ECONOMIC SURVEY (2020-21)

 

 

On growth and debt sustainability

 

Does growth lead to debt sustainability? Or, does fiscal austerity foster growth? Before we answer this question, it is very important to understand the above statements.  Debt sustainability refers to ensuring that we only borrow as much as we can repay. Fiscal austerity refers to being prudent in spending, so that we spend only as much as we have, or can pay back in case we borrow. Given the need for fiscal spending amidst the COVID-19 crisis, these questions assume significance. Since, growth causes debt to become sustainable in countries with higher growth rates, we can say that in Indian context growth leads to debt sustainability. As such, the government can borrow money to increase its fiscal stimulus during the time when demand in economy has fallen drastically. On the other hand, fiscal austerity may put the country on negative growth path,  which may in turn worsen debt sustainability.

 

 

On inequality and growth

 

In advanced economies, high economic growth has been found to be correlated with increase in inequality. However, in the Indian context, economic growth has been found to have more effect on poverty alleviation than on increase in inequality due to India’s redistributive policies. Given India’s stage of development, India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie. Redistribution is only feasible in a developing economy if the size of the economic pie grows. 

 

 

On healthcare sector

 

The recent COVID-19 pandemic has emphasised the importance of the healthcare sector and its inter-linkages with other key sector of the economy. The ongoing pandemic has showcased how a healthcare crisis can get transformed into an economic and social crisis. In this regard, some of the recommendations to help India fight such pandemics successfully in future are as below.

  1. Telemedicine needs to be harnessed to the fullest by especially investing in internet connectivity and health infrastructure.
  2. Government must increase public spending in healthcare sector from current 1 percent to 2.5-3 percent of GDP as envisaged in the National Health Policy 2017.
  3. As a bulk of the healthcare in India is provided by the private sector, it is critical for policymakers to design policies that mitigate information asymmetry in healthcare, which creates market failures and thereby renders unregulated private healthcare sub-optimal. A sectoral regulator to undertake regulation and supervision of the healthcare sector must be considered.
  4. Insurance premiums need to be lowered to increase insurance penetration in the healthcare sector.
  5. The National Health mission (NHM) has played a critical role in mitigating inequity as the access of the poorest to pre-natal and post-natal care as well as institutional deliveries has increased significantly. Therefore, in conjunction to with Ayushman Bharat, the emphasis on NHM should continue.

 

 

On Fiscal Developments

 

In the backdrop of an unprecedented crisis, the year 2020-21 has been a challenging one on the fiscal front. The shortfall in revenue collection owing to the interruption in economic activity and the additional expenditure requirements to mitigate the fallout of the pandemic on vulnerable people, small businesses, and the economy in general, created immense pressure on the available limited fiscal resources.

People tend to save and avoid expenditure on non-essential items during periods of high uncertainty. India, therefore, adopted a calibrated approach best suited for the evolving situation of the economy in contrast to front-loaded large stimulus packages adopted by many countries. Therefore, during the initial months of the pandemic when uncertainty was high and lockdown imposed economic restrictions, India did not waste precious fiscal resources in trying to pump up discretionary consumption. The approach was to provide a cushion for the poor and vulnerable section of society and to the business sector (especially the MSMEs) in the initial phase of lockdown. This included the world’s largest food programme, direct transfers to Jan Dhan accounts, as well as government guarantees for credit, postponement of financial deadlines etc. During the unlock phase, when uncertainty declined and the precautionary motive to save subsided on the one hand, and economic mobility increased on the other hand, India ramped up its fiscal spending focusing on overall demand revival. With the gradual un-locking of the economy, the focus of the fiscal stimulus was widened to boost domestic demand through measures such as ramping up of capital expenditure, Production Linked Incentives and other schemes to revive consumption demand.

Reforms in tax administration have set in motion a process of transparency, accountability and more importantly, enhancing the experience of a tax-payer with the tax authority, thereby incentivising tax compliance.

