From UPSC perspective, the following things are important :
Prelims level: Schemes related to the social sector;
Mains level: Employment challenges;
Why in the News?
Budget 2024 maintains the same approach as previous years regarding social sector allocations.
Decreasing allocations in the Budget for social sector schemes
Education Sector: The allocations for school education increased by ₹5,000 crore and for higher education by ₹3,000 crore. The increased recoveries from fees and self-financing schemes suggest a shift towards cost recovery in educational institutions.
Health Sector: The allocation for the Department of Health and Family Welfare rose by only ₹1,500 crore.
Food Subsidy: There is a limited increase in food subsidies despite rising economic costs and the need to update coverage based on the latest population figures.
Shift in Approach: The government giving greater emphasis on cost-effectiveness and privatization in education and health, shifting focus towards contributory schemes like the Atal Pension Yojana.
Social Sector Schemes in Budget 2024-25
Social Protection Schemes:
POSHAN Scheme: There is a slight increase from ₹11,600 crore to ₹12,467 crore, but still less than the actual expenditure in 2022-23.
Saksham Anganwadi Scheme: The allocation increased to ₹21,200 crore from ₹20,554 crore, but no increase in salaries for Anganwadi workers or honorarium for mid-day meal cooks.
Maternity and Social Assistance:
Samarthya Scheme: The budget reduced to ₹2,517 crore from ₹2,582 crore. The PMMVY scheme’s maternity benefits have remained unchanged since 2017.
NSAP: Allocation for social security pensions remains unchanged at ₹9,652 crore, reducing real coverage and value.
Schemes for the Unemployed
The ‘Prime Minister’s Package for Employment and Skilling’ includes government-sponsored internships, formalization of jobs through incentives for EPFO enrolments, and skill-development programmes
An allocation of ₹2 lakh crore over five years for the employment package, linked to industry response
Schemes for Street Vendors
The PM SVANidhi Scheme (PM Street Vendor’s AtmaNirbhar Nidhi) aims to benefit over 50 Lakh street vendors across India
All lending institutions, including NBFCs, are participating in the scheme to provide affordable loans to street vendors
Employment Challenges
Stagnant Wages and Dampened Demand: The Indian economy faces significant challenges with stagnant wages, which affect consumer demand. This stagnation can hinder overall economic growth and employment generation.
Reliance on the Private Sector for Job Creation: The government is increasingly looking to the private sector to address employment challenges.
Initiatives like the ‘Prime Minister’s Package for Employment and Skilling’ aim to incentivize private sector job creation through government-sponsored internships and skill development programs.
Limited Budgetary Allocations: The budgetary allocations for employment-related schemes are limited, with the entire employment package amounting to ₹2 lakh crore over five years.
Focus on Supply-Side Solutions: The current approach emphasizes supply-side measures to incentivize the private sector rather than addressing the underlying demand-side issues, such as low consumer spending and economic uncertainty.
Way forward:
Enhance Social Sector Investments: The government should significantly increase budget allocations for critical social sector schemes, particularly in education, health, and social protection.
Comprehensive Employment Strategy: Need to develop a holistic approach to employment that addresses both supply and demand-side issues.
From UPSC perspective, the following things are important :
Prelims level: Data trends in economic survey;
Mains level: Major five issues with the Indian Economy;
Why in the News?
The 2023-24 Economic Survey highlights realistic challenges for India’s growth, projecting GDP growth at 6.5%-7% for FY 2024-25 despite 8% growth in FY 2023-24.
What are the major five issues with the Indian Economy?
Weak Demand: In India, an unfavourable environment for FDI growth is due to high interest rates in developed countries, which increases the cost and opportunity cost of investment in India.
Dependence on China: Due to over-reliance on China for imports, particularly in key sectors like renewable energy, limits India’s manufacturing capabilities and increases vulnerability to geopolitical tensions.
Tepid Private Investment: Despite tax cuts aimed at stimulating capital formation, the corporate sector has not significantly increased investment, leading to a lack of job creation and economic dynamism.
