MPSC मुख्य परीक्षा २०१६. अर्थशास्त्र भाग १. सामान्य अध्ययन पेपर ४

INDIAN ECONOMY
-Syllabus & meaning of Concept
- Types & Process of Planning
- Historical aspects & Timeline of Plg
- Review of Five yr plans
- NITI Aayog
- 14th
Finance Commission

Timeline of planning in India
1934-M. Visvesvarayya plan in his book “The planned economy of
India”.
1934- FICCI plan
1938- Nehru’s Congress plan. But not implemented due to WW2.
1944- ‘Bombay plan’ by noted industrialists such as JRD Tata,
GD Birla, Kasturbhai Lalbhai et al.
1944- Sriman Narayan Agrawal’s ‘Gandhian plan’.
1945- MN Roy’s “People’s plan” – with socialist leanings.
1950- Jayprakash Narayan’s ‘Sarvodaya Plan’ based on Vinoba
Bhave’s philosophy.
1950-Cabinet resolution to form Planning commission.
1952- National Development council (NDC) made by Cabinet
resolution.
2014 - Modi shuts down planning commission.
2015 - Government notified the formation of Niti Aayog- National
Institution for Transforming India.

Five Year plans in India
Plan Period Theme/Model/target
1st (2.1 vs 3.6) 1951-56 Harrod Domar Model
- Main focus: Agriculture, irrigation and power.
- Got more GDP growth than its original target;
- Importance to Agri; Only FY plan when inflation reduced
-CDP(1952),NES(1953)
-DVC;Bhakra Nangal,Kosi;Hirakund.
- Sindri Fertilizers;Chittaranjan Locomotives;HAL
2nd
(4.5 vs 4.21) 1956-61 P.C.Mahalanobis Model
Socialist model, Rapid industrialization, heavy industries.
-Importance to Heavy Industries;
-2nd
IPR(1956),IADP
-BHEL,Bhilai Steel Plant(Indo-Russia), Rurkela Steel Plant (Indo-
German),
Durgapur(Britain,Germany, Russia & India).
- Nangal Fertilizers;Rurkela Fertilizers
3rd
(5.6 vs 2.7) 1961-66 Sukhmoy Chakraborty and Sanddy
Also called “Gadgil Yojana”.
Failed to achieve target due to droughts and wars with Pak-China
-CACP, FCI
Holidays 1966-69 - Holiday Plan;
- Devaluation of currency (1966);Green Revolution
4th (5.7 vs 2.0) 1969-74 Ashok Rudra-Alon Manney
- Growth with stability and self-reliance.
- Failed due to Bangladeshi refugee problem and drought.
- Nationalization of banks;MRTP Act (1969);FERA Act (1973)
- DPAP; Op Flood

5th (4.4 vs 4.8) 1974-79 -Focus on poverty removal and self-reliance
-Originally it was a 10 year long term perspective plan
-Satrted politicization of plg as PC tool
-TRYSEM,DDP,ICDS
Rolling Plan 1978-80 -Morarji Desai’s Janta government came up with Rolling plan
- We’ll measure progress every year (for sectoral areas) and
make new plans accordingly for next year.
- Adv of flexibility and reducing gap betn expected & achieved growth rate
- DIC for devlt of SSIs
6th (5.2 vs 5.5) 1980-85 - Poverty removal & Empl generation,
- IRDP(1980), NREP(1980), DWCRAetc.
-Nationalization of 6 banks(1980),NABARD(1982),EXIM(1982)
7th
(5.0vs 6.0) 1985-89 -Focus on Employment
- First time Indicative Plg in S&T.
-Perspective plan for 1985-2000
-JRY,NRY,CAPART
2 Annual plans 1989-91 -Political & Eco instability at Centre. So only annual plans.
8th (5.6 vs 6.7) 1992-97 -John W.Miller model.
- PV Narasimha Rao- LPG reforms
- LPG;Rethinking on role of State;Thrust on social sector

9th (6.5 vs 5.5) 1997-2002 Growth with social justice and equity.
- Issue of fiscal consolidation became top priority;
- Reducing subsidies,decentralisation
- Failed due to global slowdown after Asian financial crisis.
FEMA (1999),,PMGSY(1999),PMSRY(1997),AAY(2000),SSA(2001)
10th (8.0vs 7.7) 2002-07 - People’s plan with more involvement of NDC
- -Monitorable targets(27 targets, 6 areas)
- -VAT (2005),Bharat Nirman(2006), NREGS(2006),JSY(2005)
- 8% GDP growth rate, double per capita income in 10 years.
11th (9.0/8.1 VS 7.9%) 2007-12 Theme: “inclusive growth”
- C.Rangarajan framed it with targets: 8-10% growth rate, 70
million new jobs, lower IMR, CMR, TFR etc
12th (9.0) 2012-17 Theme: “Faster, More inclusive and sustainable growth”.
Target growth rates: 9% GDP, 4% Agriculture, 10% Mfg.
10% reduction in poverty, create 50 million new jobs.
Get IMR:26, MMR:1 per 1000,Child Sex ratio: 950, TFR: 2.1
Increase mean school years, forest cover, infrastructure
investment, rural tele-density.

What is the theme of 12th Five Year plan?
 Theme=Faster, sustainable and more inclusive growth.
 Faster growth= GDP should grow at 9% per year.
 Sustainble growth = Today’s development without hampherig tomorrow’s future.
 More inclusive growth= Women, SC,ST,BPL, Physically challenged and minorities should also benefit from 9%
GDP growth. + The fruits of Growth should be spread all over India and should not get concentrated in a few big
states only.
What are the main targets of 12th FYP?
 Every year GDP should grow the 9%. (this was the original target but in Oct 2012,
new target is 8.2% per year).
 Every year Agriculture sector should grow at 4%, because Higher agricultural growth would provide income
benefits to the rural population and It’ll also reduce food inflation.
 Every year, manufacturing sector should grow at 10%
 At present, 30 per cent of the population is below poverty line. 12th FYP wants to bring down the poverty ratio
by 10 per cent.
 Major flagship programmes in the Eleventh Plan, would continue in the Twelfth Plan.
1. National Health Mission (NHM),
2. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA),
3. Pradhan Mantri Gramin Sadak Yojana (PMGSY)
4. Integrated Child Development Scheme (ICDS)
5. National Rural Livelihoods Mission (NRLM).
 Focus Areas: Health, education, infrastructure and skill development
 Allocation in the health sector is all set to double.

• Different Models of Investment and Planning related to India includes:
• Harrod Domar Model : The model implies that economic growth depends
on policies to increase investment, by increasing saving, and using that
investment more efficiently through technological advances. It suggests
that there is no natural reason for an economy to have balanced growth. It
was more or less a One Sector Model. —>Failed to attract investment on
consumer goods in India as we lacked good capital goods industries.
• Solow Swan Model : The neo-classical model was an extension to the 1946
Harrod–Domar model that included a new term: productivity growth.
• Feldman–Mahalanobis model : A high enough capacity in the capital goods
sector in the long-run expands the capacity in the production of consumer
goods. Thus the essence of the model is a shift in the pattern of industrial
investment towards building up a domestic consumption goods sector. It
was a Two Sector Model which was later developed into Four Sector Model.
Also known as Nehru-Mahalanobis model. Rao ManMohan Model : Policy
of Econmic Liberilization and FDI initiated in 1991 by Narasimha Rao and
Dr.Manmohan Singh.
• Lewis model of economic development by unlimited labour supply.
• Induced Investment Model.
• Leverage Investment Model.

Position Planning Commission NITI Aayog
Born - 1950, March 15th
2015, January 1st
Chairman - Prime minister PM
Vice Chairman - Last Dy.Chairman was Montek Singh Ahluwalia (Cabinet
minister rank).
Free market economist Arvind Panagriya. He was the Chief economist of Asian
Development bank, and the the brain behind Rajasthan’s land-labour reform.
CEO-Member-Secretary (IAS) Sindhushree Khullar
A secretary level bureaucrat with fixed tenure.
Same Ms. Sindhushree Khullar is the first CEO.
Ex officio members-Finance Minister & Planning minister
PM can nominate four-Union ministers. Modi has nominated following:
1. Home
2. Finance
3. Railway
4. Agriculture
Full time members- 4 to 7 full time members, who enjoy
“Minister of State” rank.
Bibek Debroy (Free market economist) &
Dr. V.K. Saraswat (technocrat, missile scientist and Ex-DRDO chief.)

SpecialInvitees-
Union ministers for
1. Transport
2. HRD
3. Social Justice
+PM can invite other experts as and when needed.
part-time members-Tech experts from research institutes.
Currently none declared. Rotational posts.
Governing Council- Chairman: Prime minister,Chief ministers
of all states,Lieutenant governors of all Union territories.
Ad hoc Regional Councils- Will have CMs of states that
fall in the region. They’ll be dealing with specific issue
concerning a group of states for example irrigation,
naxal-problem, infrastructure etc.

1. Think tank for Government policy formulation.
2. Find best practices from other countries, partner with other desi-videsi bodies to help their adoption in
India.
3. Cooperative Federalism: Involve state governments and even villages in planning process.
4. Sustainable development: + Modi’s Zero defect-zero effect(on environment) manufacturing mantra.
5. Urban Development: to ensure cities can remain habitable and provide economic venues to everyone.
6. Participatory Development: with help of private sector and citizens.
7. Inclusive Development or Antyodaya. Ensure SC, ST and Women too enjoy the fruits of Development.
8. Poverty elimination to ensure dignity and self-respect.
9. Focus on 5 crore Small enterprises– to generate more employment for weaker sections.
10. Monitoring and feedback. Midway course correction, if needed.
11. Make policies to reap demographic dividend and social capital.
12. Regional Councils will address specific “issues” for a group of states. Example: Regional Council for
drought, Left-wing extremism, Tribal welfare and so on.
13. Extract maximum benefits from NRI’s geo-economic and Geo-political strength for India’s
Development.
14. Use Social media and ICT tools to ensure transparency, accountability and good governance.
15. Help sorting inter-departmental conflicts.
Functions & Mandates of NITI AAYOG-

Niti Aayog: Criticism/Anti-Arguments
1.
Bibek Debroy (Fulltime member) himself criticized the vaguely worded press-release
on Niti-Aayog formation. Modi should have specfically pointed out its functions and
jurisdiction.
1. Modi’s “arbitrary decision” to dismantle the Planning Commission, without taking
NDC or states into confidence- this undermines cooperative federalism.
2. From union territory only Lieutenant Governors invited. CM of Delhi and
Puducherry can’t participate in Governing council.
3. Like PC, NITI Aayog too is a non-Constitutional, non-statutory body formed by a
cabinet resolution. It is not accountable to parliament, and if line-ministries fail to
achieve targets, NITI Aayog cannot punish them.
4. Niti Aayog should have been created through a legal/Constitutional amendment.
There should be a perspective plan spanning for 15 to 20 years. Otherwise, what if
another party comes into power and dismantles this.
5. It’ll take minimum 6-8 months for Niti Aayog to set things in motion. In between
that time, Development will be halted due to paucity of funds and ideas.
7. Planning commission and NDC decided “special category states” and gave them additional
funding to help the poor and backward regions. With advent of Niti Aayog, will those states
lose their ‘status’ and extra-funding?.Uncertainty prevails.
8. Niti Aayog will confict with Cabinet Secretariat (for inter-ministerial coordination) and
constitutional body Inter State Council (for coordination with states).

