Indian Economy 2018-19: Moving Forward

Ease of Doing Business Index: India improves rankings

India moved up by 23 places in the World Bank’s Ease of Doing Business Index 2018 and got
77th rank. This is attributed to 6 reforms this year- starting a business, getting electricity, construction
permits, getting credit, paying taxes and trading across borders. The maximum improvement was of
129 places in construction permits to reach 52nd rank in 2018 as compared to 181st in 2017. The
Prime Minister further said, “If we do focused improvement, breaking into the top 50 is not out of
reach.” This certainly points towards more such reforms in the near future.

Statue of Unity: A Boost to Tourism in India

The Statue of Unity, inaugurated by PM Narendra Modi on 31st October 2018 is the world’s tallest
statue at a height of 182m, built with an investment of around ₹3000 crore. In an interview with The
Economic Times on 11th November 2018, the Principal Secretary of Tourism SJ Haider said,
“Gujarat has registered 17% year-on growth in tourism with a total 5.2 crore tourists visiting the state
in 2017. The Statue of Unity will help in achieving considerable growth in arrival of tourists to
Gujarat.” This certainly might be true since in the 10 days following the inauguration saw an influx
of 1.28 lakh tourists according to the officials. The Statue is claimed to remain as it is for around
1000 years and thus is an investment that will cater to India’s tourism for the said time duration along
with development of the local area.

Make in India: Manufacturing Sector GDP Contribution Up

The Make in India Campaign launched by the Government of India in September 2014 permitted
100% FDI in 25 sectors of the economy except space, defence and media industry of India. The
movement further led to local state movements like “Make in Odisha”, “Happening Haryana” and
“Magnetic Maharashtra”. With this campaign the government aimed to raise the contribution of
manufacturing sector to 25% of GDP. In an interview with The Hindu Business Line, the Head of
Economic Development Agency, Cluster Pulse (not a well-known agency), Jagat Shah said referring
to growth from 9% in 1950-51 to 15% over next 2 decades, “In our analysis, even though we say
there has been 7-8% growth, we view this as jobless growth for, manufacturing as a percentile of
GDP was not increasing. In the last two years, it has improved to 17.1% and this is primarily due to
Make in India Drive.”

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Goods and Services Tax (GST): Single Taxation System across the Country
GST, a unified consumption tax on all goods and services except electricity, petroleum products and
alcoholic drinks was implemented by the government in July 2017. This tax eradicated the disparity
of taxes among different state governments and the multilayer tax system. Its has pooled the
resources of centre and state government under a single tax, which can benefit both. According to a
report in The Economic Times, GST has caused an increase in tax base, easier movement of goods
across state borders and reduction in tax rate from 28% to 18% for several products. The monthly
collection of GST crossed the ₹1 lakh crore mark in October 2018 however, it dropped to ₹97637
crore in November 2018. In an interview with The Economic Times on 1st December 2018, EY Tax
Partner, Abhishek Jain said, “While the GST collections have shrinked vis-à-vis the earlier month, it
is higher than the average monthly collection in the year. This steady increase in average collection
brings a gleam of hope for a regular monthly collection of ₹1 lakh crore being met soon.”

Foreign Direct Investment (FDI): All Time High

FDI rose to around $61.96 billion in 2017-2018 further increasing an all-time high of $60.1 billion in
2016-2017 which is certainly an indicator that even the foreign countries are banking on India as a
growing economy and that is definitely a step in the right direction. FDI is as good an indicator of a
growing economy as any and an increase at such a scale is quite good for the economy. The new lax
policies on FDI have led to this increase with a permit of 100% FDI in 25 sectors with 74% in
aerospace, 49% in defence and 26% in media.