In the wake of the global pandemic outbreak, the General Government (Centre plus States) is expected to register a high fiscal deficit in FY 2020-21, on account of the shortfall in revenue and higher expenditure requirements. However, longer term debt sustainability will depend crucially on how much the government is able to revive growth.

 

 

On Tax Reforms

 

  1. The platform for ‘Transparent taxation- Honoring the Honest’ was launched in August 2020 with an objective to impart greater efficiency, transparency and accountability, and to eliminate physical interface between taxpayers and tax officers.
  2. The key features of the platform are
    1. Usage of technology, data analytics and Artificial Intelligence
    2. Recognizing taxpayers as partners in nation-building.
  3. The Platform stands on 3 pillars of tax administration reforms namely
    1. Faceless assessment – Automated random allocation of cases across Income Tax teams with dynamic jurisdiction, and elimination of face-to-face contact between the income-tax authorities and the taxpayer.
    2. Faceless appeal – All Income Tax appeals will be finalised in a faceless manner under the faceless ecosystem with the exception of appeals relating to serious frauds and major tax evasions.
    3. Taxpayers’ charter – The taxpayer’s charter for India comprises of commitments by the Income Tax Department and obligations of the taxpayers. International experience suggests an ombudsman system is necessary for ensuring protection of taxpayer’s rights. However the institution, in India’s past experience, was not effective and was abolished. A possible reason may have been inadequate independence from the tax department. Therefore, there is a need to reinvigorate the systems of grievance redressal in India, which needs to be customer oriented in service and also independent in its functioning with adequate powers provided by law.

 

 

Trends in government finances (FY 2019-20)

 

 

As percentage of GDP

(Budget Estimates FY 2020-21)

As percentage of GDP

(Provisional Estimates FY 2019-20)

Revenue  Receipts

9

8.3

Tax Revenue

7.3

6.7

Non Tax Revenue

1.7

1.6

Non Debt Capital Receipts

1.0

0.3

Total  Expenditure

13.5

13.2

Revenue Expenditure

11.7

11.6

Capital Expenditure

1.8

1.7

Fiscal Deficit (Total Expenditure – Total Revenue)

3.5

4.6

For FY2019-20, highest growth rate was observed for non-tax revenue receipts, while the steepest fall was observed for non-debt capital receipts. Non-debt Capital receipts mainly consist of recovery of loans and advances, and disinvestment receipts.

On the revenue front, more than 80 percent of revenue came from taxes. The direct taxes, comprising mainly of corporate and personal income tax, constitute around 55 percent of Gross Tax Revenue, while the non-direct taxes constituted about 45 percent, more than half of which came from GST.

On the expenditure front, revenue expenditure consisted of about 87 percent of the total expenditure.

The gross fiscal deficit of states stood at 2.8 percent of the GDP. Some of the steps taken by central government w.r.t.  finances of the state governments are –

  1. Total transfer to states has been increased to 6 percent of GDP in FY2020-21. Out of the corpus of 90,000 crore allocated as grant for local bodies in the year 2020-21, 32.5 percent have been recommended for urban local bodies and the remaining for rural local bodies.
  2. In the current year, when the states are dealing with the pandemic with a constrained fiscal space, capital expenditure can play a pivotal role in the recovery process. In order to re-orient the focus of the states’ fiscal policy on capital expenditure, Central government has announced scheme for special assistance to states for capital expenditure during FY2021, under which special assistance is being provided to the state governments in the form of 50-year interest free loan up to an overall sum not exceeding INR 12,000 crore.
  3. Under the Atma Nirbhar Bharat package, additional borrowing limit of up to 2 percent of Gross State Domestic Product (GSDP) was allowed to the states. Of the additional 2 per cent borrowing allowed to the States, the first instalment of 0.5 per cent borrowing was untied for all the states. The second part amounting to 1 per cent of GSDP was subject to implementation of following four specific State level reforms, where weightage of each reform is 0.25 per cent of GSDP – a) Implementation of One Nation One Ration Card System; b) Ease of doing business reform; c) Urban Local body/ utility reforms; and d) Power Sector reforms The final 0.5 per cent borrowing was conditional on undertaking at least 3 out of the above mentioned reforms.
  4. In order to compensate the states for the loss of GST revenue during FY 2020-21, Central Government had given the states an option to borrow an equivalent amount of debt under a Special Window coordinated by the Ministry of Finance.

