Summary of Economic Survey 2019 Vol - I

Budget and Survey 2019 notes: https://skidha.home.blog/2019/03/14/budget-and-es-2019/ 1

Preface .............................................................................................................................................................................................. 1

Ch1 : Shifting gears – Pvt Investment as the key driver of growth, jobs, exports, demand ............................................................. 1

Ch 2 : Policy for homo sapiens, not homo economicus – leveraging behavioral economics of ‘nudge’ .......................................... 3

Ch 3 : Nourishing Dwarfs to become giants: reorienting policies for MSME growth ....................................................................... 8

Ch 4 : Data ‘of the people, by the people, for the people’ ............................................................................................................... 9

Ch 5 : Ending Matsyanyaya – How to ramp up capacity in the lower judiciary .............................................................................. 12

Ch 6 : How does policy uncertainty affect Investment? ................................................................................................................. 13

Ch 7 : India’s demography at 2040 – Planning public good provision for 21st century .................................................................. 14

Ch 8 : From Swachh Bharat to Sundar Bharat via Swasth Bharat – an analysis of SBM ................................................................. 15

Ch 9 : Enabling inclusive growth through affordable, reliable and sustainable energy.................................................................. 16

Ch 10 : Efficient use of tech for welfare schemes – case of MGNREGS .......................................................................................... 17

Ch 11 : Redesigning a Minimum Wage system in India for inclusive growth ................................................................................. 18

Preface Sky blue cover of the survey = unfettered approach in thinking about appropriate economic model for India

2017 Nobel Prize in Economics to Prof Thaler for Behavioral Economics

Ch1 : Shifting gears – Pvt Investment as the key driver of growth, jobs, exports, demand

Accomplishments in last 5 years India became 6th largest economy in the world by sustaining higher growth rates than China => got tagged as ‘fastest

growing major economy in the world’

MPC constituted in Feb 2015 following agreement between GoI and RBI with mandate (set by GoI) to target headline

inflation of 4 ± 2% => EXCEPTION : only in 1 month since 2015 has inflation been outside this band

Eventual target of Gross Fiscal Deficit (GFD) = 3% of GDP (was 3.4% in 2018-19)

Pathways govt created for benefits of growth to ‘trickle-down’ to bottom of socio-economic ladder –

o Aadhaar Act 2016 : govt has ability to provide targeted support using UID; 90% population covered

o PM Jan Dhan Yojana : financial inclusion

o DBT possible through JAM (Jan Dhan-Aadhaar-Mobile) trinity by mandating linking of phone numbers and

Aadhaar with bank accounts. Schemes under DBT are – MGNREGA, National Social Assistance Program (NSAP),

PM Awas Yojana Gramin (PMAY-G) etc

o PM Ujjwala Yojana

o Ayushmaan Bharat Yojana – insurance cover of 5 lakh to 100 mn BPL families at premium of Rs. 100/month

Bogibeel bridge in Assam is the 2nd longest rail-cum-road bridge in Asia

Federalism

o 14th FC had increased share of states in divisible pool of central taxes from 32% to 42%; however, central

grants to states were cut down. Positive effect = states empowered to manage their revenues and

expenditures independently of the Centre

o Launch of GST; GST Council = cooperative federalism

o NITI Aayog has also helped promote cooperative federalism by setting up teams from both Centre and states

to jointly evolve development strategies

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Next 5 years – blueprint for growth and jobs PM’s vision = $5 tn economy by 2025 (this will make India world’s 3rd largest economy); to achieve this, we need to

accelerate and sustain a real GDP growth rate of 8%

As per international experience (mainly of high-growth East Asian economies like S. Korea), such growth can only be

sustained by a virtuous cycle of savings, investment (especially private investments) and exports supported by a

favourable demographic phase

Benefits of pvt investment = drives demand, creates capacity, increases labour productivity, introduces new tech,

generates jobs and allows creative destruction (refers to disruptive innovations;

https://www.investopedia.com/terms/c/creativedestruction.asp)

This Survey departs from traditional thinking in following ways

o By advocating a growth model for India that views the economy as being in a constant disequilibrium i.e. either

in a virtuous (growth) or a vicious (recession) cycle, and thus never in equilibrium

o This is because the concept of equilibrium is being challenged following the 2008 GFC

o Also, shortcoming in traditional view is that it attempts to solve job creation, demand, exports, and economic

growth as separate problems

What is the key driver that catalyses the economy into a virtuous cycle? – Investment can create a self-sustaining

virtuous cycle in India

o Public investment – crowding OUT effect because govt will compete for funds with private sector, but

crowding IN effect because the good infra created due to public investment will encourage higher private

investments. Overall effect is that of crowding IN as per 2019 economic survey

o Private investment

Importance of Savings

o Feldstein-Horioka puzzle – both of them thought that if capital is perfectly mobile across countries, domestic

savings and domestic investments would have no correlation because borrowers would prefer borrowing from

abroad at global rates and savers would prefer lending abroad at global rates. However, when they analysed

data they found that domestic savings rate and domestic investment rates are highly correlated. And this

PUZZLED them, hence the name.

Conclusion : a high investment effort must be backed by domestic savings

o Positive correlation between savings and growth is stronger than positive correlation between investment and

growth => savings more important

o Investments are risky => loss of invested capital due to business failure possible => savings have to increase

more than investments to account for this

Jobs

o Claim that investment displaces jobs is not true because when entire value chain is examined, it is found that

production of capital goods, R&D and supply chains generate jobs. What matters is that investment should

enhance productivity and international competitiveness.

o Eg. China – country with highest investment rates also created the most jobs

Exports - Exports essential for higher growth because higher savings would mean that domestic consumption cannot

be a driver of final demand (since, high domestic savings => low domestic consumption). Therefore, final demand for

the large capacities created by high investment has to come from exports.

o Current disruptions in global trade provide an opportunity for India to insert itself into global supply chains

o High Level Advisory Group under Surjit Bhalla has submitted report on increasing exports

Navigating a world of constant dis-equilibrium Earlier attempt to create 5-year plans used ‘equilibrium framework’ and hence failed because it was too prescriptive

for an inherently unpredictable world

Tools for navigating unpredictable economy (chapters in this Economic Survey connected through this theme) –

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o Ch 1 : modeling ‘virtuous’ and ‘vicious’ cycle

o Ch 2 : incorporating insights from behavioral economics to change behavior (taking Beti Bachao Beti padhao,

Swachh Bharat Abhiyaan, IBC as case studies)

o Ch 3 : measurement of new concepts

o Ch 4 : employing data as a tool to enable welfare-driven policy-making

o Ch 9 : sustainable development

o Ch 10 : using tech to administer welfare programs effectively and reduce inequality

