Indian economy

ALPINE SKI HOUSE
Structure of
Indian
Economy
History, Growth, Future.
Manu Antony Chachirayil

ALPINE SKI HOUSE
History of
Indian Economy
Through the Ups and Downs

ALPINE SKI HOUSE
ANCIENT INDIA
 Indus Civilization
 Growth of Empires
 Indian Economy Stabilizing
 Major Trade items were; Jewelry, Cotton,
Handicrafts & Utensils, Rice & Wheat etc.
 World’s largest and most beautiful cities.
 Progress in Literature, Science and
Technology

ALPINE SKI HOUSE
MEDIEVAL INDIA
 Mughal Rule
 Islamic Economic Policies
 Growth of per capita GDP
 Largest economy and manufacturing
power in the world.
 25% of world’s industrial output.
 Leader in agriculture, textiles, ship
building etc.

ALPINE SKI HOUSE
BRITISH INDIA
 Destruction of Domestic Industry
 Forceful conversion to a consumer market
 Agriculture sector was destroyed to create raw
material supply for British Industries.
 Huge tax burden and tariffs
 Transformation from richest to one among the
poorest
 Share in the world economy declining from 24.4% in
1700 to 4.2% in 1945
 Share in the global industrial output declining from
25% in 1750 to 2% in 1900

ALPINE SKI HOUSE
POST-INDEPENDENCE
 Rising From the ashes
 Industrial Policies
 Planning Commission
 Green Revolution
 LPG Policies
 Tertiary Sector flourishing

ALPINE SKI HOUSEALPINE SKI HOUSE
INDIAN ECONOMY –
CHARACTERISTICS
6th largest Economy
Low Per-capita Income
Agrarian Economy
Huge Population
Income Disparities
Low Capital Formation
Backwardness of Infrastructure
& Technology

ALPINE SKI HOUSEALPINE SKI HOUSEManu Antony Chachirayil

Sectorial Contributions to Indian GDP (1950-51)
Primary (54.56%)
Secondary
(16.11%)
Tertiary (29.33%)
GDP Contribution (Percentage)
Primary (54.56%)
Secondary (16.11%)
Tertiary (29.33%)

Sectorial Contributions to Indian GDP (2018-19)
Primary
(15.87%)
Secondary
(29.73%)
Tertiary (54.4%)
GDP Contribution (Percentage)
Primary (15.87%)
Secondary (29.73%)
Tertiary (54.4%)

ALPINE SKI HOUSE
46.61
40.33
24.9
17.49 17.32
0
5
10
15
20
25
30
35
40
45
50
Iraq Saudi
Arabia
Iran UAE Venezuela
Crude Imports (in million tonnes)
2018-2019
Crude Imports (in
million tonnes)
2018-2019
220 mt
(2017-18)
207 mt
(2018-19)
Decrease in India’s Oil Imports

India’s International Trade (2017-18, WB Reports)
Imports
$444 Billion
Exports
$294
Billion

India – Export & Import
Top 5 Export Partners
1) European Union (17.5%)
2) USA (16.1%)
3) UAE (9.6%)
4) Hong Kong (5%)
5) China (4.2%)
Top 5 Import Partners
1) China (16.6%)
2) European Union (10.4%)
3) USA (5.7%)
4) UAE (4.9%)
5) Saudi Arabia (4.6%)

India – Export & Import
Top 3 Export Items
1) Refined Petroleum (19%)
2) Gems, Precious Stones and Jewelry
(13%)
3) Automotive (4.6%)
Top 3 Import Items
1) Crude Oil (33%)
2) Gems and Precious metal (13%)
3) Electronics Goods (7%)

ALPINE SKI HOUSE
INDIAN ECONOMY - 1947
Vicious Circle of Poverty
Low Per Capita Income
Illiteracy at 84%
Poor Health Management
Unemployment and Disguised
Unemployment
No significant Industries
Agriculture
49%
Mines & Mnf
17%
Trade&
Transport
18%
Others
16%
Share in NI 1947
Agriculture Mines & Mnf Trade& Transport Others

ALPINE SKI HOUSE
Economic
Planning
The Indian Context

Need for Planning in India
• Economic Growth
• Economic Equality and Social Justice
• Full Employment
• Economic Self Reliance
• Modernization
• Redressing Imbalances.

