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1. What is tax terrorism and why this term has been used, while referring to Indian taxationpractices? Critically analyze its impact on business and investment environment.

• 'Tax terrorism' generally refereed to sudden levy of substantial retrospective tax bills oncorporations. But now the term is freely used to refer to any kind of official harassment thattax officers and department of taxation engage in.

• In last few years, Indian government used it more frequently, which was generally seen asanti-business practice. Thus, the term is associated with Indian taxation practices quitecommonly.

• For example in Vodafone case, more than $2 billion were charged as retrospective tax in2012.

• Rather than moving to repeal the 2012 law that allowed for the retrospective charges onVodafone, recently Cairn India, an oil exploration company owned by the U.K.-based Vedantagroup, was slapped with a tax notice worth $3.6 billion for a transaction that occurred in2006-07.

This practice can be critically analyzed by keeping following points in mind: impact on futureinvestment, impact on market sentiment, price rise, and upgradation of technology.

• Firstly retrospective taxation creates environment of distrust among government and investors.It discourages investor to invest further, as they consider retrospective tax as an embezzlementand sudden loss. Also it is against the laws of natural justice.

• Secondly it affects financial market sentiment. When investor is taxed retrospectively, it leadsto negative market sentiment and share prices fall which results into loss to shareholders

• Further to fulfill the gap corporations may tend to increase the product price.

• Finally due to loss, investor may not upgrade new technology, which may be disadvantageousto the society.

2. What is the stipulated role of MUDRA bank; how it has addressed the issues of microfinanceindustry and users in India?

• The main of the MUDRA (Micro Units Development and Refinance Agency Bank) Bankis to empower the small micro business. This business will help grow the economy of thecountry. Small entrepreneurs, when are helped to grow, helps the economy to grow alongwith them.

• The reason for this scheme to get into action is that the current remote entrepreneurs areunable to get money from the institution. These people get their finance from money lendersat a very high interest rate, which in return effects the growth of the micro business.

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• The biggest bottleneck to the growth of entrepreneurship in India the poor SME supportsystem. Overall, the non-corporate small business sector lacks not only financial support, butalso the draconian labour laws.

• Role of MUDRA

• The main objective of the committee is to build a suitable system to grow these businessesby providing finance.

• These banks are also to setup a good method of using the last-mile credit agent schemesystem to small and micro business.

• Another important objective of the bank is to make a good credit guarantee system so thatthe money is not loaned to a person who will go into debts and later becoming a liabilityto the government.

• The committee will also be guiding the person in order to ensure that his business won't bea failure.

• Registering all the Microfinance Institutions and agencies to evaluate the performance ratingand later accreditation for the first time.

• Mudra Bank will ensure clients are properly protected and will lay down principles andmethods of loan recovery in case of a default.

Schemes Offered by MUDRA Bank

Currently the scheme will be offering three types of loan divided in three segments known as thestarters, the mid-stage finance and next level growth seekers. The three loans that are provided bythe MUDRA bank are as follows:

• Shishu- this is the scheme for starters and will be lending the amount of Rs 50,000

• Kishor- this scheme is for the mid-level organization and will be lending amount from theRs 50,000 to Rs 5 Lakh

• Tarun- This is the scheme for the next level organization helping them to grow. This willcover loan from Rs 5 lakh to Rs 10 lakh.

The scheme will help empower the small business and is surely to help Indian economy grow alongwith entrepreneurs.

3. Why entrepreneurship is considered as one of the most important focus area for employmentgeneration and development. Discuss the recent measures taken by government?

• Entrepreneurship is basically the practice of starting a business in order to earn profit onnew found opportunities. It is a challenging task as many businesses which start fail to takeoff.

• Entrepreneurship has many uncertainties, especially when new products are created forwhich there is no existing market. Entrepreneurship affects economic growth in variousways and employment generation and innovation are most important of those.

• New firms not only bring new ideas, but they also have lower hierarchies compared to oldestablished firms. This encourages labour and increases productivity.

• Entrepreneurship converts a job seeker into job provider and thus, boosts the job availability,especially in new technology and domains. Thus, net new jobs are added as they do notreplace old firm in equal measure and add to the number of firms and industries.

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• MUDRA bank is major initiative taken by Government to boost entrepreneurship. As it willensure financial availability for budding entrepreneurs and help them setting up businessand will provide partial insurance cover over losses.

• Similarly pushing ahead with the ambitious Skill India mission, the government has launcheda number of initiatives aimed at developing skills and promoting entrepreneurship amongyouth. These include a redesigned Model Skill Loan Scheme, Skill Card for persons certifiedunder Pradhan Mantri Kaushal Vikas Yojana and the new National Policy for SkillDevelopment.

4. Why PPP has not been successful in case of development of railway infrastructure, whilethe same model did well for highways? Analyze with suitable examples?

• Physical infrastructure, such as roads, water and sanitation networks, and transportationsystems, involve large investments that can put a strain on the public purse. This strain isespecially great for countries, such as India, whose economies is undergoing rapiddevelopment and urbanization and has a great need for expanded infrastructure.

• Public-private partnerships (PPPs) are increasingly being used by governments and publicsector authorities throughout the world as a way of increasing access to infrastructureservices for their citizenry and economies at a reduced cost.

• In Indian context, PPP means an arrangement between a government or statutory entity orgovernment owned entity on one side and a private sector entity on the other, for theprovision of public assets and/ or related services for public benefit, through investmentsbeing made by and/or management undertaken by the private sector entity for a specifiedtime period, where there is a substantial risk sharing with the private sector and the privatesector receives performance linked payments that conform (or are benchmarked) to specified,pre-determined and measurable performance standards.