Niti Aayog: Criticism/Anti-Arguments
9. FinMin offcials always try to squeeze budget to keep the fiscal deficit under FRBM
targets. Niti Aayog and its free market economists will further reduce welfare schemes to
help them.
10. At present we’ve 60+ centrally sponsored schemes. Modi aims to combine them into
just 10 schemes. Thus, poor and marginalized communities will suffer.
11. Planning commission used to monitor of human development in the States, Sub-plans
for women, SC and ST. Niti Aayog doesn’t say how they’ll do it.
12. Niti Aayog’s mandate repeatedly says they’ll focus on manufacturing sector. Rajan says
“just because China succeeded on manufacturing focus, doesn’t automatically guarantee
that same Cinderella story will repeat here.”
13. Modi distributed the planning-Expenditure function to FinMin and subject matters to
respective ministries. This will result in loss of perspective and long-term view. Now State
governments will have to lobby at both type of ministries to get funds released.
14. Planning Commission’s Nehruvian Economists advocated decentralized planning.
Modi’s free market economists and technocrats will pursue centralized planning and e-
monitoring.
15. 1961: Indian Economic Service (IES) was born on Nehru’s initiative. Modi doesn’t invite
them in meetings, free market economists look down upon them with utter disdain. How
they’ll be integrated in the new system? No clear answers given in the press-release.
16. There is no need for any Planning commission or Niti Aayog. Good work can be done
even without them- through line ministries and interstate councils.
Anyways, the real work of NITI Aayog is yet to begin. So, most criticism is centred around
the theme that “Since press release doesn’t talk about xyz thing- so only bad thing will
happen.”. But, only time will tell how NITI Aayog fares in real life.

Fourteenth Finance Commission
Appointed every five years the Finance Commission is a constitutional body with the broad mandate to define
centre – state federal relations. Its most important task is to recommend division of states’ revenues collected
by the Centre of the ‘divisibility pool’ between the Centre and the states and the share to be allocated to
each state.
The Fourteenth Finance Commission (FCC) submitted its recommendations to the Government
in December, 2014. Some of its important recommendations include the devolution of a
significantly higher share of 42 per cent of the divisible pool to states compared with the 32 percent share
recommended by the 13th Finance Commission.
Accordingly the total devolution to the states in 2015-16 is to be ₹ 5.26 lakh crores which is ₹1.78 lakh
crores more than the previous year. This is in response to the demand by the states for increased flow of
untied fiscal resources in place of tied resources that come with Centrally Sponsored Schemes.
Other recommendations by FCC concern GST, fiscal consolidation, road map and pricing of
public utilities, public expenditure management.

ECONOMIC REFORMS
• Meaning- Minimizing role of State & increasing role of
pvt sec
• Background- Scepticism amongst Developing countries
against foreign investments as they feared their
dominance & rule of colonisers
• Components: 1. Macroeconomic stabilization
measures(Boost aggregate demand of economic either
domestic or external, domestic by incresing purchasing
power of masses by gainful &quality empl opportunities)
2.Structural Reform measures (Boost aggregate supply of
goods & services , mostly by capitalists)
• LPG : Liberalization shows Direction of Reforms;
Privatization shows path of Reforms & Globalization
shows the Ultimate goal of Reforms.

ECONOMIC REFORMS
• Liberalization- Pro-capitalistic or Pro- market inclination
of an economy; decreasing traits of a state economy;
liberalising from shackles of restrictions/regulations of a
state economy
• Privatization-
- Denatiolization- Tfr of State ownership of assets to pvt
sector to the tune of 100%
-Disinvestment- Denatiolization of state owned
enterprises of less than 100% ownership to pvt sector
- All the economic policies of State which directly or
indirectly promote expansion of role of pvt sector or
mkt(deregulation, reducing subsidies,permission to FDI)
• Globalization- Increase in economic integration among
nations
-Unrestricted cross border movement of goods,services,
capital or labour force is Globalization(WTO)

ECONOMIC REFORMS
• FIRST GENERATION REFORMS(1991-2000)-
Promotion to pvt sector; Ext sector Reforms like
FDI,abolishing QR on imports; Public Sector Reforms to
make PSU efficient,profitable,disinvestment; Financial
Secor Reforms like Insurance, Banking; Tax Reforms to
avoid tax evasion,simplify, broadbase tax.
• SECOND GENERATION REFORMS(2001 Onwards)-
Factor Mkt Reforms where dismantling Administered
Price MechanismPromotion (Remaining Urea, K oil, LPG),
Public Sector Reforms for greater autonomy to
PSU,disinvestment; Adm Reforms where State from
Controller to Fascillitator; Legal Sector Reforms like
Labour laws, Company laws; Critical Areas Reforms in
Health care,education, agri like R & D in agri,corporate
farming.

ECONOMIC REFORMS
• THIRD GENERATION REFORMS-
Panchayat Raj Institutes, so that development reaches
grass root level; Factor of Inclusiveness
• FOURTH GENERATION REFORMS-
IT- enabled reforms
- Reforms is a simultaneous and continuos process and is a
mean to an end.

CURRENT AFFAIRS
 India to Appeal against WTO verdict on solar content usage-
India is set to file an appeal against a recent verdict by WTO on domestic solar content
usage. World Trade Organization has decided in favour of USA, ruling that Indian
domestic solar content requirements under its National Solar Mission programme
were inconsistent with the international trading norms.
The Indian government has set some conditions and rules stipulating a certain
minimum percentage of total capacity of solar content manufacturing to be sourced
from domestically assembled modules.
The U.S. had filed a case against India alleging discrimination against the USA solar
equipment with respect to India mandated sourcing of locally produced solar cells
and panels by offering subsidies and higher capital to entities using domestic
equipment and demanding level-playing field for domestic and foreign solar
component manufacturers.
Previously, Indian manufacturers had complained against USA alleging dumping in
India, which if pursued could have resulted in levying of high anti-dumping duties and
penalties against U.S. A. Committed to shielding its domestic manufacturing sector,
India is planning to appeal the said verdict of WTO.

FOURTH INDUSTRIAL REVOLUTION
‘Fourth Industrial Revolution’ or Industry 4.0 is the theme of the 2016 annual meet of World Economic Forum.
• It is a collective term embracing a number of contemporary automation, data exchange and manufacturing
technologies and denotes a fundamental change in the way business is being done in the present world.
• It is characterized by a wave of innovations and fusion of technologies that is blurring the lines between the
physical, digital, and biological spheres.
• New technology, increased connectivity, artificial intelligence etc. has changed the way any industry functions,
the consumer demand and the competition.
• The inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on
combinations of technologies (the Fourth Industrial Revolution) is forcing companies to re-examine the way they
do business.
 The First Industrial Revolution started in the 18th century with the use of water and steam power to mechanize
production.
 The Second in 19th century used electric power to create mass production.
 The Third began in the 1960s and used electronics and information technology to automate production.
 Now a Fourth Industrial Revolution is building on the third, that is, the digital revolution.
Challenges posed by Fourth Industrial Revolution
• Risk of greater unemployment especially low skilled ones has increased
• Sustainability of businesses especially small ones is under threat
• Disruptions in existing industries as new ways of serving needs are coming up.
• The innovators are improving the quality, speed and price of services at a much faster rate due to better access to
global digital platforms for research, development, marketing, sales, and distribution.
• Growing transparency and consumer engagement would demand more adaptation from the companies.
• IT security issues
• It also affects the governance system as well.

GARV APP
Why in News?
 Power ministry has launched the GARV (Grameen Vidyutikaran) app to
provide the first hand information with respect to village electrification
programme in the country.
Key Highlights:
 To speed up the work related to village electrification Grameen Vidyut
Abhiyantas (GVAs or rural electrification engineers) have been appointed.
 Reports by these GVAs are shared through the GARV (Grameen
Vidyutikaran) app with officials as well as the public.
Significance
 It will help in monitoring the work of power ministry and respective
state authorities by the common man.
 The GARV app puts pressure on State governments for timely and
quality delivery.
 This is very good step towards better accountability and transparency in
ensuring village electrification.
 It also gives an opportunity to media to scrutinize the rural electrification
work of ministry/state governments and seek accountability.

SETU BHARTAM PROJECT
 The project aims to make all national highways
free from railway level crossings by 2019.
 Under the project, 208 bridges will be built at a
cost of Rs 20,800 crore.
 Also, 1,500 old bridges will be reconstructed,
which will cost Rs 30,000 crore.
 The ministry has also established an Indian
Bridge Management System (IBMS), the aim of
which is to carry out condition survey of all
bridges (approx. 1,50,000) by using mobile
inspection units.
 The Project is thought to not only improve road
safety but also allow for faster transportation and
improve infrastructure network

CURRENT AFFAIRS
Lok Sabha passed Real Estate (Regulation and Development) Bill, 2015-
Main highlights of the Bill
• The Bill seeks to regulate transactions between buyers and promoters and provides for setting up of state level
regulatory authorities.
• It also provides for registration of promoters and agents with the authorities.
• The promoters are mandated to deposit 70 percent of the money collected from buyers in a separate bank account, to
be used only for construction of that project.
• They will also have to disclose project information including details of the promoter, land status, status of approvals,
agreements along with details of real estate agents and contractors.
• Projects under construction are also required to be registered with the RERA.
• If builders cause delays in transferring properties to buyers, the appellate tribunal would intervene and slap fines on
them within 60 days. In case consumers fail to make payments to developers, the appellate tribunal can fine them, too.
• It provides for imprisonment of up to three years in case of promoters and up to one year in case of real estate agents
and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both.
• The builders would also be responsible for fixing structural defects for five years after transferring the property to a
buyer.
• Buyers will now be paying only for the carpet area and not the super built-up area.
• The developers will now have to take consent of 66 per cent of the homebuyers in case they have to increase the
number of floors or change the building plans. This will protect the buyers from any ad-hoc changes that are a norm
presently.
• Projects only below the size of 500 square meters are exempted from the accountability ambit compared to earlier
1000 square meters or 12 apartments.
-The real state sector is the second largest employer after agriculture and contributes 9% to the Gross Domestic Product
(GDP).