Benefits of ‘data’ in governance – enhance ease of living for citizens, enable evidence-based policy, improve targeting

in welfare schemes, uncover unmet needs, integrate fragmented markets, bring greater accountability in public

services, generate greater citizen participation in governance etc

Legal systems and contract enforcement (rule of law) necessary in an uncertain economy because uncertainty results

in temptation to renege on contracts when actual outcome is different from expected outcome. Even thinkers like

Kautilya and Kamandak saw the rule of law as key to averty Matysa-nyaya (rule of the fish / law of the jungle)

o Unfortunately this is not good in India; WB’s Ease of Doing Business ranked India 163 for CONTRACT

ENFORCEMENT

o Legal system reform must be a top priority

o Productivity of courts will have to increase along with use of tech, increase in working days and administrative

reforms

Consistency in economic policy making

o Surges in economic policy uncertainty increase the systematic risk => increase in cost of capital in economy =>

lower investment

Role of demographics in ‘virtuous’ cycle

o Working age population in India (20-59 yrs) will increase to about 60% in 2041

o Rise in share of working age population due to decline in fertility rate => higher per capita income as output

per worker remains unchanged but number of youth dependents declines

o Savings increase => investment increases

Demographics and wages/income growth are the major factors that drive savings. Therefore, keeping domestic savings

rates high may not encourage savings behavior significantly and hence only a mildly positive real rate is good enough.

This gives policymakers a key degree of freedom (they do not have to worry about keeping interest rates high in order

to attract savings). Thus reduction in real interest rates can foster investment and thereby set in motion the virtuous

cycle of investment, growth, exports and jobs

Role of job creation and earnings

o Dwarf firms = small firms that never grow beyond their small size, i.e. firms that are both small (<100 workers)

and older than 10 years; these dominate the Indian economy and hold back job creation and productivity; 50%

of total number of firms but employ only 13% of total workers

o Firms that are able to grow over time to become large are the biggest contributors to employment and

productivity in the economy; 9.5% of total firms but employ >50% of total workers

Ch 2 : Policy for homo sapiens, not homo economicus – leveraging behavioral economics

of ‘nudge’ Nudge policies gently steer people towards desirable behavior even while preserving their liberty to choose. Such

policies leverage insights from human psychology to influence the choice architecture of people

Homo economicus (hypothetical) are rational and unbiased people who behave like robots and form the basis of

classical economic theory. For them, the choice architecture is irrelevant as they would make the most optimal choice

irrespective of the way the choices are presented to them. However, real people respond to choice architecture

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Behavioral economics relies on this essential insight from human psychology that real people do not always behave

like robots

Example – as individuals suffer from tremendous inertia when they have to make a choice, they tend to stick to the

default option provided in a form. This was utilized in the USA to automatically enroll people to a savings plan. Option

in the form ask people to check a box if they did NOT want to enroll. By default, they got enrolled

Successful applications of behavioral insights in India

Swachh Bharat Mission

First program to emphasize behavior change as much as, if not more than, construction of toilets

SBM achieved success not only in providing toilets but also in ensuring that these toilets are used

Measures of female literacy and early marriage of girls correlate powerfully with access and usage of toilets across

states. Thus, toilet access and usage can be suitably increased with behavioral nudges that push female literacy rates

up and discourage early marriage of girls

How were behavioral insights used in SBM

o Association with Gandhiji, India’s most revered role model; to leverage values propagated by him and create a

mass movement along the lines of satyagraha

o Logo is also Gandhiji’s specs

o > 5 lakh ‘swacchagrahis’ were recruited – named similar to ‘satyagrahis’; to leverage their local ties to reinforce

the message; people are more likely to listen to and emulate someone they know; thus this proved more

effective than mass media campaigns

o Relying on community based approaches to sanitation – Participatory Rural Appraisal, Community-led Total

Sanitation etc; non-conformers find their act more visible to their community and a desire to fit in led many to

renounce open defecation

Beti Bachao Beti Padhao

Flagged off at Panipat in Haryana which had the worst Child Sex Ratio (CSR) of 834 among Indian states, as compared

to national average of 919

How were behavioral insights used in BBBP

o Association of battle against socially ingrained bias against girl child with famous battles fought at Panipat

o Expansion of program on 8th March 2018 - International Women’s Day

o Expansion of program from Jhunjhunu in Rajasthan, the state which had improved the most from a CSR of 888

in 2011 to 922 in 2017-18 – to send the msg that good performance is rewarded

o Selfie with Daughter program made people want to conform to the new social norm of celebrating girl children

rather than viewing them as a burden

o ‘Failure bias’ is when people tend to think that failing is more prevalent and is the norm. Selfie with daughter

campaign helped correct the failure bias by focusing on people who treat their girls fairly

Power of clear messaging

This has been utilized by naming schemes like NAMAMI Gange, POSHAN Abhiyaan, UJJAWALA, PM MUDRA Yojana, Jan

DHAN Yojana, AYUSHMAAN Bharat etc

Principles for applying behavioral insights to public policy Principle 1 : leverage default rules – choose the right default value. Eg. Make the default as ‘opt-in’ for welfare

programs like insurance, retirement savings, organ donation etc

o Potential use : ‘opt-out’ could be made default option to be chosen for availing subsidy to nudge people

towards display of altruism

Principle 2 : make it easy to choose – keep options few and easy to comprehend

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o Potential use : use tech to make things simple to understand, cut through layers of processes and target

benefit to actual beneficiary

Principle 3 : emphasize social and cultural norms – emphasize the number of people following the good behavior;

clarify the insignificant role of detractors. Eg. National Corporate Social Responsibility Awards by MCA

Principle 4 : disclose outcomes – disclose realized benefits of good behavior

o Potential use : to improve tax compliance, productivity etc by showing people their benefits

Principle 5 : reinforce repeatedly – remind people of past good behavior. Eg. MARD (Men Against Rape and

Discrimination) campaign

o Potential use : monetary incentives to good Samaritans who help road accident victims

Principle 6 : leverage loss aversion – design incentives to reward good behavior with threat to revoke award if

behavior fails to match expectations

o Potential use : nudge policy makers towards taking seemingly harsh but necessary policy decisions even

though these may not garner enough support from people

Principle 7 : make msgs mimic mental models – catchy slogans, association with places like Panipat above etc

o Potential use : to prevent rise of online trolling, drug abuse among youth, gender based violence etc

Transforming gender equations : from BBBP to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay

Lakshmi)

:|| = societies when women are respected prosper

Launch a new campaign called BADLAV to represent the change towards gender equality by drawing on the imagery of

the forms of Goddess Lakshmi that symbolizes wealth and victory

Other examples from Indian mythology can be used. For example – Ardhanareshwar form of Shiva captures the

equality between men and women; Maitreyi rejected half her husband’s wealth in favour of spiritual knowledge etc