• The PPP model has not been successful in Railways, because of three major issues:

• Too much interference of politicians, as railways is used for populist sentiment. Thisdrives the profits down and forces operator to adopt some of the inefficient practices.

• Very long gestation period, while infrastructure projects generally have very long gestationperiod, railways is much longer than them. Most private companies don't want to workin such uncertain environment as profit can't be predicted for too foreseeable a future.

• BoT model that worked in case of highways is not possible for railways as railways can'twork in multi-fare format. Neither a differential fare policy possible given the politicalscenario and similarly, nor a toll can be levied.

• Very few railway PPP projects have been signed so far and all of them have been in the areaof freight and commercial lines around ports or some sections in dedicated western freightcorridor. But, response is still far from encouraging and even 10% of targeted investmentcouldn't be met in 12th FYP. One of the few successful projects is Pipavav railways inGujarat, which was developed for a modernization of pipavav port. Even this project hadto face too many problems and red tapesim and took double time then stipulated.

5. What is the difference between a Maharatna, Navratna, and Miniratna company? How thestatus does help these companies in their day-to-day working?

• Various PSUs have been awarded additional financial autonomy. These are public sectorcompanies that have comparative advantages, giving them greater autonomy to compete inthe global market so as to "support them in their drive to become global giants".

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• Financial autonomy was initially awarded to nine PSUs as Navratna status in 1997. In 2010,the government established the higher Maharatna category, which raises a company'sinvestment ceiling from Rs. 1,000 crore to Rs. 5,000 crore. The Maharatna firms could nowdecide on investments of up to 15 per cent of their net worth in a project while the Navaratnacompanies could invest up to Rs. 1,000 crore or 15% of their net worth on a single projector 30% of their net worth in the whole year (not exceeding Rs. 1,000 crores).

• Miniratna have two tiers, while Miniratna I can invest up to Rs. 500 crore or equal to theirnet worth, whichever is lower; the Miniratna II can invest up to up to Rs. 300 crore or upto 50% of their net worth, whichever is lower.

Advantages:

• Grating of status allows company to hire more independent directors at subsequent stage,which increases its professionalism and frees it from bureaucratic setting.

• There is larger autonomy in day to day business and most decisions do not require ministry'spre-approval, which saves time and cost.

• Financial independence allows company to plan their investment in advance, as comparedto a case where the company is required to seek approval each time and most decisions aretaken by the time profit or returns have already exhausted.

• Granting status allows healthy competition among companies to do well and achieve betterstatus and thus autonomy. this spirit helps in growth.

6. What is exit policy and why is it important, if India wants to improve on 'Ease of doingbusiness' and 'start-up culture in India? What are the some of the recent initiatives in thisregard?

• Exit policy is an umbrella term for laws that govern the closure of an industrial unit or afirm. Usually firms are not given complete freedom to close-down any time, in many countries;the closure of a non-viable unit is a regular phenomenon with the state taking care of theunemployed under specific terms for a certain period through unemployment benefits oralternate jobs in some cases.

• In India, the limited resources available in the hands of the government do not permit it tooffer any substantial help under such an eventuality and this is compensated by the legalbarriers in right to exit.

• The Industrial Disputes Act, 1947 puts restrictions on employers in the matter of reducingexcess staff by retrenchment, by closure of establishments and the retrenchment processinvolved lot of legalities and complex procedures. Also, any plans of retrenchment andreduction of staff and workforce are subjected to strong opposition by trade unions. Becauseof this, it is often seen in India that loss making PSUs are kept running just for the sake ofemployment.

• Exit policy is very important for start-ups because, they are not sure about fate of theirbusiness and easy exit policy is required in case business idea is not successful or companydoesn't grow well enough to repay investments.

• While there are risks of sudden increase in unemployment and lack of social security, becauseof firms closing down at their will, however, such risks must be considered holistically asopportunities outweigh them.

• Easy exit policy will encourage millions of entrepreneurs in India and abroad to invest innew ideas and arenas, will generate more employment than the people losing jobs, because

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of easy exit. Currently the old and outdated labour laws act as a major impediment in thepath of opening new firms, especially in case of small start-ups with low investment.

• In case of merger and acquisition, the non-viability of the merged unit suffering underprolonged recession creates a huge problem for the parent unit, if it can't outlay employees,like it is proving for Tata and very recently for Arcelor Mittal.

• Government is taking several steps, including reduction in number of documents for foreigntrade and online application for environment clearance. Make in India is one of the biggestprogramme government started to ensure ease of doing business. It also started single windowonline clearances for government industrial areas.

• To give boost to the start-up culture, recently the government started MUDRA bank and RBIalso directed banks to provide loans to self help groups.

• In line with the recent 'Start up India, Stand Up India', the government has decided to allota unique entrepreneurship number (UEN) that can be used for completing various statutoryregistrations and report compliance with tax and labour laws.

• If India wants to achieve the double digit economic growth and improve the start up culturein India, It is the right time that we should focus to strengthen our Exit or Industrial policy.

7. FCI has lost more than 40,000 tones of grains in past 2 years. Discuss the major reasonsthat are responsible for such a glaring loss and suggest measures to reduce such wastagein future?

• CAG has highlighted the increasingly inadequate storage capacity of the Food Corporationof India (FCI), the government agency entrusted with food management and the procurementof food grains. This storage gap and other policies of the FCI led to food spoiling in a nationwhere millions still go hungry every day.

