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[Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) Mrunal

[Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3)
AGRO and Food Management
Agriculture: Problem areas?
#1: Land holding
#2: Nutritional security
#3: Supply Chain Management
Kelkar
Tax to GDP ratio?
Steps Taken by Government

AGRO and Food Management

Agro + allied industries

Approx. number

Share in Indias GDP

14% (2011-12)

Share in total employment 58% (2001)

The declining share of the agriculture and allied sector in the countrys GDP= this is characteristic of any fast growing economy
but that doesnt mean we should ignore agro and pay more attention to manufacturing / service sector.
Because fast agricultural growth = vital for jobs, incomes, food security, + curbing food inflation.
11th Five year plan has led to improvement in agricultural performance. Even states that were traditionally not procuring
sufficient foodgrains, e.g. Bihar, Madhya Pradesh, Bihar, Chhattisgarh, and West Bengal have showed significant increase.

Agriculture: Problem areas?

#1: Land holding
Indian agricultural sector is the domination of small farmers with small sized landholdings. = they cannot afford sophisticated
tractors, thrashers, irrigation system etc. Therefore, per hectare Agricultural yields or productivity= very low
Government should carry out land reforms, land consolidation, promote cooperative farming etc. to reduced these small sized
farms.

#2: Nutritional security

Food security =everybody should get food. But doesnt mean nutritional security.
For example, you can feed a poor-child with cheap quality wheat / rice. But for healthy growth of body and mind, you also
need various vitamins, fruits, vegetables, milk, protein, oil, etc. nutritional items. Malnutrition is a big problem in India.
So we dont just need food security, we also need nutritional security.
For ensuring nutritional security, Government has to arrange the right amounts of food items in the food basket of the common
man.
So, Government must give a thrust on horticulture products and protein-rich items, apart from the regular wheat, maize, rice and
foodgrains.
+ invest more money in agricultural research.

#3: Supply Chain Management

Another critical issue is supply-chain management in agricultural marketing in India.
Lot of agro-produce gets wasted due to infra problem (bad roads, no cold storage, electricity etc.)
Government needs to link wholesale processing, logistics, and retailing with farm-production activitie.
Recently the government allowed FDI in multi-retail, = Itll bring for investment in new technology, storage, processing and
marketing of agro produce.= less spoilage, better prices for farmers.
Other problems:
soil erosion,
soil salinity,
waterlogging,
excessive use of fertilizers and pesticides
overexploitation of groundwater for irrigation.
Still dependent on the vagaries of monsoon.

Kelkar
The government appointed a committee headed by Dr Vijay Kelkar to chalk out a roadmap for fiscal consolidation. We already
discussed his recommendations in detail. click me
Target: Reduce fiscal deficit to 3.0 per cent of GDP in 2016-17. But how?
Government will have to control the Expenditure on subsidies.
Government will need to increase the domestic prices of petrol, diesel, LPG as per the prevailing in international markets.
Government has capped the number of subsidized gas cylinders to nine.
^this will decrease the outgoing money for Government.

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[Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) Mrunal

^this will decrease the outgoing money for Government.

But that alone, cannot solve the fiscal deficit problem. Government also needs to increase the incoming money.

Tax to GDP ratio?

As the name suggest: It is the Ratio of tax collection against the national gross domestic product.
From Governments point of view, higher tax to GDP ratio= incoming money is more.
Time

Tax to GDP ratio%

2007-08 11.9
2011-12 9.9
Therefore, if Government wants to achieve fiscal consolidation, it must raise the tax-GDP ratio to above the 11 per cent level.
But how?
Of course, one way is increase the tax rate like 75% income tax for rich people, 25% income tax for middle class. But then
people will feel more compelled to evade tax and / or relocate to some other country where tax rates are low.
So, instead of raising the taxes very much, better try to broaden the base and improve the tax collection mechanism. There are
two ways to do it 1)GST (for indirect taxes) 2) Direct tax code (direct tax)

Steps Taken by Government

(list not exhaustive)
1. Government has setup CCI: Cabinet Committee on Investments. This Committee is headed by Mohan. Itll fast-track projects
more than Rs.1,000 crore.
2. Cabinet has cleared the Land Acquisition and Rehabilitation and Resettlement (LARR) Bill. already discussed click me
3. Government has increased FDI in a number of areas including multibrand retail, power exchanges, and civil aviation.
4. Government is increasing investment in irrigation, storage and cold storage networks = less farm produce wasted during
transport.
5. Government has passed The Banking Laws (Amendment) Act 2012. This will strengthen RBI and make way for entry of new
banks. (we already saw this in detail. click me).
6. Financial Sector Legislative Reforms Commission is formed. This Commission is examining the laws governing the financial
sector and suggest ways of modernizing those laws.
7. Government introduced new External Commercial Borrowing (ECB) scheme for companies in the manufacturing and
infrastructure sector. So they can get cheap loans from abroad.
HUMAN DEVELOPMENT
In 12th FYP>> social sector Expenditure, Government aims to spend lot of money on education + health.
Nevertheless, Indias expenditure on health as a per cent of GDP is lower than in many other emerging and developed
countries.
Poverty removal
As per Tendulkar Committee, the percentage of people living below the poverty line in the country has declined
Year