Using behavioral principles for BADLAV

o Make it easy – for women to report incidences of harassment and discrimination, to get govt docs, to open

bank accounts etc

o Emphasize social norms – showing how prevalent gender based violence is runs the risk of normalizing it;

instead emphasizing on how many people are not perpetrators can be helpful in shaping correct norms;

advertise women village leaders as role models

o Disclose outcomes – publish gender rankings like number of women in legislatures, in bureaucracy, gender pay

gap etc

o Reinforce repeatedly – multiple visually descriptive posters against sexual harassment at workplace in all

corridors of workplaces

o Leverage loss aversion – application fee waiver for women applicants in competitive exams

o Make messages match mental models – companies can offer flexibility at workplace for women

From Swachh and Ayushmaan Bharat to Sundar Bharat Way forward for Swachh Bharat Mission by leveraging behavioral economics

o Studies find that if people pre-commit to doing something, they are more likely to do it – swacchagrahis can

use this to make people pre-commit to sanitation goals. This can be reinforced by swacchagrahis helping

people assess themselves periodically on achievement of their sanitation goals

o People are more likely to sustain new behavior if told about tangible benefits – swacchagrahis can disseminate

info on incidence of sanitation-related illnesses in the community and how this rate improved after adoption

of sanitation practices. This activity can also be performed for individual households

Using behavioral principles for a Sundar Bharat

o Leverage default rules – giving individuals default flu-shot appointment time can increase influenze vaccination

rates; smart insurance plan defaults as mentioned in US savings plan case above

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o Make it easy to choose – behavioral alterations in schools and college menus like giving interesting names to

healthy options, placing these near the cash counter etc; restricting health plans to those which are relevant

for the particular individual

o Emphasize social norms – adolescents often over-estimate how much alcohol and drugs their peers take and

hence perceive over-consumption as a desirable attribute. Campaigns focusing on number of people who

don’t drink or take drugs can be effective here; presenting info on how many people in the neighbourhood

have chosen to take up health insurance plan etc

o Disclose outcomes – disclosing to people the realized benefits of hand-washing, family planning etc

o Reinforce repeatedly – sending msgs to patients containing info on the day and time of their next vaccination

can boost uptake of vaccines; for people with critical diseases not taking medicines on time, text msgs or pill

bottles that light up if not opened at the right time, appreciation certificate for following prescription

certificate etc can increase drug adherence

o Leverage loss aversion – people find it difficult to achieve self-goals like weight loss. Voluntarily making such

people invest money someplace that will be returned to them if they achieve their goals but forfeited

otherwise, can help them achieve their goals

o Make message match mental models – message boards emphasizing gains from smoke cessation or

breastfeeding

Think about the Subsidy For campaigns like ‘Give it Up’ for giving up LPG subsidy

Behavioral economics tells us that even if people are truly interested in giving up their subsidies, they need to be

moved to action with a gentle nudge. For this, the default choice given to individuals matters a lot as people have a

strong tendency to go with status quo

People act positively when they see others act positively and particularly when they relate to such individuals. For now,

there is a ‘Scroll of Honor’ feature listing people who have given up their LPG subsidies, but the process to access these

names is cumbersome. Hence, people would not know if their neighbours or friends have given up their subsidies or

not

Using behavioral principles for ‘think about the subsidy’

o Leverage default rules – default option can be modified so that households above a certain income threshold

have to opt in to continue their subsidies with the default option being ‘opt-out’

o Make it easy to choose – pre-populating fields of subsidy giving up forms can make it more likely that people

will submit such applications; mobile phones and apps can make impulsive giving up easier

o Emphasize social norms – to discourage middle class and rich from enrolling for subsidies, govt could publish

advertisements stating that the scheme is intended to benefit the poor X% of population that earns less than

Rs. Y per month; advertisements could suggest that by giving up subsidy, rich are contributing to eradicating

poverty; increasing visibility of donors (displaying photos of persons from the same locality who gave up

subsidies) can encourage giving up of subsidies

o Disclose outcome – immediately showing givers the effect of them giving up; for eg. Givers could view personal

photos of the people benefitting from the subsidy

o Reinforce repeatedly – during tax filing, people could be shown an extra field in the form about giving up

subsidy for the cause of the nation

o Leverage loss aversion – loss aversion can be used to explain why a large number of people have not given up

their subsidies

o Match msg to mental model – can be used to reduce effective costs of subsidy

Jan Dhan Yojana Using behavioral principles to enhance impact of Jan Dhan Yojana

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o Leverage default rules – make auto enrolment into a savings plan the default option while offering people the

option to opt out

o Make it easy to choose – products for the poor must not confound with too many options

o Emphasize social norms – info campaigns highlighting number of people who use their bank accounts in the

local village; send out sms to every person at the end of every month highlighting number of transactions by

this person compared with average transactions by people in the village; holders of dormant accounts may be

periodically reminded of the number of people in their neighbourhood who actively use their accounts

o Disclose outcomes – showing people the savings they have done by opening the bank account

o Reinforce repeatedly – by simply asking the people whether they plan to save next month, the intention to

save can be reinforced

o Leverage loss aversion – a good time to get people to save more is when salary increases. At such times,

people are less likely to consider increased savings as a loss than at other times of the year

o Make msgs match mental models – money set aside for a specific purpose like education is unlikely to be spent

fast. Thus people should be asked to choose their own names such as ‘home savings plan’ or ‘education

savings plan’ etc

Improving tax compliance Plato : ‘what is honoured in a country is cultivated there’

Behavioral insights need to be employed to modify the social norm from ‘evading taxes is acceptable’ to ‘paying taxes

honestly is honourable’. For eg. Interim Budget speech 2019 publicly and explicitly thanks tax payers

Tax evasion is driven significantly by tax morale i.e. the intrinsic motivation of taxpayers in a country to pay taxes. Tax

morale is driven by 2 perceptive factors

o Vertical fairness – whether what I pay in taxes is commensurate to the benefits I receive as services from the

govt

o Horizontal fairness – differences in taxes paid by various sections of the society; perceptions of horizontal

fairness suffer when the employee class has to pay taxes whereas self employed gets away paying minimal

taxes

Using behavioral principles to enhance tax compliance

o Leveraging default rules – automatic deduction of tax and directing all or portion of refunds into savings

accounts

o Make it easy to choose – filing of tax forms even for zero payment of tax; remove barriers to filing taxes;

automated tax collection

o Emphasize social norms – tax amnesties might reduce tax compliance if taxpayers perceive amnesties unfair;

on the other hand, providing info on people who pay taxes can encourage tax compliance; highlighting and

recognizing regular and high taxpayers by giving them privileges like fast-lane privileges at highways, airports,

immigration etc. Such steps can help propagate the social norm that paying taxes is honorable

o Disclose outcomes – public shaming of individuals who evade taxes

o Reinforce repeatedly – repeatedly sending fairness driven and normative msgs added to standard reminder

letters

o Leverage loss aversion – tax withholding followed by refunds at the time of tax filing may increase tax

compliance and total taxes paid

o Match msgs to models – reminding taxpayers that public goods can only be provided in return for tax

compliance can boost tax morale; repayment of debt in one’s own life is prescribed as necessary by scriptures

across religions. Given the importance of religion in India, this can be leveraged to reduce tax evasion and

willful default

Measures to be taken to leverage behavioral principles Set up a behavioral economics unit in NITI Aayog – only experts in behavioral economics must be appointed to it