CURRENT AFFAIRSLok Sabha passes National Waterways Bill-
The National Waterways Bill, 2015, which provides for declaring certain inland
waterways as national waterways, was passed by the Lok Sabha recently. The bill
seeks to declare 106 additional inland waterways as national waterways. After the
inclusion of 106 additional inlands waterways to the existing five national
waterways, the total number of national waterways goes upto 111.
The Bill repeals the five Acts that declare the existing national waterways. These
five national waterways are now covered under the Bill.
Significance of this Bill:
Inland waterways, comprising rivers, lakes, canals, creeks and backwaters, extend
about 14,500 km across the country. However, potential of this mode of transport
has not been fully exploited so far.
The Statement of Objects and Reasons of the Bill states that while inland waterways
are recognised as a fuel efficient, cost effective and environment friendly mode of
transport, it has received lesser investment as compared to roads and railways. Thus,
the central government has come up with this policy.
It should be noted here that under the Union List of the Seventh Schedule of the
Constitution, the central government can make laws on shipping and navigation on
inland waterways which are classified as national waterways by Parliament by law.

CURRENT AFFAIRSSingapore pips Mauritius as India’s top FDI source
Singapore has replaced Mauritius as the top source of foreign direct
investment (FDI) into India during the first half of the current financial year.
According to the recently released data from the Department of
Industrial Policy and Promotion (DIPP), during April-September 2015, India
has attracted $6.69 billion (Rs 43,096 crore) FDI from Singapore while from
Mauritius, it received $3.66 billion (Rs 23,490 crore). Foreign investment
from Singapore was $2.41 billion in the year-ago period.
Sectors that attracted the highest foreign investment during April-
September 2015 include computer software and hardware ($3.05 billion),
trading ($2.30 billion), services and automobile ($1.46 billion each) and
telecommunications ($659 million).
Foreign investment is crucial for India, which needs about $1 trillion by
March 2017 to overhaul infrastructure such as ports, airports and
highways, and to boost growth.

Question: Which the international non-governmental organization released a report named “An Economy for the
One Percent” on the global economic inequality?
(a) Oxford
(b) Oxfam
(c) IBRD
(d) IMF
Ans (b)
Related facts:
 On 18 January 2016, Oxfam an international non-governmental organization released a report named “An
Economy for the One Percent” on the global economic inequality.
 The report analyzed growing trends of concentration of wealth across the world and suggested remedies to
correct the anomaly.
 According to the report richest 1% now has more wealth than the rest of the world combined. Power and
privilege is being used to skew the economic system to increase the gap between the richest and the rest.
 In 2015, just 62 individuals had the same wealth as 3.6 billion people. This figure is down from 388 individuals as
recently as 2010.
 According to the report the wealth of the richest 62 people has risen by 44% in the five years since 2010 – that's
an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
 According to Oxfam since the turn of the century, the poorest half of the world’s population has received just
1% of the total increase in global wealth, while half(99%) of that increase has gone to the top 1%
 The average annual income of the poorest 10% of people in the world has risen by less than $3 each year in
almost a quarter of a century. Their daily income has risen by less than a 1% every year.
 The name Oxfam comes from the Oxford Committee for Famine Relief, founded in Britain in 1942, it has
distributed food among affected women and children in the Second World War.

Question: What was the theme of World Development Report released -2016 released on 14 January 2016?
(a) Risk Management
(b) Climate change
(c) Digital Dividend
(d) Transition Economies
Ans (c)
Related facts:
 On January 14, 2016 World Bank had released the World Bank World Development Report -2016.
The theme of this year report is “Digital Dividend”.
 The report is helpful in understanding impact of the internet, mobile phones, and related technologies
on economic development across the world.
 According to the report, more than 40 percent of the world's population has access to Internet.
 In the past decade, the number of Internet users has increased more than threefold it has been increased
from 1 million in 2005 to 3.2 billion at the end of 2015.
 China has the largest number of internet users, followed by the United States, with India, Japan, and Brazil
filling out the top five.
 The lowest mobile penetration is in Sub-Saharan Africa (73 %), against 98 percent in high-incomecountries.
 According to the report internet adoption lags behind considerably, only 31% of the population in
developing countries had access in 2014, against 80 percent in high-income countries.
 Out of world's 3.2 billion Internet users, 1.1 million people use high-speed Internet.
 The benefits of digital technologies filter throughout the economy, For businesses, the internet promotes
inclusion of firms in the world economy by expanding trade, raises the productivity of capital, and intensifies
competition in the marketplace, which in turn induces innovation.
 Three main mechanisms to transmit the digital dividend are described as inclusion, efficiency and
innovation.

Q.1) Which of the following initiative has not been covered under the
Bharatmala Project?
a) Construction of roads along India’s borders and coastal areas
b) Improving connectivity of nonmajor
ports, religious and tourist places
c) Development of newly declared national highways in district headquarters
d) Improving connectivity by inland waterways
Ans d
Bhartmala is an ambitious roads and highways project of the NDA government. It
involves construction of roads and highways to India’s borders, coastal areas, ports,
religious and tourist places as well as over 100 district
headquarters. It will involve construction of around 25000 km of road network.
Following states will have road construction under this-Gujarat, Rajasthan, JnK,HP,
Uk, borders of UP and Bihar near Terai region, Sikkim, Assam, Arunachal Pradesh and
upto Indo-Myanamar border in Manipur and Mizoram. Linking with this, road network
from Maharashtra to Bengal along the coastal areas will be built.
Funding of this will be done mainly by govt itself and rest through PPP model.
Benefits are huge, it will be a strong strategic component with respect to national
security, act as a multiplier effect in our economy, provide backward and forward
linkages to the markets, connect remote mountainous areas, trade and tourism will
boost and generation of huge employment. Major challenge is just of environment
clearances and land acquisition.

INDIAN ECONOMY
- Infrastructure and basic aspects
- Updates on Infrastructure related schemes
- Details of PPP Model

• RURAL & URBAN INFRASTRUCTURE DEVELOPMENT-
 Need
 Types- Physical/ Economic & Social
 Energy: Renewable & NRE; Concept of Sustainable Devlt
 RGGVY (2005)- ‘Electricity to One lac villages & One Cr Households
 DDUGJY(2015)- 24x7 Rural Electricity; Separate feeders; Metering
 100 % village electrification to be achieved by 1 May 2018 (Budget
2016-17)
 NSM (2010)- Targets of Solar Energy-
481 MW(2012);1000MW(2013);20000MW(2022);100000MW(2030);
200000 MW (2050).
 WTO Dispute of solar appliances with USA.
 GARV App- Rural electrification updates.
 Concept of Akshay Urja- 20 Aug(Akshay Urja Din);Concept of Akshay
Urja(NCE); 87000 MW by 2022.
 Problems of Energy Sector- Poor quality coal;Inadequate utilization
of Hydroelectricity projects;Scope for NCE resources; Plutonium
based FBR to be developed instead of Uranium based PHWR which
requires import of Uranium.
 FDI- 100% allowed in production, transmission & distribution

 Roads- Arteries of infra;Types;Need to develop
 Timeline- NHAI(1988)-NHDP(1998)-PMGSY(2000)-PMBJPY(2004)-
Bharat Nirman(2006)
 Issues- Quality, Funds, No of vehicles
 Bharatmala Project; Sagarmala Project
 PPP models; Swiss challenge
 Rlwys*- Cross subsidization; 100% FDI in Rail Infra,
 Sethu Bharatam Project-( aims to make all national highways free
from railway level crossings by 2019.)
 Bullet train (Mumbai- Ahmedabad) based on Japanese Shinkansen
system of bullet trains; 98000 Cr
 Shipping & Port- 5 Inland Waterways ( Ganga, Brahmaputra,
Mahanadi, Bunkingham canal, Champakara canal + 106 new National
Waterways bill(2015) passed.
 Airports- Greenfield & Brownfield Projects.
 Social Infra- Already discussed in HRD capsule.

 Rural Infra – Electricity (DDUGJY); Roads( PMGSY);
Sanitation(SBM); General (Bharat Nirman, Sansad Adarsh Gram
Yojana, RURBAN, PURA)
 Urban Infra- JNNURM, AMRUT, Smart City, Tourism( PRASAD,
HRUDAY); RERA Act

Union Budget 2016-17
Road Sector
• Sanction for construction of 10000 kms of new National Highways will be given in
2016-17. This will be much higher than in the two previous years.
• In addition, nearly 50000 kms of State highways will also be taken up for
upgradation as National Highways.
• Policy reforms to Fast-track the development of road sector.
Ports
• 450 crore rupees were allocated for Sagar Mala Project in 2016-17.
• New greenfield ports will be constructed both in the eastern and western coasts of
the country.
• 800 crore rupees were allocated for the development of this sector including
development of National Water Highways.
Civil Aviation
• The Government will announce a comprehensive action plan for revival of
unserved and underserved airports in the country.
• At present, there are about 160 airports and air strips with State Governments
which can be revived at an indicative cost of 50 crore to 100 crore each. The Union
Government will partner with the State Governments to develop some of these
airports for regional connectivity.
• Similarly, 10 of the 25 non-functional air strips with the Airport Authority of India
will also be developed.

