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June 2020 - Economy News



  • Country of Origin Made Mandatory on GeM
    Government e-Marketplace (GeM), a Special Purpose Vehicle under the Ministry of Commerce and Industry, has made it mandatory for sellers to enter the Country of Origin while registering all new products on GeM.

    GeM has taken this significant step to promote Make in India and AtmaNirbhar Bharat initiatives.

    Key Points
    Provisions:
    Indication of the Local Content: GeM has enabled a provision for indication of the percentage of local content in products.

    Now, the Country of Origin as well as the local content percentage are visible in the marketplace for all items.

    Make in India Filter: This new filter has been enabled on the portal so that the buyers can choose to buy only those products that meet the minimum 50% local content criteria.

    They can also switch on a new Make in India filter to see products that match their preferences on local content.

    Significance of GeM:
    Promotion of the ‘Make in India’ Initiative: Since its inception, GeM has continuously worked towards promotion of the ‘Make in India’ initiative.

    Entry of Small Local Sellers: The Marketplace has facilitated entry of small local sellers in Public Procurement, while implementing ‘Make in India’ and MSME Purchase Preference Policies of the Government in the true sense.

    Transparent and Cost-effective Procurement: GeM is enabling quick, efficient, transparent and cost-effective procurement, especially when government organizations require products and services urgently to fight against the Covid-19 pandemic.

    Promotion of AtmaNirbhar Bharat: GeM has been promoting the AtmaNirbhar Bharat policy, introduced in the wake of the Covid-19 pandemic, meant to encourage self-reliance and boost small Indian manufacturers.



  • CBIC launches flagship programme “Turant Customs”
    The Central Board of Indirect Taxes and Customs (CBIC) unveiled a Secure QR coded Shipping Bill that would be electronically sent to exporters.

    This will enable end to end paperless exports under ‘Turant Customs’.

    Key Points
    This step has been taken by CBIC for fulfilling its commitment to a Faceless, Paperless, and Contactless Customs under the umbrella of its “Turant Customs” programme.

    The launch of paperless documentation on exports is a sequel to a similar initiative that was begun for imports w.e.f. 15th April 2020.

    Green Customs: These initiatives will do away with the present requirement to take paper printout of these documents thereby promoting Green Customs.

    Business Friendly: Equally importantly exporters would not have to visit the Customs Houses for this purpose and can better utilize their time in promoting their business.

    Implementation:Turant Customs, which has as its main component Faceless Assessment, would be implemented in phases across the entire country by 1st January 2021.

    Benefits:
    These reforms are based on enhanced use of digital technology to reduce the time and costs for the importers, exporters and other stakeholders, thereby improving India’s ranking in the World Bank’s “Trading Across Borders” parameter of its Ease of Doing Business (EoDB) index.

    India improved to rank 80 on “Trading Across Borders” parameter as compared with 146 in 2018.

    This was possible due to reforms like Single Window Interface for Facilitating Trade, e-Sanchit (e-Storage and computerised handling of indirect tax documents), and Direct Port Delivery.

    Other Recent Initiatives:
    Ministry of Finance (Central Board of Indirect Taxes and Customs) also launched two Information Technology (IT) initiatives - ICEDASH and ATITHI.

    ICEDASH- For improved monitoring of customs clearance of imported goods.

    ATITHI- For facilitating arriving international passengers.




  • Initial Public Offer: LIC
    The Central government has started the process to launch the Initial Public Offer (IPO) of Life Insurance Corporation (LIC).

    LIC is fully owned by the government. It was set up in 1956.

    It has the biggest share in India’s insurance business.

    Initial Public Offer
    IPO is the selling of securities to the public in the primary market (a type of capital market).

    Primary market deals with new securities being issued for the first time. It is also known as the new issues market.

    It is different from the secondary market where existing securities are bought and sold. It is also known as the stock market or stock exchange.

    Under IPO, an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.

    Through an IPO, an unlisted company can get listed on the stock exchange.

    It is generally used by new and medium-sized firms that are looking for funds to grow and expand their business.

    Key Points
    LIC IPO:
    The IPO is expected to be the biggest in the Indian capital markets given the size and scale of LIC.

    The LIC’s total assets had touched an all-time high of Rs. 31.11 lakh crore in 2018-19.

    The government is seeking some exemption related to the LIC IPO from the Securities and Exchange Board of India (SEBI).

    Benefit:
    It will help the government to meet its rising fiscal deficit.

    The rating agency S&P has estimated India’s government (centre and states) fiscal deficit to rise to 11% of GDP in FY21 from 7.8% in FY20.

    An IPO will bring transparency into affairs of LIC since it will be required to inform its value and other market-related developments on time to the stock exchanges.

    It also gives an opportunity for retail investors to participate in the wealth creation of LIC.

    Listing of companies on stock exchanges disciplines the company since it comes under greater scrutiny. It also provides access to financial markets, thus raising the company’s value.

    Issues Involved:
    LIC is currently dealing with huge non-performing assets.

    Background:
    In the Budget 2020-21, the government had announced plans for IPO of LIC and a proposal to sell the government’s equity in the stressed IDBI Bank to private, retail and institutional investors through the stock exchange.

    LIC is also a majority shareholder in IDBI Bank.

    The government expects to raise Rs. 90,000 crore through stake sale in LIC and IDBI Bank, and another Rs. 1.2 lakh crore through other disinvestments.

    Earlier, in 2017, the government had listed the shares of General Insurance Corporation and New India Assurance through IPOs.


  • M3 Money Supply increased by 6.7%: RBI
    According to recent Reserve Bank of India (RBI) data, the uncertainty caused by the Covid-19 pandemic has led to a surge in money supply.

    Key Points
    RBI Data:
    Since the end of March, 2020 currency held by the public increased by 8.2%.

    M3 money supply (refer explanation below) increased by 6.7% in the first five months of 2020 compared with the same period last year. This is the highest growth in seven years.

    Currency in circulation, which measures money with the public and in banks, has also surged.

    However, the savings and current account deposits decreased by 8%. Gross capital formation also fell by 7% in the March, 2020 quarter.

    Reason:
    The recent increase reflects higher cash withdrawals by depositors to meet needs during the lockdown period and also to safeguard themselves against salary cuts or job losses.

    Impact:
    A rise in money supply usually is seen as a leading indicator of growth in consumption and business investments, but due to Covid-19 pandemic, the rise this time is unlikely to bolster either.