Bharatmala Pariyojana: Boost to Infrastructure Development

This is a centrally sponsored road and highways project of Government of India. A total investment
of ₹5.35 lakh crore to lay 83677 km or roads and highways all over the country. The plan includes
National Corridors, Economic Corridors and is expected to be completed by 2022. This points to
better infrastructure in future which will provide better connectivity and hence better growth.
Transport and Shipping Minister Nitin Gadkari said, “Our infrastructure plan will contribute 2-3% to
the GDP and will create 2 lakh crore jobs.”

North East Industrial Development Scheme (NEIDS) 2017: Generating Employment in NE

States
NEIDS was launched in March 2017 by the Cabinet with a financial outlay of ₹3000 crores up to
March 2020. Government is primarily focusing on MSME sector through this scheme to increase
employment in the north eastern states. The policy provides for Central Comprehensive Insurance
Incentive (CCII) which entails 100% reimbursement of insurance premium on insurance of building,
plant and machinery for 5 years.

Indian Economy 2018-19: Signs of Backward Moving Economy

Demonetization: GDP Growth Hampered

The demonetization of ₹500 and ₹1000 notes done in November 2016 by the Prime Minister Shri
Narendra Modi had a variety of motives including wiping out the black money from the country,
making people to pay taxes for the unaccounted cash locked away, prevent terrorism and to promote
digital finance and a cashless economy. This step caused lot of disruption in the Indian economic
growth. According to RBI reports 99% of the money has been deposited back, which tells that most
of the black money was not stored in form of cash. RBI reports suggest that demonetization may not
have affected black money hoarding but has increased tax compliance. The Personal Income Tax
Collection in 2016-17 rising to 21% and further 25% in 2017-18 according to CBDT. However, the
impacts are being faced by small bread earners, MSMEs that used to deal mainly in cash and were
not prepared for such a situation.

Unemployment: Still a Problem

The Centre for Monitoring Indian Economy (CMIE), estimated that nearly 1.5 million people lost
jobs between January and April 2017. The State of Working India (SWI) 2018 report said,
“Unemployment levels have been steadily rising, and after several years of staying around 2-3%, the
headline rate of unemployment reached 5% in 2015, with youth unemployment being a very high
16%. This rate of unemployment is the highest seen in India in at least the last 20 years.” According
to a survey conducted by CMIE, there are about 31 million unemployed youth in the country as of
February 2018.

Declining Profits: Slowing Indian Economic Growth

The quarterly profits of companies are below expectations and have seen a decline as compared to
the past years. Apart from Fast Moving Consumer Goods or FMCG products, the other sectors such
as steel, pharmaceuticals etc have seen a grave decline in their profits which does not bode well for
the economic condition of our country. TCS recorded a 3.6% decline in quarterly profit, Wipro saw a
6.6% decline and HPCL 10.4%. These are just few of many in the same boat.

Stock Market Falls: Result of Declining Rupee Value

On 4th October 2018 the Stock Market’s BSE benchmark Sensex saw a historical fall of 806.47
points accounting to 2.24% to settle at 35169.16 whereas its NSE counterpart Nifty shed 259 points
(2.39%) settling at 10599.25. 41 stocks on the Nifty were in red including Reliance Industries, Tech
Mahindra, Eicher Motors, TCS and GAIL. The reasons for this are being attributed to fall of rupee to
73.77 against USD, increase in oil prices to up to $86 per barrel and rising bond yields.

Cash Liquidity Crunch: Holding Growth of Indian Economy

After demonetization, the cash flow has decreased multi fold in the Indian economy and this has led
to lower cash liquidity in the market which in turn has caused organisations and individuals alike to
face financial problems. The cash deficit hit a peak of 1.4 lakh crore in October 2018. Suyash
Chaudhary, the head of fixed income at IDFC Mutual Fund said, “Core System Liquidity is rapidly
dwindling and may touch about 2.5 lakh crore by March.” Liquidity deficits lead to spike in short
term borrowing rates and forecasts higher future inflation.