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RAIL BUDGET 2016-17
Theme of the Budget is Overcoming challenges – Reorganize, Restructure, Rejuvenate
Indian Railways: ‘Chalo, Milkar Kuch Naya Karen’.
Railway Budget of 2016-17 is based on three pillars and they are Nav Arjan (New
Revenues), Nav Manak (New Norms) and New Sanrachna (New Structures).
Major Highlights of the Rail Budget
• Delay in running of 95% trains will be ended by 2020
• Rail tickets will be available at all places by 2020
• Aimed at increasing speed of passenger train by 80km/hr
• LIC has agreed to invest 1.5 lakh crore rupees over 5 years on extremely favourable terms
• New Dedicated Freight Corridors announced, namely Delhi-Chennai, Kharagpur-Mumbai,
Kharagpur-Vijayawda.
• To commission broad gauge lines at the rate of 7 km per day against 4.5 km over last five
years
• Institutional financing will be introduced for funding projects
• Aimed at eliminating unmanned level crossings by 2020
• North-East India, especially Mizoram and Manipur, to be connected through broadgauge soon
• To commission 2800 km of new tracks in 2016-17
• Indian Railways to surpass ambitious target of commissioning 2500 kms of broad
gauge lines, almost 30% higher than last year
• e-ticket facility for foreign debit and credit card holders will be provided
• Cancellation facility through 139 helpline number will be provided
• Journalists to get facility of e-booking of tickets on concessional passes
• Bar-coded tickets will be introduced on pilot basis, this will help to tackle menace of ticketless

CURRENT AFFAIRS
• Overnight double-decker trains to be introduced on business travel routes
• Long distance superfast train Antyodaya Express for unreserved passengers will be launched
• Deen Dayal coaches for long distance trains for unreserved passengers will be
introduced
• Full-fledged Railway University will come-up soon
• Enhanced capacity of e-ticketing system from 2000 tickets/min to 7,200/min.
• A framework will be formulated where net saving from electrification will be ableto finance capital
expenditure.
• Wi-Fi will be provided at 400 railway station in 2016-17, as compared to 100 in 2015-16
• 2000 km of electrification proposed for 2016-17
• Chennai will have India’s first rail auto hub. Railway Ministry will partner with Tamil Nadu Government to
develop suburban network in Chennai through innovative financing methods
• FM radio stations will be invited to provide train borne entertainment via PA systems
• Rail Bandhu magazine will be published in all regional languages
• Coolies have been renamed and will be called ‘Sahayaks’
• 50 crore rupees kept aside for providing innovation grants to start-ups
• Drones will be used for remote monitoring of ongoing projects
• 33 percent sub-quota for women under all reserved categories
• Advertising revenue to be increased by more than four times in 2016-17

Golden vs. Diamond quadrilateral

PPP in Airport
start / rebuild
something where
start / rebuild
something where

PPP Model
- Definition
- Charactristics
- Types
- Pros & Cons
- Swiss challenge

3 roles of Government in INFRA.
Development?

PPP Model
-The first BOT was for the China Hotel, built in 1979
by the Hong Kong listed conglomerate Hopewell
Holdings Ltd.
Types- 1.BOT (build–operate–transfer)
2.BOOT (build–own–operate–transfer)
3.BOO (build–own–operate)
4.BOLT (build–own-lease–transfer)
5.DBFO (design–build–finance–operate)
6.DBOT (design–build–operate–transfer)e.g. Refinery construction
7.DCMF (design–construct–manage–finance)
8. JV
9.MC

PPP Model
BOO (build–own–operate)-
In a BOO project ownership of the project remains
usually with the project company for example a
mobile phone network. Therefore, the private company
gets the benefits of any residual value of the project. This
framework is used when the physical life of the project
coincides with the concession period. A BOO scheme
involves large amounts of finance and long
payback period. Some examples of BOO projects come
from the water treatment plants. This facilities run by
private companies process raw water, provided by the
public sector entity, into filtered water, which is after
returned to the public sector utility to deliver to the
customers.

PPP Model
BOLT (build–own-lease–transfer)
Under BLT a private entity builds a complete project and
leases it to the government. On this way the control over
the project is transferred from the project owner to a
lessee. In other words, the ownership remains by the
shareholders but operation purposes are leased. After
the expiry of the leasing the ownership of the asset and
the operational responsibility are transferred to the
government at a previously agreed price. For foreign
investors taking into account the country risk BLT
provides good conditions because the project company
maintains the property rights while avoiding

PPP Model
DBFO (design–build–finance–operate)-
Design–build–finance–operate is a project delivery
method very similar to BOOT except that there is no
actual ownership transfer. Moreover, the contractor
assumes the risk of financing till the end of the
contract period. The owner then assumes the
responsibility for maintenance and operation

PPP Model
DCMF (design–construct–manage–finance)
Some examples for the DCMF model are the prisons or
the public hospitals. A private entity is built to design,
construct, manage, and finance a facility, based on the
specifications of the government. Project cash flows
result from the government's payment for the rent of
the facility. In the case of the hospitals, the government
has the ownership over the facility and has the price
and quality control. The same financial model could be
applied on other projects such as prisons. Therefore,
this model could be interpreted as a mean to avoid new
indebtedness of public finance.

• MAHARASHTRA ECONOMY: SALIENT FEATURES
Agriculture
Although Maharashtra is a highly industrialized state of India, agriculture continues to be the
main occupation in the state. 64.14% of the people are employed in agriculture and allied
activities.
Most of the cultivable land is still rainfed, the Southwest Monsoon season between June and
September is critical to the food sufficiency and quality of life in the state. Therefore, the
agricultural calendar of Maharashtra and other parts of India, is governed by Monsoon. Any
fluctuations in the time distribution, spatial distribution or quantity of the monsoon rains may
lead to conditions of floods or droughts causing the agricultural sector to adversely suffer. This
has a cascading effect on the secondary economic sectors, the overall economy, food inflation
and therefore the overall quality and cost of living for the general population. Districts in
Western Maharashtra on the Deccan plateau such as Pune and Ahmadnagar are particularly
prone to drought.
 Irrigation facilities are being extended so that agriculture could be made less dependent upon
rain water. Maharashtra has by far the largest number of Dams in India. Despite that, the net
irrigated area totals only 33,500 square kilometres or about 18% of cultivable land.
 Principal Monsoon crops include Rice, jowar, and Bajra. Other crops include Wheat, pulses,
vegetables and onions. The main Cash crops include cotton, sugarcane, turmeric, and several oil
seeds including groundnut, sunflower and soyabean.
 The state has huge areas, under fruit cultivation of which mangoes, bananas, grapes, and
oranges are the main ones. Most of the Growers of Cash crops such as sugarcane and cotton in
the state belong to farmers cooperatives. For example, most of the sugar production in

• MAHARASHTRA ECONOMY: SALIENT FEATURES
• Industry
 Maharashtra is India's leading industrial state contributing 13% of national industrial
output.
• Almost 46% of the GSDP is contributed by industry.
• Maharashtra has had a long History in textiles and Mumbai was the original home of India's
textile mills. Solapur, Ichalkaranji, Malegaon and Bhiwandi are some of the cities known for
textile industry today .
• Sugar industry has made considerable progress specially in the cooperative sector.
Maharashtra is well known for the development of cooperative sugar industry whereby the
farmers acquire a share in the sugar mills.
• Pharmaceuticals, petrochemicals, heavy chemicals, electronics, automobiles, engineering,
food processing, and plastics are some of the major industries in the state.
• Maharashtra is renowned for the production of three-wheelers, jeeps, commercial vehicles
and cars, synthetic fibers, cold rolled products and industrial alcohol. Small scale industries
have also come up in a big way in the state.
• The state capital Mumbai and the Mumbai Metropolitan Region has historically been the
most industrialized area in the state. Industrial development in the state is largely
concentrated in the, Pune Metropolitan Area , Nashik, Aurangabad and Nagpur.
• The six important industries in the state are cotton textiles, chemicals, machinery,
electricals, transport and metallurgy. Pune is emerging as one of the largest automobile
hubs in the country.
• To attract industries to different areas of the state, the government of Maharashtra
established Maharashtra Industrial Development Corporation (MIDC) in 1962.
• MIDC provides businesses with infrastructure such as land (open plot or builtup spaces),
roads, water supply, drainage facilities etc. To date 233 areas have been developed around
the state with emphasis on different sectors such as Industrial, IT, Pharmaceutical, and
Wine.

 India's largest stock exchange Bombay Stock Exchange, oldest
in Asia, is located in the city. More than 41% of the S&P CNX
500 conglomerates have corporate offices in Maharashtra.
 After successes in the information technology in the
neighbouring states, Maharashtra has set up software parks
in Pune, Mumbai, Navi Mumbai, Nagpur and Nasik,
Aurangabad and Latur.
• Maharashtra is the second largest exporter of software with
annual exports of 18 000 crores and accounts for more than
30 per cent of the country's software exports, with over
1,200 software units based in the state.
 Maharashtra ranks first nationwide in coal-based thermal
electricity as well as nuclear electricity generation with
national market shares of over 13% and 17% respectively.
Maharashtra is also introducing Jatropha cultivation and has
started a project for the identification of suitable sites for
Jatropha plantations.

FDI IN MAHARASHTRA
• Based on DIPP report (2000-2015 data),Gujarat has emerged as the best state to
do business, but it is Maharashtra that receives the most foreign direct investment
(FDI), followed by the National Capital Region (NCR) of Delhi, Tamil Nadu (and
Pondicherry) and Karnataka.
• Delhi (including parts of UP and Haryana, likely those that fall within the NCR)
accounts for one-fifth (20%) of the total FDI, next only to Maharashtra (including
union territories like Dadra & Nagar Haveli and Daman & Diu) with 29% of total
FDI, based on cumulative inflows (April 2000 – Jun 2015), according to the June
2015 report of the Department of Industrial Policy and Promotion (DIPP).
• Maharashtra is ranked eighth in the ease-of-doing-business ranking. The state,
however, leads in obtaining approvals for infrastructure-related utilities and
enforcing contracts related to dispute resolution.
• Gujarat was ranked first regarding ease of doing business, according to the
Assessment of State Implementation of Business Reforms by the Department of
Industrial Policy and Promotion (DIPP), based on a study conducted by World Bank
and KPMG.
• The assessment report has also highlighted the reason for the government to
come out with the report: India ranks 142nd out of 189 economies in the World
Bank’s Doing Business 2015report and the second-worst-performing economy in
South Asia. The World Economic Forum’s Global Competitiveness Reportranks
India as 71 out of 144 economies.

MAKE IN INDIA/MAKE IN MAHARASHTRA WEEK(13-18 Feb)
• 8 lac cr investment; 30 lac new employment & 2594 MOUs
for Maharashtra.(15.2 lac cr for India)
• Participants nations-102 & 17 states; Visitors-9 lac
• Maharashtra related important agreements- 1.Twin Star
Tech(Vedanta Gr) in Marathwada/ Vidarbha 2000 cr- LCD Fab
Project 2. Coca Cola for Oranges processed products 3.
Raymonds at Nagpur developing Integrated Textile Project
(1400 Cr) 4. Monsanto biggest seed hub of India at Deolgaon
Raja(Buldhana)
• Naina Project at Khalapur & 3500 Hectare land by farmers.
• Magnetic
• Arcarobot Warehousing software by Rajesh Manpat
• Ease of Doing Business- Maitri for projects above 100 cr

DROUGHT IN MAHARASHTRA• Maharashtra is experiencing drought this year too. Why does this happen every year?
• For this, we need to understand the geographical and climatic situation of
Maharashtra. As high as 80% to 84% of the agriculture in Maharashtra is rainfed, which
means that it totally depends on rainfall for its crops but there is a huge variability in
rainfall in different regions of the state.
• One-third of the state falls under the semi-arid climatic zone and has its agriculture
dependent on the monsoons. Deficient rainfall is reported once every 5 years and
drought conditions occur once every 8-9 years.
• Marathwada and Vidarbha have been experiencing severe drought over the last three
years due to deficient rainfall and this has further worsened the situation with a drastic
drop in groundwater levels, acute water shortages and severe loss of crops during the
kharif and rabi seasons.
• Despite this happening over and over again, the irrigation in the state is very low at
16% as compared to the national average of 42%. Over-dependence on private sources
of groundwater use such as tube wells, bore wells, wells and piped water, limits access
of farmers to water resources and has also led to over exploitation and severe drop in
groundwater levels in the area.
• Thus, the major problem in this area is the lack of assured water supply as no other
methods of irrigation are utilised. Rather, irrigation is more developed in western
Maharashtra as compared to Vidarbha and Marathwada, which needs it the most. Both
regions continue to remain relatively backward in terms of socio-economic indicators as
well.