• It highlighted the absence of specifications for maximum and manageable stock levels to bemaintained in the central pool and of minimum buffer norms. It added that the existingbuffer stock policy does not indicate which agency is primarily responsible for maintainingthe minimum buffer stock level for the country as a whole, which adversely affectsaccountability and transparency in the management of food grains.

• Even as storage capacity remained inadequate, existing capacity was not completely utilized.The auditor observed that utilization of existing storage capacity in various states and unionterritories was less than 75% in the majority of the months between 2006-07 and 2011-12.

The Shanta Kumar Committee has made many recommendations in this regards:

• FCI (Food corporation of India) should gradually outsource grain-storage function to centralwarehousing corporation (CWC), state warehousing corporation (SWC), and private sectorplayers- under Private Entrepreneur Guaranty (PEG) Scheme) on competitive bidding- givethem contract to store FCI grains for 20 years.

• Don't store grain in "Cover and plinth" godowns. Convert them into "Silos" with Mechanized/ robotic assemblies, with help of private sector.

• End to End computerization and online tracking of entire system from procurement to retaildistribution.

• North East and Jammu Kashmir state Governments must create storage capacity that canlast for 3 months. So, even sustain during bad weather, natural disaster and bandh-hartals,there is no shortage of food, even if they're cut-off from rest of India.

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• If grains are transported in containers, instead of gunny-bags, it'll reduce losses; get faster-turn-around time at railways and waterways.

• Immediately after the procurement, give 6 months' ration to poor-beneficiaries, with cheap-grain bins for storage. Result? FCI will have to store less grain in its godowns. Peoplethemselves will take care of storage.

• As far as possible, grain should be transported in containers. It should be packed in gunnybacks only at District HQ level- from where it'll be transported to retail outlets

• Stop labourers from using iron hooks to lift gunny bags. Provide bags with "ears" to eliminatehook-requirement.

• As and where possible, use forklifts instead of manual labour.

• Improved night security at rail-points, because >85% of PDS Grain is transported throughrailways and maximum siphoning off occurs here.

• Construct silos at mandis, and provide rail connectivity to them.

• As and where possible, use inland water transport for moving wheat and rice. Examplefrom Visakhapatnam to north-east and Kerala. Improve rail connectivity between such portsand their hinterlands.

8. India suffers from a special case of premature deindustrialization; enumerate its majorreasons and suggest measures to reverse the situation?

• Traditional economies grow and develop first by industrializing, and then by moving intoservices. But for the most latecomers this path has become increasingly difficult to traversei.e. the vast majority of developing countries are not attaining industrialization levels reachedby early industrializers.

• The term deindustrialization is used today to refer to the experience mainly of these advancedeconomies, which achieved this state after a long period of industrialization. However, someDeveloping countries, including India, have experienced falling manufacturing shares inboth employment and real value added, especially since the 1980s. For the most part, thesecountries had built up during the 1950s and 1960s modest manufacturing industries behindprotective walls and policies of import substitution. These industries have been shrinkingsignificantly since then.

• What's even more striking, the onset of deindustrialization is now taking place much sooner,at lower levels of industrialization and lower incomes. (De-industrialization is a situation inwhich an economy begins producing more services than goods.)

• It is not clear why developing countries are deindustrializing so early in their growthtrajectories. One obvious culprit may be globalization and economic openness, which havemade it difficult for countries like Brazil and India to compete with China and othermanufacturing hubs.

• However, this is not the sole reason, another reason is the spread of education, as whenWest industrialized, education levels were low and manufacturing jobs were acceptable topeople easily. This, however, has changed today, the educated people in developing countriesdon't want to work in manufacturing and prefer services.

• In the absence of sizable manufacturing industries, these economies will need to discovernew growth models. One possibility is services?led growth. Many services, such as IT and

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finance, are high productivity and tradable, and could play the escalator role thatmanufacturing has traditionally played.

• However, these service industries are typically highly skill?intensive, and do not have thecapacity to absorb - as manufacturing did - the type of labor that low? and middle?incomeeconomies have in abundance.

• The bulk of other services suffer from two shortcomings. Either they are technologically notvery dynamic. Or they are non?tradable, which means that their ability to expand rapidlyis constrained by incomes (and hence productivity) in the rest of the economy.

• In order to reverse the trend, India must rapidly reindustrialize, and the two antidotes to thesame are, FDI, Export competitiveness and Skill development.

• As these are three problems Indian Industry suffers from, lack of capital or investment,which FDI can address; Export incompetitiveness, which can be addressed through taxreforms and labour reforms and Skill development, which can solve the problem of labouravailability.

• India has surplus of both educated and non-educated people. But problem is industry doesn'trequire any, it needs more line operators and foreman than engineers and it is precisely whatSkill development program shall be aimed at, i.e. generation of employable skills and notunnecessary knowledge and information.

9. Illustrate the meaning of merit and non-merit subsidies with respect to Indian Agriculture?Critically analyze why the non-merit subsidies must be phased out slowly?

• Subsidies can correct for the under-consumption of goods with positive externalities. Withthe social benefits of a particular service or commodity exceeding the aggregate of privatebenefits to individual consumers, market solutions result in under-consumption and subsidiescan make the necessary correction.

• However, the benefits can be maximized only when the subsidies are transparent, welltargeted, and suitably designed for effective implementation without any leakages. All subsidiesshould be targeted sharply at the poor and the truly needy like small and marginal farmers,farm labour and urban poor.