GDP Growth: Yet to Go Up

The annual GDP growth rate of India has been falling for the past 2 years from 8.2% in 2015 to 7.1%
in 2016 and further reducing to 6.6% in 2017. While the annual GDP seems to be on a rise, to 2.6
lakh crore USD in 2017 from 2.27 lakh crore USD in 2016, the growth rate seems to be declining.
However, the first quarter of 2018-19 saw a growth rate of 8.2%, the rate fell to 7.1% in the third
quarter, much lower than the expected growth rate.

NPA Shoots Up in Banking System

NPA or bad assets are the loans given by banks to companies that remain unpaid. According to RBI,
the gross NPA in Indian Public Sector banks are valued at ₹400,000 crore comprising 90% of the
total NPA in India. NPA under NDA have risen by 6.2 lakh crore between March 2015 and March
2018 according to a Parliamentary Committee. ₹8040 crore given to Vijay Mallya and ₹13000 crore
bank fraud by Nirav Modi are both severe NPAs that the country in still facing the effects of.

IT Sector Job Scare

India’s IT sector saw a job offer decline of 17%. The IT sector saw major employee lay-offs and a
decline of 2.7% in the number of new jobs created. This further added to the already burgeoning
unemployment statistics in the country. Although the IT sector is rising up again, jobs are not. Top
recruiters like TCS, Tech Mahindra, Wipro saw a fall in shares at the NSE Sensex in October 2018.
Cognizant Technology Solutions (CTS) let go of 200 senior employees by August 2018. Even
Telecom companies faced major cuts. In a report in The Economic Times, popular mobile phone
brand Lava confirmed it had let go 4000 employees of a total 11000 workforce.
 Future of Indian Economy: The Road Ahead
Higher farm sector productions, higher contribution to GDP by Manufacturing sector, making India
stand up with the concepts of Start up India and Stand up India, In troduction of water transport,
creating better road and rail network, higher FDIs are expected to make Indian Economy grow faster
in future. The employment generation in India is also expected to go up as there are lakhs of jobs are
going to be offered in next two years to skilled and unskilled work force in different sectors in India.

MANGAL
The ‘Mangalyaan’ (mars craft) was launched on 5.11.2013 from launchpad at ISRO, Sriharikota with
launchvehicle PSLV C25 at 2.38 P.M.
It was the 300 days journey of the Mangalyaan’(mars craft) from the Earth to MARS
India became the first Asian Country to reach the Red Planet.
The cost of the project was Rs.450 Crore (Rs.4.5 bn), less than one sixth of US$455 million
earmarked for a Mars probe by NASA.
It had been carried into orbit by a rocket much smaller than US or Russian ones.
Small car sized Probe will detect methane in the Martian atmosphere.

Arguments for the Mission to MARS

1. On its successful completion, India will become the first Asian country to achieve this feat. Only the
United States, Europe, and Russia have been able to send probes that have orbited or landed on Mars.
2. Indian superiority in the world in general and particularly among its ever threatening neighbours will
be established.
3. India has proved that indigenously it can achieve the unexpected at a very low cost as the cost is less
than one sixth of the estimated cost of US-NASA mission to be launched later this month.
4. India will become a role model for space programming and other countries may approach India for
launching of such crafts.
5. New knowledge and more innovative spheres in space programmes will open for the benefit of
human being in the fields of communication, identifying problem areas, solar existence. For example,
INSAT’s beamed pictures of approaching Phailin cyclone saved thousands of lives.

ECONOMY CASHLESS
What is a cashless economy?
A system where no physical cash is in circulation is a cashless system. Payments are made through
credit and debit cards, bank electronic fund transfers or virtual wallets.