DROUGHT IN MAHARASHTRA• Is it due to geography, climate change or mismanagement of resources?
Geography is a factor that we know about for a long time. Climate change has worsened the situation over the
last few years, but what is more worrying is the lack of planning, short sightedness and pure disregard shown
for the situation at the policy level. The vulnerable situation of the area is already known, but we still depend
on dams for water, which goes to the farmers at a price.
• What will the small and marginal farmers do? We still focus on water-intensive crops like sugarcane. for
better and assured money. The poor farmer is forced to practice an agricultural model ,based on demand and
supply where he is unable to get an output that is at least equal if not more than what he put in. Development
of industries and cities have also put an additional load on water resources from dams, which in many cases
are diverted to cities. The farmer is thus caught in a web of unending demands and a maze of circumstances
from where there is no way out.
What is the actual situation of farmers in the area? Who are the ones committing suicide?
We have to understand the situation of a farmer in a broader context. Our policies have not looked at the
overall development of farming communities. Our farmers in the area are totally dependant on land for their
livelihoods. It is only a few farmers that also have other members in the family working in the cities, who can
provide additional income to the family in times of crisis. And farming is a resource intensive process. You
need money to buy seeds, fertilisers, pesticides, water, manpower, electricity. You put in all the money for
resources and then depend on the rain and climate to do their bit. When the vagaries of climate take their
toll, the farmer has no way out. He is then caught in the loan web to sow the next crop for the next season.
• Take the example of Vidarbha where cotton, tur and soyabeans are the important crops. Low levels of
groundwater and irregular supply of electricity makes it very difficult for farmers. There is only 4% irrigation in
an area where the capacity for irrigation can be as high as 65%. So the farmers have to invest in tube wells,
wells and pipelines in an area which already has dangerously low levels of groundwater. So why then does
farming become unremunerative? It is this emphasis on cash crops, overdependence on monsoons, low
productivity, poor irrigation facilities and dependence on wells in an area where the water tables have
already gone down coupled with poor electrification, which makes it very difficult for the farmer.

DROUGHT IN MAHARASHTRA• After changes in worldwide policies in 1991, privatisation and free economy have changed banking practises. Banks are not
very eager to give loans to farmers. The poor and marginal farmers thus fall into the clutches of moneylenders, who charge
higher rates of interest, which the farmers are unable to repay.
• With no guarantee of a good crop even during the next season within the limitations they have to face, the farmers continue to
borrow from money lenders as they get money on demand. Getting loans from banks and cooperatives often takes long and
they have to go through agents at times, who demand commissions.
What should be done to deal with this situation?
Long term plan- with focus on agri and farmer
• For example:
• Policies need to be designed to improve the education and quality of life of the farmers and their households along with
improvement in infrastructural facilities at the village level. Developing other additional skills or income generating
activities among farmers should also be encouraged to make them better equipped to cope with uncertainties arising out of
cultivation.
• Improvement in bank lending mechanisms that help and respect the farmers and provide support and training should be
encouraged, rather than banks functioning as structures that treat the farmer as a poor victim that needs loan waivers.
• Non institutional lending mechanisms like moneylenders should be brought under regulation so that they stop charging the
farmers high rates of interest that increase the risk of farmers of falling into debt traps.
• Efforts need to be made to improve irrigation facilities in rural areas and to stop emphasis on dams. Farmers must be
encouraged to harvest and use water in their own areas sustainably and equitably. Local streams, canals in the villages should
be identified, deepened and widened to enhance harvesting of water. Rivers should be considered as important units of the
village and revived.
• Development should be targeted at the village and towards small groups of farmers as units to bring about real change. In our
country, farmers suicides have happened due to the failure of the cooperative movement.
• For cash crops like sugarcane, grapes and other fruits, cotton, tur and soyabeans, the crop insurance has to be strengthened.
Innovative methods for loan settlement should be developed to help farmers to cope in times of financial crisis.
• Dependence of farmers on seeds from manufacturers and fertilisers must be stopped by encouraging development of local
seed grower families, development of organic local fertilisers and pesticides and further development in products by using
Ayurveda rather than using technologies based on western models.
• We should encourage research and development that can aid our farmers such as better weather predicting systems,
knowledge generation that is based on the day to day needs and queries of farmers. We should encourage better dialogue
between agriculturalists and farmers who can work together to find solutions to problems.
•

DROUGHT IN MAHARASHTRA
• Jalyukta Shivar Abhiyan-
• Drought free Maharashtra by 2019; Long term solution
to address both drinking water and irrigation problems.
• To make 5000 villages water scarcity free every year.
• Involves deepening and widening of strams,
construction of cement & earthern stop dams, work on
nallahs and digging of farm ponds.
• Nodal Offr- DM at Dist level
• Criteria for evaluation as accepted during Delivering
Change Foundation(DCF) and Pemandu (Performance
Management & Delivery Unit of Malaysia).
• PMKSY; PMFBY-

DROUGHT IN MAHARASHTRA
• Maharashtra has the maximum number of
big dams of any state in India (35 percent of the
total), the most expenditure on big dams (40
percent of the total) since Independence with the
least amount of cropped area under irrigation (18
percent). But the state has nine effectively
"toothless" Acts governing water and irrigation.
This lack of water governance may explain the
paradox of a state with the largest dam
infrastructure facing water scarcity and drought.

MSME
• Small and medium enterprises are the backbone of
industrial development.
• It is very important for both developed and developing
country .Small and medium enterprises always represented
the model of economic development, which emphasized high
contribution to domestic production, significant export
earnings, low investment requirements, employment
generation, effective contribution to foreign exchange
earning of the nation with low import-intensive operations.
• The development of this sector came about primarily due to
the vision of our late Prime Minister Jawaharlal Nehru who
sought to develop core industry and have a supporting
sector in the form of small scale enterprises.

Introduction……..
• SMEs sector has emerged as a dynamic and vibrant sector of the
economy. The Indian economy is expected to grow by over 8 per cent
per annum until 2020 and can become the second largest in the world,
ahead of the United States, by 2050, and the third largest after China
and the United States by 2032.
• Hence the need of important contribution from MSME.
• Importance of MSME- 8% GDP; 40% of exports; 45% of Industrial output

Definition of MSME
• According to new THE MICRO, SMALL AND MEDIUM
ENTERPRISES DEVELOPMENT ACT, 2006 the MSME
Definitions are as follows: In the case of the enterprises
engaged in the manufacture or production of goods
pertaining to any industry specified in the first schedule to
the Industries (Development and Regulation) Act, 1951, as

Definition of MSME for Manufacturing sector
Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed twenty five lakh rupees
(< 25 LAC)
Small Enterprises More than twenty five lakh rupees but does not
exceed five crore rupees
(25 LAC TO 5 CR)
Medium Enterprises More than five crore rupees but does not
exceed ten crore rupees
(5 CR- 10 CR)

Definition of MSME for Service sector
Service Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed ten lakh rupees
(<10 LAC)
Small Enterprises More than ten lakh rupees but does not
exceed two crore rupees (10 LAC to 2 Cr)
Medium Enterprises More than two crore rupees but does not
exceed five core rupees ( 2Cr to 5Cr)

Supporting agencies of SMEs
• Some of the important organizations that are associated with SMEs in
India are: Small Industries Development Organization (SIDO), National
Small Industries Corporation Ltd. (NSIC), Small Industries Development
Bank of India (SIDBI), Confederation of Indian Industry (CII), Laghu Udyog
Bharti (LUB), Federation of Indian Chamber of Commerce and Industry
(FICCI), Associated Chamber of Commerce and Industry of India
(ASSOCHAM), National Institute of Small-Industry Extension Training
(NISIET), World Association for Small and Medium Enterprises (WASME),
Small Scale Industries Board (SSIB), PHD Chamber of Commerce and
Industry (PHDCCI), Federation of Indian Exporters Organization (FIEO),
Federation of Associations of Small Industries of India (FASII)

• ROLE OF MSME & ITS SIGNIFICANCE-
• Micro, Small and Medium Enterprises (MSME) sector has emerged as a
highly vibrant and dynamic sector of the Indian economy over the last five
decades.
• MSMEs not only play crucial role in providing large employment
opportunities at comparatively lower capital cost than large industries but
also help in industrialization of rural & backward areas, thereby, reducing
regional imbalances, assuring more equitable distribution of national
income and wealth. MSMEs are complementary to large industries as
ancillary units and this sector contributes enormously to the socio-
economic development of the country.
• Employment Generation: Small Business sector in India creates largest
employment opportunities, next only to Agriculture. It has been estimated
that a lakh rupee invested in fixed assets in the sector results in
generating employment for four persons.
• Production: Small Business sector play a crucial role in the growth of the
country by accounting for 45% of the gross manufacturing output. As per
estimates, a lakh rupee of investment in fixed assets in the sector
produces 4.62 lakh worth of goods or services.

• The Sector consisting of 3.6 cr units, as of today, provides
employment to over 8.05 cr persons. The Sector through more than
6,000 products contributes about 8% to GDP besides 45% to the total
manufacturing output and 40% to the exports from the country. The
MSME sector has the potential to spread industrial growth across the
country and can be a major partner in the process of inclusive
growth.
• MSME- CRUCIAL ROLE- (i)With 3.6 crore units spread across the
country, that employ 8.05 crore people, MSME have a contribution of
37.5 per cent to the country’s GDP.(ii) Huge potential for helping
address structural problems like unemployment, regional
imbalances, unequal distribution of national income and wealth
across the country. Due to comparatively low capital costs and their
forward-backward linkages with other sectors, MSMEs will play a
crucial role in the success of the Make in India initiative. (iii)
Number of schemes/programmes like the Prime Minister’s
Employment Generation Programme (PMEGP), Credit Guarantee
Trust Fund for Micro and Small Enterprises (CGTMSE), Credit
Linked Capital Subsidy Scheme (CLCSS) for and promote start-ups
for innovation and entrepreneurship in rural and agriculture- based
industry.