Employment Challenges: The need to generate approximately 78.5 lakh jobs annually in the non-farm sector until 2030 to accommodate the growing workforce, coupled with insufficient data on job creation, complicates labour market analysis.
Infrastructure Deficiencies: Inadequate infrastructure, such as roads, railways, and sanitation, continues to hinder economic development and efficiency, requiring substantial investment and reform to improve productivity.
What are the suggestions given in the Economic Survey?
Private Sector’s Role in Job Creation: The corporate sector should take responsibility for creating jobs, as it is in their enlightened self-interest.
Embracing Healthy Lifestyle: Indian businesses should learn from India’s traditional lifestyle, food, and recipes to live healthily and in harmony with nature.
Focusing on Agriculture: The farm sector can generate higher value addition, boost farmers’ income, create opportunities for food processing and exports, and make the sector attractive to urban youth.
Removing Regulatory Bottlenecks: Licensing, inspection, and compliance requirements imposed by various levels of government are an onerous burden on businesses, especially MSMEs.
Improving Data Quality: The lack of availability of timely data on the absolute number of jobs created in various sectors precludes an objective analysis of the labour market situation.
Way forward:
Enhance Infrastructure Development: Need to prioritize investments in essential infrastructure such as roads, railways, and sanitation to boost economic efficiency and productivity.
Strengthen Data Collection and Analysis: The government should develop robust mechanisms for timely and accurate data collection on employment and other key economic indicators.
Mains PYQ:
Q Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (2019)
From UPSC perspective, the following things are important :
Prelims level: Bordering countries of India;
Mains level: Neighbourhood First Policy;
Why in the News?
The Union Budget presented by Finance Minister Nirmala Sitharaman prioritized India-funded projects in neighbouring countries, receiving the majority of the Ministry of External Affairs’ allocation.
What are the India-funded projects in the neighbourhood?
India has provided significant aid to Nepal, including funding for hydroelectric power plants like Pardi, Trishuli and Devighat.
In Afghanistan, India has provided over $3 billion in assistance and was involved in over 400 projects across 34 provinces, including major infrastructure projects like the Salma Dam and the Zaranj-Dalaram Highway.
In Myanmar, Kaladan Multi-Modal Transit Transport Projects is $484 million project aims to connect the northeastern Indian state of Mizoram to the Sittwe port in Myanmar’s Rakhine state.
In the 2024-25 budget, India allocated ₹700 crore to Nepal (up from ₹550 crore), ₹245 crore to Sri Lanka (up from ₹150 crore), and ₹30 crore to Seychelles (up from ₹10 crore).
Reasons for reduced focus on Bhutan
Bhutan, the largest recipient of MEA’s annual allocation, saw a dip in funding by ₹332.02 crore to ₹2,068.56 crore.
However, this slight reduction does not indicate a decrease in funding for projects in Bhutan, as India and Bhutan recently cleared 61 projects amounting to ₹4,958 crore.
Importance of Bhutan for India:
Strategic Importance:
Bhutan shares borders with India and China, acting as a buffer state between the two. Its strategic location is crucial for India’s security interests.
India has provided assistance to Bhutan in areas like defence, infrastructure, and communication to maintain its sovereignty and territorial integrity.
During the 2017 Doklam standoff between India and China, Bhutan allowed Indian troops to enter its territory to resist Chinese incursions.
Economic Importance:
India is Bhutan’s largest trading partner, accounting for 98% of its exports and 90% of its imports.
Bhutan’s hydropower potential is a significant source of revenue, and India has been instrumental in assisting Bhutan in developing these projects.
India provides substantial economic support to Bhutan. In 2015-16, India’s budgetary support to Bhutan stood at ₹61.60 billion, making it the largest recipient of India’s foreign aid.
Cultural Ties: Bhutan and India share strong cultural ties, as both countries are predominantly Buddhist
Future scope for India’s Neighbourhood Policy (Way forward)
Strengthening Bilateral Ties: Need to negotiate free trade agreements, promote investments, and collaborate on infrastructure projects to boost economic ties.