 

 

Trends in External Sector

 

India’s trade balance with China and the US improved as imports contracted. India’s exports of gems and jewellery, engineering goods, textile and allied products decreased while exports of drugs and pharma, software and agriculture and allied products increased. Pharma exports, in particular, used this opportunity to enhance their share in total India’s exports and indicate India’s potential to be the pharmacy of the world. Supported by resilient software service exports, India is expected to witness a current account surplus during the current financial year after a gap of 17 years. India’s current account deficit averaged 2.2 percent of GDP in the last 10 years. Given the trend in imports of both goods and services, it is expected that India will end with an annual current account surplus of atleast 2 percent of GDP. FDI and FPI inflows increased.

Indian pharmaceutical industry is third largest in the world, in terms of volume, behind China and Italy and 14th largest in terms of value. A significant raw material base and availability of a skilled workforce have enabled India to emerge as an international manufacturing hub for generic medicines. The pandemic, however, exposed the excessive dependence of Indian pharmaceutical industry on China for sourcing Active Pharmaceutical Ingredients (APIs) and Key Starting Materials (KSMs). A well-defined strategy for broad based development of the industry needs to include the following components:

  1. Broaden base in terms of markets, as well as product categories.
  2. Restructure the current regulatory mechanism.
  3. Greater R&D Expenditure to move up the value chain from generics to Novel Chemical Entities (NCEs).

Commodities in which India’s Merchandise Trade Balance is favourable – Drugs formulation, marine products, gold jewellery, cotton fabrics, iron and steel, iron ore,  rice, and petroleum products.

Commodities in which India’s Merchandise Trade Balance is unfavourable – Petroleum crude, gold, coal, electronics, telecom, computer hardware, vegetable oils, fertilizers.

India has the most favourable trade balance with USA followed by Bangladesh and Nepal. The highest trade deficit is with China followed by Iraq and Saudi Arabia.

USA, followed by China and UAE continue to be the largest export market for India. Malaysia is a new entrant among the top 10 export destinations, as compared to last year, while Nepal no longer occupies position among the top 10 destinations. China, followed by USA and UAE continue to be the largest import sources for India.

Petroleum products followed by drug formulations and  precious stones constitute the highest percentage of India’s exports. Crude petroleum followed by petroleum products and gold constitute the highest percentage of India’s imports.

Various initiatives undertaken to promote exports include Production Linked Incentive (PLI) Scheme, Remission of Duties and Taxes on Exported Products (RoDTEP), improvement in logistics infrastructure and digital initiatives. The disruption of global manufacturing value chains due to the COVID-19 pandemic presents a tremendous opportunity for India to become one of the key nodes in the chain.

India’s total external debt stands in excess of USD 550 billion. External debt as a ratio of GDP stood at approximately 21.6 percent. External Commercial Borrowings (ECBs) constitute the largest component of external debt. The US is the most heavily indebted country in the world with 23.9 per cent of the total external debt stock. India is placed at 23rd position globally.

 

 

On monetary policy and banking sector

 

Given the unprecedented shock of COVID-19 pandemic, monetary policy was significantly eased from March 2020 onwards. This means that the central bank adopted expansionary monetary policy.  

RBI undertook various conventional and unconventional measures like Open Market Operations, Long Term Repo Operations, Targeted Long Term Repo Operations etc. to manage liquidity situation in the economy.