• Khadi is the proud legacy of our national freedom movement and the father of
the nation. Khadi and Village Industries (KVI) are two national heritages of
India. One of the most significant aspects of KVI in Indian economy is that it
creates employment at a very low per capita investment. The KVI Sector not
only serves the basic needs of processed goods of the vast rural sector of the
country, but also provides sustainable employment to rural artisans. KVI
today represent an exquisite, heritage product, which is ‘ethnic’ as well as
‘ethical’. The Sector has a potentially strong clientele among the middle and
upper echelons of the society.
• Coir Industry is an agro-based traditional industry, which originated in the
state of Kerala and proliferated to the other coconut producing states like
Tamil Nadu, Karnataka, Andhra Pradesh, Odisha, West Bengal, Maharashtra,
Assam, Tripura, etc. It is an export oriented industry and has greater potential
to enhance exports by value addition through technological interventions and
diversified products like Coir Geotextiles etc. The acceptability of Coir products
has increased rapidly due to its ‘environment friendly’ image.
• Ministry of Micro, Small & Medium Enterprises (M/o MSME) envisions a
vibrant MSME sector by promoting growth and development of the MSME
Sector, including Khadi, Village and Coir Industries, in cooperation with
concerned Ministries/Departments, State Governments and other
Stakeholders, through providing support to existing enterprises and
encouraging creation of new enterprises.

• On 9 May 2007, subsequent to an amendment of the Government
of India (Allocation of Business) Rules, 1961, erstwhile Ministry of
Small Scale Industries and the Ministry of Agro and Rural
Industries were merged to form the Ministry of Micro, Small and
Medium Enterprises (M/o MSME). This Ministry now designs
policies and promotes/ facilitates programs, projects and schemes
and monitors their implementation with a view to assisting
MSMEs and help them to scale up.
• The primary responsibility of promotion and development of
MSMEs is of the State Governments. However, the Government
of India, supplements the efforts of the State Governments
through various initiatives. The role of the M/o MSME and its
organisations is to assist the States in their efforts to encourage
entrepreneurship, employment and livelihood opportunities and
enhance the competitiveness of MSMEs in the changed economic
scenario.

• The schemes/programmes undertaken by the Ministry and its organizations
seek to facilitate/provide:
• (i) adequate flow of credit from financial institutions/banks;
• (ii) support for technology upgradation and modernization;
• (iii) integrated infrastructural facilities;
• (iv) modern testing facilities and quality certification;
• (v) access to modern management practices;
• (vi) entrepreneurship development and skill upgradation through
appropriate training facilities;
• (vii) support for product development, design intervention and packaging;
• (viii) welfare of artisans and workers;
• (ix) assistance for better access to domestic and export markets; and
• (x) cluster-wise measures to promote capacity-building and empowerment
of the units and their collectives.

The opportunities of growth in the SMEs sector
• 1. Less Capital Intensive
• 2. Extensive Promotion & Support by Government
• 3. Reservation for Exclusive Manufacture by small scale sector
• 4. Project Profiles
• 5. Funding - Finance & Subsidies
• 6. Machinery Procurement
• 7. Raw Material Procurement
• 8. Manpower Training
• 9. Technical & Managerial skills
• 10. Tooling & Testing support
• 11. Reservation for Exclusive Purchase by Government
• 12. Export Promotion
• 13. Growth in demand in the domestic market size due to overall
economic growth
• 14. Increasing Export Potential for Indian products

Factors affecting SMEs
• MSMEs in India face several problems such as-
1. lack of availability of adequate and timely credit
2. High cost of credit
3. inadequate infrastructure facilities like power, water and
roads, and lack of access to modern technology.
4. limited access to equity capital
5. problems in supply to government departments and agencies
6. procurement of raw materials at a competitive price
7. Issues of storage
8. Designing, packaging and product display

MSME’s Contribution to Exports
They may also be in the form of export orders from large units or the
production of parts and components has shown excellent growth rates in this
decade.
The product groups which dominate the exports comprises of sports goods,
readymade garments, woollen garments and knitwear, plastic products,
processed food and leather products. Further, MSMEs are re-orienting its
export strategy towards the new trade regime being ushered in by the WTO.

 NEW INITIATIVES-
• Udyog Aadhar Memorandum (UAM):
- The UAM scheme, which was notified in September 2015 under section 8 of
the MSME Development Act 2006, is a pathbreaking step to promote ease
of doing business for MSMEs.
- On self-certification basis and no supporting documents - instantly get a
unique Udyog Aadhaar Number (UAN)
• Employment Exchange for Industries:
To facilitate match making between prospective job seekers and employers
an employment exchange for industries was launched on June 15, 2015 in
line with Digital India.
• Framework for Revival and Rehabilitation of MSMEs: Under this
framework, which was notified in May 2015, banks have to constitute a
Committee for Distressed MSME enterprises at zonal or district level to
prepare a Corrective Action Plan (CAP) for these units.
• A scheme for Promoting Innovation and Rural Entrepreneurs
(ASPIRE): ASPIRE was launched on March 16, 2015 with the objective of
setting up a network of technology centres and incubation centres to
accelerate entrepreneurship and promote start-ups for innovation and
entrepreneurship in rural and agriculture based industry.

• In order to protect, support and promote small enterprises as also to help them become self-supporting,a
number of protective and promotional measures have been undertaken by the Government. This job is taken
up by both centre and state governments. There is separate ministry for MSMEs which helps in following way.
• 1. Reservation – Reservation of products for exclusive manufacture in the small scale sector was introduced
for the first time in 1967 with the reservation of 47 items. As of July 2010, 20 items are reserved for exclusive
manufacture in the small scale sector.
• 2. Government has ‘procurement policy’ which prefers SSI – 358 items are also reserved for exclusive
purchase from MSE sector.
• 3. Interest Subvention schemes are started from time to time.
• 4. Technology Upgradation Fund Scheme – under this subsidy is available to small and medium scale industry
to adopt new technology. Subsidy is available either on Capital Expenditure, or as interest Subvention.
• 5. Export Assistance & Facilities – In certain cases duty free or with concessional rate of Custom Duty, so as to
ensure higher production for exports.
• There were less restriction for exports by this sector and overall various supporting facilities such as remission
of duties paid on input materials were available.
• Exporters are recognized as Export House, Trading Houses, Star Trading Houses and Super Star Trading Houses
on the basis of certain criteria as laid down in the Export-Import Policy 1997-2002.
• Criteria are quantitative targets, such as turnover or FOREX earned. For Small Scale Sector their respective
figures are considered 3 times the actual. By this they are granted special import license, which gives them
rebate on import duty.
• 6. They get government support for participation and exhibition in International Fairs
• 7. Technical & Managerial Consultancy Services to the MSME manufacturers/exporters is provided through a
network of field offices
• 8. The National Small Industries Corporation through its ‘export development program’ is playing a vital role
to promote the MSME sector in exporting their products/projects in international, markets by providing
following assistance to the small enterprises.
• 9. These schemes are Small Scale Industry specific and are available in addition to the general schemes

- -2016, -2016, -2016, /-2015 .
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• Feb, 2006 () , 2015 241 SEZ Proposals 3.59 .

SEZ
• A Special Economic Zone (SEZ) is a territory within a country with
special rules for facilitating Foreign Direct Investment for export
oriented production, and for purposes of trade and custom duties
i.e. ‘DUTY FREE ENCLAVES’.
• An SEZ is a geographically demarcated region that has economic
laws that are more liberal than the country’s typical economic
laws and where all the units therein have specific privileges (World
Bank)
• EXIM policy defines SEZ as specifically delineated duty-free
enclaves and shall be deemed to be foreign territories for the
purpose of trade operations and duties and tariffs.
• The concept dates back to thirteenth century Spain and in more
recent times late 1950’s and early 1960’s to Ireland and Puerto
Rico, which established Economic Processing Zones. In the early
1980’s one of the earliest and an exemplary Special Economic
Zone ‘Shenzen’ was founded by the government of the Republic
of China under Deng Xiaoping. Recently, Puno in Peru has been
earmarked to become a “Zona Economica”. In the United States,
SEZs are referred to as “Urban Enterprise Zones”.

Indian Set-Up
• To comprehend the development of SEZ in India one needs to
dwell on the stages of its formation. India adopted a mixed
economy after independence. In the year 1950, import
substitution was the focus. Foreign trade as a stimulant to
economic growth was overlooked and inward looking
industrialization was emphasized. The economic policies of
1960’s were geared towards selective import liberalization
and export promotion, thus marking the development of
Export Processing Zone’s (EPZ’s) in the country. The first EPZ
in India which was also the first in Asia was set up at Kandla in
1965.
• In India, the Santa Cruz Electronics Export Processing Zone
(SEEPZ), was set up at Mumbai in 1974. SEEPZ was initially
planned as a single product zone but by 1986 it was made a
two product zone providing for gems and jewellery along with
processed electronic goods.
• Export Oriented Units (EOU) were introduced in the year 1981
which gives customs duty exemption but not tax exemptions.

• In the year 1984,emphasis was on growth led export
and thus, four more zones were set up in the mid-
eighties at NOIDA (NEPZ, Uttar Pradesh), Chennai
(MEPZ, Tamil Nadu),Cochin (CEPZ, Kerala), and Falta
(FEPZ, West Bengal) and the seventh EPZ in the country
was commissioned at Vishakhapatnam (VEPZ, Andhra
Pradesh) in 1994. These aimed to provide export
facilities with better infrastructure such as telecom,
water and power. But the financial incentives were not
attractive and bureaucratic red tape hurdles
continued.
• In the year 1998, the first private SEZ was implemented
in Surat. In 2003-04, four new SEZ; Mahindra World City
in Jaipur and Chennai, Indore and Manikanchan were
created,thereby initiating the development of SEZ in full
swing.

• Salient Features of SEZ
• As per the SEZ Act, 2005, SEZ in India can be set up by the private sector,state
government or joint sector (state sector and private). This offers equal
opportunity to both Indian and International private developers.
• The country is divided into two territories with Special Economic Zones and
Domestic Tariff Area (DTA). The area outside of SEZ is DTA,where laws of the
country are applicable. On the other hand, in the SEZ the laws and controls of the
country may be applicable only partially as they are lead by special laws. Goods
flow from DTA into the SEZ area are treated as exports and goods coming from
SEZ area into DTA are treated as imports.
• SEZ are of three types:-
• a) Multi-product SEZ – occupying minimum of 1000 ha of land,
• b) Sector specific SEZ – occupying minimum of 100 ha of land,
• c) Gems and Jewellery, IT-ITES – BPO’s and Biotech – SEZ occupying 10 ha of land
(may be reduced to 4 ha in special cases). Backward states have the option of
relaxation of minimum size of SEZ.
• The basic approval of the SEZ lies with the commerce ministry. There is a provision
for hundred per cent foreign direct investment (FDI) for all investments in SEZ’s
except activities under negative lists. But there is no relaxation for pollution
control laws and labour laws. The local regime on these subjects will be enforced.
States are required to exempt the electricity duty and sales tax on electricity as
well as remove all controls on electricity generation and sale within the SEZ.
Private generation, transmission and distribution of power in SEZ are allowed.
Developers are even permitted to build roads, airports etc as per their
requirement.