For example, India and Bangladesh have made significant progress in recent years, with the inauguration of the Maitri Setu bridge connecting Tripura to Bangladesh. The two countries are also working on the Akhaura-Agartala rail link to enhance connectivity.
Promoting Regional Cooperation: Need to collaborate on regional initiatives such as the BBIN (Bangladesh, Bhutan, India, Nepal) Motor Vehicles Agreement for seamless movement of goods and people.
For instance, India has been actively involved in the BIMSTEC Coastal Shipping Agreement and the BIMSTEC Grid Interconnection project to enhance regional connectivity and energy cooperation.
Mains PYQ:
Q Evaluate the economic and strategic dimensions of India’s Look East Policy in the context of the post-Cold War international scenario. (UPSC IAS/2016)
From UPSC perspective, the following things are important :
Prelims level: Trend in Defence budgeting;
Mains level: Significance of indigenisation in defence sector ;
Why in the News?
Union Finance Minister Nirmala Sitharaman has allocated ₹6.22 lakh crore for the Defence Ministry for 2024-25, matching the amount presented in the interim Budget in February.
Budgetary allocation for different sectors
Border Roads Organisation (BRO): The BRO received a significant increase in funding, with an allocation of ₹6,500 crore, aimed at improving border infrastructure and promoting socio-economic development in border areas.
Indian Coast Guard: The allocation for the Indian Coast Guard is ₹7,651.8 crore, which is 6% lower than the revised estimates for FY24. Of this, ₹3,500 crore is designated for capital expenditure to enhance maritime capabilities.
Innovation in Defence: An additional ₹400 crore has been allocated for innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme, aimed at engaging startups and MSMEs in developing indigenous defence technologies.
Overall Allocation Breakdown: The allocation for the Defence Ministry includes 27.66% for capital expenditure, 14.82% for revenue expenditure, 30.66% for pay and allowances, 22.7% for defence pensions, and 4.17% for civil organizations under the Defence Ministry.
Marginal Capex Push
Slight increase in capital expenditure: The budget reflects a marginal increase in capital expenditure, focusing on strengthening the capabilities of the armed forces and enhancing domestic procurement.
Strategic infrastructure development: The increased allocation to the BRO and the Coast Guard indicates a strategic push towards improving infrastructure in border areas and maritime security, though the overall capital push remains modest.
Focus on Indigenous solutions: The emphasis on domestic capital procurement and innovation through the iDEX scheme aims to bolster self-reliance in defence technology, fostering a more robust Indigenous defence industry.
Long-term strategic goals: The allocations are aligned with long-term strategic goals, including enhancing operational preparedness and infrastructure development in sensitive regions, although the overall growth in capital expenditure may be viewed as conservative.
Balancing defence needs with budget constraints: While the budget seeks to address critical defence needs, the slight reduction in the overall percentage of the budget allocated to defence suggests a balancing act between defence priorities and other pressing social and economic needs.
Way forward:
Enhance Focus on Indigenous Production: The government should further promote indigenous production capabilities by increasing investments in research and development, and by providing incentives for domestic manufacturers to produce advanced defence technologies.
Strengthen Infrastructure Development: The need for continued emphasis on infrastructure projects, particularly in border areas, should be prioritized to enhance national security and socio-economic development, ensuring that allocations are effectively utilized for maximum impact.
From UPSC perspective, the following things are important :
Prelims level: Climate Finance Taxonomy
Why in the News?
The 2024 Union Budget, presented by Finance Minister, includes developing a taxonomy for climate finance.
The aim is to enhance the availability of capital for climate adaptation and mitigation.
What is a Climate Finance Taxonomy?
A climate finance taxonomy is a classification system that identifies which economic activities can be marketed as sustainable investments.
It serves as a guide for investors and financial institutions to direct capital towards projects that contribute to climate adaptation and mitigation, aligning with broader environmental goals.
Significance of a Climate Finance Taxonomy
Net-Zero Economy: With global temperatures rising and the adverse effects of climate change worsening, countries need to transition to a net-zero economy.