  1. Open Market Operations – It is one of the most important ways of monetary control that is exercised by the central banks. Under this system, the central bank sells securities in the market when it wants to reduce the money supply in the market. It is done to increase interest rates. This policy is also known as the contractionary monetary policy. Similarly, when the central bank wants to increase the money supply in the market, it will purchase securities from the market. This step is taken to reduce the rate of interest and also to help in the economic growth of the country. This policy is known as the expansionary monetary policy.
  2. Long Term Repo Operations. (LTRO) – It is a tool under which the central bank provides one year to three year money to banks at the prevailing repo rate, accepting government securities with matching or higher tenure as the collateral. While the RBI’s current windows of liquidity adjustment facility (LAF) and marginal standing facility (MSF) offer banks money for their immediate needs ranging from 1-28 days, the LTRO supplies them with liquidity for their 1 to 3 year needs. As banks get long-term funds at lower rates, their cost of funds falls. In turn, they reduce interest rates for borrowers.
  3. Targeted Long Term Repo Operations – Targeted Long-Term Repo Operations are Long term repo operations (LTROs) conducted by the RBI to ensure adequate liquidity at the longer period for specific sectors.

The financial flows to the real economy however remained constrained on account of subdued credit growth by both banks and Non-Banking Financial Corporations.

Gross Non Performing Assets ratio of Scheduled Commercial Banks decreased during the pandemic. This is because of asset classification relief provided to borrowers on account of the pandemic.

Credit growth has been decelerating in all the sectors, except services since the onset of the pandemic. Cumulatively, there was a decrease in personal loans. While the personal loans for vehicles registered an increase, there was a decrease in personal loans for homes.

 

 

Inflation

 

At the global level, inflation remained low because of subdued economic activity as a result of COVID-19 outbreak and sharp fall in international crude oil prices in advanced economies. However, in India, headline CPI inflation remained high due to the persistence of supply side disruptions. Nevertheless, WPI inflation declined during the year on account of fall in global crude oil prices. During COVID-19, WPI inflation has been in the negative region while CPI-C inflation has been above 6 percent. The major feature in this widening gap is that this has happened in a period witnessing high food inflation. The average CPI-Combined inflation, which was 5.9 percent in 2014-15, fell continuously to 3.4 percent in 2018-19. It however increased to 6.6 percent in 2020-21 (Apr-Dec) before easing to a 15-month low of 4.6 percent in December 2020. The rise in inflation was mostly driven by food inflation, which has about 60 percent weightage in CPI-C. Steps were taken to stabilise prices of food items like banning of export of onions, imposition of stock limit on onions, easing of restriction on imports of pulses, maintaining buffer stock of pulses under Price Stabilization Fund etc. Gold prices saw sharp spike as investors turned to gold as a safe haven investment amid COVID-19 induced economic uncertainties.

During this period, difference in rural-urban CPI inflation declined. Food inflation has almost converged now, however, divergence in rural-urban inflation is observed in other components of CPI like fuel and light, clothing and footwear, miscellaneous etc.

To capture the latest consumption pattern of working-class family, Labour Bureau has revised the base year of the existing CPI-IW series from 2001 to 2016. Food and Beverages has the highest weightage.

 

 

Sustainability development and climate change

 

The 2030 agenda for Sustainable Development with 17 Sustainable Development Goals (SDGs) and 169 associated targets encompasses a comprehensive developmental agenda integrating social, economic and environmental dimensions. Several initiatives have been taken at both the national and the sub national level to mainstream the SDGs into the policies, schemes and programmes of the Government. India has been taking several proactive climate actions to fulfill its obligations as per the principles of common but differentiated responsibilities and respective capabilities and equity. As mandated in the UNFCCC and its Paris Agreement, the climate actions of the developing countries would have to be supported by finance flows from the developed to the developing countries. The Nationally Determined Contribution (NDC) submitted by the country has been formulated keeping in mind the developmental imperatives of the country and is on a “best effort basis”. In its NDC, India has sought to reduce the emissions intensity of its GDP by 33 to 35 per cent below 2005 levels by the year 2030; achieve 40 per cent of cumulative electric power installed capacity from non-fossil fuel sources by 2030; and enhance forest and tree cover to create additional carbon sink equivalent to 2.5 to 3 billion tons of carbon dioxide by 2030.

