Yojana&Kurukshetra-March,2016

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Yojana&Kurukshetra-March,2016

Preface
This is our 12th edition of Yojana Gist and the 3rd edition of Kurukshetra Gist,
released for the month of March, 2016. Both the magazines are increasingly
finding a place in the questions of both UPSC Prelims and Mains and therefore,
weve come up with this initiative to equip you with knowledge thatll help you
in your preparation for the CSE.
Every Issue deals with a single topic comprehensively sharing views from a
wide spectrum ranging from academicians to policy makers to scholars. The
magazine is essential to build an in-depth understanding of various socioeconomic issues.
From the exam point of view, however, not all articles are important. Some go
into scholarly depths and others discuss agendas that are not relevant for your
preparation. Added to this is the difficulty of going through a large volume of
information, facts and analysis to finally extract their essence that may be
useful for the exam.
We are not discouraging from reading the magazine itself. So, do not take this
as a document which you take read, remember and reproduce in the
examination. Its only purpose is to equip you with the right understanding.
But, if you do not have enough time to go through the magazines, you can rely
on the content provided here for it sums up the most essential points from all
the articles.
You need not put hours and hours in reading and making its notes in pages. We
believe, a smart study, rather than hard study, can improve your preparation
levels.
Think, learn, practice and keep improving! That is the key to success

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Yojana&Kurukshetra-March,2016

Union Budget 2016-17 - Highlights

Growth of Economy accelerated to 7.6% in 2015-16

Allocation for Agriculture and Farmers Welfare - 35,984 crore

Pradhan Mantri Krishi Sinchai Yojana to be implemented in mission mode

28.5 lakh hectares will be brought under irrigation

Implementation of 89 irrigation projects under AIBP, will be fast tracked

A dedicated Long Term Irrigation Fund will be created in NABARD with an initial
corpus of about 20,000 crore.

Allocation for Rural Sector - 87,765 crore

38,500 crore allocated for MGNREGAs

100% village electrification by 1st May, 2018

A new Digital Literacy Mission Scheme for rural India to cover around 6 crore
additional household within the next 3 years

New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of 655 crore

Allocation for Social Sector (Including health & education) - 1,51,581 crore

2,000 crore allocated for initial cost of providing LPG connections to BPL families

3000 stores under Prime Ministers Jan Aushadi Yojana will be opened during 201617

National Dialysis Services Programme to be started under National Health Mission

through PPP mode

Stand Up India Scheme to facilitate at least two projects per bank branch; will
benefit at least 2.5 lakh entrepreneurs

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National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with
industry associations

Education

62 new Navodaya Vidyalayas will be opened

Regulatory architecture to be provided to ten public and ten private institutions to

emerge as world-class teaching & research institutions

Higher education financing agency to be set-up with initial capital base of 1000
crore

Digital Depository for school leaving certificates, college degrees, academic awards
and mark-sheets to be set up

Skill Development

Allocation for skill development - 1804 crore

1500 Multi Skill Training Institutes to be set-up

National Board for Skill Development Certification to be setup partnership with the
industry & academia

Entrepreneurship education and training through MOOCs

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Encouragement to Study Space Science

ISRO Space Science Promotion Scheme (ISRO-SSPS) - An initiative intended towards
supporting and strengthening of research in space science in universities
ISROs Sponsored Research (RESPOND) Programme - intended for encouraging academia,
Junior Research Fellows, young researchers to participate & contribute in various Space
programme related research activities in Indian universities and institutes.
Indian Institute of Space Science and Technology (IIST)

Established by Department of Space at Thiruvananthapuram

To provide specialised education in the areas of space technology

The institute is the first of its kind in the country to offer high quality education at
the undergraduate, graduate, doctoral and post-doctoral levels in the areas related
to space science & technology and its applications

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Yojana&Kurukshetra-March,2016

Price Stabilisation Fund

Why was PSF set up?

To provide financial relief to the growers when prices of the commodities fell below
a specific level and to alleviate the hardship faced by the growers due to low prices
in order to safeguard their interests

Also aimed at providing a sustained, long-term support to growers in place of ad-hoc

interventions during crisis Monitoring of prices of essential commodities is a key
element of good governance

Set up by: Department of Commerce

How does this work?