Alignment with Transition Pathways: Taxonomies help ascertain if economic activities are aligned with credible, science-based transition pathways.
Deployment of Climate Capital: They provide an impetus for the deployment of climate capital by directing investments towards sustainable projects.
Reduction of Greenwashing Risks: Taxonomies help reduce the risks of greenwashing by providing clear criteria for what constitutes a sustainable investment.
Why does India need a Green Taxonomy?
According to the IFC, India needs an estimated $10.1 trillionto achieve net-zero by 2070.
Public investments alone can’t match this goal, calling for standardization in investments.
Benefits for India
For India, a taxonomy could attract more climate funds from international sources.
Currently, green finance flows in India are falling short of the country’s needs, accounting for only around 3% of total FDI inflows, according to the Landscape of Green Finance in India 2022 report by the Climate Policy Initiative.
A lack of clarity on what constitutes sustainable activity is a significant reason for the low green finance flows. A taxonomy would address this issue.
India’s Climate Commitments:
India aims to achieve a net-zeroeconomyby 2070.
The country has pledged to reduce the emissions intensity of its GDP by 45% by 2030, compared to the 2005 level.
India has also committed to achieving about 50% of its cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.
Steps taken by India:
In January 2021, India established a task force on sustainable finance under the Department of Economic Affairs, Ministry of Finance.
The task force’s objectives include creating a framework for sustainable finance, establishing pillars for a sustainable finance roadmap, suggesting a draft taxonomy of sustainable activities, and creating a framework of risk assessment by the financial sector.
In April 2021, the RBI joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a member.
RBI is also a member of a task force on climate-related financial risks set up by the Basel Committee on Banking Supervision and the International Platform on Sustainable Finance.
Potential for Green Investments in India
According to a report by the International Finance Corporation (IFC), India has a climate-smart investment potential of $3.1 trillion from 2018 to 2030.
The largest investment opportunity lies in the electric vehicle segment, with a potential of $667 billion as India aims to electrify all new vehicles by 2030.
The renewable energy sector also presents a substantial investment opportunity, estimated at $403.7 billion.
International Adoption of Taxonomies
Many countries have either started developing or have finalized their taxonomies.
Countries with developed taxonomies include South Africa, Colombia, South Korea, Thailand, Singapore, Canada, and Mexico.
The European Union has also developed its own taxonomy.
PYQ:
[2016] With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct?
The Agreement was signed by all the member countries of the UN, and it will go into effect in 2017.
The Agreement aims to limit the greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2ºC or even 1.5ºC above pre-industrial levels.
Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.
Select the correct answer using the code given below:
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
From UPSC perspective, the following things are important :
Prelims level: Angel Tax
Why in the News?
Finance Minister announced the abolition of the angel tax, aiming to strengthen the startup ecosystem and support innovation in India.
What is Angel Investment?
An angel investor is an individual who provides financial backing to early-stage startups or entrepreneurs, typically in exchange for equity in the company.
Angel investors are typically high-net-worth individuals who invest their own personal funds, rather than investing on behalf of a firm or institution.
Features of Angel Investing: Early-stage funding, equity investment, high-risk, high-reward, active involvement,personal investment,f lexible terms and shorter investment horizon.
What is Angel Tax?
Referred to as Angel Tax, this rule is described in Section 56(2)(vii)(b) of the Income Tax Act, 1961.
Essentially it’s a tax on capital receipts, unique to India in the global context.
This clause was inserted by the Finance Actin 2012 to prevent laundering of black money, round-tripping via investments with a large premium into unlisted companies.
The tax covers investment in any private business entity, but only in 2016 was it applied to startups.
Why was angel tax introduced?
The complicated nature of VC fundraisingwith offshore entities, multiple limited partners and blind pools is contentious.
There has been some element of money laundering or round-tripping under guise.
Details of its levy
The Angel Tax is being levied on startups at 9% on net investments in excess of the fair market value.
For angel investors, the amount of investment that exceeds the fair market value can be claimed for a 100% tax exemption.