 

 

Indian Agriculture

 

The resilience of India’s agriculture sector can be seen from the fact that despite the COVID-19 pandemic, its performance in output was strong. While the difficulties created by COVID induced lockdowns adversely affected the performance of the non-agricultural sectors, the agriculture sector came up with a robust growth rate of 3.4 percent at constant prices during 2020-21 (first advance estimates).

About 54.6 per cent of the total workforce in the country is still engaged in agricultural and allied sector activities (Census 2011) which accounts for approximately 18 percent of the country’s Gross Value Added (GVA) for the year 2019-20 (at current prices). Crops constitute more than 50 percent of GVA in agriculture sector. Livestock is the second biggest contributor to agriculture sector. For the FY2019-20,  the total food grain production in the country is estimated at record 296 million tonnes. Since economic reforms began in 1991, India has remained a net exporter of agri-products, with agri-exports touching ` 2.52 lakh crores and imports at `1.47 lakh crores in FY 2019-20. The top agricultural export products were marine products followed by Basmati Rice. An increasing trend was witnessed for non-basmati rice, spices and sugar. However, India’s total agri-export basket accounts for a little over 2.5 percent of world agri-trade.

For the FY2019-20, agriculture credit flow stood at approximately INR14 lakh crore. The regional distribution of the agricultural credit has, however, been skewed in favour of the Southern Region. The share of north-eastern states has been very low.

Milk

  1. Total Production = 198 million tonnes
  2. Per capita availability of milk = 407 grams per day
  3. India continues to be the largest producer of milk in the world

Eggs

  1. Total Production = 114 billion tonnes
  2. Per capita availability of milk = 86 eeggs per day
  3. India is the third largest producer of eggs in the world

Fisheries

  1. Total Production = 14 million tonnes
  2. Export = 12.9 lakh tonnes
  3. India is the second largest fish producing country in the world.

Major Announcements for Agriculture and Food Management under the Atma Nirbhar Bharat Abhiyan –

  1. INR 1 lakh crores Agri Infrastructure Fund for funding agriculture infrastructure projects at farm-gate, at aggregation points and for post-harvest infrastructure.
  2. INR 10,000 crores scheme for Formalisation of Micro Food Enterprises (MFE) who need technical upgradation to attain FSSAI food standards, build brands
  3. INR 20,000 crores for fisherman through Pradhan Mantri Matsya Sampada Yojana (PMMSY) for integrated, sustainable and inclusive development of marine and inland fisheries by developing infrastructure such as fishing harbours, cold chain, markets, etc
  4. INR 15000 crore for Animal Husbandry Infrastructure Development Fund
  5. ‘Operation Greens’ run by Ministry of Food Processing Industries (MOFPI) to be extended from tomatoes, onion and potatoes to ALL fruit and vegetables.
  6. Reforms in Essential Commodities Act to remove agricultural commodities such as cereals, pulses, oilseeds etc. from the list of essential commodities.
  7. PM Garib Kalyan Ann Yojana. ensuring food and nutritional security to around 80 crores ration card holders who were affected due to the COVID-19 induced national lockdown.

 

 

Industry and Infrastructure

 

The industrial sector has an overall contribution in GVA of 26 percent in 2020-21 (FY21). The contribution of the industrial sector has been constantly declining since 2011-12. Only the electricity and power sector has been showing an increase in share. The highest share has been of manufacturing sector followed by construction sector. This is followed by electricity and mining sectors.

The IIP growth reached its historical low in April-2020. The steepest decline was in the manufacturing sector. In terms of use based classification, the steepest decline was in consumer durables, followed by capital goods. Electricity stood as the most resilient sector. In terms of use based classification, primary goods registered the least decline in demand. The calibrated and gradual unlocking process led to the resumption of economic activities translating into positive growth in IIP for the first time in September-2020 since the lockdown. The subsequent months have seen consistent improvement and the sub-components of the IIP have gradually inched towards their pre-COVID levels, a reflection of the beginning of the revival of the economy.