Involves- Principle of Participation

Both government and grower make their contributions to this fund subjected to
normal production, boom produce or distress of crops in a year

In a normal year, the government deposits 500 per grower and each grower
deposits 500; Withdrawal is not permitted

In a boom year, the grower deposits 1000, but no withdrawal is permitted

In a distressed year the government deposits 1000 per grower and the grower can
withdraw upto 1000

Every grower opens a PSF SB account in any of the assigned banks. By paying a
deposit fee of 500, even a small grower can enrol himself under this scheme.

The Corpus Fund for the PSF is deposited in the Public Account of GOI. However the
Corpus Fund is not utilized. Only the interest on corpus fund is utilised for the PSF
Scheme.

In Union Budget 2016-17, a corpus of 900 crore has been provided for the PSF to
support market interventions.

A buffer stock of pulses will also be created through procurement at MSP and at
market price through PSF

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Yojana&Kurukshetra-March,2016

Fiscal
Whether Deficit is Good or Bad?

Deficit financing helps in stimulating the economy by improving the demand

Deficit financing would be beneficial only when the financing is for investment and
the returns it generate is higher than that of interest rates payable for financing the
deficit

The expansionary fiscal policy by increasing the government expenditure will take
place with increased borrowings at higher interest rates increase the interest rate
in the market reduce the credit availability for the private sector

Tax cuts would be a better measure which can decrease costs, bring back businesses
to profit, improve employment as well as easy to administer

Financial Crisis

Indias 1991 financial crisis Combined fiscal deficit of union and states = 11.24% of
GDP and acute balance of payment problems

Structural adjustment reforms were undertaken followed by devaluation of rupee

against major foreign currencies

Combined deficit was contained to 8.17% of GDP during 1996-97 Deficit again
rose to 11% due to 5th Pay Commission

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Revenue deficit of states increased to 4.6% from 3% in 1999-2000 mainly due to

revenue expenditure

Revenue deficit accounting for more than 60% of fiscal deficit, driven by increased
subsidies and salary expenditure Deficits could not be controlled without a
binding legal framework

Maastricht Treaty and target of Fiscal Deficit

The European nations signed a treaty at Maastricht in Netherlands to form European

Union in 1992

The EU members agreed upon the need to contain the inflation, fiscal deficit, the
total debt and fixed targets for the same

Member countries would contain inflation within 1.5% of the average of three
member countries with lowest inflation

Member countrys public debt would not be more than 60% of its GDP and fiscal
deficit will be maintained within 3% of the GDP

It is often said that India borrowed the targets of fiscal deficit and total debt from
the Maastricht Treaty

Former Governors of RBI (Rangarajan & Subbarao) interpreted the estimated savings
of India to be about 13% of which 5% & 2% being consumed by corporate and public
sector respectively resulting in about 6% which is the cumulative deficits of central
and state governments (3% each)

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Fiscal Responsibility and Budget Management Act 2003

The Act specified that the government would take necessary steps to reduce fiscal
deficit to 3% of GDP and revenue deficit in such a manner so as to eliminate revenue
deficit by 31st March 2008 & to build revenue surplus thereafter.

It specified that annual targets are fixed in order to reach the desired limits of deficit.

It also specified that the government would place before the two houses of
Parliament the three statements every financial year along with Annual Financial
Statement and Demand for Grants.

The three statements are

Medium term fiscal policy statement

Fiscal policy strategy statement

Macroeconomic framework statement

Objectives of the FRBM Act

To make the government responsible to ensure inter-generational equity in fiscal

management implying that borrowings are nothing but deferred taxation and the
government is living beyond their means leave a burden of debt on future
generations.

To make the government responsible for ensuring long term Macro Economic
stability because reckless borrowings by government crowds out private investment
or fuels inflation or leads to balance of payment crisis eventually leading to macroeconomic instability.