• TYPES OF SEZ
• 1. ON THE BASIS OF SECTOR
• Sector Specific: Manufacture one or more goods in particular sector.
• Render one or more services in particular sector.
• Multi-Product SEZ: Manufactures multiple goods in one sector or
• multiple sectors.eg Trading and Warehousing. Render two or more services in a sector or multiple sectors.
• 2. ON THE BASIS OF AREA
• Processing area: Where SEZ units can be located for the manufacture of goods or rendering of services.
• Non-processing area: Which is intended to provide support facilities to the SEZs processing area facilility.
• 3. ON THE BASIS OF ACTIVITY
• Manufacturing SEZ: Apparel, Garments and leather, Automobile and
• Auto-component, Engineering-light, heavy and application,
• Pharmaceutical, Food processing, Telecom equipment, Computer
• Hardware, and Microelectronics, Consumer Electronics and
• Appliances, Gems and Jewellery and Diamonds.
• Service SEZ: IT enabled Services, Biotechnology, R&D, Health Care,
• Financial Services, Knowledge Services, Entertainment, Leisure and
• Recreation, Sports and Related Activity, Organised Retail Business
• Services Conventional and Exhibitions, Warehousing and Trade
• Related Services.
• 4. ON BASIS OF APPROVAL STATUS
• Formally approved: Given when land is available to set up the SEZ
• In principle: Given when the land has not yet been secured but all other
• criteria are fulfilled.
• Notified: Final stage after which physical development work begins

• Special Economic Zone is one or more areas of a country where the tariffs
and quotas are eliminated and bureaucratic requirements are lowered so
that more companies are attracted to the area. The companies establishing
in the area also gets extra incentives for doing business.
• In India, the policy for setting up SEZ was introduced on April 1, 2000 with a
view to provide an internationally competitive and hassle free environment
for exports. The policy offered setting up of SEZ in the public, private, joint
sector or by State Governments. Prior to Special economic zones, Expert
processing Zones (EPZ) were in vogue. With a view to overcome the
shortcomings experienced on account of the multiplicity of controls and
clearances(SEZ provides ‘single window clearance’), absence of world-class
infrastructure, an unstable fiscal regime and with a view to attract larger
foreign investments in India, the Special Economic Zones (SEZs) Policy was
announced in April 2000. For all specified procedural purposes Special
Economic Zones are considered foreign territory within the country.
Domestic trade with SEZ is generally eligible for export concessions.
• For IT industry there are similar Software Technology Parks . Benefits are
available to Export Oriented Units under separate Scheme.
• Export Promotion Capital Goods Scheme – Scheme allows import capital
goods at zero or concessional custom duty, provided importer exports
specified goods of value not less than 6 times duty saved

• What is an SPV?
• . In the USA, the term used is special purpose entity (SPE). The name SPV is given to an entity which is formed for a single, well-
defined and narrow purpose. An SPV can be formed for any lawful purpose. No SPV can be formed for an unlawful purpose, or
for undertaking activities which are contrary to the provisions of law or public policy. An SPV is, primarily, a business association
of persons or entities eligible to participate in the association. According to Joy Jain of PricewaterhouseCoopers, an SPV is
mainly formed to raise funds by collateralising future receivables.
• Is there a difference between a special purpose vehicle and a company?
• SPVs are mostly formed to raise funds from the market. Technically, an SPV is a company. It has to follow the rules of
formation of a company laid down in the Companies Act. Like a company, the SPV is an artificial person. It has all the attributes
of a legal person. It is independent of members subscribing to the shares of the SPV. The SPV has an existence of its own in the
eyes of law. It can sue and be sued in its name. The SPV has to adhere to all the regulations laid down in the Companies Act.
Members of an SPV are mostly the companies and individuals sponsoring the entity.
e.g. SPV for Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Cabinet has also granted permission to GAIL
(India) to join the SPV. The Dubai-based SPV, TAPI Ltd., will scout for consortium leader, who will develop and operate the
project, arrange finances and be accountable for safe supply of gas through the pipeline.
What is an SPV? What is the difference between a company and an SPV? How an SPV is set up? What are the benefits of
creating an SPV? What is an SPV? SPV is the acronym for Special Purpose Vehicle which is also called Special Purpose Entity. An
SPV is primarily a business association of persons or entities eligible to participate in the association meant for a single, well-
defined and narrow lawful purpose. No SPV can be formed for an unlawful purpose, or for undertaking activities which are
contrary to the provisions of law or public policy. An SPV is very similar to a company which is mainly formed to raise funds by
collateralizing future receivables. What is the difference between a company and an SPV? Although both these entities are
established as per Company Act and also follow the all the regulations in the Company Act, the difference lies in the purpose.
The company, as distinguished from an SPV, may be called a general purpose vehicle. A company may do several things which
are mentioned in the memorandum of association (MoA) or permitted by the Companies Act. An SPV may also do the same,
but its scope of operation is limited and focused. The MoA is quite narrow in the case of an SPV. This is primarily to provide
comfort to lenders who are concerned about their investment. How an SPV is set up? An SPV is set up with the help of its
promoter(s) or sponsor(s). The sponsoring company diverts some of its assets from the rest of the company into an SPV. This
isolation of assets creates a distance b/w the SPV and the sponsoring company which is important as it provides comfort to
investors by almost insulating the SPV from the ups and downs of the originating entity. What is significant here is the distance
b/w the sponsoring company and the SPV. In the absence of adequate distance b/w the sponsor and the new entity, the later
will not be an SPV but only a subsidiary company. A good SPV should be able to stand on its feet, independent of the sponsoring
company. Unfortunately, this does not happen in practice.
What are the benefits of creating an SPV? The key advantage is that it helps in separating the risk and freeing up the capital. As
a result, the SPV and the sponsoring company are protected against risks like insolvency, which may arise during the course of
operation. The SPV also allows securitization of assets without disturbing the managerial relationship. Under the arrangement,
any predictable income stream generated by secure assets can be securitized.
•

• Special Investment Regions (SIR)
• Special Investment Region (SIR) is a concept similar to Special Economic Zone. However, this
is a unique term applied in the territory of one of the states in India called Gujarat.
• The Gujarat government has enacted a legal framework for the SIR –
The Gujarat Special Investment Region Act – 2009(GSIR -2009) which has come into effect
from 6th January, 2009.
• SIR refers to an existing or proposed Investment Region with an area of more than 100 sq.
Kms or Industrial Area with an area of 50-100 sq. Kms declared so by the Government of
Gujarat under Section 3 of the Gujarat Special Investment Region Act – 2009 .
• By giving SIR status, Gujarat Government proposes to develop the investment region
/industrial area as global hubs of economic activity supported by world class
infrastructure, premium civic amenities, centres of excellence and proactive policy
framework.
• Here "Economic Activity" is defined in the GSIR Act to mean the activities and services
including but not limited to industrial, manufacturing, commercial, financial, processing,
packaging, logistics, transport, tourism, hospitality, health, housing, entertainment, research
and development, education and training, information and communication, management
and consultancy, corporate offices and the activities and services connected therewith or
incidental thereto and other economic activities as the Apex Authority may specify;
• While Special Economic Zones are primarily developed by private parties, the Gujarat
Government may set up or designate Government agencies including companies formed
under the Companies Act, 1956 as the project development agencies and assign them the
powers and functions relating to project Development of a Special Investment Region.
• Only Gujarat Government is empowered to establish, develop, operate and regulate the
Special Investment Regions (SIR).
• An Investment Region or Industrial Area declared as a SIR may be known with the name of
its location or its predominant economic activity.