    People have curtailed their discretionary spending as they’re not sure of their permanent income.

    Lenders too are unwilling to take risks as slowing discretionary spending slows demand for manufactured and industrial goods.

    Money Supply:
    The total stock of money in circulation among the public at a particular point of time is called money supply.

    It needs to be noted that total stock of money is different from total supply of money.

    Supply of money is only that part of total stock of money which is held by the public at a particular point of time.

    The circulating money involves the currency, printed notes, money in the deposit accounts and in the form of other liquid assets.

    RBI publishes figures for four alternative measures of money supply, viz. M1, M2, M3 and M4.

    M1 = CU + DD.
    M2 = M1 + Savings deposits with Post Office savings banks.
    M3 = M1 + Net time deposits of commercial banks.
    M4 = M3 + Total deposits with Post Office savings organisations (excluding National Savings Certificates).

    CU is currency (notes plus coins) held by the public and DD is net demand deposits held by commercial banks.

    The word ‘net’ implies that only deposits of the public held by the banks are to be included in money supply.

    The interbank deposits, which a commercial bank holds in other commercial banks, are not to be regarded as part of money supply.

    M1 and M2 are known as narrow money. M3 and M4 are known as broad money.

    These gradations are in decreasing order of liquidity.

    M1 is most liquid and easiest for transactions whereas M4 is least liquid of all.

    M3 is the most commonly used measure of money supply. It is also known as aggregate monetary resources.



  • New Purchasing Power Parities: ICP 2017
    Recently, the World Bank has released new Purchasing Power Parities (PPPs) for reference year 2017, under International Comparison Program (ICP) that adjusts for differences in the cost of living across economies of the world.

    Key Points
    India is a co-chair of the ICP Governing Board along with Statistics Austria for the ICP 2017 cycle.

    India has participated in almost all ICP rounds since its inception in 1970.

    The Ministry of Statistics and Programme Implementation is the National Implementing Agency (NIA) for India, which has the responsibility of planning, coordinating and implementing national ICP activities.

    The ICP 2017 results, revised results for 2011 and estimates of annual PPPs for the period 2012-2016 are available on the ICP website and the World Bank’s Databank and Data Catalog.

    The next ICP comparison will be conducted for reference year 2021.

    Global Status:
    Values:
    Globally, 176 economies participated in the 2017 cycle of ICP.

    The PPPs of Indian Rupee per USD at GDP level is now 20.65 in 2017 from 15.55 in 2011.

    The Exchange Rate of USD to Indian Rupee is 65.12 from 46.67 during the same period.

    The PLI of India is 47.55 in 2017 from 42.99 in 2011.

    Rankings:
    In 2017, India retained and consolidated its global position, as the third largest economy and accounted for 6.7% of global GDP in terms of PPPs.

    China was at first position with 16.4% and the USA at the second position with 16.3%.

    India is also the third largest economy in terms of its PPP-based share in Global Actual Individual Consumption (AIC) and Global Gross Fixed Capital Formation (GCF).

    Regional Status (Asia-Pacific):

    Regionally, 22 economies participated from the Asia-Pacific.

    In 2017, India retained its regional position as the second largest economy and accounted for 20.83% of Regional GDP in terms of PPPs.



  • ChinaIndia imposed Anti-dumping Duty on Steel Imports from China, Vietnam and South Korea
    Recently, India imposed anti-dumping duty on imports of certain types of steel products from China, Vietnam and South Korea.

    Key Points
    Dumping:
    In international trade practise, dumping happens when a country or a firm exports an item at a price lower than the price of that product in its domestic market.

    Dumping impacts the price of that product in the importing country, hitting margins and profits of local manufacturing firms.

    Anti-dumping duty is imposed to rectify the situation arising out of the dumping of goods and its trade distortive effect.

    Imposition of Anti-dumping Duty:
    The anti-dumping duty was imposed after the Directorate General of Trade Remedies (DGTR), in its probe, found that the steel products imported in India from these three countries were below its associated normal value, which resulted in dumping.

    The duty has been imposed for five years with a view to guard domestic manufacturers from cheap imports from these countries.

    Earlier, a provisional duty was imposed in October 2019 on these products from these three countries, which expired in April 2020.

    According to global trade norms, including the World Trade Organization (WTO) regime, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers.

    The duty is imposed only after a thorough investigation by a quasi-judicial body, such as DGTR, in India.

    Different from Countervailing Duty:
    Anti-dumping duty is different from countervailing duty. The latter is imposed in order to counter the negative impact of import subsidies to protect domestic producers.

    Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.

    CVDs are meant to level the playing field between domestic producers of a product and foreign producers of the same product who can afford to sell it at a lower price because of the subsidy they receive from their government.

    stands first with 50.76% and Indonesia is at third position with 7.49%.

    India is also the second largest economy in terms of its PPP-based share in Regional AIC and Regional GFCF.



  • Co-operative Banks Under RBI Supervision
    Recently, the Central government approved an Ordinance to bring all urban and multi-state co-operative banks under the direct supervision of the Reserve Bank of India (RBI).

    Key Points
    Reason:
    The decision comes after several instances of fraud and serious financial irregularities, including the major scam at the Punjab and Maharashtra Co-operative (PMC) Bank in 2019.

    Till now, all the co-operative banks came under dual regulation of the RBI and the Registrar of Co-operative Societies, resulting in regulatory and supervisory lapses at many of these banks.

    The RBI had no powers to draw up an enforceable scheme of reconstruction of a co-operative bank.

    However, from now onwards the urban and multi-state co-operative will come under the direct supervision of RBI.

    Benefit:
    The move will empower the RBI to regulate all urban and multi-state co-operative banks on the lines of commercial banks.

    Earlier, the Supreme Court pronounced that co-operative banks come within the definition of ‘Banks’ under the Banking Regulation Act, 1949 for the purposes of the Sarfaesi Act, 2002.

    The Sarfaesi Act is an effective tool for bad loans (Non-Performing Assets) recovery.

    It will also provide more security to depositors.

    In India, there are 1482 urban co-operatives banks and 58 multi-state co-operative banks.

    These banks have a depositor base of 8.6 crores, who have saved a huge amount of Rs. 4.84 lakh crore with these banks.

    Issues Involved:
    The rural co-operative banks will continue to remain under the dual regulation of RBI and Registrar of Co-operative Societies.

    The rural co-operative banks face the same issue of misgovernance and fraud, like urban co-operatives banks.