• Major non-merit farm subsidies include,

a. Under Nutrient Based Subsidy scheme, the prices of all fertilizers except urea arealmost decontrolled. Urea prices are governed by New Pricing Scheme-III (NPS-III). Dueto this urea is the most consumed fertilizer. It leads to Unbalanced use i.e. even in areaswhich requires potash as nutrient we apply urea, which is a major source of nitrogenwhich affects productivity.

b. In case of major irrigation (canals) then there are no maintenance charges and in caseof minor irrigation i.e. tube-wells then electricity is provided at subsidized rate andsometimes even free. It leads to over-exploitation of groundwater which in turn leads tolowering of ground water table; leads to water-logging and consequent salinity.

• Similarly, a few merit subsidies would include, soil and water conservation, agriculturalresearch and education, flood control and drainage, as these benefit the needy and non-needy alike and non-needy sections can't take undue advantages of such subsidies.

• Thus, from above discussion it is clear, how subsidies distort markets, price, and usage ofresources. Also the benefit of subsidy goes to more affluent ad rich farmers and not to small

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and marginal farmers as they can only have access to tube-wells; Price subsidies in electricitycan only benefit the (relatively wealthy) 67.2 percent of household that are electrified.

• Further these contributes to high fiscal deficit -In 2014-5, our fertilizer subsidy bill alone wasRs 70,000 crore. We must slowly phase them out and replace them with other mechanismssuch as direct cash transfer to the needy farmers. For better targeting JAM Number Trinity-Jan Dhan Yojana, Aadhaar and Mobile numbers- solution could be explored which willallow the state to offer this support to poor households in a targeted and less distortive way.

10. Explain what is corporate lobbying and discuss the status of its legality in India? Analyzethe Mukul Mudgal Committee Report w.r.t Wal-Mart lobbying in India?

• Lobbying is a controversial and often misunderstood activity, which in simple terms means,informing government officials as to what a group of citizens wants. Corporate lobbyingaddresses whether an industry needs to be protected from economic shocks or foreigncompetition through subsidies or tariffs. At a local level, companies can lobby lawmakers tocreate infrastructure improvements, such as wider roads for shipping goods or more busstops for commuting employees.

• Corporations often hire consulting firms to do their lobbying. Since a business' first priorityis running its business, it often doesn't have the internal expertise or connections needed tofind the right government official and fully examine all the issues and concerns that needto be addressed. Sometimes a group of companies, such as corn farmers, or workers' groups,such as unions, will band together to fund their own lobby, for example, FICCI andASSOCHAM.

• In India, corporate lobbying, in the form of intensive briefings and presentations to ministersand senior civil servants, has expanded and the current political climate also makes ministers,officials, and legislators more receptive to it. Lobbying is not yet recognized in a statutoryor non-statutory form in India. Thus there is no formal organization for lobbyin

• g. Operations like these are being routed through Public Relations Firms and some wellconnected individuals. However due to lack of organizational set up these firms largelyoperate on word of mouth.

• Scams like the recent 2G spectrum scam in India only go on to highlight the dire need toregulate legitimate lobbying. However, the term became popular, when it was disclosed thatWal-Mart hired professional PR firms for lobbying in India.

• It was in this context that Mukul Mudgal committee was formed to investigate into matterand suggest on the issue. While, the government didn't release the report despite severalrequests by CIC. The recent disclosure from the report has brought the Wal-Mart once againin news, as it has been confirmed that Wal-mart paid bribe in millions in bribe to numerouspeople, varying from few thousand to crores.

• While, the report was not made public by the government, some of its suggestions which areknown include: Government must provide a clear law on what amounts to lobbying andwhich aspects are illegal in India, as there are many activities which can be described aslobbying and are yet allowed, for example, formation of advocacy groups like FICCI. Similarly,the other suggestions are regarding the political donations and election funding, which mustbe duly published and should be available to public.

• Given the nature of suggestions, it is highly unlikely that political parties would agree to itas the same suggestion has been provided by many advocacy groups for different objectives,while we surely need clarity regarding the lobbying practices, which are illegal and must berefrained from.

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11. The MSP in India is not decided by technocrats and policy-makers, but by politicians withan attempt to appease the farmer community. Analyze the impacts of this policy?

• The MSP is used as a tool to incentivize farmers to produce food grain and help them duringperiods of crop failure. However, like all other social sector spending, it has become a toolto appease farmers as their votes influence the final election outcome.

• While MSPs are supposed to be used as a tool to compensate farmers in particular duringperiods of stress like dough and/or flood; which means that during normal periods, MSPsought to be lowered or even suspended). However, in reality MSPs in India have alwaysmoved in one direction, which is upwards.

• The continuous uptrend in MSPs creates market distortions. There has never been even asingle instance when specific hikes in MSPs, say for drought relief, or as bonuses to meetspecific procurement targets etc., were withdrawn the subsequent year. Rather, these act asa floor for prices that year.

• From financial year 2007 onward, a substantial hike in MSPs was announced for paddy riceand wheat and this was followed by steep across-the-board hikes the year after. From thenon, MSPs have been rising very fast. While, between 1998-99 and 2006-07, the MSPs haveincreased between 3.1% and 4.2% p.a., they rose by between 9.3% and 15.7% p.a. over2006-07 and 2013-2014.

• Consider for example, rice and wheat subsidies. The government provides both producerand consumer subsidies totaling about ` 125,000 crore. Wheat and rice are procured fromfarmers at guaranteed above-market minimum support prices (MSPs - ` 14/kg of wheat, `13.6/kg of rice). Which was even higher than the prevailing market price and determinedthe floor market price.