Economic Systems
• An economic system, or economic order, is a system of production, resource
allocation and distribution of goods and services within a society or a given
geographic area.
• It includes the combination of the various institutions, agencies, entities, decision-
making processes and patterns of consumption that comprise the economic
structure of a given community.

Free Market/ Capitalist Economy
“An economic system, where the factors of production are owned and managed by private
individuals and corporations and all the economic activities are directed towards earning
monetary benefits”
• Profit Motive – income received in monetary terms
• Private ownership of Factors of production
• Minimal Govt. Intervention
• Competitive Market
• Two-Class system
• Freedom of Choice

Planned Economy/ Socialist Economy
• “A socialist economic system is characterised by social ownership and operation of the
means of production that may take the form of autonomous cooperatives or direct public
ownership wherein production is carried out directly for use.”
• Social Welfare
• No private ownership
• Income may not be monetary
• Existence of Central plan

Mixed Economy
• “An economic system, blending elements of market economies with elements of planned
economies, free markets with state interventionism, and private enterprise with public
enterprise”.
• Co-existence of Control and Freedom
• Public and Private ownership
• Planning
• Profits and Social Welfare

Planning Commission of India
• Set up by a resolution of the Govt. of India in 1950
• Prime Minister as the Ex-officio chairman
• 7 members other than PM;
4 full time members,
Minister of Planning,
Minister of Defence,
Minister of Finance

Functions of Planning Commission
• Assessment of Resources
• Making Plans for the effective utilization of the resources
• Defining the stages of Plan execution
• Establishing the system and Govt. Machinery required to enact the plan
• Appraisal
• Recommendations

Limitations of Centralized Planning in India.
• 1. Unrealistic/Over ambitious Plans
• 2. Lack of Pragmatic approach
• 3. Faulty Implementation
• 4. Natural Constraints
• 5. Rapid Growth of Population
• 6. Lack of Coordination
• 7. Diversity of Economy and Society

ALPINE SKI HOUSE
National
Institution for
Transforming
India

NITI AAYOG
• A policy think tank of the GOI, established with the aim to achieve Sustainable
Development Goals and to enhance cooperative federalism by fostering the
involvement of State Governments of India in the economic policy-making process
using a bottom-up approach.

Composition
• The permanent members of the governing council are;
• All the State Chief Ministers, along with the Chief Ministers of Delhi and Puducherry,
• The Lieutenant Governor of Andaman and Nicobar
• A vice chairman nominated by the Prime Minister
• In addition, temporary members are selected from leading universities and research
institutions. These members include a chief executive officer, four ex-official
members and two part-time members.

Present Composition
• Chairperson: Narendra Modi
• Vice Chairperson: Rajiv Kumar
• Ex-Officio Members: Amit Shah, Rajnath Singh, Nirmala Sitaraman and Narendra Singh Tomar
• Special Invitees: Nitin Gadkari, Piyush Goyal, Thawar Chand Gehlot and Rao Inderjit Singh
• Full-time Members: V. K. Saraswat (former DRDO Chief), Ramesh Chand (Agriculture Expert) and Dr.
Vinod Paul (Public Health expert)
• Chief Executive Officer (CEO): Amitabh Kant
• Governing Council: All Chief Ministers of States (and Delhi and Puducherry), Lieutenant Governor of
Andaman & Nicobar Islands, and Special Invites

Functions
• To evolve a shared vision of national development priorities, sectors and strategies.
• To foster cooperative federalism.
• To develop mechanisms to formulate credible plans at the village level.
• Incorporation Interests of National Security in Economic Strategy
• Special attention to the sections of our society that may be at risk of not benefiting adequately from
economic progress.
• To design strategic and long term policy and programme frameworks and initiatives, and monitor
their progress and their efficacy.