Benefits:
 Cost Reduction: cashless system brings down the cost associated with printing, storing and
transporting of cash.
 Risk Reduction: The risk of money getting stolen or lost is minimal. Even if the card is stolen or lost
it is easy to block a credit/debit card or a mobile wallet remotely. It is also a safer and easier spending
option while travelling.
 Convenient: The ease of conducting financial transactions is probably the biggest motivator to go
digital. With the advent of digital modes, one can avoid queue for ATMs, transact 24*7 and save
time. Additionally for service providers, with the emergence of e-KYC, it is no longer necessary to
know your customer physically as the payments model has overcome limitations related to physical
presence.
 Tracking spends: Spending done via mobile or computer applications can be easily tracked with a
simple click. This allows users to keep a track of all their spending and manage their budget
effectively.
 Increase in tax base: Traders, small businesses, shopkeepers, and consumers regularly use cash as a
means to avoid paying service tax, sales tax, etc. However, in a cashless economy where all
transactions will be done through organized channel, through banks and financial institutions, they
can be monitored by the government and proper actions could be taken against the evaders. This will
result in more transparent transactions which in turn lead to fall in corruption in the economy of the
country.
 Containment of parallel economy: In a cashless economy it is easier to track the black money and
illicit transactions unlike cash based economy in which money does not come into the banking
system. In case of digital transactions it is easy to track and monitor suspicious transactions as all the
records are available with the banks.
 Financial Inclusion: At present, India’s low-income households access credit through informal
systems, through relatives or private lenders. Forcing them to shift to cashless payment platforms
instantly formalizes this world of informality and include them in formal economy.
 Discounts: A lot of ecommerce websites offer huge incentives in terms of discounts, cash back,
loyalty points to the customers for making digital transactions for shopping online.
Group Discussion Topics & Tips: Learn the Facts
 Group Discussion (GD) is widely used for Admissions to top MBA colleges, Job interviews, and other selection process.
 GD Tips: Learn how to start a group discussion, take the lead, make positive impact, and score high.
 Top 100 GD Topics: GD topics can be based on Current Affairs, Business & Economy, Social Issues, or Abstract.
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Yes, India is ready for a cashless economy.
 According to TRAI, as on 30 September 2016, 82 out of 100 citizens in India owned a mobile phone.
The evolution of the telecom ecosystem, with significant reduction in call and data rates, along with
the prices of smart phones, is propelling the shift to a cashless economy.
 The government of India is working dedicatedly to push India towards a cashless economy. With
major initiatives such as demonetization, Direct Benefit Transfers, BHIM and many more. The intent
is to streamline the economy and curb corruption.
 The government approved for a proposal, under which there would be no charge for BHIM, UPI,
and debit card transactions up to ₹2000.
 Government also ran a DigiDhan campaign where 16 lakh lucky winners (users and merchants) were
rewarded with prizes ranging from Rs 1000 to 1 crore.
 Further to incentivize behavior change and bring down the cost of digital payments, referral and cash
back schemes have also been launched for BHIM where users and merchants receive cash back.
Also, initiatives like USSD and the *99# service have ensured that non-Smartphone users are also on
board the cashless wave.
 Demonetization has given an impetus to e-wallet services. According to a report “Securing the
cashless economy”, by Pwc, India witnessed
 3X increase in the download of a leading mobile wallet app within 2 days of the demonetization
announcement.
 1 million: Number of newly saved credit and debit cards within two days of demonetization
announcement.
 100%: Day-on-day growth in customer enrolment with leading mobile wallets after demonetization.
 30%: Increase in app usage and 50% increase in the download of wallets backed by leading banks.

