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NITI AYOG - New India @ 75


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Chapter # 1 Growth (India @ 75)

Objectives

  • Steadily accelerate the gross domestic product(GDP) growth rate to achieve a target of about 8 per cent during 2018-23
  • This will raise the economy’s size in real terms from USD 2.7 trillion in 2017-18 to nearly USD 4 trillion by 2022-23. Besides having rapid growth, which reaches 9-10 per cent by 2022-23, it is also necessary to ensure that growth is inclusive, sustained, clean and formalized.
  • The investment rate should be raised from 29 per cent to 36 per cent of GDP which has been achieved in the past, by 2022-23.
  • Exports of goods and services combined should be increased from USD 478 billion in 2017-18 to USD 800 billion by 2022-23.

Current Situation w.r.t Growth

  • Economic growth in India has been broadly on an accelerating path. It is likely to be the fastest growing major economy in the world in the medium-term.

Share of manufacturing 

  • The share of manufacturing in India’s GDP is low relative to the average in low and middle-income countries.
  • It has not increased in any significant measure in the quarter century after economic liberalization began in 1991.
  • Within manufacturing, growth has often been highest in sectors that are relatively capital intensive, such as automobiles and pharmaceuticals.
  • This stems from India’s inability to capitalize fully on its inherent labour and skill cost advantages to develop large-scale labour intensivemanufacturing. Complex land and labour laws have also played a notable part in this outcome. There is a need to increase the pace of generating good quality jobs to cater to the growing workforce, their rising aspirations and to absorb out-migration of labour from agriculture.

Positive thing about India Economy Growth Rate

  • The positive news is that high growth rate has been achieved with strong macroeconomic fundamentals including low and stable rates of inflation and a falling fiscal deficit. However, along with macroeconomic stability, the sufficient condition for escalating growth is to continue with the structural reforms that address the binding constraints for a more robust supply-side response.

Constraints

Overall, growth can be accelerated by a number of measures across different policy areas, which have been detailed in different chapters of this strategy for 2022-23. This chapter focuses on the macroeconomic drivers of growth.

Way Forward

  1. Raising investment rates to 36 per cent by 2022-23
  • To raise the rate of investment (gross fixed capital formation as a share of GDP) from about 29 per cent in 2017-18 to about 36 per cent of GDP by 2022-23, a slew of measures will be required to boost both private and public investment.
  • India’s tax-GDP ratio of around 17 per cent is half the average of OECD countries (35 per cent) and is low even when compared to other emerging economies like Brazil (34 per cent), South Africa (27 per cent) and China (22 per cent). To enhance public investment, India should aim to increase its tax-GDP ratio to at least 22 per cent of GDP by 2022-23. Demonetization and GST will contribute positively to this critical effort.
  • In addition, efforts need to be made to rationalize direct taxes for both corporate tax and personal income tax. Simultaneously, there is a need to ease the tax compliance burden and eliminate direct interface between taxpayers and tax officials using technology.
  • In 2016-17, the share of government (central and state combined) capital expenditure in total budget expenditure was 16.2 per cent,1 and government’s contribution to fixed capital formation was close to 4 per cent of GDP. This needs to be increased to at least 7 per cent of GDP by 2022-23 through greater orientation of expenditure towards productive assets, and minimizing the effective revenue deficit.
  • States could also undertake greater mobilization of own taxes such as property tax, and taking specific steps to improve administration of GST to increase tax collections.
  • Two areas in which higher public investment will easily be absorbed are housing and infrastructure. Investment in housing, especially in urban areas, will create very large multiplier effects in the economy. Investment in physical infrastructure will address long-standing deficiencies faced by the economy. Sector-specific measures are mentioned in corresponding chapters.
  • The government has taken significant measures to attract foreign direct investment by easing caps on the extent of permissible stake holding and the norms of approval. By 2022-23, the government may consider further liberalizing FDI norms across sectors. Domestic savings can be complemented by attracting foreign investment in bonds and government securities. Regulatory limits can be relaxed for rupee denominated debt.
  • The government should continue to exit central public sector enterprises (CPSEs) that are not strategic in nature. Inefficient CPSEs surviving on government support distort entire sectors as they operate without any real budget constraints. The government’s exit will attract private investment and contribute to the exchequer, enabling higher public investment. For larger CPSEs, the goal should be to create widely held companies by offloading stake to the public to create entities where no single promoter has control. This will both improve management efficiency and allow government to monetize its holdings with substantial contribution to public finances.
  • Private investment needs be encouraged in infrastructure through a renewed public-private partnership (PPP) mechanism on the lines suggested by the Kelkar Committee.