Functions
• To provide advice and encourage partnerships
• To create a knowledge, innovation and entrepreneurial support system
• To offer a platform for resolution of inter-sectoral and inter departmental issues
• To maintain a state-of-the-art Resource Centre, be a repository of research on good governance.
• To actively monitor and evaluate the implementation of programmes and initiatives.
• To focus on technology up-gradation and capacity building for implementation of programmes and
initiatives.
• To undertake other activities as may be.

Major Initiatives
• AMRUT
• Digital India
• Atal Innovation Mission
• Medical Education Reforms
• Agriculture reforms etc.

ALPINE SKI HOUSE
Public Sector
in India
Dynamics, Scope & Relevance

Maharatna Companies
• National Thermal Power Corporation (NTPC)
• Oil and Natural Gas Corporation (ONGC)
• Steel Authority of India Limited (SAIL)
• Bharat Heavy Electricals Limited (BHEL)
• Indian Oil Corporation Limited (IOCL)
• Coal India Limited (CIL)
• Gas Authority of India Limited (GAIL)
• Bharat Petroleum Corporation Limited (BPCL)

Criteria for Maharatna Status
• For the last three years company should have the turnover more than Rs. 25,000 Crore.
• Net worth of the company for last three years should be more than Rs. 15,000 Crore.
• Net profit on yearly basis should be more than Rs. 5000 Crore after paying tax for last three years.
• The company must have its presence at Indian stock Exchange as per the SEBI’s rules of minimum
prescribed public shareholding limit.

Objectives of Public Sector
• Rapid Economic Growth and Industrialization
• Returns on Investment
• Redistribution of Income and Wealth
• Employment opportunities
• Balanced Regional Development
• Development of small scale and ancillary Industries
• Import Substitution
• Putting up effective competition
• Gaining economic Command

Role & Relevance of Public Sector in India
• Prosperity of Private Sector
• Filling the gaps in Capital Goods
• Share in National Income
• Development of Agriculture
• Command on Strategic Sectors
• Share in total investment
• Employment Generation
• Export Earnings
• Balanced regional developmentManu Antony Chachirayil

Arguments against Public Sector
• Performance & Efficiency
• Loss makers
• Requires Budget support
• Low return on Capital
• High Production cost
• Low quality
• Weakens fiscal position

ALPINE SKI HOUSE
Public Sector
Reforms
Redefining the Economy

• The major Public sector reforms in India began in the year 1991.
• The elemental changes included the following;
• 1. Liberalization of Govt Controls
• 2. Larger role for the Private Sector
• 3. Functional Autonomy to the Public sector
• 4. Increasing Competition
• 5. Greater integration with World Economy

New Industrial Policy 1991
• Reduction of Industries in Public Sector
• Disinvestment
• Policy for Sick public enterprises
• Greater autonomy for PSU Management

Nehruvian
Model Economy Liberalized
Economy

PHASES OF REFORMS
Phase 1 – 1992-1998
Phase 2 – 1998-2004
Phase 3 – 2004-2014

ALPINE SKI HOUSE
Phase 1
1992 - 1998

Major Reforms
• Policy framework for Divestment upto 20% shares in CPSEs
• Targeted buyers were- Mutual Funds, Workers and General Public
• Foreign Institutional Investors were also allowed
• Rangarajan committee recommended upto 74% divestment in non strategic areas
• Maruti Udyog Ltd was sold to Suzuki
• IBP was sold to IOC
• Focusing on enterprises on areas like strategic, High technology and Basic infrastructure sector
• Sector reservation policy was taken away
• Sick unit management and institutional framework for laid off employees
• Navaratna Status

ALPINE SKI HOUSE
Phase 2
1998 - 2004

Major Reforms
• Change in Political Ideology
• Disinvestment to Privatization
• Realizing about 63.5 Billion from strategic sales
• Indian Petrochemicals, VSNL, Bharat Aluminum etc. were privatized

ALPINE SKI HOUSE
Phase 3
2004 - 2014

Major Reforms
• Discontinuation of Privatization
• Revival measures for sick PSUs
• Creation of Board of Reconstruction of Public Sector Enterprises (BRPSE)
• Arjun Sengupta Committee
• Managerial Autonomy to PSUs
• Reducing Ministerial control through ‘Presidential Decree’
• Negative List