The above mentioned data clearly represent a shift towards a cashless economy.
 The smart phone revolution has led to the emergence of e-commerce, m-commerce and other
services, including app-based cab aggregators, who encourage digital payments for use of various
services. The value added services such as cash back, bill payment facilities, loyalty points, rewards
and ease of use have resulted in surge of such digital platforms. These developments have given rise
to a modern payment model.
Hurdles in making India a cashless economy
 More than 60% of Indian population belongs to rural region. Almost a quarter of the rural populace
doesn’t have mobile phones and a large percentage of them are computer illiterate. They are not
comfortable using computers or mobile phones for transactions and rely on other people for help.
This sometimes leads to misuse of the accounts and siphoning of funds, so majority of rural mass
prefer cash over digital modes.
 About 90% of the Indian labor market is informal. Majority being employed in agriculture and
manufacturing sector where daily wage is prevalent. Under such circumstances the informal labor
market is heavily cash dependant.
 India is a country where 90% of transactions are paid for in cash because cash facilitates making
transactions anonymous, helping conceal activities from the government in a way that might help
agents avoid laws, regulations and taxes. Transition from a 90% cash based economy to a
 Security is another big concern regarding cashless transactions. The Indian Computer Emergency
Response Team (CERT-In) has reported a surge in the number of incidents till October 2016 with
close to 39,730 security incidents. Indians are wary of digital modes due to cyber security incidents
such as phishing, scanning, website intrusions, defacements and virus code.
 Though several companies have come up with inexpensive smart phones still they are not affordable
for most of the people in the country. Unless Indian government provides necessary subsidy or
affordable solutions cashless economy would be a farfetched dream.
 Digital India suffers from the threat of thefts and hacking of digital money instruments. The ATM
cards, Debit/Credit cards, Net Banking solutions and even the transaction websites of the financial
institutions and banks are hacked by the mischievous people who withdraw money by making clones
and changing the passwords. This has to be taken care of before proceeding on digital India mission..

What is Globalization?
According to International Monetary Fund, Globalization refers to the increasing integration of
economies around the world, particularly through trade and financial flows. The term sometimes also
refers to the movement of people (labor) and knowledge (technology) across international borders. In
addition, there are also broader cultural, political and environmental dimensions of globalization.
 The four basic aspects of globalization identified by the International Monetary Fund are
 Trade and transactions,
 Capital and investment movements,
 Migration and movement of people and the
 Dissemination of knowledge
Further, environmental challenges such as climate change, global warming, cross-boundary water, air
pollution, and over-fishing of the ocean are also linked with globalization.

Driving Factors
 The creation of the World Trade Organization, World Bank and other major trade organizations their
rules and regulations in part, facilitated broad 'global' changes, lowering trade barriers and
deregulation of economies.
 In the aftermath of financial instability, the Government of many developing and poor countries
liberalized economies internationally to boost development and attract investment.
 It is considered that open economies are all better off from trading, as they make use of their
resources in most optimal way and offers variety of products at competitive prices.
 After I970s, Business Corporations and banks based in the most highly industrialized countries were
driven by their intrinsic and incessant pursuit of wider markets, further and more profitable
investment fields and access to essential resources elsewhere in the world. All these aims of these
Organizations, supported by their governments in 'the national interest' pushed for Globalization.
 Industrial and Financial corporations sought internationalization of their respective products, and
investment operations to evade economic, social and political 'impediments' at home as well as to
take advantage of more favorable opportunities abroad.
 The main forces that have driven global integration are technological innovations, broader political
changes and economic policies.
Group Discussion Topics & Tips: Learn the Facts
 Group Discussion (GD) is widely used for Admissions to top MBA colleges, Job interviews, and other selection process.
 GD Tips: Learn how to start a group discussion, take the lead, make positive impact, and score high.
 Top 100 GD Topics: GD topics can be based on Current Affairs, Business & Economy, Social Issues, or Abstract.
 Prepare GD with MBAUniverse.com. Read 100+ GD Topics with Answers, Solutions. New topics added every week.
Globalization as an Opportunity
 Greater Opportunity: Global markets offer greater opportunity for people to tap into more and
larger markets around the world. It means that they can have access to more capital flows,
technology, cheaper imports, and larger export markets.
 Cross-cultural Integration: Liberalized nations offer multiple avenues for higher education, tourism
and jobs to the immigrants of different countries resulting in cross culture Integration.
 Prosperity: Globalization has helped lift hundreds of millions to escape poverty over the past
decades. Populous countries like China and India have enjoyed phenomenal growth, improved
standards of living, life expectancy, literacy and employment rates.
 Outward-oriented policies brought dynamism and greater prosperity to much of East Asia,
transforming it from one of the poorest areas of the world 40 years ago.
 According to International Monetary Fund, 20th century saw unparalleled economic growth, with
global per capita GDP increasing almost five-fold.
 Competition: One of the most visible positive effects of globalization is the improved quality of
products at competitive price. As the domestic companies have to fight out foreign competition, they
are compelled to raise their standards and customer satisfaction levels in order to survive in the
market.
 Foreign investment: Multinational corporations are a result of globalization. They occupy a central
role within the process of globalization as evidenced through global foreign direct investment
inflows.
 Technological Innovation. Increased competition from globalization helps stimulate new
technology development, particularly with the growth in FDI, which helps improve economic output
by making processes more efficient.
 Global Challenges: Globalization helped attenuate the major environmental challenges we are
experiencing today. Some national and international agreements such as UN Framework Convention
on Climate Change, The Kyoto Protocol etc. aim to attenuate the negative effects of globalization on
the environment.