  • Electricity (Amendment) Bill 2020
    Recently, the Central government has introduced the Electricity (Amendment) Bill 2020 to amend various provisions in the Electricity Act 2003.

    Key Points
    Rationale Behind Amendment:
    To address critical issues weakening the commercial and investment activities in the electricity sector.

    The current challenges plaguing the Indian power sector is derived from negligence in addressing the structural issues.

    These include operational and financial inefficiencies of power generation, transmission and distribution utilities, access and quality of power supply, political interference, lack of private investments, inadequate public infrastructure and lack of consumer participation.

    Bringing transparency and accountability to protect the interest of consumers and ensuring healthy growth of the power sector.

    Key Objectives:
    • Ensure consumer centricity,
    • Promote Ease of Doing Business,
    • Enhance sustainability of the power sector,
    • Promote green power,

    Key Amendments:
    National Selection Committee: Instead of the separate Selection Committee (for appointment of Chairperson and members of State Electricity Regulatory Commissions-SERCs), there is a proposal to set up a National Selection Committee.

    However, the Central Government is also considering to continue with the existing separate Selection Committees for each state – but make them Standing Selection Committees so that there is no need for constituting them afresh every time a vacancy occurs.

    The only difference is that it will now be proposed to be presided by the Chief Justice of the High Court of the state.

    Introduction of Direct Benefit Transfer: Direct Benefit Transfer will be beneficial for both the State Governments and as well as Distribution Companies.

    It will be beneficial for the State Government because it will ensure that the subsidy reaches the people who are actually entitled and the State Government gets clear accounts of the amount given as subsidy.

    It will benefit the distribution company by making sure that the subsidies due are received as per the number of beneficiaries.

    National Renewable Energy Policy: India is a signatory to the Paris Climate Agreement. It is therefore proposed to have a separate policy for the development and promotion of generation of electricity from renewable sources of energy.

    The policy prescribes a minimum percentage of purchase of electricity from renewable sources of production. It seeks to give special attention to hydro power.

    Sustainability:
    Cost Reflective Tariff: There had been the issue of lazy attempts from the commissions in adopting the tariffs determined, causing issues of cost escalation.

    To address this problem, the Amendment has prescribed a period of 60 days to adopt the determined tariffs. Failing such a timeline of 60 days, the tariff would be deemed to be accepted.

    Payment Security: It is proposed to empower Load Dispatch Centres to oversee the establishment of adequate payment security mechanisms before dispatch of electricity, as per contracts.

    Late payment of dues of generating and transmission companies have reached unsustainable levels. This impairs the finances of the Gencos and Transcos and also increases the Non Performing Assets of the Banks.

    Ease of Doing Business:
    Establishment of Electricity Contract Enforcement Authority (ECEA): It is an Authority headed by a retired Judge of the High Court with powers to execute their orders as decree of a civil court.

    The Authority will enforce performance of contracts related to purchase or sale or transmission of power between a generating company, distribution licensee or transmission licensee.

    Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) do not have powers to execute their orders as decree of a civil court.

    Cross Subsidy: The Bill provides for the SERCs to reduce cross subsidies as per the provisions of the Tariff Policy.

    Miscellaneous:
    Strengthening of the Appellate Tribunal (APTEL): It is proposed to increase the strength of APTEL to at least seven to facilitate quick disposal of cases.

    To be able to effectively enforce its orders, it is also proposed to give it the powers of the High Court under the provisions of the Contempt of Courts Act.

    Penalties: In order to ensure compliance of the provisions of the Electricity Act and orders of the Commission, section 142 and section 146 of the Electricity Act are proposed to be amended to provide for higher penalties.

    Cross Border Trade in Electricity: Provisions have been added to facilitate and develop trade in electricity with other countries.

    Distribution sub-licensees: To improve quality of supply, an option is proposed to be provided to Discoms to authorise another person as a sub-license to supply electricity in any particular part of its area, with the permission of the State Electricity Regulatory Commission.

    Issues involved:
    Cost reflective tariff has been a concern for states like Telangana which provide free electricity to the farming sector.

    Formation of ECEA has also been criticized as a move towards centralization of power.

    Recognition of franchisees and sub- licensees might open the sector to private players.



  • GST Council Meeting
    Recently, the 40th Goods and Services Tax (GST) Council meeting was held.

    Key Points
    GST Collections:
    In the first two months of the current financial year, 2020-21, the cumulative GST revenues of states and the Centre has been only 45% of the monthly target.

    In 2020-21, the combined monthly GST revenue target is estimated at Rs. 1.21 lakh crore taking into account the budget estimate and states’ protected revenue.

    Market Borrowing:
    As revenue has fallen for both the Centre and states, the GST Council has decided to hold a single-point agenda meeting in July, 2020 which will discuss market borrowing by the Council itself as one of the ways to raise money and compensate states for GST revenue losses.

    The GST Act, 2017 extends a guarantee to states that any loss in revenues in the first five years (2017-2022) of GST implementation will be compensated through a cess that accrues to the Compensation Fund.

    The shortfall is calculated assuming a 14% annual growth in GST collections by states over the base year of 2015-16.

    In the 8th GST Council meeting it was discussed that in case the amount in the GST Compensation Fund fell short of the compensation payable, the Council shall decide the mode of raising additional resources including borrowing from the market.

    The borrowing could be repaid by collection of cess in the sixth year or further subsequent years.

    Issues Involved:
    There is a question about the legality of the GST Council to borrow; for instance, can it be accorded sovereign status like Centre and states.

    The burden and the impact of market borrowing on the Fiscal Responsibility and Budget Management Act (FRBM Act), 2003 is not clear.

    Tax Rationalization:
    The Council discussed correction of inverted duty structure for footwear, fertilisers and textiles.

    Inverted duty structure is a situation where the rate of tax on inputs used is higher than the rate of tax on the finished good.

    Take an imaginary situation of the tyre industry, the tax rate on natural rubber (input) purchased is 10% whereas the tax rate on rubber tyre is 5%. Here since the tax rate on input is higher than that on the finished good, there is an inverted tax structure.

    However, the decision was deferred because it would have resulted in increase in the prices of fertiliser, footwear and ready-made garments, which would have affected the process of economic revival.

    Compliance-related Relief:
    The GST Council also provided compliance-related relief to small taxpayers with turnover up to Rs. 5 crore.

    It reduced the interest by half on delayed filing of GST returns for February, March and April, 2020 to 9%, provided the returns are filed by September 2020.