ALPINE SKI HOUSE
Disinvestment
Process & Impact

Meaning
• Financial Perspective : Liquidation of an Investment by means of
converting them into cash
• Economic Perspective : Dilution of the stake of Government in a public
enterprise through public offerings

Objectives of Disinvestment
• Reducing the Financial Burden of the Govt.
• Improving public Finances
• To introduce competition and market discipline
• To find growth
• To encourage wider share of ownership
• To depoliticize essential services

ALPINE SKI HOUSE
Air India
Case Analysis

Air India
• Est. 1946
• Originally Tata Airlines (1936)
• Largest International Carrier of India
• 18.6% Market Share
• 60+ International Destinations
• Member of the Star Alliance

Reasons for Poor Performance
• Acquisition of Indian Airlines
• Massive fleet order
• Faulty deployment
• Low utilization of HR
• Lack of ancillary revenue
• Mismanagement (A320 issue)
• Loss making International Operations
• Manpower management (Required Employees – 7245, Actual – 11,433)
• Faulty Sale& Leaseback method

Solutions
• Sale of non core assets
• Revenue from renting the assets and premises
• Slab Retirement
• VRS & other exit schemes for employees
• Better management of flight routes and timings
• Better utilization of manpower

ALPINE SKI HOUSE
Case Analysis
BSNL

BSNL
• Est. 2000
• Largest provider of fixed telephony and Broadband internet services in the Country
• Market share is more than 60%
• Fourth largest mobile service provider
• Pioneers of mobile network technologies in India like GSM.

Reason for Losses
• Govt. in Loksabha have stated 3 major reasons for the poor performance;
• 1. Low Tariffs
• 2. High Staff cost (Salary expenses alone is 75% of operating revenue)
• 3. Absence of 4G services.
• Poor Management
• Slow decision making process
• Lack of motivation/encouragement etc

How to revive?
• 4G Spectrum
• Fiscal aid to manage the initial competition
• Exit policies for redundant employees or poor performers
• Professional Management

ALPINE SKI HOUSE
Public Private
Participation

Meaning
• IMF Defines PPP as
• “The transfer to the private sector of investment projects that traditionally have been executed or
financed by the Public sector”
• The key elements of a PPP arrangement are;
• 1. Involvement of Govt./Statutory entity and the Private Sector
• 2. Creation of Public assets or Public Services
• 3. Investment/Management being undertaken by Private entities
• 4. Specified time frames
• 5. Allocation of Risk among the two parties
• 6. Cash inflows authorized to the Private entity for a specified period of time.

Types of PPP Models in India
• 1. Service Contract
• 2. Management Contract
• 3. Lease Contract
• 4. Concession
• 5. Other Popular Models

Service Contract
• Govt hires a private entity to carryout one or more specific tasks/services for a
specified period
• Typically the duration is 1-3 years
• Public authority remains the primary provider of the Infrastructure
• Performance standards for the private entity
• Specified cost agreement

Management Contract
• Contract for transferring both Management and Operation
• Private party provides for the Working Capital here
• No long term financing obligations for the Private Party
• Private party is paid at predetermined rates for its labour and other operating costs.
• Primary responsibility for service remains with Public sector.

Lease Contract
• Responsibility for the service is with the private entity.
• Private sector undertakes obligations for maintaining quality and service standards
• The operator provides the service at his own cost and risk
• Duration is typically 10-20 years
• Operator is responsible for losses and unpaid customer debts

Concession
• Here the private entity is termed as the ‘CONCESSIONAIRE’
• The Concessionaire is responsible for the full delivery of services in a specified area.
• Responsibilities include Construction, operation, maintenance, collection,
management and rehabilitation of the system.
• Operator is responsible for all capital investment
• The ownership of the assets remains with the Public sector
• Public sector plays the role of a regulator.
• Operator collects tariffs from the customers directly
• Duration 25-30 years