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To make the government responsible for removing fiscal impediments to the

effective conduct of monetary policy because unsustainable increase in deficit makes
the task of the RBI to control money supply difficult as the RBI also happens to be
the debt manager of the government.

Amendments to the FRBM Act, 2003

The target year for elimination of revenue deficit was shifted from 2007-08 to 200809 through the Finance Bill presented on 5th July.

The Act was again amended through the Finance Bill 2012 passed by the Parliament
in May 2012. It enacted that the Central Government shall take appropriate
measures to reduce the fiscal deficit, eliminate effective revenue deficit by 31 st
march 2015 and also to reach revenue deficit of not more than 2% of GDP by 31 st
March 2015.

This Act introduced a new concept of effective revenue deficit Signifies the
difference between the revenue deficit (traditionally understood) and the grants for
creation of capital assets.

The grants for creation of capital assets means the grants in aid given by the
Central Government to the State Governments, constitutional authorities or bodies
and other scheme implementing agencies for creation of capital assets which are
owned by the said entities.

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Yojana&Kurukshetra-March,2016
Trends and Implications of Revenue Deficit

Revenue deficit is defined as the excess of governments revenue expenditure over

governments revenue receipts.

To finance revenue deficit, the government depends upon capital receipts (revenue
receipts are already exhausted).

Financing the deficit through capital receipts is dangerous Capital receipts either
decrease the assets or increase the liabilities.

Increase in liabilities further leads to increase in future liabilities of interest payment

and consequently increases the revenue deficit in future (Part of revenue
expenditure)

Disinvestment will further worsen the revenue situation by reducing the revenue
earnings.

Revenue deficit can be contained to the minimum through revenue augmentation

and revenue mobilization by enhancing revenue from tax & non-tax sources.

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Yojana&Kurukshetra-March,2016

Fiscal Deficit and its Implication on Fiscal Prudence

Fiscal deficit is defined as the excess of government total expenditure over

government total receipts except borrowing.

It indicates how much our country depends upon total borrowing to finance the
deficit during a particular fiscal year.

Fiscal deficit is used as an instrument of measuring economic growth and debt

liabilities of a country and determines the financial soundness and economic wellbeing of the people of a country.

Linkage between Revenue Deficit and Fiscal Deficit

Key constituents of fiscal deficit

Revenue Deficit

Capital Spending

Government adheres to borrowing to finance the revenue short fall and borrow to
meet the capital expenses.

Fiscal prudence depends on how the government manages the revenue deficits in
particular.

Fiscal consolidation can be possible through revenue augmentation Enhance tax

revenue through tax buoyancy so as to reduce the deficit.

Fiscal deficit can be reduced to its desired level only by reducing the revenue deficit
(Not the capital expenditure)

Efficient and effective management of expenditure is the key to fiscal consolidation

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Yojana&Kurukshetra-March,2016
Initiatives for Fiscal Consolidation
Fiscal goals can be achieved through

Expansion of the economy

Tax buoyancy

Increase in tax collection

Better tax administration

Increase Tax-GDP ratio

Efficiency in expenditure

Improvement in macroeconomic environment

Good and maximum governance

Measures to control the fiscal deficit to achieve the set targets

Expenditure Rationalization

Government needs to rationalize various expenditure and allocation of funds among

different heads

It should ensure to prevent leakages and shut the loopholes in the process by
economizing the resources

Reprioritize objectives by supporting the pace and need of the expenditure without
compromising much on wellbeing and welfare of the masses

This can be achieved by increasing efficiency, controlling corruption and by reducing

administrative losses

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Yojana&Kurukshetra-March,2016

The success of expenditure rationalization depends upon the correction of revenuecapital expenditure imbalance.

Revenue Augmentation

Revenue augmentation is serious intent of the present government and steps have
been taken to generate more revenue by sources and amounts both at tax and nontax level.

This years budget proposed to achieve higher tax to GDP ratio in the future through
tax buoyancy, increase in tax collection and better tax administration.

This will help in reduction of the fiscal deficit to a great extent and can help in
achieving fiscal prudence as proposed by FRBM Act.