 

  1. Macroeconomic stability through prudent fiscal and monetary policies
  • Sustained high growth requires macroeconomic stability, which is being achieved through a combination of prudent fiscal and monetary policies.
  • The government has targeted a gradual lowering of the government debt-to-GDP ratio.
  • It will help reduce the relatively high interest cost burden on the government budget, bring the size of India’s government debt closer to that of other emerging market economies, and improve the availability of credit for the private sector in the financial markets.
  • But even as lowering of debt and limiting fiscal deficit are important, the government should be flexible in its approach towards setting annual targets based on prevailing economic conditions. This approach is enshrined in the existing Fiscal Responsibility and Budget Management (FRBM) architecture that has built in flexibility in the form of adequately defined“escape and buoyancy” clauses. Targets should take cognizance of the stage of the business cycle and fiscal deficit and borrowing targets should not be set in isolation.
  • The effective revenue deficit should be brought down as rapidly as possible. Capital expenditure incurred for the health and education sectors, which in effect builds human capital, should be excluded from estimates of revenue expenditure. This will increase government savings.
  • One of the major institutional reforms of recent years has been to statutely mandate the RBI to maintain “… price stability while keeping in mind the objective of growth”. Inflation needs to be contained within the stated target range of 2 per cent to 6 per cent. Inflation targeting provides a reasonably flexible policy framework which is in line with global best practices and can respond appropriately to supply shocks.
  • Policy should be directed to minimize volatility in the nominal exchange rate.

 

  1. Efficient financial intermediation
  •  Efficient functioning of the financial markets is crucial to maintain high growth in the economy.
  • There is a need to deepen financial markets with easier availability of capital, greater use of financial markets to channel savings and an improved risk-assessment framework for lending to avoid a situation of large-scale non-performing assets in the banking sector.
  • Governance reforms in public sector banks require, apart from the establishment of independent and commercially driven bank boards, performance assessment of executives and increased flexibility in human resources policy.
  • The Gujarat International Finance and Tech City (GIFT) should be leveraged to push the envelope on financial sector liberalization. It is an opportunity to onshore trading in rupees and other derivatives, which currently happens outside India for regulatory reasons. If GIFT succeeds, liberalization can be extended to the rest of the country.
  • Enable alternative (to banks) sources of credit for India’s long-term investment needs.
  • The bond market needs deepening through liberalization of regulations and continued fiscal consolidation.

 

  1. Focus on exports and manufacturing
  •  India needs to remain globally competitive, particularly in the production and exports of manufactured, including processed agricultural, goods. The following reforms would help in improving the competitiveness:
  • A focused effort on making the logistics sector more efficient is needed.
  • Power tariff structures may be rationalized to ensure global competitiveness of Indian industries.
  • Import tariffs that seek to promote indigenous industry should come with measures to raise productivity which will provide the ability to compete globally.
  • Improve connectivity by accelerating the completion of announced infrastructure projects. Enhancing physical connectivity will help reduce delivery times and improve global connectivity and the reach of our exporters. By 2022-23, we should complete projects that are already underway such as the Delhi-Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridors.
  • Work with states to ease labour and land regulations. In particular, we should introduce flexibility in labour provisions across sectors. All state governments should speedily implement fixed term employment (FTE) that has now been extended to cover all sectors.
  • The government has recently established a dedicated fund of INR 5,000 crore for enhancing 12 “Champion Services Sectors”.Among others, these include IT & ITeS, tourism, medical value travel and audio visual services.Given the significant role of services exports in maintaining India’s balance of payments, the government should continue to focus on these sectors.
  • Strengthen the governance and technical capabilities of Export Promotion Councils (EPCs) by subjecting them to a well-defined, performance-based evaluation. Performance evaluations of EPCs could be based on increasing the share of Indian exports in product markets covered by these EPCs. Those EPCs unable to achieve mutually agreed upon targets for increasing market shares could be closed down or re-structured.
  • Explore closer economic integration within South Asia and the emerging economies of South East Asia particularly Cambodia, Laos, Myanmar and Vietnam, using the existing Bangladesh, Bhutan, India, Nepal (BBIN) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation (BIMSTEC) frameworks.
  • Building the physical infrastructure and putting in place measures to facilitate seamless cross-border movement of goods in the North-East region would help accelerate integration and promote exports.

