, support improved equity, livelihoods, and incomes through forward linkages, on a platform of inclusiveness and local participation

     

     What are the benefits?

    • Lead to reducing surface runoff of rainwater
    • It will increase recharge of groundwater and better availability of water in rainfed areas
    • It resulting in incremental rainfed agriculture productivity, enhanced milk yield and increased cropping intensity through better convergence related programmes in project areas
    • It will strengthen and provide technical assistance to enhance delivery capacity
    • This is an area development programme and all people living in the project area will be benefitted

    What are the challenges ahead?

    • Enhanced participation of communities, building stronger capacities and systems to plan, implement, monitor and post-project sustainability of local institutions and assets
    • These challenges, if not resolved, can result in implementation delays, slow disbursements and benefits

    Want to read more?

    Published with inputs from Arun

  • Hard targets

    The Finance Minister is a worried man. It’s Budget time after all. The top season for unreasonable demands has just begun at the ministry.

    On hearing that the FM met with the “captains” of the Indian industry, Mr Bedi alleged that this kind of a “cricket huddle” should not be allowed in the budgeting process. After all, the Finance Ministry is the Deep Deficit Cutting Association aka DDCA. With personal blessings from AAP, he has asked that the FM step down from this DDCA as well.

    But the muffler has more to demand from the business suit. “Why is the FM suddenly backtracking on the fiscal consolidation path for the year 2016-17? We are against this. We are basically against everything that the government does. Book the Jantar Mantar for a Dharna! Be fiscally prudent, keep deficits in check. And be physically prudent, wear a muffler in Delhi.”

    “Hmph! Prudent or not, he is definitely impudent,” is what the FM was thinking. But then not for nothing is our FM known for keeping his temper in the most trying of circumstances. The good man sent an entire team from Delhi School of Economics to the AAP office to teach them the basic Keynesian model. “When the private investments won’t pick up, the Government spending has to spur the system. Hence, we may have to go soft on fiscal targets next year, so that growth can be on track.” AAP reacted by sending leftists from JNU to the Finance Ministry, causing a nervous breakdown amongst the younger, innocent economists at the Ministry.

    In a wild attempt to get some economic sense going, the FM gave personal assurances to AAP that fiscal targets will only be softened for those financial years ending in odd numbers. Thus, we will stick to the FY16 target of 3.9 per cent like a leech, but we go soft in FY17. AAP has finally okayed the proposal.

    The NCP in the meanwhile, believes that it has a master solution for the entire macroeconomic framework. It has asked that tax exemptions be given for not only buying the second home, but also the third, fourth and fifth properties. The moment you give these exemptions, people will start buying properties. Voila! Construction will begin anew and all problems concerning low private investment levels will disappear. Not only that, but as this huge inventory of unsold houses reduces, the banking system will also become robust. This is good fiscal and monetary policy, all rolled into one. Dr Rajan, who shuddered after receiving such out-of-the-bank ideas, has said curtly that there is no need for the NCP to get worried about banks.

    The UPA scion, fresh from the Europe sojourn, insists that the Indian states are like the European Union. “I know what needs to be done in the Budget! We need to have a common market and a common currency!” On being informed that we already do (just pass the GST!), the UPA has declared that all brand new ideas pertaining to Europeanising Indian markets will only be discussed on the Arnab Goswami show. Rumour is that Mr Goswami has gone into hiding and will only be seen post-Budget.

    The PM has suggested from a remote location in Antarctica, that the FM incorporate a “Lambi Udaan, Sasti Udaan” Yojana to give a boost to the airline industry. Subsidies could be declared for frequent fliers.

    The poor FM is left wondering how to handle flights of fancy.

     

  • Crop Insurance – PMFBY, etc.

  • Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

  • Direct Benefits Transfers

    The government’s DBT plan involves transferring the subsidy amount directly to the beneficiaries’ bank accounts.

    • Here, the government does not have to fiddle around with differential pricing for the underprivileged.
    • This method can effectively address the issue of leakages and go a long way in solving the mis-targeting problem.

    The government has also linked DBT to Aadhaar. Efficient targeting, using Aadhaar-linked data, ensures that the intended beneficiary receives the money in his account, thus helping him as well as reducing the government’s subsidy burden. This has resulted in effectively solving the leakage and mis-targeting problems in some schemes.

    • DBT in India
    • Pre requisite of successful DBT
    • Merits of DBT
    • Demerits of DBT
    • DBT in fertilizers
    • Is India ready to implement DBT in all programmes?
    • Suggestions for improvement
    • Conclusion

    DBT in India

    Direct Benefit Transfer is a mechanism to transfer the subsidy amount directly to the bank account of beneficiaries. Main agendas for DBT is to prevent and address following

    1. Leakages
    2. Delays
    3. Reducing structural expenses in distributing the subsidies in hand
    4. Encouraging everyone to have bank account and achieve financial inclusion.