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Every program must go through a behavioral economics audit before its implementation

Work with state govts to inform them about potential benefits of behavioral economics

Ch 3 : Nourishing Dwarfs to become giants: reorienting policies for MSME growth Working-age population to grow at 97 lakh per year in coming decade and 42 lakh per year in the next one. If Labour

Force Participation Rate (LFPR) is assumed to remain at 60%, 55-60 lakh new jobs will have to be created annually over

the next decade

Bane of dwarfism and its impact on jobs and productivity Dwarf firms = small firms that never grow beyond their small size, i.e. firms that are both small (<100 workers) and

older than 10 years; these dominate the Indian economy and hold back job creation and productivity

o 50% of total number of firms but employ only 13% of total workers

o contribute only 8% to productivity

o share in Net Value Added (NVA) is a miniscule 7.6%

Young large firms = firms that have >100 workers and are <10 years old; these are able to grow over time to become

large are the biggest contributors to employment and productivity in the economy

o 5.5% of total firms but employ >21.2% of total workers

o account for 90% of productivity

o share in NVA is 37.2%

Old large firms = firms with >100 workers and are >10years old

o 10% of total firms but employ 50% of total workers

o Contribute 50% to NVA

Infant firms (different from dwarf firms) are those that have potential to grow and become giants rapidly

Findings mentioned above dispel the notion that small firms generate the most employment – small firms may

generate a higher number of new jobs but they destroy as many jobs as well, leading to lower net levels of jobs

As compared to small firms, it is the young firms that contribute significantly to employment and value added; firms

<10 years old account for about 30% of employment and 50% of NVA

Why do Dwarfs remain small Our policies protect and foster dwarfs rather than infants

Some of these policies create perverse incentives for firms to remain small. If the firms grow beyond a certain

threshold, they will be unable to obtain said benefits

As economies of scale stem primarily from firm size, these firms are unable to enjoy such benefits and hence remain

unproductive

This lack of productivity and growth inhibits the ability of the dwarfs to create jobs

Role of policy in fostering dwarfism

Impact of labour regulation

Legislations such as the Industrial Disputes Act, 1947 mandate companies to get permission from the govt before

retrenchment of employees. This restriction is however applicable only to firms with >100 employees. Such labour

legislation creates perverse incentives for firms to remain small

States with rigid labour laws are unable to create enough employment, cannot attract adequate capital into their

states and their wages are lower as their productivity is lower

Labour law reforms in Rajasthan have proved fruitful

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Impact of small scale reservation

Policies such as priority sector lending at subsidized interest rates to MSMEs, Purchase Preference policy, Price

Preference policy, Credit Guarantee Fund scheme, benefits in tendering, GST composition scheme etc promote small

firms irrespective of their age

Small Scale Industries reservation policy – certain products reserved for production by MSMEs. It has been noticed that

‘dwarfs’ are more likely to produce reserved products whereas larger firms and younger firms are more likely to

produce un-reserved products

Way forward Our policies must focus on enabling MSMEs to grow by unshackling them

Incentivize ‘infant’ firms rather than ‘small’ firms – with appropriate grandfathering of existing incentives, they need

to be shifted away from dwarfs to infants. Aadhaar can be used to ensure this. For eg if a promoter starts a new firm,

utilizes benefits for 10 years when the age-based policy is available and then closes the firm to start a new one to avail

the benefits again through the new firm, Aadhaar can alert authorities of this misuse

Reorienting priority sector lending – under MSME’s PSL targets, it is necessary to prioritize ‘start-ups’ and ‘infants’ in

high employment elastic sectors like rubber & plastic products, electrical and optical equipment, transport equipment

etc. This would enhance direct credit flow to sectors that can create the most jobs in the economy

Sunset clause for incentives – every incentive for fostering growth should have a sunset clause of say 5-7 years after

which the firm should be able to sustain itself

Focus on service sectors with high spillover effects such as tourism

Ch 4 : Data ‘of the people, by the people, for the people’ Increasing marginal benefits of data

o Evidence based policy making possible

o Accountability in public services

o Better targeting of welfare programs

o Nationally integrated markets

o Product innovation

Why must data be treated as a public good? Data is non-rivalrous i.e. consumption by one individual does not reduce the quantum for others

Data can be made excludable – i.e. possible to exclude people from accessing data by say, erecting pay-walls

There are some kinds of data, like those gathered by the govt on issues of social interest, that should be democratized

in the interest of social welfare

Data is generated by the people, of the people and should be used for the people

Social sectors of the economy, such as healthcare and education, have lagged the commercial sectors in exploiting

data. This is because the private sector cannot internalize the social benefits of data in these sectors (for them only the

economic benefits can be internalized, which are few). Hence the market for data in these sectors has not developed

so far

To ensure that socially optimum amount of data is harvested and used, the govt needs to step in, either by providing

the data itself or correcting the incentive structure faced by the private sector. For eg. Govt did exactly this by creating

e-NAM

Anonymized data = data that is not linked to a specific individual but is still available at an individual level of granularity

Characteristics that data must possess for synergistic benefits to accrue Whole is larger than the sum of its parts – data is more useful when it is married with other data. For eg. Jan Dhan data

and MGNREGA data can be linked and used together. MNREGA as a real-time indicator of rural distress + credit

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scoring done using transactions data of Jan Dhan accounts can be used to provide credit in districts that are

experiencing distress

Data needs to cover a critical mass of individuals/firms so that comparisons and correlations can be assessed to

generate useful policy insights. For eg. To gather price data across the country, a very large number of producers and

buyers need to log their transactions on platforms in real-time. In such cases, inducing numerous agents to log

transactions regularly is a task that requires significant initial investment

Data must have a long enough time-series so that dynamic effects can be studied and employed for policymaking