    5. Employment generation

  • The necessary condition for employment generation is economic growth. Achieving the growth targets by implementing the development strategy outlined in this document can generate sufficient jobs for new entrants into the labour force, as well as those migrating out of agriculture.
  • A large part of jobs would hopefully be generated in labour-intensive manufacturing sectors, construction and services. In addition, the employability of labour needs to be enhanced by improving health, education and skilling outcomes and a massive expansion of the apprenticeship scheme.



Chapter # 41. Data Led Governance and Policy Making

Objectives Evidence based policy making should be made integral to the overall governance structure in New India, 2022-23. To achieve this, timely gen

Chapter # 40. Optimizing the Use of Land Resources

Optimizing the Use of Land Resources-Ensuring that land markets function smoothly, through efficient allocation of land across uses, provision of secu

Chapter # 39. Modernizing City Governance For Urban Transformation

Objective  City Governance For Urban Transformation To transform our cities into economically vibrant and environmentally sustainable habitats that p

Chapter # 38. Civil Services Reforms

Objective  civil-services-reforms To put in place a reformed system of recruitment, training and performance evaluation of the civil service to ensur

Chapter # 37. Legal, Judicial and Police Reforms

Objective To ensure the safety and security of citizens and ensure access to effective legal systems and speedy delivery of justice. Current Situation

Chapter # 36. The North-East Region

Objectives The North-East Region (NER) should: Have adequate road, rail and air connectivity, waterways, internet connectivity and financial inclusion

Chapter # 35. Balanced Regional Development: Transforming Aspirational Districts

Objective  Balanced Regional Development: Transforming Aspirational Districts Achieve balanced development in India by uplifting 115 districts, curre

Chapter # 34. Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), Other Tribal Groups and Minorities

SCs, STs, OBCs, De-Notified Tribes (DNTs), Nomadic Tribes (NTs) and Semi-Nomadic Tribes (SNTs) Objective  To accelerate the socio-economic developm

Chapter # 33. Senior Citizens, Persons with Disability and Transgender Persons

SENIOR CITIZENS  Objective To ensure a life of dignity, social security and safety for senior citizens, enabling them to actively participate in econ

Chapter # 32. Gender

Objective  To create an enabling environment, sans institutional and structural barriers. To enhance the female labour force participation rate to at

Chapter # 31. Nutrition

Objectives  Under POSHAN Abhiyaan, achieve the following outcomes by 2022-23, compared to the baseline of 2015-16 (National Family Health Survey-4):

Chapter # 30. Universal Health Coverage

Objectives  On the strong platform of Pradhan Mantri – Jan Arogya Yojana (PM-JAY): Attain a coverage of at least 75 per cent of the population

Chapter # 29. Human Resources for Health

Objectives  Achieve a doctor-population ratio of at least 1:1400 (WHO norm 1:1000) and nurse-population ratio of at least 1:500 (WHO norm 1:400) by 2

Chapter # 28. Comprehensive Primary Health Care

Objectives  Under Ayushman Bharat, scale-up a new vision for comprehensive primary health care across the country, built on the platform of health an

Chapter # 27. Public Health Management and Action

Objectives  To revamp radically the public and preventive health system in the nation through the following strategic interventions: Mobilize public

Chapter # 26. Skill Development

Obejctives  For harnessing the demographic advantage that it enjoys, India needs to build the capacity and infrastructure for skilling/reskilling/up-

Chapter # 25. Teacher Education and Training

Objectives There cannot be a quality education system without quality teachers. Therefore, a thorough revamp of the entire ecosystem of teacher educat