The FDI equity flows have been on the upswing since FY13. During FY20, total FDI equity inflows were USD 50 billion. The bulk of FDI equity flow is in the non-manufacturing sector.

Steel

  1. India is the second-largest producer of crude steel only after China. India is also the second largest consumer of steel. However, our per capita steel consumption is almost one third of the global average.
  2. The National Steel Policy-2017 aims at achieving a crude steel capacity of 300 million tonnes (MT) and a finished steel capacity of 230 MT with a per capita consumption of 158 kg by 2030-31.

Coal

  1. Coal is the one of the most important and abundant fossil fuel in India. It accounts for 55 per cent of the country’s energy needs.
  2. India’s total coal production is about 729 million tonnes.
  3. India is also an importer of coal importing roughly 250 million tonnes annually.

Textile

  1. India is the sixth-largest exporter of textile and apparel products after China, Germany, Bangladesh, Vietnam, and Italy
  2. The sector is the second-largest employment generator in the country, next only to agriculture. Most important with a major part of this workforce being women, it plays a vital role in women empowerment and in the overall social development of the country.
  3. Steps taken by the government –
    1. Amended Technology Upgradation Fund Scheme (ATUFS) to modernize and upgrade the technology of the Indian textile industry.
    2. Scheme for Integrated Textiles Park (SITP) for providing world class infrastructure facilities.
    3. Samarth focusses on capacity building in the textile sector.

In a major initiative, the government launched CHAMPIONS online platform to help and handhold the MSMEs. ‘CHAMPIONS’ stands for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength. Detailed objectives of CHAMPIONS are –

  1. Grievance Redressal: To resolve the problems of MSMEs.
  2. To help them capture new opportunities: including manufacturing of medical equipments and accessories like PPEs, masks, etc.
  3. To identify and encourage the sparks:e. the potential MSMEs who are able to withstand the current situation and can become national and international champions.

National Infrastructure Pipeline (NIP)

  1. To achieve the GDP of USD 5 trillion by 2020-25, India needs to spend about USD 1.4 trillion (INR 100 lakh crore) over these years on infrastructure. Therefore, the government launched NIP with the projected infrastructure investment of 111 lakh crore (USD 1.5 trillion) during the period 2020-2025.
  2. It is jointly funded by the Central Government, State Government, and the private sector
  3. The sectors like energy, roads, urban infrastructure, railways have a major share in the NIP

With the objective of enhancing India’s manufacturing capabilities and exports, the GoI has introduced the Production-Linked Incentive (PLI) Scheme in the 10 key sectors under the aegis of Atmanirbhar Bharat. The scheme will be implemented by the concerned ministries with an overall expenditure estimated at INR 1.46 lakh crores and with sector specific financial limits.

 

 

Services

 

Services sector’s significance in the Indian economy has been steady, with the sector now accounting for over 54 percent of the economy and almost four-fifths of total FDI inflows. Chandigarh and Delhi stand out with a particularly high share of services in GVA of over 85 percent while Sikkim’s share remains the lowest at 27 percent.

Notwithstanding the setback witnessed in the wake of the pandemic, India’s services sector remained relatively resilient when compared to merchandise trade. India remained among the top ten trading countries in commercial services in 2019 accounting for 3.5 percent of world services exports. Although India witnessed decline in tourist arrivals, aviation and transportation, the demand  for software services stayed strong during COVID-19 slowdown.

Despite the disruptions being witnessed globally, FDI inflows into India’s services sector grew robustly. India improved its position from 12th in 2018 to 9th in 2019 in the list of the world’s largest FDI recipients according to the latest World Investment Report 2020 by United Nations Conference on Trade and Development (UNCTAD). FDI into India recorded almost 17 percent jump during April-September 2020 over the corresponding period last year, despite the global slowdown, the COVID-19 pandemic, lockdown measures and supply chain disruptions. Services sector being the largest recipient of FDI in India, witnessed a strong growth during April-September 2020. The jump in FDI equity inflows was driven by strong inflows into the ‘Computer Software & Hardware’ sub-sector.