Approx. population living BPL

2004

37%

2009-10 29%
In the last few years public expenditure on social programmes increased dramatically.
In the Eleventh Plan period nearly 7 lakh crore has been spent on the 15 major flagship programmes.
To secure the rights of people, Government made many laws in recent years
Act

Beneficiary?

Right to information Act

Everybody.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) Poor rural households.
Forest rights act

Tribals

Right to education act

Children (mostly poor).

But the main problem is: Government money isnot reaching the targeted beneficiaries. There is lot of corruption.
Government has come up with solution: Direct benefit transfer (DBT) with the help of the Unique Identification (UID).
This concludes the gist of Chapter 1 of Economic Survey. Next chapter, next time.
For more articles on economy, visit the Archive @ Mrunal.org/economy
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25 comments to [Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government
(part 3 of 3)

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k k verma
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outstanding.

anonymous
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sir,
asking off the topic. i am going to appear for ppsc mains exam, as i m preparing for my optionals, i dont know much about gs-1 and gs-2
papers. i have a poor gs knowledge and the notification is yet come, may be i have 20 more days for the exam, so how should i prepare
for the gs papers in such a short span of time ..???

anonymous
Reply to this comment
i have previous year ppsc papers and i have complied your section wise material into a word document (like full topics of economy, .etc),
but dont how to share both :(

Sahil
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Hey Mrunal.. commendable work
Can u give me some idea regarding the budget ?? I mean how to go through it. todays newspaper is all about Budget.. But i want to
understand the Budget report first then will go through the newspaper articles and pros n cons of all allocation to ministries..
Please let me know the basic idea from where to start like Budget Highlights, Budget at a glance etc.
P.S. preparing for UPSC + PO
Waiting for your reply.

k k verma
Reply to this comment
u can go through the budget highlights at first hand to have a glance on areas focused by GOI.
http://pib.nic.in/archieve/others/2013/feb/bh.pdf here is the link to pdf of budget highlight. jot down the imp areas of major
allocations, imp flagship programs of govt focused in this budget, social diaspora covered, agriculture, industry, health and
education etc. for eg. when you will read health and education u will find allocations for NNHM, AYUSH, AIIMS, SSA, RMSA, MDM
etc. regardless of going through numbers you must read about these programs. after having read to highlights and insight about it u
will find reading newspapers/mags easy.
hope this might help you.

Sahil
Reply to this comment
thnx man.. Ur strategy to tackle this budget is right.
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[Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) Mrunal

MANISH KUMAR
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Thanks a lot brother..

neha
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thank u sir.thanks a lot

Renu
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Hello Mrunal Sir,
really nice article v
I want to know what is Flagship program?
Please rply.

rocky
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sir please explain current account deficit and rupee weakening against dollar

Prateek
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Too good sir, truely

Lucky
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Sir, could you provide the material or approach for IBPS Specialist officer (IT OFFICER-SCALE 2) exam to be held on 16th March?

Lucky
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Why is there shortage of cold storage in India? Cant govt develop these on the pretext of which it is allowing FDI in multi brand retail?

Ram
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Sir, could you please publish an article on the layout and objectives of 12th Five year plan, or If You had already published an article on
it,please share the link

Dusky
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Superb Artile Mrunal Sir.. It is a pleasure reading ur posts n updates.. Great goind.. A big help for all of us.. Thanks a lot..

hitaish
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Waiting for the next chapter.

Jaan
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This concludes the gist of Chapter 1 of Economic Survey. Next chapter, next time.

prabhat
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what is External Commercial Borrowing?

purnima
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THANK YOU SO MUCH MRUNAL SIR..!!!:)

k k verma
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Sir, When will you be coming up with next chapters of Economic survey, waiting for same eagerly.

rameshwer
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dear mrunal.thank u for your invaluable contributions.kindly post the 2nd chapter of economic survey in your style

balamurli krishna
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Mrunal the Great !

rishi
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thanks^ infinity..

mahesh
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sir what is the difference between advance,budget and revised estimates..

parmod sheoran
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thanks mrunal.

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