Chapter # 24. Higher Education

Objectives  Increase the gross enrolment ratio (GER) in higher education from 25 per cent in 2016-17 to 35 per cent by 2022-23. Make higher education

23. School Education

Objectives Universal access and retention: o Hundred per cent enrolment and retention at elementary education and secondary education levels; achieve

Chapter # 22. Sustainable Environment

Objective  The objective is to maintain a clean, green and healthy environment with peoples’ participation to support higher and inclusive economic

Chapter # 21. Water Resources

Objectives By 2022-23, India’s water resources management strategy should facilitate water security to ensure adequate availability of water for l

Chapter # 20. Swash Bharat Mission

Objectives The key objectives of the Swachh Bharat Mission include: 1. Making India Open Defecation Free (ODF) by October 2, 2019. 2. Carrying out ext

Chapter # 19.Smart Cities for Urban Transformation

Objectives  Leverage the ‘Smart Cities’ concept in select urban clusters to: Drive job creation and economic growth. Significantly improve effici

Chapter # 18. Digital Connectivity

Objectives Given the relevance of digital connectivity to economic growth and the need to eliminate the digital divide by 2022-23, India should aim to

Chapter # 17. Logistics

Objectives Achieve multi-modal movement of cargo on par with global logistics standards. Reduce the logistics cost to less than 10 per cent of GDP fro

Chapter # 16.Ports, Shipping and Inland Waterways

Objectives  Double the share of freight transported by coastal shipping and inland waterways from 6 per cent in 2016-171 to 12 per cent by 2025. Incr

Chapter # 15. Civil Aviation

Objectives Enhance the affordability of flying to enable an increase in domestic ticket sales from 103.75 million in 2016-171 to 300 million by 2022.2

Chapter # 14. Railways

Objectives By 2022-23, India should have a rail network that is not only efficient, reliable and safe, but is also cost-effective and accessible, both

Chapter # 13. Surface Transport

Objectives Increasing the coverage and quality of roads and highways is critical to enhancing connectivity and internal and external trade. By 2022-23

Chapter # 12. Energy

Objectives The government’s on-going energy sector policies aim “to provide access to affordable, reliable, sustainable and modern energy”. At t

Chapter # 11. Minerals

Objectives Double the area explored from 10 per cent of obvious geological potential (OGP) area to 20 per cent.1 Accelerate the growth of the mining s

Chapter # 10. Travel, Tourism and Hospitality

Objectives  Increase India’s share in global international tourist arrivals from 1.18 per cent to 3 per cent. Increase the number of foreign touris

Chapter # 9. Housing For All

Objectives Provide every family with a pucca house, with a water connection, toilet facilities, and 24×7 electricity supply and access. Build 2.9

Chapter # 8. Financial Inclusion

Objectives Banking for the unbanked  o Bank accounts: Ensuring universal access to bank accounts, which are a gateway to all financial services.  o

Chapter # 7.Doubling Farmers’ Income (III): Value Chain & Rural Infrastructure

Objectives • Transform the rural economy through the creation of modern rural infrastructure and an integrated value chain system. • Leverage the

Chapter # 6.Doubling Farmers’ Income (II): Policy & Governance

Objectives Create a policy environment that enables income security for farmers, whilst maintaining India’s food security. Encourage the participati

Chapter # 5.Doubling Farmers’ Income (I): Modernizing Agriculture

Objectives • Modernize agricultural technology, increase productivity, efficiency and crop diversification. • Generate income and employment throu

Chapter # 4.Industry

Objectives Double the current growth rate of the manufac-turing sector by 2022. Promote in a planned manner the adoption of the latest technology adva

Chapter # 3. Technology and Innovation

Objectives India should be among the top 50 countries in the Global Innovation Index by 2022-23.1 Five of our scientific research institutions should

Chapter # 2.Employment and Labour Reforms

Objectives Complete codification of central labour laws into four codes by 2019. Increase female labour force participation to at least 30 per cent by

Chapter # 1 Growth (India @ 75)

Objectives Steadily accelerate the gross domestic product(GDP) growth rate to achieve a target of about 8 per cent during 2018-23 This will raise the

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