    For May-July, 2020 the deadline for filing GST returns has been extended till 30 September, 2020 without any penalty.



  • Indian Digital Payment System Outside India
    The is exploring the possibility of expanding its payment system Reserve Bank of India (RBI) abroad, following the requests from several countries.

    Key Points
    Requests for Payment System:
    The RBI has received requests from abroad for implementing its payment systems like Cheque Truncation System (CTS), National Electronic Fund Transfer (NEFT), Unified Payments Interface (UPI) and messaging solutions.

    Reason:
    The availability of low cost innovative digital payment products in India has led to many countries expressing their interest in Indian payment system.

    Availability of Payment System Outside India:
    Currently, there are no RBI authorised payment system operators providing payment services outside India.

    However, there is cross-country cooperation with Bhutan with respect to CTS, National Automated Clearing House (NACH) and NEFT. NEFT is also available for one-way transfers from India to Nepal.

    Scope of Payment System Outside India:
    According to RBI there is scope for enhancing global outreach of its payment systems, including remittances, through active participation and co-operation in international and regional fora by collaborating and contributing to standard setting.

    Efforts have been made to increase and widen the scope, coverage and usage of RuPay card scheme and UPI to enhance their brand value internationally.

    Issues Involved:
    Overdependence on the foreign funds (through digital payments) may lead to possible liquidity risk issues in India.

    Different time zones may pose a risk in digital payments.

    Digital Payments and India:
    India’s growing use of retail digital payments indicates a shift in the relationship with cash.

    According to the RBI, the digital payments in the country have witnessed a growth of 61% and 19% in terms of volume and value, respectively.

    The value of digital payments to Gross Domestic Product (GDP) has also increased from 660% in 2014-15 to 862% in 2018-19.

    The Point of sale (PoS) terminals grew at a high pace of 35%, contrastingly the deployment of ATMs has grown at a low pace (4%).



  • Indian Gas Exchange: IGX
    Recently, India launched its first gas exchange which has been named as the Indian Gas Exchange (IGX).

    Key Points
    IGX:
    The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade both in the spot market and in the forward market for imported natural gas across three hubs —Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.

    The spot market is a public financial market in which financial instruments or commodities are traded for immediate delivery.

    A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery.

    However, domestically produced natural gas will not be sold on the exchange.

    The price of domestically produced natural gas is decided by the government.

    Benefits:
    IGX is expected to facilitate transparent price discovery in natural gas and facilitate the growth of the share of natural gas in India’s energy basket.

    It removes the requirement for buyers and sellers to find each other to ensure a fair price deal.

    Shorter and longer contracts period will allow buyers and sellers greater flexibility.

    The exchange allows much shorter contracts. i.e. for delivery on the next day, and up to a month. Ordinarily contracts for natural gas supply are as long as six months up to a year.

    India’s Import Dependence:
    The natural gas imports are set to become a larger proportion of domestic gas consumption as India moves to increase the proportion of natural gas in the energy basket from 6.2% in 2018 to 15% by 2030.

    Also, India’s domestic production of gas has been falling over the past two fiscals as current sources of natural gas have become less productive.

    Domestically produced natural gas currently accounts for less than half of India’s natural gas consumption. While imported natural gas accounts for the other half.

    Regulations:
    Currently, the pipeline infrastructure necessary for the transportation of natural gas is controlled by the companies that own the network.

    State-owned Gas Authority of India Limited (GAIL) owns and operates India’s largest gas pipeline network, spanning over 12,000 km.

    Government Initiatives:
    The Indian gas market has multiple price bands for assets including pre-NELP, NELP, High Temperature and High pressure (HTHP) and Deepwater and Ultra Deep Water blocks.

    India has long-term gas contracts with many countries like Qatar, Australia, Russia and the US, and has made investments abroad in strategic assets in Mozambique, Russia and other countries.

    India has taken various ongoing projects to strengthen the gas infrastructure in the country like Urja Ganga, Eastern India grid, Indradhanush project in the North-east, Dhamra-Dahej pipeline, coal gasification and CBM policy.



  • Rise in Net Financial Assets
    According to the Reserve Bank of India's recent Quarterly Estimates of Households’ Financial Assets and Liabilities, net financial assets of Indian households rose to 7.7% of the Gross Domestic Product (GDP) in the Financial Year (FY) 2019-20.

    Key Points
    Net Financial Assets:
    Net Financial Assets are the difference between Gross Financial Assets (GFA) (deposits and investments) and Financial Liabilities (borrowings).

    The net financial assets jumped from Rs. 13.73 lakh crore in FY 2018-19 (7.2 % of GDP) to Rs. 15.62 lakh crore (7.7% of the GDP) in FY 2019-20.

    The GFA rose marginally from Rs. 21.23 lakh crore in FY 2018-19 to Rs. 21.63 lakh crore in FY 2019-20.

    The financial liabilities witnessed a sharp decline from Rs. 7.5 lakh crore to Rs. 6.01 lakh crore in the same period, thereby contributing to the rise in net financial assets.

    In the first quarter of FY 2020-21, RBI also expects a spike in net financial assets of households on account of a sharp drop in lockdown induced consumption.

    Studies show households tend to save more during a slowdown and income uncertainty.

    Savings:
    In value terms GFA has increased marginally from Rs. 21.23 lakh crore in FY 2018-19 to Rs 21.63 lakh crore FY 2019-20.

    The overall savings have not grown in proportion. However, the household savings in bank deposits as a percent of GDP declined to 3.4% in FY 2019-20 compared to FY 2018-19 where it stood at 3.8%.

    The decline in household savings is because banks reduced their interest rates following sharp cut in repo rate by the RBI over the last 18-months.

    A repo rate is the rate at which RBI lends to commercial banks.

    Between January 2019 and March 2020, RBI cut the repo rate by 210 basis points from 6.5% to 4.4%. In May, 2020 RBI reduced it further to 4%.

    Small saving instruments that continued to offer higher rates than bank deposits witnessed a higher deployment of household savings as their share as percent of GDP increased from 1.1% to 1.3% in the same period.

    Savings into life insurance funds and mutual funds as a percent of GDP also declined from 2.2% in FY 2018-19 to 1.9% in FY 2019-20.



  • World Investment Report: UNCTAD
    Recently, the United Nations Conference on Trade and Development (UNCTAD) released the World Investment Report 2020.