Threats that globalization offers:

 Unemployment: Due to globalization immigration of labor from developing countries to developed
countries has become much prominent and easier. This has resulted in unemployment for the native
citizens.
 The historic withdrawal of United Kingdom from the integrated market of European Union fearing
job loss due to immigration and protectionism towards national sovereignty is a case in point.
 Inequality: The story of the 20th century was of remarkable average income growth, but it is also
worth noting that the progress was not evenly dispersed. The gaps between rich and poor countries,
and rich and poor people within countries, have grown.
 According to the World Inequality Report by the World Inequality Lab, because of high and rising
inequality within countries, the top 1% richest individuals in the world captured twice as much
growth as the bottom 50% individuals since 1980.
 Trade wars: The US is running large trade deficits with the EU as well as China. In addition to
significant trade deficits in goods with Mexico, Japan, and Canada, Mr. Trump believes the trade
deficit of US is proof that all its trading partners are unfair to America. As a protectionist measure,
Donald Trump, pushed through a metal tariff plan that puts 25% tariff on imports of steel and 10%
tariff on import of aluminium.
 The international atmosphere is full of threats of retaliation and it appears likely that major trading
partners with the US like the EU and China will hit back by setting their own import barriers against
US.
 Tax heavens: With different taxation norms in different countries citizens park their illicit or
unaccounted money in tax heavens and avoid taxation from their home countries. The revelations
made by Panama offshore leaks and Swiss bank case are case in point.
Tips to improve participation in GD round
The above discussed topic is one of the latest topics that has appeared in GD rounds at various top B-
schools and as WAT topic also in slightly different form. One needs to understand about the topic
before speaking because it is no more a Globalization in its conventional form but is to be taken up in
current global scenario. The topic has been carefully chosen and solved with the sole aim to help you
succeed in GD round. If you follow the few key tips, you can improve your chances to get through
the GD round.
 Initiate the group discussion only if you are well versed with the GD topic.
 If you are not well versed with the topic and feel a bit low on content, try to gather information from
first 1-2 speakers and then place your view point.
 Quote facts and figures, if you are sure of the source else leave it. You may encounter volley of
questions on the economic statistics, trade data or historical facts from your fellow participants.
Unless very sure, don’t use it.
 Make multiple entries using the opportunity to speak. Take clue from your predecessor and turn it to
your benefit.
 Speak in a firm and audible voice but never shout as it may result in a negative impression of yours.
 Since GD is a sort of debate, you should have a clear view point on the topic – either for or against.
Do not switch viewpoints frequently. However if you have points for both for and against the topic
substantiate your viewpoint with well qualified data, examples or exceptions.
 Even if you agree or disagree to the view point of other participant, add value by giving reasons for it
when you speak but don’t simply say I agree or disagree