Summary

Economics Class 01

GDP ESTIMATION IN INDIA (05:03 PM)

GDP Calculation changes introduced in 2014-15.
In 2015, the Central Statistics Office (CSO) introduced a new series of national account statistics.
The Base Year of the GDP Series was revised from 2004-05 to 2011-12.
Base year is revised periodically to take into account the structural changes which have been taking place in the economy and to depict a true picture of the economy.
The new series incorporates the latest recommendations of the System of National Accounts, 2008, the international guidelines on the compilation of national accounts.

WHY GDP IS NOT A VERY GOOD MARKER TO MEASURE DEVELOPMENT

It doesn't take into account externalities such as crime, pollution, inequality, and depletion of natural resources.
It doesn’t measure aspects like Environmental protection, family bonding etc.
GDP also includes socially negative activities if it generates economic output. For Example, the money spent on the repair work after the train crash is counted in GDP.
Non-Inclusion of Social Aspects of people’s life such as state of health, quality of education, etc.

NATIONAL MULTIDIMENSIONAL POVERTY INDEX (MPI) (05:20 PM)

Poverty line Only talking about consumption or income level.
Poverty is a multidimensional concept not just deprivation on income and consumption.
Other parameters include standard of living etc. This is what the MPI is doing.

NATIONAL MPI

First ever National MPI was released in 2021 (based on data taken from NFHS-4 ).
Under the government’s Global Indices for Reforms and Growth (GIRG) initiative, NITI Aayog is the nodal agency for MPI.
GIRG monitors India’s performance on various important social and economic parameters.
Methodology used in Computing India’s National MPI (Alkire-Foster Methodology): It identifies people as poor or not poor based on a dual-cut-off counting
method.
According to the AF methodology, an individual is considered MPI poor if their deprivation score equals or exceeds India’s national MPI poverty cut-off of 33.33%.

DIRECT BENEFIT TRANSFER (05:40 PM)

Spending on subsidies is high, still leakages are high -This is the ground for introducing DBT.
Transfers should be linked to inflation and the product market- These two challenges have to be addressed to make DBT successful.
KEY ENABLERS FOR DBT
JAM (Jan Dhan, Aadhaar, and Mobiles) trinity: Enabled transfer benefits in a leakage-proof, well-targeted, cashless, and timely manner.
Business Correspondents (BC) Infrastructure: Ensure that payments are disbursed to the beneficiaries on time, at their doorstep, and of full value.
Moving away from the Branch-led to Employee-led.
Payments Bank: Increased the penetration level of financial services in remote areas of the country.
Mobile money: Develop a comprehensive eco-system for cashless transactions over a mobile platform using Aadhaar as an identifier.

SELF-HELP GROUPS (05:50 PM)

Formal grouping registered as a trust or cooperative society where the members will be encouraged to save and how manage finances.
SHG is a village-based financial intermediary committee usually composed of 10-20 local women.
It is voluntary in nature.
India has around 1.2 crore SHGs, 88% of them all women-based.
SHG success stories include Kudumbashree in Kerala, Jeevika in Bihar, Mahila Arthik Vikas
Mahamandal in Maharashtra, and Looms of Ladakh.
Group responsibility: In an SHG, all members of a group take responsibility for a loan that an individual member takes.

SIGNIFICANCE

CHALLENGES

MICROFINANCE IN INDIA (06:00 PM)

STATE FINANCES (06:07 PM)

Recently, the Reserve Bank of India published an annual report titled “State Finances: A Study of Budget of 2023-24”. The theme of the Report is ‘Revenue Dynamics and Fiscal Capacity of Indian States’.
TRENDS IN DEFICIT
1)Gross FD steadily increased in the past five years.
AGGREGATE RECEIPTS
1)States own taxes like SGST, Excise duty on alcohol, Stamp duty etc.
No consistency is observed in states' taxes.
Out of the sources for own taxes sales tax is highest.
2)Non tax revenue.
Sources include interest payment and fees for Economic services like licenses for mining and royalty.

STATE'S EFFORT TO IMPROVE REVENUE

States are sovereign because they get power from the constitution, so the product they have power to tax they can also levy cess.
Cess is always done for a particular purpose.
A high debt-to-GDP ratio will lead to a crowding-out effect.
VERTICAL TAX DEVOLUTION
The Centre is not collecting most of the money as tax, But as cess.
HORIZONTAL DEVOLUTION WEIGHTS
Need
Fiscal disability
Equity
Efficiency.
15th FC did not take into account infrastructure.

PUBLIC DEBT (07:03 PM)

DEBT PROFILE OF THE GOVERNMENT

Component Internal and External.
Under Internal -
Marketable and Non-marketable securities.
Under marketable -Dated securities, Treasury bill, Cash management bills.
Under Non Marketable -NSSF securities.
External debt again we have two sources: External assistance windows- Like IBRD, and IDA and Bilateral sources like Russia, Germany and Japan.
Other sources include
1)IMF-SDR.
2)Defence debt
3)FII in Gsecs.

TRENDS

Non-marketable debt has risen.
Public Debt denotes liabilities payable by the Central Government, which are contracted against the Consolidated Fund of India, as provided under Article 292 of the Constitution of India.
Current Status of Public Debt in India:
Central Government’s Public Debt stood at 57.1 % of GDP as of the end of March 2023.
General Government Debt was 81% of GDP in 2022-23.
General Government Debt represents the indebtedness of the Government sector (Central, State Governments and UTs with legislature).
Internal Debt constituted 94.6 % of Public Debt at end-March 2022.
Currency composition: Max debt taken in US $ and second is Indian Rupees.

The topic for the next class: PLFS