• This also meant that any type of grain, whether stale, inferior quality, or pest ridden, wouldsell at this price only instead of going into cattle feed at lower prices. This has also pushedup the cattle feed price too.

High MSPs induce distortions, some of which ultimately hurt the poor, apart from obvious damageto the exchequer, in following ways:

• High MSPs result in farmers over-cultivating rice and wheat, which the Food Corporationof India then purchases and houses at great cost.

• High MSPs also encourage under-cultivation of non-MSP supported crops. The resultantsupply-demand mismatch raises prices of non-MSP supported crops and makes them morevolatile.

• High MSPs and price subsidies for water together lead to water-intensive cultivation thatcauses water tables to drop, which hurts farmers, especially those without irrigation facilitiesand infrastructure.

12. None of the policies of government would help reduce the unemployment in India unlessSkill Development is ensured for all the unskilled labourers. Discuss the major initiativestaken by the government to address this issue?

• The objective of Skill Development is to create a workforce empowered with the necessaryand continuously upgraded skills, knowledge and internationally recognized qualificationsto gain access to decent employment and ensure India's competitiveness in the dynamicglobal market. It aims at increasing the productivity and employability of workforce (wageand self -employed) both in the organized and the unorganized sectors.

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• It seeks increased participation of youth, women, disabled and other disadvantaged sectionsand to synergize efforts of various sectors and reform the present system with the enhancedcapability to adapt to changing technologies and labour market demands.

• But the current education system does not focus on training young people in employableskills that can provide them with employment opportunities. Today, a large section of India'slabor force has outdated skills. With current and expected economic growth, this challengeis going to only increase further, since more than 75% of new job opportunities are expectedto be "skill-based." Thus achieving a balance between cost, quality, speed and scale is aformidable one.

The Schemes launched by the Government are discussed as under:

• Ministry for Skill Development: A new Ministry of Skill Development, Entrepreneurship,Youth Affairs and Sports has been created to work with various other ministries in theGovernment and harmonize the skill development activities across the country.

• National Skill Development Corporation (NSDC): The NSDC, a Public Private Partnershipwas created to catalyze the setting-up of large scale, for-profit sustainable vocationalinstitutions in the country, by encouraging private sector participation through providinglow cost funding for creation of training capacity. The NSDC is working closely with variousorganizations in Australia, Iran, Canada, Bahrain, Germany, UK and Asian DevelopmentBank to ensure international participation in Skill Development in India.

• National Skill Development Agency (NSDA): The NSDA was created in June 2013 tocoordinate and harmonize skill development efforts across various stakeholders includingcentral Ministries, States and the private sector in the country. The NSDA has been nowmade a part of the newly formed Ministry of Skill Development and Entrepreneurship.Technical Assistance agreements between NSDA have been signed and various internationalorganizations such as Asian Development Bank (ADB), India-EU and Department forInternational Development (DFID) with 11 States across the country.

• Special Schemes for J&K - Udaan: The NSDC is driving a Scheme titled Udaan andworking with corporates and Government to provide training and employment to theyouth of J&K in high growth sectors. Till date, 54 Corporates have committed to train over68000 candidates over five years.

• Special initiatives in North East

Skills Development at Kamrup Metropolitan Constituency: A plan has been chalkedout to train approximately 1000 students per year across 6 different trades under the"Constituency Model for Skills Development"

Regional level workshop on skill development for the North -East Region: TheNSDA had organized a regional level workshop for the North East Region in August 2014to exchange ideas around Skill Development in the region

13. Explain how the stipulated Common National Agricultural Market would be a step aheadfrom the Model APMC act and discuss its major advantages, once it is established?

The National Agriculture Market (NAM) is envisaged as a pan-India electronic trading portal whichseeks to network the existing Agricultural Produce Market Committees (APMCs) and other marketyards to create a unified national market for agricultural commodities. NAM is a "virtual" marketbut it has a physical market (mandi) at the back end.

NAM was announced during the Union Budget 2014-15 and is proposed to be achieved throughthe setting up of a common e-platform to which initially 585 APMCs selected by the states arelinked.

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NAM will be implemented as a Central Sector Scheme through Agri-Tech Infrastructure Fund(ATIF). The Department of Agriculture & Cooperation (DAC), Ministry of Agriculture will set itup through the Small Farmers Agribusiness Consortium (SFAC). The Central Government willprovide the software free of cost to the states and in addition, a grant of up to Rs. 30 lakhs permandi /market will be given as a onetime measure for related equipment and infrastructurerequirements. In order to promote genuine price discovery, it is proposed to provide the privatemandis also with access to the software but they would not have any monetary support fromGovernment.

NAM is said to have the following advantages:

• For the farmers, NAM promises more options for sale. It would increase his access tomarkets through warehouse based sales and thus obviate the need to transport hisproduce to the mandi.

• For the local trader in the mandi / market, NAM offers the opportunity to access a largernational market for secondary trading.

• Bulk buyers, processors, exporters etc. benefit from being able to participate directly intrading at the local mandi / market level through the NAM platform, thereby reducingtheir intermediation costs.

• The gradual integration of all the major mandis in the States into NAM will ensurecommon procedures for issue of licences, levy of fee and movement of produce. In aperiod of 5-7 years Union Cabinet expects significant benefits through higher returns tofarmers, lower transaction costs to buyers and stable prices and availability to consumers.

• The NAM will also facilitate the emergence of value chains in major agriculturalcommodities across the country and help to promote scientific storage and movement ofagricultural goods

14. Discuss the state of 3rd generation financial reforms in India, what are major objectivesof these and how many of these have been implemented?