    The World Investment Report focuses on trends in Foreign Direct Investment (FDI) worldwide, at the regional and country levels and emerging measures to improve its contribution to development.

    Key Points
    Global Scenario:
    According to the report, global FDI flows are forecast to decrease by up to 40% in 2020, from their 2019 value of $1.54 trillion.

    This would bring global FDI below $1 trillion for the first time since 2005. The FDI is projected to decrease by a further 5% to 10% in 2021.

    Developing economies are expected to see the biggest fall in FDI because they rely more on investment in Global Value Chain (GVC) based industries, which have been severely hit due to Covid-19 pandemic.

    They have also not been able to put in place the same economic support measures as developed economies.

    However, the investment flows are expected to slowly recover by the start of 2022.

    Global FDI flows rose modestly in 2019, following the sizable declines registered in 2017 and 2018.

    The rise in FDI was due to the waning of impact of the 2017 tax reforms in the United States.

    India’s Investment Scenario:
    India jumped from 12th position in 2018 to 9th position in 2019 among the world’s largest FDI recipients.

    In 2019, the FDI inflows into India jumped over 20% to $51 billion.

    The report also observed that FDI into India may decline sharply in 2020 because of the impact of the Covid-19 pandemic and the consequent lockdown measures, supply chain disruptions and economic slowdown.

    In India the number of greenfield investment announcements declined by 4% in the first quarter of financial year 2020-21. The Mergers and acquisitions (M&A) also contracted by 58%.

    A greenfield investment is a type of FDI in which a parent company creates a subsidiary in a different country, building its operations from the ground up.

    However, the report mentioned that India’s large market will continue to attract market-seeking investments to the country.

    India’s professional services and the digital economy could see a faster rebound as global venture capital firms and technology companies continue to show interest in India’s market through acquisitions.

    Investors concluded deals worth over $650 million in the first quarter of 2020, mostly in the digital sector.



  • 4% Contraction in Growth: ADB
    According to the Asian Development Outlook (ADO) released by the Asian Development Bank (ADB), the Indian economy is expected to contract by 4% during the current financial year (2020-21).

    Earlier, in April 2020, ADB had projected India’s economy to grow at 4% in 2020-21.

    The ADO analyzes economic and development issues in developing countries in Asia. This includes forecasting the inflation and growth rates of countries throughout the region, including China and India.

    Key Points
    Reasons for Contraction:
    Global health emergency created by the Covid-19 pandemic.

    After the introduction of lockdowns in late March 2020, economic activity in South Asia came to standstill.

    The lockdown also disrupted the supply chain.

    The Gross Domestic Product (GDP) slowed to 3.1% in the last quarter (Jan-March) of the financial year 2019-20. It is the slowest since early 2003.

    The overall economic growth slowed to 4.2% in 2019-20 as both exports and investment started to contract.

    The Purchasing Managers’ Index fell to all-time lows in April 2020.

    Migrant workers have gone home to their villages after losing their jobs in the cities and will be slow to return to cities to work again.

    Growth Projections for Developing Asia:
    Developing Asia refers to a group of over 40 countries, including India, that are members of the ADB. Growth of 0.1% is expected.

    This is down from the 2.2% forecast in April 2020 and would be the slowest growth for the region since 1961.

    However, China is expected to record a positive growth of 1.8% in 2020-21.

    No V-shaped Recovery:
    Even as lockdowns are slowly eased and select economic activities restart, economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year.

    Despite a higher growth outlook for the region in 2020-21, there will not be a V-shaped recovery.

    Issues Involved:
    The Covid-19 pandemic may see multiple waves of outbreaks in the coming period. This may lead to an increase in sovereign debt and worse to a financial crisis.

    There is also the risk of renewed escalation in trade tensions between the United States and China.



  • Increase in Foreign Portfolio Investment
    The quantum of Foreign Portfolio Investments (FPIs) flows in the equity market reached a record high in the first week of June compared to any other month in the current calendar year of 2020.

    Key Points
    The foreign portfolio investors have bought shares worth about Rs. 21,000 crore in just five trading sessions in the first week of June 2020.

    This is the highest in any month of 2020, with the previous high registered in May at Rs. 14,569 crore.

    The FPI has been brought into sectors like automobiles, private banks and pharmaceuticals.

    The sudden surge in FPIs is because of the Rights Issue of Reliance Industries Limited (RIL), stake sale in Kotak Mahindra Bank, and the slight increase in optimism in Indian market.

    RIL’s Rights Issue is India's largest Rights Issue at Rs. 53,124.20 crore.

    UdayKotak sold shares worth around Rs. 6,800 crore of Kotak Mahindra Bank, which were bought by FPIs.

    However, the cumulative foreign flows in equities this year is still negative at Rs. 19,531 crore, since March and April saw huge outflows.

    March witnessed a record outflow of Rs. 61,973 crore, which was followed by selling worth Rs. 6,884 crore in April.



  • Shapes of Economic Recovery
    As India is going to come out of the Covid-19 lockdown, experts are debating over the shape of recovery of Indian economy.

    Key Points
    The economists are unanimous that in the current financial year 2020-21, India’s economy will contract.

    According to the World Bank’s South Asia Economic Focus report, India’s growth is likely to remain at 1.5-2.8% in 2020-21 which is the slowest since 1991 economic reforms.

    Many economists are also of the opinion that after hitting the bottom this year, the Indian economy will start its recovery in the next financial year (2021-22).

    However, according to an analysis by PronabSen, former Chief Statistician of India, India’s economy will contract not just in the financial year 2020-21 but also in 2021-22.

    This means that India could experience a full-blown depression – the first in India’s history as an independent nation.

    The Table shows India’s absolute Gross Domestic Product (GDP) is likely to struggle to even come back to the 2019-20 level by 2023-24.

    India is likely to end up with an “elongated U-shape” recovery due to the weakness of the economy going into the Covid crisis as well as the inadequate fiscal stimulus measure taken by the government.

    The Table also provides a snapshot of the likely trend level of GDP had India grown at 6% and 8% respectively over the same period.



  • Fall in Money Remitted Abroad
    According to data released by the Reserve Bank of India, the amount of money Indians send abroad has witnessed a 61% decline under the Liberalised Remittance Scheme (LRS) as Covid-19 and the lockdown cripple the global economy and ground international travel.

    Key Points
    In April 2020, Indians remitted $499.14 million under the Liberalised Remittance Scheme (LRS) — a 61% decline from $1,287.91 million in the same month last year.