However, the investor must have a net worth of ₹2 crores or an income of more than ₹25 Lakh in the past 3 fiscal years.
Key Issues with Angel Tax
Share Valuation: The tax impacted the valuation of shares, causing complications for startups in raising funds.
Discounted Cash Flow (DCF) Method: Issues arose with the treatment of estimated figures in the DCF method, leading to disputes.
Scrutiny of Funding Sources: The scrutiny of funding sources and investor credibility added another layer of complexity for startups.
Retrospective Application: The retrospective application of the tax and its effect on the conversion of convertible instruments into equity were also significant points of dispute.
Significance for the Startup Community
Startups has long advocated for a more supportive and less restrictive environment for fundraising.
With this change, the government aims to create a more favourable atmosphere for innovation and investment in India.
PYQ:
[2014] What does venture capital mean?
(a) A short-term capital provided to industries.
(b) A long-term start-up capital provided to new entrepreneurs.
(c) Funds provided to industries at times of incurring losses.
(d) Funds provided for replacement and renovation of industries.
From UPSC perspective, the following things are important :
Prelims level: Vishnupad and Mahabodhi Temples; Kashi Vishwanath Temple
Why in the News?
Finance Minister announced during her Union Budget speech that corridor projects will be built for the Vishnupad Temple at Gaya and the Mahabodhi Temple at Bodh Gaya in Bihar.
These will be modelled on the Kashi Vishwanath Temple Corridor, to transform them into world-class pilgrim and tourist destinations.
About the Vishnupad Temple at Gaya
Details
Dedicated to
Lord Vishnu
Significance
Contains a 40 cm long footprint of Lord Vishnu; considered sacred in Hinduism; attracts pilgrims for “Pind Daan” rituals.
Historical Importance
Believed to be over 1000 years old; associated with various legends and historical references in Hindu texts.
Architecture
Built in Shikhara style;
Features intricate carvings and silver-plated flagposts;
Constructed of grey granite blocks.
Built by
Queen Ahilyabai Holkar of Indore in 1787.
Festivals and Rituals
Major site for “Pind Daan” rituals during Pitru Paksha;
Attracts thousands of pilgrims during this period.
Mythology
The footprint is believed to be where Lord Vishnu placed his foot to subdue the demon Gayasur.
Associated River
Located on the banks of the Phalgu River, considered sacred for ritual offerings.
Access and Visitation
Accessible year-round; major pilgrimage site with facilities for devotees.
Recent Developments
Ongoing efforts for preservation and restoration; improved infrastructure for pilgrims.
About the Mahabodhi Temple Complex:
Details
Location
Bodh Gaya, Bihar;
Significance
Marks the location where Buddha attained enlightenment
UNESCO Status
World Heritage Site since 2002
Historical Importance
One of the four holy sites related to Buddha’s life (Enlightenment).
Other holy sites: Lumbini (Birth) in Nepal, Sarnath (First Sermon) in Uttar Pradesh, Kushinagar (Death) in Uttar Pradesh
Original Construction
Built by Mauryan Emperor Ashoka around 260 BCE
Reconstruction
Reconstructed in brick during the late Gupta period (5th or 6th centuries)
Archaeological Finds
Indicates site of veneration since the Mauryan period.
Vajrasana (Diamond Throne): Located within the temple, dated to the third century BCE
Main Temple Structure
Dates from the 6th century CE, incorporates parts from 2nd or 3rd century CE
Architectural Features
Two large shikhara towers, the largest over 55 meters high
Influenced Jain, Hindu, and Buddhist architecture globally
Materials
Made mostly of brick covered with stucco
Bodhi Tree
Direct descendant of the original tree under which Buddha attained enlightenment
Traditional Accounts
Describes 7 weeks Buddha spent meditating after enlightenment at various spots within the complex
Decline and Revival
Declined after Huna invasions and early Islamic invasions.
Revived under the Pala Empire (8th-12th century).
Declined again after 12th century CE invasions by Turk armies.