The objective of the 3rd Generation Reforms is to resolve the issues that the financial sector faces asof now.

• First, India's financial system is not providing adequate services to the majority of domesticretail customers, small and medium-sized enterprises, or large corporations. Governmentownership of 70 percent of the banking system and hindrances to the development ofcorporate debt and derivatives markets have stunted financial development. This will inevitablybecome a barrier to high growth.

• Second, the financial sector-if properly regulated but unleashed from government stricturesthat have stifled the development of certain markets and kept others from becomingcompetitive and efficient-has the potential to generate millions of much-needed jobs and,more important, have an enormous multiplier effect on economic growth.

• Third, in these uncertain times, financial stability is more important than ever to keepgrowth from being derailed by shocks hitting the system, especially from abroad. Althoughthe Indian economy dodged the Asian crisis and the recent subprime crisis, a lot remains tobe done to secure the stability and durability of the financial system.

• Many of the reforms are intertwined. For instance, it makes sense to level the playing fieldbetween banks and non-bank financial corporations by easing the requirement that theformer finance priority sectors and the government.

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• But making these changes while the government continues to have huge financing needsand without having a more uniform and nimble regulatory regime could be dangerous.

• The connections, which stretch beyond just financial reforms to broader macroeconomicreforms, can in fact have a positive effect by reinforcing the effects of individual actions.

• For instance, the process of removing restrictions on capital flows could serve as an adjunctto other reforms if handled adroitly. Allowing foreign investors to participate more freely incorporate and government debt markets could increase liquidity in those markets, providefinancing for infrastructure investment, and reduce public debt financing through banks.

• India's rich and complex political process being what it is, focusing solely on the big picturecould bog down progress. A hundred small steps, many of them less controversial, but stillrequiring some resolve on the part of policymakers, could get the process of reforms goingand build up momentum for the bigger challenges that lie ahead.

• For instance, converting trade receivable claims to electronic format and creating a structureto allow them to be sold as commercial paper could greatly boost the credit available to smalland medium enterprises.

• It is believed that if other policies are in sync, financial sector reforms could add significantlyto economic growth and also make a major contribution to the sustainability of this growth,in both the economic and political dimensions.

15. Politicization of any department affects its effectiveness and progress in long run, such asagricultural procurement has been used as a political tool. Illustrate the above statementin context of Indian railways and discuss the suggestions by Bibek Debroy Committee toaddress this issue?

• Indian Railways is one of the most politicized and populist, apart from being the largest PSUin India and given the people's dependence on this mode of transport, it is not unreasonablycalled the lifeline of India. However, it is its popularity only, which has made railway faresand train availability a popular appeasement tool as it is one of the few arenas in which thecentral government directly provides services to the masses.

• Every year the budget speech is filled with announcements about new trains and lines andthe document ceases to remain a policy document and transforms into a dole announcementsfor states. It becomes difficult to spot proposals for the overall improvement of services andstrengthening of the system.

• Most of the projects were determined by political calculations, which only focused on shortrun and immediate services, while turning blind eye to the long run functioning and healthof the sector. Because of this crowded routes became even more crowded and dirty, whilehitherto untouched areas didn't receive any attention, for example, North-East is still notconnected through railways, except the NJP-Guwahati-Dibrugarh line.

• Similarly railway cleanliness was badly affected as no attention was paid to it. However, thepresent government has shown a reverse trend and railway modernization and cleanlinessis now the prime focus once again. it is in this context only that Bibek Debroy committeewas formed to suggest reforms for depoliticization of railways in long run.

Major suggestions by the Debroy committee in this regard are:

• Establishment of an independent regulator, Railway Regulatory Authority of India (RRAI)with a separate budget and to be independent of the Ministry. RRAI will decide on tariffsto revamp the cash-strapped railways. This will maintain the independence in terms of faredetermination through a professional body on the basis of true user charges.

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• Railway Budget should be phased-out with gross budgetary support to Indian Railways.There is need to improve the internal resource generation and explore varied methods offinancing, but also to improve utilization of available resources. The separate budget sometimesnecessitates the railway minister to announce some lucrative new schemes and new trains;in absence of a separate railway budget, politicization would be much less.

• Separation of activities like running of hospitals, schools, real estate development, catering,manufacturing of locomotives, coaches and wagons from the core business of running trains.

16. Poverty alleviation is not a policy choice, but a warlike emergency; however, despite thatsuccessive governments have only focused on merely the expenditure reducing aspects insteadof income & skill augmenting approach. Critically analyze.

• Poverty alleviation approach in India has mostly been focused on consumption aspect throughusage of subsidy (Food security and Social security programmes) and somewhat on incomegeneration (Wage employment or self-employment).

• The focus of security programs is welfare, which, however, doesn't improve the conditionof beneficiaries in long run. While short-run support to vulnerable is necessary, it shouldn'tbe the mode of poverty alleviation, as it is not effective for that purpose.

• While, employment generation program is successful, if it either provides regular employmentas a source of income, or provides experience, which can then enable people to get job inprivate sector. However, most government employment generation programs fall flat on thatcount as they don't provide either.

• The most ambitious program, i.e. NREGS, is at best a support program for seasonally employedpeople, but this also doesn't impart any skill and thus, a long term benefit.

• Thus, most important aspect for poverty alleviation shall be skill and capability development,which would impart people skills for self-employment. Whereas the current programs forself-employment focus on provision of income-generating assets, the most important reasonfor poverty is however, is not unavailability of resources; rather it is unavailability to usefulskills.