Do read: http://indianexpress.com/article/opinion/columns/union-budget-2016-themerits-of-fiscal-prudence/

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GROUND WATER CONCERNS AND IRRIGATION POTENTIAL

India must quickly expand its irrigation network and improve water usage to offset the
impact of less monsoon rainfall to ensure quick results for farmers by reviewing
administrative mechanism, financial arrangements and technology use in irrigation.

Irrigation scenario:

Share of agricultural GDP is declining from 23.4 % in 9th five year plan to 17.60
percent in 2014-15. Share of people involved is decreasing from 60 percent to 49
percent.

Growth rate in 2014-15 is estimated to be 0.2 percent as against countrys 7.3 %

economic growth rate.

55% of net cropped area is rain fed

About 80% of horticulture based livelihoods and 100% of forest products are realised
without irrigation

Yield of food grains in rain fed areas is almost 50 % of that in irrigated areas.

Irrigation potential is 102.8 MHA as against proposed potential of 140 MHA in 1997.

Ground water: 70% of Indias irrigation needs are sourced from ground water supplies,
the share of ground water in 1960-61 which was just 1% of the total irrigation resources
increased to 30 percent in 2011-12.

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Schemes for water resource development:

1.) Command area development program (CADP) in 1974-75, to bridge the gap
between irrigation potential created and its actual utilization by introducing suitable
cropping pattern, strengthening research, extension and training facilities etc.
2.) Rural infrastructure development fund in 1995-96 to complete incomplete irrigation
projects, mobilizing deposits out of the shortfall in commercial banks lending target
to agriculture to complete irrigation development projects.
3.) Accelerated irrigation benefit program (AIBP) in 1996-97, for extending financial
assistance to state governments to complete incomplete irrigation schemes
4.) From 2004-05 CADP and AIBP was merged and renamed as command area
development and water management (CAD&WM) to improve water use efficiency.
5.) National mission on micro irrigation was established to increase water use
efficiency by promoting drip and sprinkler irrigation systems. (Around 80% of the
crops can be cultivated using drip {suitable for wide spaced crops} and sprinkler
{suitable for closely packed crops} irrigation)

Factors responsible for low adoption of micro irrigation include:

High investment cost

Complex technology

Large number of small and marginal farmers

Fragmented landholdings

Cumbersome procedure to access institutional credit and government subsidies

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Lack of awareness about irrigation and regarding maintenance of the micro irrigation

Areas of serious concern:

1. Delayed implementation of irrigated projects: Out of 297 projects 163 irrigation
projects are delayed
2. Incomplete projects: Closely 500 to 600 incomplete projects have remained
incomplete since 1969-74
3. Time and cost overrun
4. Under-utilization: The gap between irrigation potential utilized and irrigation
potential created is steadily widening from first plan. Reasons are:

Lack of proper operation and maintenance

Incomplete distribution systems

Non completion of command area development works

Diversion of land for other purposes

Inadequate provision of budget for operation and maintenance

5. Ground water depletion: 70% of the ground water potential has been utilized water tables in many regions are falling very rapidly due to over utilization
6. Food insecurity: If the problem of over exploitation of ground water continues it has
deep impacts on national food security.

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INDIAS DAIRY SECTOR-TECHNOLOGY- THE KEY TO PROGRESS

Scenario of Dairy Sector:

It contributes 3.9 percent to GDP

India is the largest producer of milk in the world; however, Indias milk productivity is
far less than the average in developed dairy nations

Consumer preferences are changing, necessitated by changing socio-economic

conditions in the country. Market growth rate for some of these products is in the
range of 15-20 % Scope for development

Schemes for Dairy Development:

National Dairy Development Board

Created to promote, finance, and support producer owned and controlled

organisations

Carries out extensive research and development activities in Biotechnology aimed at

developing formulations and technologies useful for improving the productivity of
milch animals

Dairy Cooperatives: They account for major share of processed liquid milk marketed in
the country.

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National Dairy Plan:

Examining launching a national dairy plan with an outlay of more than 17300 crores to
achieve a target of 180 million tonnes of milk production annually by 2021-22

Mera Gaon Mera Gaurav: This scheme aims to take the technologies developed by
the scientists in the field and make the villages a partial learning laboratory for the
scientists.