    The monthly outward flow in April 2020 is lowest since February 2016 when it was $449.28 million.

    Substantial decline has been recorded in money sent for purchase of immovable property abroad; investment in equity/debt; deposit; gift; medical treatment; and other categories during April 2020.

    A Triple Whammy Effect:
    This dip reflects economic distress, lockdown at home and curbs on overseas travel.

    Earlier, Resident Indians have remitted a record $18,750 million under LRS in the financial year ended March 31, 2020.

    Despite the outflows reaching a record level during last financial year, March, 2020 saw a dip — $1,358.82 million — against $1,476.82 million in the corresponding month of 2019.

    Money sent for Travel Purposes: The sharpest decline — 71.81% — has been recorded in money sent for travel purposes which came down to $121.13 million in April this year from $429.75 million a year ago.

    This is significant as an estimated 2 million Indian nationals travel overseas every month.

    Money Sent for Studies Abroad: This has also seen a sharp decline of 68.85% — $78.76 million in April this year from $252.84 million in the corresponding month last year.

    Over 7 lakh Indian students pursued studies in foreign institutions in 2018.

    Maintenance of Close Relatives: The category, which contributes the highest amount to total outward remittances under LRS has recorded a decline of 50%— $148.25 million in April this year from $296.14 million last year.

    Deposit and Investment in Equity/Debt: These categories have recorded lesser decline i.e. of 29.91%.

    Donations:
    The only exception (stands neutral in terms of decline or increase) to other sources of remittances is “donations” e.g. for charity or social service, which contribute a negligible amount to the total outflows.

    Gift and Medical Treatment: While the category “Gift” has recorded a 66% decline in outward remittances, “medical treatment” has seen a decline of 45.85% in April 2020.

    Fall in Direct Tax Collection
    According to the Central Board of Direct Taxes (CBDT), the gross direct tax collections for the financial year (FY) 2019-20 fell by almost 5% compared to FY 2018-19.

    The total direct tax collections for 2019-20 was at Rs. 12.33 lakh crore against Rs. 12.97 lakh crore of 2018-19.

    Direct tax is a type of tax where the incidence and impact of taxation fall on the same entity. In the case of direct tax, the burden can’t be shifted by the taxpayer to someone else.

    These are largely taxes on income or wealth. e.g Income tax, corporation tax, property tax etc.

    Key Points
    The fall in the collection of direct taxes is due to a combination of factors, which include the historic tax reforms undertaken in 2019 and much higher refunds issued during the FY 2019-20.

    Tax Reforms:
    Reduction in corporate tax rate to 22% from FY 2019-20 for all existing domestic companies.

    Incentive for new manufacturing domestic companies by reducing the tax rate to 15%.

    Such companies have also been exempted from payment of Minimum Alternate Tax (MAT).

    This was done in order to promote growth and investment.

    Reduction in MAT rate from 18.5% to 15% to provide relief to the companies which continue to avail exemption and pay tax under MAT.

    Exemption from income-tax to individuals earning income up to Rs. 5 lakh and increase in standard deduction from Rs. 40,000 to Rs. 50,000.

    The revenue impact of these reforms have been estimated at Rs. 1.45 lakh crore for Corporate Tax and at Rs. 23,200 crore for the Personal Income Tax (PIT).

    High Refunds: In FY 2019-20, the total refunds given was Rs. 1.84 lakh crore as compared to Rs. 1.61 lakh crore in FY 2018-19 which is a 14% increase year-on-year.



  • Gross Value Added
    According to the provisional data released by the National Statistical Office (NSO), the Gross Value Added (GVA) estimates for the first three quarters of financial year 2019-20, revealed significant revisions from what the NSO had shared back in February 2020.

    Key Points
    In February, the NSO had pegged year-on-year GVA growth rates in the first three quarters at 5.4%, 4.8% and 4.5%, respectively.

    However, the latest estimates saw significant downward revisions in the GVA data pertaining to the first three quarters to 4.8%, 4.3% and 3.5% respectively.

    The revisions combined with dull performance in the fourth quarter ultimately lowered the overall annual GVA growth estimate for 2019-20 by as much as 1% point to 3.9%, from the 4.9% forecast in February.

    The significant revisions in GVA data point to a deeper weakness in the service sectors.

    The growth estimates for the largest services sector, Financial, Real Estate and Professional Services, have been reduced sharply.

    Q1, Q2 and Q3 growth has been cut from 6.9%, 7.1% and 7.3%, respectively to 6%, 6% and 3.3%, respectively.

    Financial, Real Estate and Professional Services contributes almost one-fourth of the overall GVA.

    Trade, Hotels, Transport, Communications and services related to Broadcasting also saw a significant reduction in estimates.

    Q1, Q2 and Q3 growth has been cut from 5.7%, 5.8% and 5.9%, respectively to 3.5%, 4.1% and 4.3%, respectively.

    These services contribute almost 20% to GVA and are the second largest component of GVA.

    However, the revisions show two other key sectors, Agriculture and Public Administration in a positive light.

    The Public Administration sector’s Q1, Q2 and Q3 growth have been revised from 8.7%, 10.1% and 9.7%, respectively, to 7.7%, 10.9% and 10.9%.



  • Fitch ratings stated that Indian economy to grow at 9.5 percent in next fiscal
    Fitch Ratings stated that India's economy is forecast to grow with a sharp growth rate of 9.5% in 2021 if the country avoids further deterioration in financial sector health.

    Highlights:
    The reports initially stated that the COVID-19 pandemic will lead to shrinking of the already slowing economy in 2020-21 that started in the month of April.

    Fitch has forecasted a 5% contraction in the GDP in the ongoing financial year 2020-21.

    It also reported that India's GDP growth will return to higher levels than 'BBB' category peers.

    This is based on the expectation of slower economic growth in FY21 and wider fiscal deficits, assuming that the government's fiscal response remains restrained.



  • Foreign Direct Investment (FDI) growth in India
    According to official data released by the Department for Promotion of Industry and Internal Trade (DPIIT), foreign direct investment (FDI) in India grew by 13% to a record of $49.97 billion in the 2019-20 financial year.

    Key Details about Growth in Foreign Direct Investment (FDI)
    Foreign Direct Investment (FDI) into India rose 13% to a record $49.97 billion in FY2019-20 from $44.36 billion a year earlier.