Types of data on citizens that govt can harness for welfare of citizens Administrative data like birth and death records, crime reports, land records, vehicle registrations, tax records,

movement of people across national borders etc

Survey data for statistical purposes like NSSO surveys, indicators on unemployment, education, nutrition etc

Institutional data - data held by public institutions about the people; for eg. Data with district hospitals, govt schools,

govt univs etc

Transactions data – individual’s transactions like those on UPI, BHIM etc

Challenges in utilizing data for public welfare in India Fixed costs involved in generating such rich and massive data is significant. Private sector may not have appetite or

capital for this

Even if the private sector were to put such rich data together, it would result in a monopoly that would reduce citizen

welfare and also violate the principle of ‘data by citizens, for citizens’

Currently, data collection in India is highly decentralized. For each indicator of social welfare, responsibility to gather

data lies with the corresponding union ministry and its state counterparts. This creates silos of data not linked with

each other

A lot of data has not been digitized yet – it lies in paper-based form in various govt offices

Lack of a common identifier to analyze data for entities like villages, schools, hospitals etc. For example, each village is

characterized by a pin code assigned to it by the Dept of Post, a separate village code assigned to it by the Dept of

Rural Development and yet another code in the form of a ‘health block’ assigned by Health Ministry. This makes it

difficult to consolidate info for a particular village in one database

o An initiative to address this issue is the Local Govt Directory, an app by Panchayati Raj Ministry which maps

each land region entity to a local Govt body and assigns location codes compliant with Census ‘11

o The Ministry has also published this data for all to use

For many schemes data is available only at the district or the state levels and not at village level

Data privacy and safety concerns

Case study 1: Open Govt Data platform of Union govt Allows citizens to access a range of govt data in machine-readable form in one place

Portal allows Union Ministries/Depts to publish datasets, documents, services tools and apps

Citizen engagement tools like feedback forms, data visualizations, APIs etc also included

Benefits

o Gets people involved in solving problems – throwing open govt data to public multiplies number of people

analyzing and deriving insights from the data => usability of data itself increases

o Smart India Hackathon by MHRD to crowd-source solutions to improve governance using relevant data

Case study 2: Benefits of opening up “Transport for London’s” data Transport for London (TfL) releases significant amount of data (like timetables, service status, disruption etc) in an

open format for anyone to use for free

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Benefits – Support travel apps + Real-time alerts to save time, reduce uncertainty and lower info costs + supporting

growth in the tech economy and employment opportunities + increasing the use of public transport

Future – TfL is now developing a tool that will analyse data feeds from Tube trains to provide maintenance staff with

live info about the condition of the train => maintenance and planning would become more efficient and prevent

costly faults leading to service delays

Case study 3: Samagra Vedika initiative of Telangana govt Around 25 existing govt data-sets linked using a common identifier – the name and address of an individual

7 categories of info were linked in this aggregation exercise – crimes, assets, utilities, subsidies, education, taxes and

identity info

Each individual was then linked to relatives such as spouse, siblings, parents and other associates

Case study 4: NREGAsoft and e-governance in MGNREGA NREGAsoft is a comprehensive e-gov system for the MGNREGA scheme and captures the complete flow of all

MGNREGA work at every level

Makes available docs like muster rolls, registration application register etc

Accessible in a number of languages

Worker management module for worker-related services, fund mgt module to track movement of funds from Central

Ministry all the way to the workers’ pockets, grievance redressal module (accessible even to illiterates through touch-

point kiosk model) etc

Way forward in creating a Data Access Fiduciary Architecture While any ministry should be able to view the complete database, a given ministry can manipulate only those data

fields for which it is responsible

Updating of data should happen in real-time and in such a way that one ministry’s engagement with the database does

not affect other ministries’ access

Public service delivery can benefit from real-time storage of data. While the costs of real-time updating of database

may not always justify its marginal benefits, it is essential to have a high frequency logging of data for certain sectors.

Education is one such sector. If a school does not have a functional toilet for girls, leading girls to remain absent, this

information cannot for even for 6 months to be updated to database and acted upon. Within these 6 months, girls

would have lost almost half an academic year! Such updates must reach concerned officials on a daily or weekly basis.

Database should be secure with no room for tampering. Immutable access logs for all data should be available so that

citizens know who has seen their data and why

All future data should be collected in digital, machine readable format. Added benefits of this are that it ensures that

data is logged exactly as observed, obviates redundancy of data entry and eliminates data entry errors

Existing data needs to be converted to this format – Recently launched Digitize India initiative is an ingenious solution

to this problem

o It crowdsources the data entry effort by presenting volunteering citizens with snippets of scanned docs which

they type into a data entry portal

o Correct entries earn cash rewards for the contributor and recognition as ‘digital contributors’

o Contributors may even earn certificates as ‘Data entry operators’

o The program also features a mobile app so that even citizens without a computer can participate

Data processing – govts at all levels should invest in building their internal capacities to exploit data in real-time,

perform analyses and translate data into meaningful info. MoSPI and MeITY can act as nodal depts. to steer such

efforts at the national level

Govt may consider opening certain kinds of annonynized data to the private sector with all necessary security

safeguards to harness the skills and enthusiasm of data analytics professionals to gain max insights from data

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For citizens to visualize data, govt should initiate scheme dashboards for every major govt scheme with granular data,

all the way to the village level. For eg. Replicate Swachh Bharat Mission dashboard for other schemes. Such

dashboards need to be maintained and updated with data on a real-time basis

Applications of data Govts as beneficiaries – improve targeting in welfare schemes and subsidies by reducing both exclusion and inclusion

errors; improve public service delivery etc

Private sector firms as beneficiaries – private sector can reap massive dividends from such data. As a result even the

govt can earn revenue by charging the private sector for data use and thus recover a part of investments made in

gathering data

o For eg using test scores of students, demographic characteristics of each district and other publicly available

data, a private firm may be able to uncover unmet needs in education and cater to these needs by developing

innovative tutoring products tailored to specific needs of specific districts => profits for private sector +

revenue for govt + improved education levels

Citizens as beneficiaries – examples

o DigiLocker – people no longer need to run from pillar to post to get original docs like driving license, Aadhaar,

CBSE results etc

o RBI has announced NBFC-Account Aggregator (NBFC-AA) which allows users to pull all their financial data

together for personal finance mgt, to apply digitally for a new housing loan etc

o National Health Registry – doctor can access the medical history of a patient from this national health register.