Krishi Vigyan Kendra (KVK) and Agricultural technology management agency (ATMA)
are engaged in extension activities. A close coordination among all the stakeholders
is necessary for overall development of agriculture in villages.

To fill the gap related to the scarcity of veterinary doctors holders in agricultural and
animal sciences, veterinary colleges have been increased from 36 to 40

Rastriya Gokul Mission: to promote conservation and development of indigenous

breeds of cows in a focussed and scientific manner

an indigenous cattle centres or Gokul grams will be established in breeding tracts

of indigenous breeds (PPP based)

Be established near metropolitan cities for housing the urban cattle.

The scheme will identify and trace animal with unique identification number,
upgrade information network on animal productivity and health on national
database

Farmers who maintain the best centre will be awarded Gokul Ratna awards.

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Animal health cards and Pashu Sanjeevani scheme to increase animal productivity increase
the quality of livestock and control diseases.

E-market platform called as E-pashu Haat for disease free bovine germplasm; providing one
stop platform for bovine breeders.

HORTICULTURE: SCOPE AND RECENT INITIATIVES

Scenario of Horticulture sector:

India ranks second in the world next to china, the horticulture production has been
1.94 times than what it was in 2001-02.

It contributes 34% GDP of agriculture

Plan outlay under 12th plan increased to 4.6% compared to 3.9% in Ninth plan for
improvement

Over the last decade the area under horticulture crops grew by about 2.7% and
annual production increased by 7%

Schemes and organisations involved in promotion of Horticulture:

1. National horticulture board (NHB)

Set up 1984 by GOI on the recommendations of Group of perishable agricultural

commodities

It is registered as a society under Societys Registration Act 1860

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Objective: To improve integrated development of horticulture industry and to

help in coordinating, sustaining the production and processing of fruits and
vegetables

2. Mission for Integrated development of Horticulture (MIDH)

Started in 2014-15

Aim: To bring all ongoing schemes on horticulture under a single roof.

3. Commercial horticulture scheme: Development of commercial horticulture

through production and post-harvest management of horticulture crops

4. Cold storage scheme: NHB provides capital investment subsidy for

construction/expansion/modernisation of cold storage and storages of horticulture
products.

5. Market information service for horticulture crops; horticulture promotion

services/expert services and strengthening capability of NHB horticulture promotion
service.

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STORAGE FACILITIES FOR PERISHABLES CRITICAL GAPS AND

INITIATIVES

Why cold storage is important?

It caters to the demands for a changed consumption pattern

Helps in reducing the wastage of the agricultural products.

Acts as a cushion to minimise the price fluctuations.

Cold storage facilities serve as a link between the agriculture, industry and
consumers, and also act as a means for enhancing the shelf life and preserving
the product quality.

Storage facilities for grains have received greater policy support since long, such an
accelerated focus for perishables has not been observed.

Various estimates on the extent of post-harvest losses conducted by ICAR

Cereals and pulses 4 to 6%

Oil seeds 3 to 10%

Fruits and vegetables 6 to 18%

Inland and marine fisheries 7% and 3% respectively

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Way forward

Despite efforts to increase the cold storage facility, there is still a critical gap of 25MT
against the requirement of 61MT. There is a need to speed up this process of Cold
chain infra creation.

Various agricultural commodities (fruits, milk, meat, fish, and poultry) have different
levels of requirement of cold storage. However the cold storage facilities already
developed are not multipurpose and existing cold storage facilities largely cater to
storage of potato. So emphasis needs to be given for creation of cold chain facilities
for selected product categories in case of cold storage.

Cold chain industry is poised to grow at the rate of the 25% in coming years; given
the vast potential that this sector offers, government needs to create more
favourable policy (like land) for entry of private players in to this sector.

Government is also providing assistance (Grant-in-aid, subsidy, capital investment

subsidy, interest rate subvention etc.) through various schemes of National
Horticulture Board, Department of Agriculture and Cooperation and National
Cooperative Development Corporation.

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