• While, there is no doubt, that even skilled people are also unemployed; the reason behindthe same is regional disparity and unavailability of jobs in most densely populated Easternregion of India. This, shouldn't deter government from focusing on skill development andhuman development as these two alone can lift substantial population out of poverty, whilethe rest are support programs until this happens.

17. Indian power sector not only suffers from low production, but also poor capacity addition?Analyze the major reasons behind this bottleneck and discuss how suggested reforms byDeepak Parikh committee address this concern?

• The major reasons for not achieving the capacity addition targets include delay in theplacement of orders for main plant equipment, delay and non-sequential supply of materialfor main plant and Balance of Plant, slow progress of civil works, contractual disputesbetween project developer and contractor and their sub-vendors / sub-contractors, poorgeology, flash flood, delay in land acquisition, environmental concern, shortage of manpower,law and order problems and difficult climate conditions.

• Fuel availability has emerged as the biggest risk faced by thermal Power projects in India.Coal production has not kept pace with Power capacity addition in the current Plan anddevelopers have been forced to import coal at a time when international coal prices haveshot up. Lack of clarity on financing this extra cost as well as added transport costs for

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plants in the interior have led to uncertainty and reduced investments in Power. There is aneed to remove uncertainties in the regulations to overcome these problems.

• With coal-based capacity addition expected to account for over 50 per cent of total capacityadditions in the upcoming 12th plan, the issue of acute shortage of domestic coal in thecountry due to SC order cancelling coal blocks allocated in last auction. This affected thepower production for at least 2 years before it could be boost up by restoring coal suppliesto some extent from last auction.

Deepak Parekh Committee

• The committee, in its final report submitted to the government recommended earmarking15% of the power generation capacity of Central PSUs for open access consumers. The ideais to introduce competition and attract private investment in power generation as producerswill be able to sell directly to bulk consumers in a competitive market.

• Though open access was envisaged in the Electricity Act, 2004, it hasn't materialised aspower producers continue to rely on the state-sector discoms which are hamstrung byuneconomic policies and don't have unhindered direct access to consumers.

• It also suggesting Privatization of coal mining wherein Coal India or its arms/subsidiariescan retain ownership of mines Constitute a High level task force headed by a deputygovernor of RBI to decide on measures to restore the health of power projects facing financialtrouble due to scarcity of fuel

18. Discuss the major factors contributing to low productivity in Indian agriculture. Analyzethe government efforts in post-liberalization era to address these concerns?

The factors that and causes of low agricultural production in India are discussed under the followingbroad heads:

• Pressure of population on land: The country's population is much greater than its share inthe land of the world. Not only this, the ratio of cultivable land to total land is alsocomparatively low. There is, therefore, greater pressure of population on land. Increasingpressure of population on land is partly responsible for the sub division and fragmentationof holdings. Productivity on small uneconomic holdings is low.

• Degradation of Land: According to Government of India, about 329 million hectares (halfof the land) have already been degraded. This results in 33 to 67 percent of yield loss.Moreover, 5% of land has been damaged so badly that it cannot be used further.

• Subsistence farming: A large majority of farmers keep to farming for raising food grains fortheir subsistence and therefore they do not produce for selling in the market. The productivityof such farms is bound to be low on account of the cropping pattern of the low prospectsfor the agricultural improvement.

• Outdated agricultural techniques: Most of the Indian farmers continue to use outdatedagricultural techniques. Wooden ploughs and bullocks are still used by a majority of farmers.Use of fertilizer and new high-yielding verity (H.Y.V) of seeds is also extremely limited. Insummary, Indian agriculture is traditional, therefore, productivity is low.

• Lack of irrigation facilities: Despite considerable efforts in bringing more area under irrigation,only 1/3rd of the total cultivated area is provided with irrigation facilities. Obviously, therest of the area has to depend on rainfall. Even in the case of irrigated area optimum useof water is not made on account of non-availability of suitable water channel sprinklers.

• Lack of adequate finance: Financial facilities are utterly inadequate so that the farmer hasto depend on the village money lender who charges exorbitant rates. More over theinstitutional credit covered barely 6.4% of it. In such a state productivity cannot be significant.

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• Absence of productive investment: Investment is jewellery, gold. etc., seem to be moreattractive than investment in, land and other productive purposes. In the absence of productiveinvestment, production cannot expand.

• Neglect of agricultural research: Expenditure on agricultural research is very small and notdevelopment oriented.

Government's Role

The policies of the central government since the beginning of the 1990s have had direct and indirecteffects on farmers' welfare. The economic reforms did not include any specific package specificallydesigned for agriculture. Rather, the presumption was that freeing agricultural markets andliberalizing external trade in agricultural commodities would provide price incentives leading toenhanced investment and output in that sector, while broader trade liberalization would shift inter-sectoral terms of trade in favour of agriculture. The neo-liberal economic reform strategy involvedthe following measures which specifically affected the rural areas:

• Actual declines in Central government revenue expenditure on rural development, cuts inparticular subsidies such as on fertilizer in real terms, and an the overall decline in per capitagovernment expenditure on rural areas.

• Reduction in public investment in agriculture, including in research and extension.

• Substantial declines in public infrastructure that affect the rural areas, including irrigation.

• Financial liberalization measures, including redefining priority sector lending by banks, whicheffectively reduced the availability of rural credit, and thus made farm investment moreexpensive and more difficult, especially for smaller farmers.

• Liberalization and removal of restrictions on internal trade in agricultural commodities,across states within India.