This would be especially useful in emergency situations. Anonymized data can be sold to private parties for

analytics, which would enhance prevention of epidemics by offering predictive and prescriptive knowledge

Ch 5 : Ending Matsyanyaya – How to ramp up capacity in the lower judiciary Matsyanyaya = law of the fish / law of the jungle = opposite to rule of law

Despite a huge leap in overall Ease of Doing Business rankings, India continues to lag on the indicator for enforcing

contracts, climbing only 1 rank from 164 to 163 in the latest report

Indian judicial system has over 3.53 crore pending cases with 87.5% of the pending cases in subordinate judiciary

Pendency = time since the date of filing of the case; 64% cases pending for >1 year

Disposal time – 74.7% civil cases and 86.5% criminal cases are disposed within 3 years

Case Clearance Rate (CCR) = ratio of number of cases disposed of in a given year to the number of cases instituted in

that year; CCR has remained below 100% and this means that cases would keep on accumulating; it decreased from

90.5% in 2017 to 88.7% in 2018

Can the legal logjam be cleared? A 100% clearance rate must first be achieved so that there is zero accumulation to the existing pendency – according

to the Survey, to reach 100% CCR, 2279 additional judges would be needed in District and Subordinate courts (this

number is within the sanctioned strength for these courts!!)

Next, the backlog of cases already present in the system must be removed - according to the Survey, to clear all the

backlog in the next 5 years, further 8,152 judges would be needed

High Courts need just 93 additional judges to reach 100% CCR, which is again well within sanctioned HC strength

To clear all backlogs in next 5 years, HCs need a further 361 additional judges

Supreme Court needs just 1 extra judge to reach 100% CCR and just 8 additional judges to clear all backlog in next 5

years. To clear its backlog, SC would need to increase its sanctioned strength by 6

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How should the additional judges be allocated? Data indicates that not only is the backlog of criminal cases about 2.5 times that of civil cases, but criminal cases also

have a lower CRR, which means that the situation for criminal cases is distinctly worsening

This problem is especially acute for criminal original suits such as summons, warrants etc

Thus the additional judges need to specialize in these case types to speed up disposal

Police reforms are also necessary to speed up disposal of cases

Most of the time in the lifecycle of a case is spent in the Lower Court Records – Records and Proceedings stage. Here

cases cannot proceed as the court must first receive the case’s records from the lower court. This inefficiency is a

major factor contributing to delays and backlogs

States like Gujarat and Chattisgarh have clearance rates above 100%. States like MP, Assam, TN also have clearance

rates close to 100%. On the other hand, eastern states like Bihar, Odisha and WB have very low clearance rates. Hence

these states should be given priority in the appointment of additional judges

How to make Indian courts more productive? Increase number of working days – Indian courts close down for significant periods due to vacations. However,

increasing number of working days may improve productivity of SC and HCs but is unlikely to significantly impact lower

courts because these already seem to work as many days as govt offices

Establishment of Indian Courts and Tribunals Services – to focus on administrative aspects of the legal system; to

identify process inefficiencies and advise the judiciary on legal reforms; to implement process re-engineering

Deployment of technology – for eg eCourts Mission Mode Project of Law Ministry which has allowed the creation of

the National Judicial Data Grid

Ch 6 : How does policy uncertainty affect Investment? Taper tantrum in 2013 – following the announcement by the US Federal Reserve of tapering of their policy of

monetary easing investors in emerging markets faced uncertainty about the policies that would be adopted in these

countries to control the impact of this Fed policy change

Researchers have developed an Economic Policy Uncertainty (EPU) index for India by quantifying newspaper coverage

of policy-related economic uncertainty. The index reflects the frequency of articles in leading newspapers containing

the following triple : ‘economy’, ‘uncertainty’ and one or more of policy related words like ‘fiscal policy’, ‘monetary

policy’, ‘PMO’ etc

Decoupling of economic policy uncertainty in India since 2015 Economic policy uncertainty peaked in India in 2011-12 and has since been declining with intermittent increases in

between ; uncertainty moved closely in tandem with global uncertainty till 2014; it started diverging in 2015 and

seems to have been completely decoupled in 2018 => uncertainty has been increasing in US, UK, China etc whereas it

has been falling in India

Increase in uncertainty globally because of US-China trade tensions, Brexit, slower world growth

Turnaround in investment activity in India Economic policy certainty may have helped to foster the turnaround in investment activity

Continued resolution of twin balance sheet problem following implementation of IBC 2016 and recapitalization of

banks helped promote investment

Measure taken to improve ease of doing business, clarity in policy for FDI liberalization etc also helped

Other factors affecting investment Cost of borrowing – negatively associated with investments as they reflect higher input costs

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Prices that producers get for their products – rise in prices are expected to trigger higher investments as businesses

find it profitable to do so. It is observed that investment growth is positively correlated to WPI but negatively to CPI.

This may be because producers would realize price closer to wholesale prices upon selling any product whereas

consumers would have to pay consumer prices and higher prices may dampen the demand

Capacity utilization – positive relationship with investment growth. This is because excess unutilized capacity in the

previous quarter may lower the need for new investment in the current quarter

FDI and FII flows – expected to be negatively related to volatility of exchange rate because the returns realized by

foreign investors are in foreign currency terms. Portfolio investments (short term) are more affected by volatility in

exchange rate as compared to FDI flows

Way forward Top level policymakers must ensure that their policy actions are predictable, provide forward guidance on the stance

of policy, maintain broad consistency in actual policy with the forward guidance and reduce arbitrariness in policy

implementation

To ensure predictability, the horizon over which policies will not change must be mandatorily specified. Examples of

this being done already – FRBM Act, Monetary Policy Framework of RBI etc

Economic Policy Uncertainty Index must be monitored by policymakers regularly. Sub-indices can be created to

measure uncertainties stemming from fiscal policy, tax policy, monetary policy, trade policy and banking policy

The actual implementation of policy occurs at the lower levels, where ambiguity gets created and exacerbates

economic policy uncertainty. To overcome this, govt depts. must be mandated to seek quality certifications

Ch 7 : India’s demography at 2040 – Planning public good provision for 21st century

Demographic trends Total Fertility Rate in India halved from 4.5 in 1984 to 2.3 in 2016 (TFR of 2.1 children per woman is called replacement

level fertility, which is the avg number of children a woman would need to have in order for population to replace

itself)

TFR is now below replacement level fertility in 13 of 22 major states

This means that population growth is set to slow markedly in the next 2 decades along with a significant increase in the

share of working-age population (demographic dividend)

Policy implications of demographic trends to be considered in these areas – provision of health case, old-age care,

school facilities, access to retirement related financial services, public pension funding, income tax revenues, labour

force, retirement age etc

The share of India’s young (0-19 years) population has already started to decline and is projected to drop from 41% in

2011 to 25% by 2041

The share of elderly (60+) population will continue to rise from 8.6% in 2011 to 16% by 2041

India’s demographic dividend is expected to peak around 2041, when the share of working age (20-59) is expected to

be 59%

Working age population – would rise by 96.5 million during 2021-31 and by 41.5 mn during 2031-41

o LFPR is around 53% (80% for males and 25% for females)