    While the FDI through FIPB route / RBI’s Automatic Route / Acquisition Route rose 13% on year, total FDI that also includes equity capital of unincorporated bodies, reinvested earnings and other capital was up 18% on year to $73.45 billion, more than double from $36.04 billion in 2013-14.

    Sectors which attracted maximum foreign inflows during 2019-20 include:

    Services ($7.85 billion)
    Computer software and hardware ($7.67 billion)
    Telecommunications ($4.44 billion)
    Trading ($4.57 billion)
    Automobile ($2.82 billion)
    Construction ($2 billion)
    Chemicals ($1 billion)

    Singapore emerged as the largest source of FDI in India during the last fiscal with $14.67 billion investments followed by Mauritius ($8.24 billion).

    Among states, Maharashtra garnered the highest share of FDI at 30% with investments clocking $7.26 billion.

    Karnataka and Delhi followed with 18% and 17% share, respectively.



  • Draft e-com policy for comments soon: DPIIT
    Background:
    India does not have an e-commerce policy yet.

    E-commerce is a fast emerging sector and there is a need to have a definite, clear and coherent policy, keeping in tune with the requirement of the society and service providers.

    Details:
    The Department for Promotion of Industry and Internal Trade (DPIIT) will be putting out a draft e-commerce policy in the public domain to seek views and comments.

    Challenges:
    Data regulations:
    Several foreign e-commerce firms have raised concerns over some points in the draft pertaining to data.

    Quality of products:
    There are a lot of counterfeit and inferior products being listed on the e-commerce platforms. There have also been reports of violation of various safety standards in the products being sold via the e-commerce platforms.



  • India’s Rating Downgraded
    Recently, ratings agency Moody’s Investors Service downgraded India’s sovereign ratings from Baa2 to Baa3.

    Key Points
    Reason:
    The ratings agency cited slow reform momentum, constrained policy effectiveness and slower growth compared to India’s potential among the reasons for the downgrade.

    Covid-19 pandemic has only amplified the vulnerabilities in India’s credit profile that were present and building prior to the shock.

    The rating has been downgraded in the context of the coronavirus pandemic, it was not driven by the impact of the pandemic.

    Lowest Grade:
    Baa3 is the lowest investment grade in Moody’s rating ladder.
    This means, India is just one notch above the non-investment grade or junk grade.
    Moody’s had upgraded the country’s rating to Baa2 in November 2017.

    Lowers Growth Forecast:
    According to Moody, India’s real GDP growth rate will contract by 4% in 2020-21 due to the shock from the coronavirus pandemic and related lockdown measures.

    It expects the economy to grow 8.7% next financial year and closer to 6% in the subsequent year.

    India’s GDP growth slipped to an 11-year low of 4.2% in 2019-20. The fiscal deficit also expanded to 4.6% of the GDP as against the revised estimate of 3.8% of GDP in the previous financial year.



  • Social Stock Exchange
    Recently, an expert panel constituted by the Securities and Exchange Board of India (SEBI) has recommended allowing non-profit organisations to directly list on Social Stock Exchanges (SSE).

    Major Recommendations
    Issuance of Bonds:
    Allowing non-profit organisations to directly list through issuance of bonds in the form of zero coupon or zero principal bonds.

    Zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, drawing a profit at maturity, when the bond is redeemed for its full face value.

    This would help to access funds from donors, philanthropic foundations and Corporate Social Responsibility (CSR) spenders as they will be encouraged to buy zero coupon bonds.

    Social Venture Funds (SVFs):
    It recommends a range of funding avenues, such as Social Venture Funds (SVFs) under Alternative Investment Funds (AIFs).

    Social Venture Funds (SVFs) are funds investing in early-stage social enterprises to expand opportunity for people living in poverty.

    Enhanced Reporting Standards:
    Profit social enterprises be allowed to list on the platform with enhanced reporting requirements.

    The social stock exchange can be housed within the existing national bourses like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

    Significance:
    This will help the SSE to leverage existing infrastructure and client relationships with onboard investors, donors, and social enterprises.

    Certain tax incentives allowed under the recommendation would encourage participation in the culture of ‘giving’ among various stakeholders.

    It would encourage banks and other investors to participate with non profit organisations and thereby making social and economic growth more inclusive.



  • Import Cut to Become Self-Reliant
    Recently, the Union Government has identified 10 promising sectors to cut “unnecessary” import.

    Key Points
    Identified Sectors: The sectors include capital goods and machinery, mobile and electronics, gems and jewellery, pharmaceuticals, textiles and garments.

    Earlier, the government had asked the Indian industry to set new targets towards building self-reliance in furniture, footwear and air conditioners.

    Government’s Plan:
    The government is looking for increasing domestic manufacturing and exploring the export potential in these areas.

    For this, the government is bringing more investment and making India a major manufacturing destination for these sectors.

    The government is also focussing on raising quality controls to make India globally competitive.

    If necessary, the government can also raise the import duties on these sectors without violating the World Trade Organisation (WTO) bound rates.

    PM’s Focus on AtmaNirbhar Bharat: Earlier, the Prime Minister had stressed on the need for self-reliance and a stronger focus on manufacturing locally by enterprises to strengthen the economy against the impact of coronavirus and get the country back on the growth track.

    He had emphasised on the need to build robust local supply chains and focus on Make In India.

    He called for creating strong enterprises in India that can become global forces and help in generating employment.

    He highlighted that India did not use to manufacture PPE kits earlier but the pandemic has shown that India can fulfill its own needs.

    Schemes:
    The government has brought various schemes towards making India a major player in sectors like medical devices, Active Pharmaceutical Ingredients (APIs). For example: Production Linked Incentive (PLI) Scheme.

    However, in some cases, the schemes are repackaged versions of older attempts of the previous government to promote domestic production in these areas.

    For instance, recently, the government invited applications from companies to invest in India under the second phase of the electronics manufacturing scheme.

    An earlier version of a similar electronics manufacturing scheme, called the Modified Special Incentive Package Scheme was notified by the previous government in July 2012.



  • Global Economic Prospects: World Bank
    Recently, the World Bank has released a part of the Global Economic Prospects (GEP) June 2020 report.

    The report highlighted that the Covid-19 pandemic will be having a “severe” short and long term effects on economic growth.

    Key Findings
    Impact on Global Poverty:
    The Covid-19 pandemic and economic shutdowns have devastated the poor around the world which is unprecedented in modern times.

    It has been estimated that 60 million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies.

    These economic lockdowns have also damaged the multiple channels, including lower investment and innovation, erosion of the human capital and a retreat from global trade and supply linkages.