Other Popular Models
• BOT
• BTO
• BOO
• DBO
• Joint Ventures

ALPINE SKI HOUSE
Vizhinjam
International
Sea Port
PPP Example in Kerala

Vizhinjam International Transshipment Deep-water
Multipurpose Sea Port
• Design Build Finance Operate and Transfer Model
• The Partners are Govt. of Kerala and Adani Group
• Landlord Model

Selection of Concessionaire

ALPINE SKI HOUSE
Fiscal Policy

ALPINE SKI HOUSE
“The policy framework
established by the Govt.
to manage taxation,
public expenditure and
borrowings”

ALPINE SKI HOUSE
Fiscal Policy
Revenue Expenditure Deficit Debt

ALPINE SKI HOUSE
Revenue&
Expenditure!
Indian Context

Classification Of Expenditure

ALPINE SKI HOUSE
Deficit&
Debt!
Indian Context

Budgetary Deficit
Fiscal Deficit
• Total Receipts (Excluding Borrowings) – Total Expenditure
Revenue Deficit
• Total Revenue Receipts – Total Revenue Expenditure
Primary Deficit
• Fiscal Deficit – Interest Payments

Effects of Deficit Financing – Individual Perspective!
Creditors
Come Calling
Credit Rating
Plummets
Cost of Credit
Increases
No Savings
Gambling
No
Investments

Effects of Deficit Financing in an Economy
• Leads to Inflation
• Adverse Effect on savings and Investment
• Inequality
• Unfavourable BOP
• Changes in the pattern of Investment

MULTILATERAL,
10.90% BILATERAL, 4.60%
IMF, 1.10%
EXPORT CREDIT,
1.80%
COMMERCIAL
BORROWINGS, 38.30%
NRI DEPOSITS, 24.00%
RUPEE DEBT, 0.20%
COMPOSITION IN INDIA'S TOTAL EXTERNAL DEBT
MULTILATERAL
BILATERAL
IMF
EXPORT CREDIT
COMMERCIAL BORROWINGS
NRI DEPOSITS
RUPEE DEBT

LONGTERM DEBT,
81%
SHORT TERM
DEBT, 19%
COMPOSITION OF INDIA’S FOREIGN DEBT
LONGTERM DEBT
SHORT TERM DEBT

India’s Bilateral Debt Composition
Japan, 79.70%
Germany, 10.90%
Russia, 5.30%
France, 3.30% US, 0.70%
Others, 3.10%
India's Bilateral Debt
Japan
Germany
Russia
France
US
Others

ALPINE SKI HOUSE
Why Japan is
Lending So
much to
India?

Rationale
• Low Interest Rates in Japan (Almost Touching Zero)
• High Liquidity of Japanese Banks
• Japan’s fear of Deflation
• Assisting Stagnant Industries of Japan
• Sourcing Clauses with India
• India’s good Creditworthiness

Bullet Trains

Mag-Lev Trains

ALPINE SKI HOUSE
Credit Rating - Countries by Standard & Poor's Foreign Rating (March 2019)

ALPINE SKI HOUSE
Monetary
Policy
Meaning & Measures

Definition
“Monetary policy consists of the
policy framework of the central
bank, or other competent
monetary authority of a
country, that controls the
quantity of money in an
economy and the channels by
which new money is supplied”

Monetary
Policy
Credit Control
Control of
Money Supply

Tools of Monetary Policy
• Bank Rate (Repo, Reverse Repo)
• Statutory Ratios (CRR,SLR)
• Open market Operations
Quantitative
Measures
• Direct Action
• Moral Suasion
• Margin Requirements
Qualitative
Measures

ALPINE SKI HOUSE
Management
of Public Debt

Classification of Public Debt
Internal Debt
External Debt
Public Account Liabilities

Internal Debt - Instruments
• Dated Securities/Govt. Bonds
• Treasury Bills
• Borrowings from ‘Small Savings Fund’
• Market Stabilization Scheme (MSS Bonds)