 

 

Social Infrastructure, Employment and Human Development

 

Year 2020 began with the once-in-a-century pandemic, which saw the frontline health workers working tirelessly to save human lives from COVID-19. While the pandemic caused its ripples on the economy and on the social sector, India has one of the lowest case fatality rates of less than 1.5 percent. Public spending on social sector was increased in 2020-21 to mitigate the hardships caused by the pandemic and the loss to livelihood due to the lockdown.

During the lockdown, online schooling took off in a big way and the Government introduced several measures to make online education accessible to all children. Similarly the lockdown period also saw the growth of the gig economy (a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs) and increasing work from home in the organized sector. The size of the workforce increased by about 1.64 crore. The increase in workforce and decline in unemployment was more in rural areas, and among women. The female labour participation rate stood at about 18 percent. There was a net increase of new subscribers in employee provident fund.

In the health sector, strengthening of health infrastructure and efficiency in health care delivery was reflected in the outcomes of NFHS-5 with infant mortality rate and under-five mortality rate showing a decline in most of the selected States in NFHS-5 as compared to NFHS-4.

The expenditure on social services (education, health and other social sectors) by Centre and States combined as a proportion of GDP increased to 8.8. percent (Education sector –  3.5 percent, Health –  1.5 percent). The share of expenditure on social services out of total budgetary expenditure, has also increased to 26.5 percent (Education – 10.4 percent, Health – 5.4 percent).

India’s rank in Human Development Index (HDI)1 was 131 in 2019, compared to 129 in 2018, out of a total 189 countries according to UNDP Human Development Report, 2020. It may be mentioned that the decline in HDI ranking by two points in 2019 as compared to 2018 is relative to other countries. Nevertheless, over the years, there has been an improvement in all the components of India’s HDI.  The current life expectancy stood at 69.7 years, expected years of schooling stood at 12.2 years, mean years of schooling stood at 6.5 years, Gross National Income stood at USD 6681. India’s HDI for 2019 stood at 0.645.

 

Education

As per National Sample Survey (NSS), the literacy rate of persons of age 7 years and above at the All India level stood at 77.7 percent but the differences in literacy rate attainment among social-religious groups, as well as gender still persists. The age specific attendance ratio (ASAR) indicates the proportion of children of a particular age group actually attending schools/colleges irrespective of the level or class in which they are studying. Children in the age-group of 6-13 years have reported almost 95 per cent and above attendance across States (Table 5). But the attendance rate in the early childhood education, which the National Education Policy (NEP), 2020 emphasises on is low and diverging irrespective of the achievement in education status of the States concerned. While Punjab reported a high attendance rate of 61.6 percent of the children in the age groups of 3-5 years (i.e. early childhood education), Karnataka reports the lowest attendance rate of only 18.3 percent. In the 14-17 years age group, which covers the secondary and higher secondary education level, the attendance rates are low as compared to national average in Madhya Pradesh, Odisha, Assam, Gujarat, and Rajasthan. In the 18-23 years age bracket, which comprises students pursuing higher education, Kerala and the hilly States have reported higher attendance compared to rest of India.

Samagra Shiksha is an overarching programme for the school education sector extending from pre-school to class 12. The scheme has been prepared with the broader goal of improving school effectiveness measured in terms of equal opportunities for schooling and equitable learning outcomes. The vision of the Scheme is to ensure inclusive and equitable quality education from pre-school to senior secondary stage in accordance with the SDG for Education. It subsumes the three Schemes of Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE). The scheme was launched in 2018-19 with the following major features:

  1. Treat school education holistically as a continuum from Pre-school to Class 12.
  2. Focus on quality of education.
  3. Focus on digital education.
  4. Focus on sports and physical education.
  5. Focus on skill development.
  6. Improve the Quality of Infrastructure in Government Schools at all levels.
  7. Enhanced Transport facility to children from classes I to VIII for universal access to schools.
  8. Focus on girl education, including self-defence training for girls from upper primary to senior secondary stage.