Policy implications of ageing Elementary schools – number of school-going children will decline by 18.4% between 2021-41 => number of schools

per capita will rise significantly across India even if no more schools are added

o The time may soon come in many states to consolidate/merge elementary schools in order to keep them

viable

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o Schools within 1-3 km radius of each other can be chosen for this purpose to ensure no significant change in

access

Healthcare facilities – rising population over the next 2 decades will sharply reduce the per capita availability of

hospital beds in India. States with high population growth are also ones with the lowest per capita availability of

hospital beds. Hence there is a straightforward case for expanding medical facilities in these states

o Type of healthcare services will have to adapt towards greater provision of geriatric care

Retirement age – given that life expectancy is likely to continue rising in India, increasing the retirement age for both

men and women could be considered in line with the experience of other countries

o This will be key to the viability of pension systems

o This would also help increase female labour force participation in the older age-groups

Ch 8 : From Swachh Bharat to Sundar Bharat via Swasth Bharat – an analysis of SBM Gandhiji : Sanitation is more important than Independence

SBM adopts a multi-faceted approach including

o Community participation

o Flexibility in choice – by building in a menu of options so that the disadvantaged families can subsequently

upgrade their toilets depending upon their requirements and financial position

o Capacity building – augments institutional capacity to change behavior at the grassroots level

o Instill behavior change

o Broad based engagement – setting up of Swachh Bharat Kosh to encourage Corporate Social Responsibility and

accept contributions from private orgs, individuals etc

o Use of tech

98.9% India covered under SBM; over 9.5 crore toiler built since 2014; since 2014 – 5.6 lakh villages, 2.5 lakh gram

panchayats and 618 districts have been declared ODF

National Annual Rural Sanitation Survey 2018-19 by Independent Verification Agency – 93.1% households had access

to toilets during survey period and 96.5% households that had access to toilets, used them; 90.7% village ODF

Adequate sanitation has played a key role in reducing diarrhea, malaria, still births and low birth weight cases

In 2006, World Bank estimated the economic impacts of inadequate sanitation in India to be to the tune of US$ 53

billion or 6.4% of GDP

Study found that financial savings due to improve sanitation exceeded the financial costs to households by 1.7 times

(2.4 times for poorer households)

SBM has brought about a sea change in the dignity of people, especially women. It acts as a driver for eliminating the

gender disparity through construction of gender-specific latrines in public areas

This would have an indirect positive impact on society by increasing enrolment ratio of girls in schools

SBM is aligned with SDG 6.2 which aims at achieving access to adequate and equitable sanitation and hygiene for all by

2022

Way forward

o Need to maintain a culture of swachhta at public places beyond individual houses, cleaning water bodies,

scientific waste mgt, dealing with plastic menace, controlling air pollution etc

o To sustain the momentum created and behavioural change, a number of actions would have to be taken on a

continuous basis such as motivation of ‘agents of change’ at the ground level, impart training to field agents,

appointment of sanitation ambassadors etc

o Going forward, SBM should focus on achieving 100% disposal of solid and liquid waste

o Cleaning of our rivers should become an integral part of clean India – treatment of industrial effluence, drain

bio-remediation, river surface cleaning, rural sanitation, river front development, afforestation, biodiversity

conservation etc

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o Due to large resource requirements, there is a need to facilitate and sustain innovative financing mechanisms

Ch 9 : Enabling inclusive growth through affordable, reliable and sustainable energy Sun is the soul of all, animate and inanimate – Rig Veda

India has a per capita energy consumption of only about 1/3rd of the global average. Though India accounts for 18% of

world population, it uses only around 6% of world’s primary energy

Share of renewable in total generation in India has increased from 6% in 2014 to 10% in 2018

Adoption rate of electric vehicles (EVs) has been slow, largely due to lack of charging infra and the time taken for

completely charging an EV

In the initial years of economic development, increase in per capita GDP requires a large increase in primary energy per

capita. India cannot become an upper-middle-income country without

o Rapidly raising its share of the global energy consumption commensurate with its share of the global

population

o Ensuring universal access to adequate modern commercial energy at affordable prices

Energy poverty A large proportion of population, especially in rural areas relies on non-commercial biomass such as firewood and dung

cakes for their cooking/heating needs => health concerns due to poor indoor air quality

There is a large gap in energy access between rural and urban areas

There is also a wide variation in the energy access between the households at various economic strata

Access to clean cooking fuel has increased considerably in recent years, especially through schemes such as the

Ujjawala Yojana, DBT for LPG consumers (PAHAL) etc

Energy efficiency Primary energy intensity of India’s GDP has followed a falling trend over the years from 0.0004 toe (tonnes of oil

equivalent) in 1990 to 0.0002 toe in 2017

Steps taken by India towards improving energy efficiency – Energy Conservation Act 2001, creation of Bureau of

Energy Efficiency (BEE), Energy Efficiency Services Ltd (EESL), Perform Achieve Trade scheme (PAT), UJALA, Energy

Conservation Building Code, BEE Eco-Niwas Samhita, BEE Star rating, Agriculture Demand Side Mgt (AgDSM) for

pumping water, Municipal Demand Side Mgt for street lighting, Standards and Labeling Program etc

India’s energy efficiency programs led to savings of about Rs. 53k crore in 2017-18 and reduced 108.28 million tonnes

of CO2 emission

There is scope for huge further savings through energy efficiency in sectors such as Industries and Transport

Sustainability of energy generation India’s Nationally Determined Contribution (NDC) under Paris Agreement states that India will achieve 40% installed

capacity of power from non-fossil fuel sources by 2030

Despite increases in renewable energy generation, almost 60% of India’s installed capacity is in thermal power in which

main component is coal based power plants. This is unlikely to reduce drastically in near future because

o Sudden abandonment of coal based plants without complete utilization of their useful lifetimes would lead to

standing of assets that can have further adverse impact on the banking sector

o Given the intermittency of renewable power supply, unless sufficient technological breakthrough in energy

storage happens, it is unlikely that thermal power can be easily replaced

Thus, there is a need for building capacity for cleaner and more efficient coal technologies

Steps taken by govt to promote renewable energy Budget 2018-19 announced zero import duty on components used in making solar panels

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Govt has also offered various financial incentives for off-grid decentralized renewable energy systems

Progressively declining costs, improved efficiency and reliability have made renewable sources attractive

India’s target is to achieve 175 GW installed renewable capacity by 2022

As viability of renewable energy has improved drastically in recent times, tariff discovery is made through reverse

auctioning process. Solar tariff has come down from Rs. 18/kWh in 2010 to Rs. 2.44 in 2018