National Small Saving Fund
• National Small Savings Fund (NSSF) in the Public Account of India was established in 1999.
• The Fund is administered by the Government of India, Ministry of Finance
• Small savings instruments can be classified under three heads:
• Postal deposits (comprising savings account, recurring deposits, time deposits of varying
maturities and monthly income scheme),
• Savings certificates like: National Small Savings Certificate(NSC) and Kisan Vikas Patra (KVP)
• Social security schemes like: Public Provident Fund (PPF) and Senior Citizens‘ Savings
Scheme(SCSS)

External Debt - Sources
• Multilateral Borrowings (IBRD,WB,IDA,ADB ETC)
• Bilateral Borrowings (From Foreign Countries)

Public Account Liabilities
• It refers to the liability of the Govt. upon the fund in the Public Account
of India.
• The fund includes – Small Savings, PF etc.

Reasons for Public Borrowing
• Public Sector Projects
• Natural Calamities
• Economic Growth & Stability
• Financing PSUs
• To provide for foreign exchange
• Soft Revenue option

Debt Management in India
• 1. RBI – Domestic Marketable Debt
• 2. MOF – External Debt + Public Account Liabilities

ALPINE SKI HOUSE
The Union
Budget
Views n Vows

ALPINE SKI HOUSE
GST
History & Development in India

GST - Overview
• It is a comprehensive, multistage, destination based tax.
• The tax came into effect from July 1, 2017 through the implementation
of One Hundred and First Amendment of the Constitution of India by
the Indian government.
• The tax replaced existing multiple flowing taxes levied by the central
and state governments.

Key Elements
• it has subsumed almost all the indirect taxes except
few.Comprehensive
• it is imposed at every step in the production process,
but is meant to be refunded to all parties in the various
stages of production other than the final consumer.
Multistage
• it is collected from point of consumption and not point
of origin like previous taxes
Destination
Based

GST Tax Slabs

GST –
Exempted items

Items outside GST
• Petroleum
• Alcohol
• Electricity
There is a special rate of 0.25% on rough precious
and semi-precious stones and 3% on gold.
In addition a cess of 22% or other rates on top of 28% GST applies on
few items like aerated drinks, luxury cars and tobacco products.

GSTIN –
GST Identification Number

HSN Code
• HSN – Harmonized System of Nomenclature
• HSN is an 8-digit code for identifying the applicable rate of GST on
different products as per CGST rules.
• If a company has turnover up to 1.5 Crore in the preceding financial
year then they need not mention the HSN code while supplying goods
on invoices.

GST Council
• It is the Governing body of GST
• It is the apex member committee to modify, reconcile or to procure any law or
regulation regarding GST in India.
• 33 Members
• Chair – Union Finance Minister
• The Finance Ministers of all the states are members of the council

GSTN – Goods and Service Tax Network
• "Goods and Services Tax"
Network (GSTN) is a nonprofit
organisation formed for
creating a sophisticated
network, accessible to
stakeholders, government and
taxpayers to access information
from a single source (portal).
Central Govt,
24.50%
State Govt,
24.50%HDFC,
10%
ICICI, 10%
NSE
Strategic
Holdings,
10%
LIC Housing
Finance, 11%
Share Holding
Central Govt
State Govt
HDFC
ICICI
NSE Strategic
Holdings
LIC Housing Finance

History of GST
• 1999 – Draft Proposal – Vajpayee Government
• 1999 – Draft committee for GST Model Development
• 2004 – 12th Finance Commission recommends GST Roll out
• 2004 - BJP Defeated at the Center, UPA Assumes power.
• 2011 – TMC Defeated at W.B, GST Committee head Asim Dasgupta resigns, causing further
delay
• 2014 – NDA back to power
• 2016 – Loksabha passes the Constitution Amendment Bill, But deadlock in Rajyasabha
• 2016 – Parliament passes the Amendment Bill
• 2016 – 18 states ratifying the same.
• 2017 July 1 - GST Regime Commences

ALPINE SKI HOUSE
THANK YOU
www.slideshare.net/ManuAntony
Manu Antony
9567 320 002
cmanuantony@gmail.com

Indian economy

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Indian economy

Similar to Indian economy (20)

More from Manu Antony

More from Manu Antony (20)

Recently uploaded

Recently uploaded (20)

Indian economy

Editor's Notes