    It has also lowered the potential growth and labor productivity.



  • Agricultural Sector Reforms
    Recently, the Cabinet has approved a proposal to promulgate three separate ordinances to push agriculture marketing and commodities trade reforms in the country.

    These reforms are part of the third tranche of the economic package announced under Atmanirbhar Bharat Abhiyan to counter Covid-19 pandemic.

    These ordinances are expected to give effect to the amendments proposed to the Essential Commodities Act and bring in two new Central laws on inter-state trading and engagement of the farmers with processors, exports, etc.



  • Amendments to Essential Commodities Act (1955)
    Background:
    India has become surplus in most agri-commodities but farmers have been unable to get better prices due to lack of investment in cold storage, processing and export.

    The imposition of the curbs on stocking of farm produce and regulation of the prices of commodities, etc. under Essential Commodities Act (ECA) are some of factors responsible for less entrepreneurial spirit and thus less investment in the farm sector.

    Benefits of Amendments:
    The amendment would deregulate the commodities such as cereals, edible oils, oilseeds, pulses, onions and potatoes. It will help to lessen the fears of private investors of excessive regulatory interference in their business operations.

    Any limits under ECA over these commodities will be imposed only in exceptional circumstances such as war, famine, extraordinary price rise and natural calamity.

    The freedom to produce, hold, move, distribute and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector.

    It will help drive up investment in cold storages and modernization of the food supply chain.

    Significance:
    The announced amendment is expected to help both farmers and consumers while bringing in price stability.

    It will also create a competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.

    It is considered as a step towards transformation of agriculture and raising farmers’ income.



  • USTR’s Probe into Digital Services Taxes
    Recently, the office of the United States Trade Representative (USTR) has initiated investigations into taxes adopted or under consideration by 10 nations, including India, on revenues of American digital service companies like Netflix, Airbnb etc.

    Such taxes are known as Digital Service Taxes.

    Key Points
    The Office of the United States Trade Representative (USTR):
    It is responsible for developing and coordinating US international trade.

    The Section 301 gives the USTR broad authority to investigate and respond to a foreign country’s action which may be unfair or discriminatory as well as negatively affect US commerce.

    Adopted through the 1974 Trade act, the Section allows the US President to impose tariffs or other curbs on foreign nations.

    However, the law mandates consultations with trading partners.

    Digital Services Taxes (DSTs):
    These are the adopted taxes on revenues that certain companies generate from providing certain digital services. E.g. digital multinationals like Google, Amazon and Apple etc.

    The Organisation for Economic Cooperation and Development (OECD) is currently hosting negotiations with over 130 countries that aim to adapt the international tax system. One goal is to address the tax challenges of the digitalization of the economy.

    Some experts argue that a tax policy designed to target a single sector or activity is likely to be unfair and have complex consequences. The digital economy cannot be easily separated out from the rest of the global economy.

    India's Tax on Digital Companies:
    The US is probing the 2% Digital Services Tax (DST) that India adopted in March and which went into effect on April 1, 2020.

    The tax applies only to non-resident companies with annual revenues over $267,000, and covers online sales of goods & services to persons in India.

    Further, equalisation levy at 6% has been in force since 2016 on payment exceeding Rs. 1 lakh a year to a non-resident service provider for online advertisements.

    This is applicable for e-commerce companies that are sourcing revenue from Indian customers without having tangible presence in the particular country.



  • TULIP: The Urban Learning Internship Program
    The Ministry of Human Resource Development, the Ministry of Housing & Urban Affairs, and All India Council for Technical Education (AICTE) have jointly launched an online portal called The Urban Learning Internship Program (TULIP).

    Key Points
    Aim: The program aims to provide internship opportunities to 25,000 fresh graduates in all Urban Local Bodies (ULBs) and Smart Cities across the country.

    Concept: TULIP has been conceived pursuant to the Budget 2020-21 announcement under the theme ‘Aspirational India' which laid emphasis on changing the approach of education from ‘doing by learning,’ to ‘learning by doing'.

    Area of Work: The internship opportunities will be provided for ‘Smart City’ projects which range from positions in urban planning, water supply, waste management, slum improvement and digital governance among others.

    Eligibility: Applicants must be Indian citizens who have completed their final year of college within the last 18 months and have a degree of B. Tech, B planning, B. Arch, BA, BSc, BCom, LLB.

    Duration: Internship durations can range from eight weeks to one year.

    Benefit: It would help enhance the value-to-market of India’s graduates and help create a potential talent pool in diverse fields.

    TULIP would also benefit ULBs and smart cities. It will lead to infusion of fresh ideas and energy with engagement of youth in co-creation of solutions for solving India’s urban challenges.

    The TULIP’s launch is also an important stepping stone for fulfillment of MHRD and AICTE’s goal of 1 crore successful internships by the year 2025.



  • Periodic Labour Force Survey 2018-19
    The National Statistical Office (NSO) released the Periodic Labour Force Survey (PLFS) for July 2018 to June 2019.

    Key Points
    Unemployment Rate: India’s unemployment rate fell to 5.8% during 2018-19 from 6.1% during the same period of 2017-18.

    The urban unemployment rate reduced to 7.7% from 7.8%.

    The rural unemployment reduced to 5% from 5.3%.

    Labour Force Participation Rate: The labour force participation rate rose to 37.5% during 2018-19 from 36.9% of 2017-18.

    Female Participation Rate: The female participation rate also improved going up to 18.6% in 2018-19 from 17.5% the year before.

    Worker Population Ratio: The worker population ratio also increased, to 35.3% as against 34.7% in the 2017-18.

    Issues Involved:
    Unemployment was a concern in 2019 and it worsened in 2019-20 due to Covid-19.

    According to the monthly Centre for Monitoring Indian Economy data, the unemployment rate in India shot up from 7.87% in June 2019 to 23.48% in May 2020.

    Periodic Labour Force Survey (PLFS)
    PLFS is India’s first computer-based survey launched by the National Statistical Office (NSO) in 2017.

    It has been constituted based on the recommendation of Amitabh Kundu.

    PLFS has two fold objectives:
    To estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the Current Weekly Status (CWS).

    To estimate employment and unemployment indicators in both usual status and CWS in both rural and urban areas annually.

    Before PLFS the NSSO (previous name of NSO) used to bring the data related to employment and unemployment based on its quinquennial household socio-economic survey programme.


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