• Liberalization of external trade, first through lifting restrictions on exports of agriculturalgoods, and then by shifting from quantitative restrictions to tariffs on imports of agriculturalcommodities.

• Import tariffs were very substantially lowered over the decade. Exports of important cultivateditems, including wheat and rice, were freed from controls and subsequent measures weredirected towards promoting the exports of raw and processed agricultural goods.

• While lot of new schemes to revive farm sector were launched, they failed to achieve theirobjectives, with some exceptions.

• This is not to say that Indian agricultural productivity in wheat and rice has not improvedover the years. Yield rates in wheat have grown at a compounded annual growth rate of1.8% from 1983 to 2013 and in rice by 1.71% over the same period. These aren't particularlyslow growth rates. The improvement in yield rates for rice would place it at number 13 inthe world while that in wheat would peg it at 14th rank. However, productivity is still lowerthan many developing countries, such as China and South Africa.

19. What do you understand by Net-neutrality and why it is intensely debated throughout theworld? Analyze the A.K. Bhargava Committee suggestions to ensure the net-neutrality inIndia?

• As its name indicates, net neutrality is about creating a neutral internet. The basic principledriving net neutrality is that the internet should be a free and open platform, almost like anyother utility we use in our home (like electricity). Users should be able to use their bandwidth

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however they want (as long as it's legal), and internet service providers should not be ableto provide priority service to any corner of the internet.

• To put it out straight, if there is no net neutrality, the Internet won't function as we'veknown it too. It will mean Internet Service Providers (ISP) will be able to charge companieslike YouTube or Netflix as they consume more bandwidth, and eventually the load of theextra sum will be pushed to the consumers.

• Net Neutrality is extremely important for small business owners, start-ups and entrepreneurs,who can simply launch their businesses online, advertise the products and sell them openly,without any discrimination. It is essential for innovation and creating job opportunities. Bigcompanies like Google, Twitter and several others are born out of net neutrality.

• With increasing Internet penetration in India and given that we are becoming a breedingground for startups and entrepreneurs, the lack of net neutrality should worry us greatly.Besides, it is very important for freedom of speech, so that one can voice their opinionwithout the fear of being blocked or banned.

• Though Bhargava Committee unhesitatingly recommended for adherence of the coreprinciples of Net Neutrality, it also suggested few exceptions in the interests of nationalsecurity and businesses.

• According to report the primary goals of public policy in the context of Net Neutralityshould be directed towards achievement of developmental aims of the country by facilitatingAffordable Broadband, Quality Broadband and Universal Broadband for its citizens.

• User rights on the Internet need to be ensured so that Telecom or Internet Service Providersdo not restrict the ability of the user to send, receive, display, use, post any legal content,application or service on the Internet, or restrict any kind of lawful Internet activity or use.

• The panel said that "collaborations between telecom operators and content providers thatenable such gate-keeping role to be played by any entity should be actively discouraged".

At the same time, the panel approved allowing zero rating platform after telecom operatorscompared it with a toll-free number.

• It said there is a multitude of possibilities in designing tariff plans and everything cannot bevalidated in advance on parameters of Net neutrality. The panel proposed "ex-antedetermination" and "ex-post regulation" model for dealing with tariff plan, including zerorating.

20. Explain how India has moved from central planning to indicative planning; also discuss thereasons behind such a shift? Is NITI Aayog more compatible to this mode of planning ascompared to planning commission?

• Post independence, there was a system of authoritative/imperative planning in India. Underthis detailed policy was set with precise estimates of output, production and investment;with government directing both the public & private sector substantially.

• But post 1990's with the launch of 8th 5YP we moved to indicative planning. Under thisonly a broad framework is given instead of precise targets set and government followsa policy of persuasion and encouragement with private sector to achieve broad goals.

• The indicative machenism works through monetary and fiscal policy tools, where in they areused to determine the interest level, price level, and public sector investment in the economy,which further affects the inflation, employment, and private sector investment and thus,helps government to achieve its target.

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• Reasons

i. imperative planning failed to achieve growth as well as distribution

ii. In era of liberalization and globalization with too much uncertainty, one can't set toolong term target

iii. Huge role of private sector, as state doesn't have much money to invest, so the state canonly persuade, not compel it.

• Now it is argued that in the background of this shift, whether there was a need for an apexplanning body with over-riding power or not. However, despite increasing space for privatesector, the public sector and planning still has relevance.

a) We are lagging behind in social indicators like health, education, and basic infrastructure,which can't be left to private sector. And this requires states intervention and this furtherincreased with the inclusive growth agenda.

b) State role in achieving growth has reduced but has a major role in distribution of resources.

c) We still have a strong public sector which can be seen by presence of many profitablePSU's.

• Thus we definitely need a planning body, but not with an overriding powers which erodesstate governments autonomy and sets precise target. And in this background NITI Aayoghas rightly replaced the planning commission which has the task of

a) Setting national agenda in consultation with states.

b) To develop mechanisms to formulate "plans at the village level" and aggregate theseprogressively at higher levels of government.

c) Acting as a Resource Centre which will act a repository of research and best practiseson good governance.

d) To provide advice and encourage partnerships between key stakeholders and nationaland international like-minded Think Tanks, as well as educational and policy researchinstitutions.

• NITI Aayog will seek to facilitate and empower this critical requirement of good governance,which is people-centric, participative, collaborative, transparent and policy-driven. It willprovide critical directional and strategic input to the development process, focusing ondeliverables and outcomes but the centralization of economic powers may be carried furtherforward under NITI AAYOG.