    Right now it is applied to only 4 areas that too in selected districts:

    1. LPG subsidies
    2. Jnani Suraksha Yojana
    3. Old age pension
    4. Scholarships

    Pre requisite of successful DBT

    source

    Merits of DBT (Direct Benefit Transfer)

    • Leakage and delays are prevented.
    • Reduces Corruptions and black money issue.
    • Reduces economical inequalities in rural areas as everyone gets theire share rightfully.
    • Reducing the government expense on PDS, Cooperative society, bureaucracy to distribute scholarships etc.
    • Reduces time, energy and money of people to get their money/commodity.
    • Encourage free and fair market structure. Earlier subsidised grains entering market through backdoor used to distort the price in market.
    • More circulation of money in economy which will lead to at least 0.5% growth in GDP.
    • Government can better focus on other issues and not engaging in distribution.
    • Transportation charge for FCI and NABARD subsidies for warehouses will be reduced.
    • Slowly importance of MSP will reduce while price a farmer would fetch will increase which is win-win situation for farmers, also non-food crops will get importance which is issue right now in India.
    • Financial institutions will pay attention in rural area once people have cash in their hand.
    • Health facility will get better with private hospital giving facilities once people will have money to get treatment.

    Demerits of DBT

    • Money in the hand of poor may get spent in something other than what is needed, a scholarship needed to be spent in education only, but how government can ensure that, once she has sent it to account
    • Most accounts holder are males who have accessibility to banks, hence it will lead to usage by them only. Females may not get their share if they are the intended beneficiaries
    • With lesser banks in rural parts of India, it will be another overhead for people to get their withdrawal
    • Delay in transfer may create more turbulence as many will flock to banks to check on their balances

    DBT in fertilisers

    Government is embarked on rationalizing subsidies as has been seen in LPG subsidy which saved thousands of crores of government exchequer. Now it has proposed for rolling out DBT for fertilizers as has been mentioned in recent economic survey.

    Pros of DBT in fertilizer –

    • It would be beneficial for minimizing the use of fertilizer which would check degradation of soil nutrients and would prevent water contamination.
    • Farmers would be free from moneylender’s debt trap as now they would have secure money in their bank accounts. It would be helpful for inculcating saving habits also in farmers.
    • Released government control on the fertilization market would drive competition and would enhance productivity.
    • Enhanced financial inclusion and financial literacy will give boost to digital India and skill India.
    • No middlemen > no leakage > benefits to the needy > correct use of tax payer’s money (redistribution of wealth).
    • Less burden on government exchequer > fiscal consolidation target >money transferred in job creation and infrastructure development

    However there are some cons which need to be factored – 

    • More money in hand may lead to misuse like in drug, alcohol, unnecessary shopping or gambling etc.
    • May further widen the gap between big farmers and small farmers.
    • Bio-identification can be detrimental for the personal information of farmers if not properly handled.

    Operational challenges –

    • Management of data whether it may be of land, of status of farmer (landholder, tiller or tenant etc) or pertaining to agriculture practice is not up to the level in our country.
    • Though crores of accounts are opened but still there is a good number of people who are unbanked.
    • Some farmers have little knowledge about banking system so they can fall prey of undue interference.

    Is India ready to implement DBT across all programmes?

    The debate of implementing DBT in all subsidy programmes is discussed below. A proper implementation would helpful in following ways –

    • Filling leakages: DBT will help in reducing malpractices like leakages, ultimately giving the beneficiary what he is entitled. Example: LPG subsidy.
    • Increasing incomes: with large number of schemes which are implemented with an intention to increase incomes of the poor, but due to delay and other factors most of the time poor gets subsidy after a long time (like in wages of MNREGA). DBT can reduce these cases.
    • Financial inclusion: with the provision of DBT, poor will get themselves included in financial system of the country, which will help them to get other benefits and will boost their saving.

    Some of the downsides of the implementation – 

    • People may use money for other purposes rather than using it for what it is meant for like in case of PDS.
    • Due to lack of education and financial literacy, poor will keep themselves outside the purview of banks.
    • Inadequate development of the banking channel in rural areas is also a challenge.
    • Lack of adequate documents also leads to exclusion of many poor from banking sector.

    source

    Conclusion

    DBT revolutionized the banking sector by connecting low income segments of society with banks. There is no doubt that DBT has created a firm base for financial inclusion, which will include poor sections to the growth and development processes.

    National Payment Corporation of India (NPCI) has successfully opened 150 million DBT accounts with Adhaar numbers and around 125 million accounts under Jan Dhan Yojana.

    The government is fully relying on this scheme to plug leakages and save costs. It is estimated that over the time it could save up to 1.2% of GDP, which is currently lost in transit.

    References:

  • Textile Sector – Cotton, Jute, Wool, Silk, Handloom, etc.