Initial target for National Solar Mission up to 2022 was to install 20 GW solar power. This was enhanced to 100 GW in

early 2015. Solar installed capacity has increased around 1000 times from 25 MW in 2011 to 28.18 GW in 2019

Green Energy Corridor– to facilitate smooth integration of increasing share of renewable into national grid

KUSUM scheme for providing financial and water security to farmers and for de-dieselization of farm sector

India has a hydro potential of 145.3 GW of which only 45.4 has been utilized

o High tariffs have been a major obstacle for this

o A new Hydro Policy has been approved which recognizes large hydro projects as ‘renewable’

o Tariff rationalization measures undertaken – providing flexibility to producers to determine tariff

o Increased debt repayment period to 18 years

o Introduced escalating tariff of 2%

o Budgetary support for funding enabling infra and flood moderation on case-to-case basis

Electric vehicles in India In India, transport sector is the 2nd largest contributor to CO2 emissions after industrial sector with road transport

accounting for 90% of transport emissions

Given our large import dependence for petroleum products, it is imperative to shift focus to alternative fuels

National Electric Mobility Mission Plan 2020 was set up with objective to achieve sales of 60-70 lakh units of EVs

In 2015, Faster Adoption and Manufacturing of EVs (FAME) was launched. FAME II launched in 2019 with emphasis on

electrification of public transport with outlay of Rs 10k crore

Way forward

o Studies have found that the market share of EVs increases with increasing availability of charging infra –it

becomes important that adequate charging stations are made available throughout road networks

o It is important to provide info on public chargers to EV users through online maps, physical signage etc

o Development of battery tech that can function efficiently in high temperature conditions in India

o New policies should focus not only on reducing upfront costs of owning an EV but also reduce overall lifetime

costs

o India can emerge as the hub of manufacturing of EVs generating employment and growth opportunities – thus

becoming the Detroit of EVs in the future

Ch 10 : Efficient use of tech for welfare schemes – case of MGNREGS Objective of MGNREGA – enhance livelihood security of poor households in rural areas

Issues with MGNREGA – corruption, political interference, leakages, delay in wage payments

Use of tech to overcome shortcomings

o PM Jan Dhan Yojana was launched to ensure universal access to banking facilities

o Aadhaar provided a credible identity source for whoever wanted to open a bank account – this also helped in

verifying identity of genuine beneficiaries

o Use of Aadhaar Linked Payments system -> leveraged JAM trinity to provide DBT to beneficiary accounts; this

reduced scope for delays in payments, which provides farmers with necessary liquidity for survival in times of

distress

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o National electronic Fund Mgt System (NeFMS) – to streamline the system of fund flow; Central govt directly

credits wages of MGNREGS workers, on a real-time basis, to a specific bank account opened by state govts. All

Program Officers debit this state-level single account for authorization of payment

o NREGAsoft – local language enabled workflow based e-gov system to capture all activities under MGNREGA at

all levels

o GeoMGNRGA – use space tech to create a database of assets created under MGNREGS using tech

interventions like mobile based photo geo-tagging and GIS based info system

o Increased accountability through various citizen centric mobile apps like Gram Samvaad and JanMnREGA

Other steps taken to improve MGNREGA

o Tweaking wage and material ratio – the 60:40 wage and material ratio mandated at Gram Panchayat level

often led to non-productive assets being created because 60% has to be spent on unskilled wage; to address

this issue, the 60:40 ratio was allowed at the District level instead of Gram Panchayat level

o Emphasis on individual beneficiary schemes (IBS) like goat shed, dairy sheds, work in PMAY-G, wells, farm

ponds, vermin-compost pits, water soak pits etc have been taken up

o National Resource mgt (NRM) – Mission Water Conservation – systematic development of land to improve its

productivity and harnessing of water through development of watersheds

o Support for drought proofing – provision of additional employment of 50 days in drought affected areas over

and above the 100 days per household

Way forward

o Demand for work under MGNREGS may be used to develop a real-time indicator of distress at the panchayat

level. This is crucial because NSSO surveys are released after a gap of almost 2 years and hence prove

ineffective in providing assistance at the right time

o Expansion of ‘works’ under MGNREGS – the definition of ‘works’ should be regularly reviewed and amended.

For eg, inclusion of desilting of canals and water bodies would enhance storage capacity

o Up-skilling of MGNREGS workers – provide horizontal and vertical mobility to them; convergence of MGNREGS

and DDU-Grameen Kaushalya Yojana and involvement of women SHGs needs to be strengthened

o Expand use of JAM to other welfare schemes based on learning from MGNREGS

o Use of digital infra created for MGNREGS for other micro-benefits like micro-insurance, pensions etc

Ch 11 : Redesigning a Minimum Wage system in India for inclusive growth A well designed minimum wage system can reduce inequalities in incomes, bridge gender gaps in wages and alleviate

poverty

But for minimum wage system to play a meaningful role in aligning protection with promotion of sustainable growth, it

must be properly designed, its goals clarified and its enforcement made effective

Minimum wage system in India Enactment of Minimum Wages Act 1948 – protects both regular and casual workers

Minimum wages are set by both Central and State govts for employees in selected ‘scheduled’ employment

Min wages have been set for different categories of workers according to skill level, location and occupations

Tripartite advisory boards comprising of employers, employees and independent persons to advice govt on fixing min

wages

Argument against National level min wage – wide disparities in economic development and large variationsin cost of

living between regions and states

Min wage system in India has expanded and become very complex. Issues related to it

o Issues related to its coverage – 429 scheduled employments and 1915 scheduled job categories

o Lack of uniform criteria for fixing the min wage rate

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o Min Wages Act does not cover all wage workers – 1/3rd of wage workers not protected by this law

o Gender discrimination – Min Wages Act is not discriminatory; but min wages for different occupations shows

persistence of systematic bias. For eg women dominate in domestic workers category whereas men dominate

in security guards category. The min wage rate for domestic workers within a state is consistently lower than

that for security guards

o Proliferation of min wage rates and scheduled employments is a strong deterrent for compliance – this also

triggers migration of industries to lower wage regions/states

Way forward Minimum wages need to be set at an appropriate level so as to ensure compliance

Relatively simple systems are more effective. Complex systems show a lack of coherence about wage levels and wages

being set in arbitrary fashion. Rationalization of min wages as proposed under the Code on Wages Bill needs to be

supported

Central govt should notify a ‘national floor min wage’. Thereafter states can fix the min wages which shall not be less

than the floor wage

Criteria for setting min wage should be based only on 2 factors – skill category and geographical region

Min wages should be expanded to all workers in all sectors and cover both organized and unorganized sectors

A mechanism should be developed to adjust min wages regularly and frequently

Use tech to make info available in simple and clear manner

Make grievance redressal systems accessible