The government announced the new National Education Policy, 2020 replacing the 34 year old National Policy on Education, 1986. The new policy aims to pave the way for transformational reforms in school and higher education systems in the country. Salient features of the policy are –

  1. Universalization of education from pre-school to secondary level with 100 percent Gross Enrolment Ratio (GER) in school education by 2030.
  2. To bring 2 crore out of school children back into the mainstream education.
  3. The current 10+2 system to be replaced by a new 5+3+3+4 curricular structure corresponding to ages 3-8, 8-11, 11-14, and 14-18 years, respectively
  4. Vocational Education to start from Class 6 with Internships.
  5. Teaching up to at least Grade 5 to be in mother tongue/regional language, wherever possible. No language will be imposed on any student.
  6. By 2030, the minimum degree qualification for teaching will be a 4-year integrated B.Ed. degree

PM eVIDYA initiative was announced for school and higher education under the Atma Nirbhar Bharat programme in May, 2020. It is a comprehensive initiative to unify all efforts related to digital/online/on-air education. The four PM e-Vidya components of school education are:

  1. One nation, one digital education infrastructure: Under this component all States/UTs have free access to a single digital infrastructure called DIKSHA.
  2. One class, one TV channels through Swayam Prabha TV Channels: Swayam Prabha DTH channels are meant to support and reach those who do not have access to the internet. 12 channels are devoted to telecast high quality educational programmes in school education.
  3. Extensive use of Radio, Community radio and Podcasts.
  4. One DTH channel is being operated specifically for hearing impaired students in sign language. For visually and hearing-impaired students, study material has been developed in Digitally Accessible Information System (DAISY) and in sign language; both are available on NIOS website/ YouTube.

 

Skill Development

Only 2.4 percent of the workforce of age 15-59 years have received formal vocational / technical training and another 8.9 percent of the workforce received training through informal sources. Among those who received formal training, the most opted training course is IT-ITeS among both males and females, followed by electrical-power and electronics. National Education Policy 2020 has given a big fillip towards integration of Vocational Education and Training (VET) in general education. Pradhan Mantri Kaushal Vikas Yojana (PMKVY) seeks to encourage and promote skill development in the country by providing free short duration skill training and incentivizing this by providing monetary rewards to youth for skill certification. It was launched in 2015 under Skill India Mission. PMKVY 3.0 envisages training of eight lakh candidates over a scheme period of 2020-2021. By taking the bottom-up approach to training, it will identify job roles that have demand at the local level and skill the youth, linking them to these opportunities.

 

Employment

The total workforce is approximately 51 crores, out of which 47 crore are employed while 4 crore are unemployed. Agriculture is still the largest employer with 42.5 percent of workforce. About 52 percent of the population is self-employed. LFPR. (Labour Force Participation Rate) of females in the productive age (15-59 years) stands at approximately 27 percent. The proportion of regular wage/salaried employees saw an increase in both rural & urban areas and for both males & females. At the same time, the proportion of casual labour showed a decline.

The nature of work has been changing with the change in technology, evolution of new economic activities, and evolving business models. Digital platforms have emerged as enablers for employment creation with the power to easily discover job seekers and job providers in the absence of middlemen. During the period of COVID-19 induced lockdown, the increasing role of the gig economy was evident with significant growth of online retail business. The lockdown period also saw employers preferring ‘Work from home’ of their employees, cutting down on staff strength and engaging freelancers or outsourcing tasks to reduce overhead costs as well as to hire skilled services. The benefit of the gig economy is that it allows flexibility in employer-employee relationship to both service seeker and service provider. The nature of job contract for a gig worker is different from the contract between an employer and employee/worker. Their labour contract is usually shorter and more specific to the task or job assigned. The workers most of the time are flexible to decide on when to work, where to work etc. For the first time, these class of workers have been brought under the ambit of the newly introduced Code on Social Security 2020 by defining them exclusively in the category of unorganized worker for providing social security benefits.