• 5.0 Strategies:
• The State has entered into the phase of second generation economic reforms, with emphasis on structural changes in addition to fiscal incentives for the promotion of industry and balanced regional growth.
This has coincided with increasing international competition and rapid technological changes, which pose new challenges for industry. The Industrial Policy 2001 set out below has been formulated in this
context, keeping in view the objectives of sustained growth and employment and an expansion in livelihood opportunities. It supplements the provisions of the Information Technology and other sectoral
policies announced earlier. The components of the new Package Scheme of Incentives contained in this Policy will be operative from 1st April, 2001 upto 31st March, 2006:
• 5.1 Strategies:
• New industries establishing in C, D, and D+ areas an No-Industry District(s) will be exempted from payment of Electricity Duty for a period of 15 years. In other parts of the State, 100% Export Oriented Units
(EOUs), Information Technology (IT) and Bio-Technology (BT) units, and industries setting up in Special Economic Zones (SEZs), and Electronic Hardware Technology Parks will be exempted from payment of
Electricity Duty for a period of 10 years.
• 5.2 Waiver of Stamp Duty and Registration Fees: At present, IT units in
• Waiver of Stamp Duty and Registration Fees: At present, IT units in public IT Parks are exempted from stamp Duty and Registration fees upto 31st March 2006. Now all new industrial units (including IT and BT
units) and expansions, will be exempted from payment of Stamp Duty and Registration fees up to 31st March 2006 in C, D and D+ areas and No-Industry District(s). However, 50% of the Stamp Duty and
Registration fees will be waived for IT units set up in other IT Parks in talukas/areas in the State in "A" and "B" categories.
• 5.3 Octroi Refund:
• The scheme of refund of octroi provided under the Package Scheme of Incentives, 1993 will be included in the new Scheme up to 31-3-2006 on the same pattern. Where account-based cess or other levy is
charged instead of or in lieu of octroi, such change will also be eligible for refund as in the case of octroi.
• 5.4 Incentives to SSI units:
• The subsidy will be disbursed in equal annual instalments over 5 years. Existing SSI and small-scale IT and BT units will be eligible for 75% of the subsidy admissible as above for expansion, diversification or
modernization involving additional investment to the extent of 25% or more.
• 5.4.2 Interest Subsidy to new textile, hosiery and knitwear SSI units: New textile, hosiery and knitwear small-scale industries setting up indifferent parts of the Start will also be eligible for Interest Subsidy on
the interest actually paid to the financial institution/bank on the term loan for creating fixed capital assets, equal to the interest payable at 5% per annum as stated in the table below. The monetary ceiling will
be applicable for the complete period of eligibility.
5.5 Development of non-conventional energy:In order to give an impetus to the development of non-conventional energy, such projects will be eligible for benefits under the new Package Scheme of
Incentives.
• 5.6 Classification of talukas/areas:The present classification of different talukas/areas in the State in A, B, C, D and D+ categories on the basis of their level of development is contained in the Package Scheme
of Incentives, 1993, and will continue for the present. The matter of revision of the area classification will be separately considered by a Committee under the Chairmanship of the Minister (Industries). Norms
for the mid-term reclassification of talukas depending on changes in their development status will also be considered, and No Industry District(s) will be separately categorized.
• 5.7 Financing of capital incentives and refunds under the Package Scheme:A budgetary provision of at least Rs. 200 crores will be made each year from 2001-2002 onwards to meet past commitments and the
incentives under the new Scheme. Additional resources will also be raised through bonds linked with Sales Tax repayments under past Schemes.
• 5.8 Exemption from Sales Tax for Khadi & Village Industries:24 khadi and village industries are exempt from Sales Tax up to certain limits on annual turnover. Considering the potential of this sector for
employment generation and rural industrialization, Sales Tax will also be waived in respect of the 72 remaining industries for their turnover up to Rs. 20 lakhs pr annum. This concession would be available to
khadi and village industry units registered with and assisted by the Maharashtra State Khadi and Village Industries Board.
• 5.9 Sales Tax on IT products:Up to 31st March, 2006, the Sales Tax rates on IT products would be maintained at the level of the minimum floor rates, wherever applicable. No turn-over tax, additional Sales Tax,
surcharge or any other additional levy related to Sales Tax shall be applied to IT products.
• 5.10 Sick SSI units:Issues relating to the rehabilitation of sick SSI units are reviewed in the State-Level Inter Institutional Committee and Sub Committee of the Reserve Bank of India, and in the District Level
Committee which have been set up as an adjunct of the Zilla Udyog Mitras. Sick SSI units taken up for re-schedulement of arrears of Government and electricity dues, to be repaid in 36 monthly installments at
13% interest. The interest rate on the rescheduled arrears will now be reduced to 10%, in all except 'A' areas of the State. The repayment of such arrears would be allowed in 60 monthly installments.
• 5.11 Stamp Duty on Corporate Restructuring:The stamp duty for demerger of companies as defined under section 2(19-AA) of Income Tax Act, 1961 will be made applicable on lines of the stamp duty structure
applicable for amalgamation of companies under every order made by the High Court under section 394 of the Companies Act, 1956.
• 5.12 Establishment of IT/BT units on textile mill lands in Greater Mumbai:while granting permission for the sale of textile mill lands in Greater Mumbai, the lands becoming available to the Maharashtra
Housing and Area Development Authority (MHADA) for residential use would also be permitted to be used for the development of IT and BT industries by MHADA itself, or by MIDC.
• 5.13 FSI for IT Units:Twice the admissible Floor Space Index (FSI) is allowed for certain types of IT units setting up in IT Parks promoted by public bodies. Such units are also permitted in No-Development Zones
of cities up to FSI of 0.2. Such IT units will now be permitted to establish in No-Development Zones with an enhanced FSI of 1.0.
• 5.14 New Industrial Townships:Maharashtra pioneered the establishment or institutions of democratic decentralizations and local self-governance several decades ago. More recently, these concepts were
extended through statutory amendments to enable the establishment of independent Industrial Townships. In the first phase, self-governing Industrial Townships with the power to raise resources and
determine their application will be established in industrial areas being developed by MIDC at twelve locations across the State, i.e. at Vile-Bhagad (Raigad), Airoli (Thane), Talegaon (Pune), Hinjewadi - Man
(Pune), Shendre (Aurangabad), Additional Latur (Latur), Nandgaon Peth (Amravati), Additional Yavatmal (Yavatmal), Tadali (Chandrapur), Butibori (nagpur), Additional Sinnar (Nashik) and Nardhana (Dhule). The
industrial townships so set up will pay 25% of their revenue to the concerned Gram Panchayat(s) or local bodies for the initial period of 5 years.
• 5.15 Special Economic Zones:The establishment of Special Economic Zones has been allowed under the recent policy of Government of India. India's most successful Export Processing Zone (SEEPZ), which was
promoted by the State Government at Mumbai nearly three decades ago, has been converted into one of the country's first Special Economic Zones. Another Special Economic Zone is being developed by the
City and Industrial Development Corporation (CIDCO) at Dronagiri, near the Jawaharlal Nehru Port. All the concessions, benefits and facilities extended to such Special Economic Zones promoted by public bodies
will also be extended to Special Economic Zones set up by other parties. The establishment of Special Economic Zones at Aurangabad and Nagpur will also be proposed to the Government of India.
• 5.16 Specialized Industrial Areas:In the last few years, specialized industrial infrastructure has been developed by State agencies for various sectors, including Information Technology, leather, chemicals, etc.
More recently, the establishment of textiles and food processing zones have been taken up. Taking into account the potential and requirements of agro-industry in different parts of the State, MIDC will set up
new complexes for this sector, including 'Grape Wine Parks' at Nashik and Sangli, 'Orange City Park' for orange processing, Floriculture Complexes and Biotechnology Parks at suitable locations.
• 5.17 Promotion of Education and Research Institutions:Educational and research institutions of international or national standards, including world-class business education institutions, would be provided
land in industrial areas/estates at nominal or concessional rates.
• 5.18 Captive Power Generation:Captive power generation is permitted for industries throughout the State in respect of IT units, and in the case of co-generation, hydroelectric power and non-conventional
energy. Other types of captive power generation are at present permitted in respect of new industries in D+ and tribal areas. New as well as existing industries in D and D+ areas and No Industry District(s) will
also be permitted to set up captive power plants. Public bodies or joint ventures promoted by them can establish 'Independent Power Producers' for the dedicated provision of power to IT and BT Park and
special Economic Zones promoted by them.
• 5.19 Gas Cooperation Agreement:Gas is an important fuel and raw material for industry. As Mumbai High gas supply declines, commercial supply of LNG will become increasingly important for industrial units.
To facilitate the planned development of gas supply infrastructure in the State, the Gas Authority of India Limited (GAIL), MIDC and the Maharashtra Petrochemicals Corporation Limited (MPCL) have recently

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• 97th amendment aimed at autonomy &
transparency in cooperative sector.
• Managing committee for 5 yrs instead of 3 yrs
• Max cap on strength of a committee members is
21.
• Compulsory 2 women & 2 expert coopted
members.
• Recovery officer from Office of Registrar,
Cooperative societies for defaulters action.

ECO SURVEY DATA
• As on 31st March, 2015 there were about 2.26 lakh co-operative societies
in the State, with about 539.30 lakh members.
• Primary Agricultural Credit Societies (PACS) provide short-term agricultural
credits mainly for seasonal agricultural operations. PACS also include
Farmers Service Societies and Adivasi Co-operative Societies. As on 31st
March, 2015, about 55.2 per cent PACS were in loss.
• Dr. Punjabrao Deshmukh Interest Rebate Scheme
• Interest subsidy is given to motivate farmers for timely repayment of the
short term crop loan. Under this scheme, three per cent interest subsidy is
given for the loan up to ` one lakh and one per cent interest subsidy is given
for loan amount exceeding ` one lakh but less than ` three lakh. The farmer
has to repay the loan by 30th June of each year .
• The State provides financial assistance to societies for setting up agro-
processing units. Co-operative sugar factories, cotton ginning & pressing,
spinning mills, handloom & powerloom, dairy societies & dairy unions and
fisheries societies are the major constituents of agro-processing co-
operatives.
• Members in agro-processing cooperatives-Sugar factories (53%), Dairy
(22%),Spinning mills (11%), Fisheries(7%)....

ECO SURVEY DATA
• Sugar Factories- Of the total sugar factories in the country, 33 per cent are located
in the State followed by 22 per cent in Uttar Pradesh. As on 31st March, 2015, out
of the total sugar production in the country, the share of State was 37 per cent
followed by 25 per cent of Uttar Pradesh.
• Dairy sector- At the end of March, 2015, there were 24,762 co-operative dairy
societies and 88 co-operative dairy unions in the State. About 43 per cent co-
operative dairy societies and about 51 per cent dairy unions were in loss.
• Co-operative marketing societies have a three-tier organisational structure. The
Maharashtra State Co-operative Marketing Federation Ltd. is the apex body. The
District Co-operative Marketing Societies and the Primary Co-operative Marketing
Societies are functioning at district and village level respectively. About 36 per cent
co-operative marketing societies were in loss at the end of March, 2015 as
compared to 39 per cent at the end of March, 2014 .
• Non-agri credit societies- As on 31st March, 2015, there were 517 urban co-
operative banks, 14,577 urban co-operative credit societies and 7,232 salary
earners’ co-operative credit societies in the State. About 22 per cent of the total
non-agricultural credit societies were in loss.
• Out of the 1,583 total urban co-operative banks in the country, 32 per cent are
located in the State. As on 31st March, 2015, in all 109 banks in the State are under
liquidation. The Deposit Insurance Credit Guarantee Corporation has approved
reimbursement of deposits up to one lakh (in insured banks) and the disbursement
for 102 banks is in process, one bank has made appeal to GoI and the process for
submitting claims of remaining banks is in progress.

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Timeline
• During the British rule , Nicholson a British Officer in India suggested to
introduce Raiffersen model of German agricultural credit Cooperatives in
India. As a follow-up of that recommendation, the first Cooperative Society
Act of 1904 was enacted to enable formation of "agricultural credit
cooperatives" in villages in India under Government sponsorship. With the
enactment of 1904 Act, Cooperatives were to get a direct legal identity as
every agricultural Cooperative was to be registered under that Act only. The
1904 Cooperative Societies Act, was repealed by 1912 Cooperative
Societies Act which provided formation of Cooperative societies other than
credit. Under 1919 Administrative Reforms act , Cooperatives was made a
provincial subject making each province responsible for Cooperative
development. In 1942, the British Government enacted the Multi-Unit
Cooperative Societies Act, 1942 with an object to cover societies whose
operations are extended to more than one state. The impulses of the Indian
freedom movement gave birth to many initiatives and institutions in the
post independence era in India and armed with an experience of 42 years in
the working of Multi Unit Cooperative Societies and the Multi-Unit
Cooperative Societies Act, 1942, the Central Government enacted a
comprehensive Act known as Multi State Cooperative Societies
Act,1984,repealing the Act of 1942.

MPSC मुख्य परीक्षा २०१६. अर्थशास्त्र भाग १. सामान्य अध्ययन पेपर ४

MPSC मुख्य परीक्षा २०१६. अर्थशास्त्र भाग १. सामान्य अध्ययन पेपर ४

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MPSC मुख्य परीक्षा २०१६. अर्थशास्त्र भाग १. सामान्य अध्ययन पेपर ४

Editor's Notes