Foreign Exchange Reserves

51
 Direction of Trade
Top export
destinations Top three import
1. USA destinations
2. UAE 1. China
3. Hong Kong 2. UAE
. 3. USA

52
53
External Debt

54
 Agriculture and Food Management

Source: Directorate of Economics & Statistics, Department of

Agriculture, Cooperation & Farmers Welfare.
55
Note: @Production in million bales of 170 kgs each.
Monsoon Rainfall and its Distribution

56
Irrigated area under Principal Crops

57
Food-Grain Stocks and Procurement in Central Pool

58
Industrial, Corporate and Infrastructure Sectors

59
Social Infrastructure, Employment and Human
Development

60
Employment Scenario

61
62
 Experimental Health Outcome Index
Health Outcome Index has LE at age 1, IMR and MMR as indicators

63
9. UNIVERSAL BASIC INCOME: A CONVERSATION WITH
AND WITHIN THE MAHATMA
Despite making remarkable progress in bringing down poverty from about
70 percent at independence to about 22 percent in 2011-12 (Tendulkar
Committee), it can safely be said that wiping every tear from every eye
is about a lot more than being able to imbibe a few calories.
Today, a radical option to realise Gandhijis objective presents itself and
has entered the policy consciousness in India and around the world:
Universal Basic Income, UBI for short.
UBI has three components: universality, unconditionality, and agency (by
providing support in the form of cash transfers to respect, not dictate,
recipients choices).
A universal basic income is, like many rights, unconditional and universal:
it requires that every person should have a right to a basic income to
cover their needs, just by virtue of being citizens.

64
Why Universalise?

65
 The first striking fact is the sheer number of
schemes and programs run by the
government.
The Budget for 2016-17 indicates that there
are about 950 central sector and centrally
sponsored sub-schemes in India accounting
for about 5 percent of the GDP by budget
allocation.

66
Misallocation of resources across districts

Consequences of Misallocation: Exclusion of genuine

beneficiaries
67
 How can a UBI overcome these Issues?
1. Beneficiaries are simply required to withdraw
money from their accounts as and when they
please, without having to jump through
bureaucratic hoops.
2. UBI reduces out of system leakage because
transfers are directed straight to the
beneficiaries bank accounts.
3. By virtue of being universal, exclusion errors
under the UBI should be lower than existing
targeted schemes.

68
 Other benefits of UBI
Improved financial inclusion Calculations suggest
that A UBI of INR
More profitable for banks 12000 per adult per
year is expected to
reduce the average
distance from the
nearest business
correspondents to
2.5 km from 4.5 km
at about half the UBI
amount.
This effect is even
larger since a UBI is
targeted at all
individuals, not only
adults.

Access to formal credit is improved

69
Access to Formal Credit

70
 Temptation Goods: Would A UBI Promote Vice?

Detractors of UBI argue that, as a cash transfer programme, this

policy will promote conspicuous spending or spending on social
evils such as alcohol, tobacco etc.
But the main finding from NSSO is that these goods form a smaller
share of overall budget/consumption as overall consumption
increases.
71
 Moral hazard: Would a UBI reduce Labour Supply?

As income of households for each unit of

labour it already supplies raises the household
can afford to reduce labour without
necessarily affecting the households income.
As plausible as this might seem on paper,
things do not seem to play out in this manner
in reality.

72
 Poverty reduction and illustrative fiscal cost
calculations: What would a UBI potentially cost?

TheUBI calculation does not require any assumption

about the poverty head count rate.
It only requires consumption data on the marginal poor
(the person at the 0.45 percent threshold) and the
poverty line.
Figure 10 shows UBI for various target poverty levels
and corresponding fiscal costs. 73
 Where is the fiscal space to finance a UBI?

Any government will have to decide on what programmes /

expenditures to prioritize in order to finance a UBI.
74
 Conclusion
Pre-requisites for Success of UBI is
JAM
Need to control leakages
Centre-state share in funding of the UBI

75
11. ONE ECONOMIC INDIA: FOR GOODS AND IN THE
EYES OF THE CONSTITUTION

At a time when international integration is under

siege and when India is on the cusp of
implementing transformational reforms to create
One India, One Market, One Tax, via the Goods
and Services Tax (GST), it seems appropriate to
ask how much internal integration India has
achieved.
To be clear, unless otherwise specified, hereafter,
trade will refer to trade between states within
India.

76
 This is done on the basis of a new Big Data set
available from the Goods and Service Tax Network on
interstate movement of goods.
Estimates for interstate trade flows indicate that
cross-border exchanges between and within firms
amount to at least 54 per cent of GDP, implying that
interstate trade is 1.7 times larger than international
trade.
While political borders impede the flow of people,
language (Hindi specifically) does not seem to be a
demonstrable barrier to the flow of goods.(evidence
tentative not conclusive)

77
 State-wise pattern
Smaller states like Uttarakhand, Himachal
Pradesh and Goa trade more
Net exporting states are the manufacturing
powerhouses of Tamil Nadu and Gujarat
States like Haryana and Uttar Pradesh are also
powerhouses because of Gurugram (Gurgaon)
and NOIDA

78
 Data Sources
Transactions recorded in the process of Central
Sales Tax (CST) collection as provided by Tax
Information Exchange System (TINXSYS)
we are able to quantify not just arms-length
inter-state trade (that is trade between firms),
but also intra-firm trade across states.
The intra-firm is, surprisingly large (at least 68 per
cent of inter-firm trade), and is affected by trade
costs to a greater extent than inter-firm trade.
79
Does India Trade More Than Other Countries?

80
 Trade Patterns
Indias aggregate interstate trade (54 per cent of GDP) is
not as high as that of the United States (78 per cent of GDP)
or China (74 per cent of GDP)

A substantial portion(almost half)of trade across states in

India occurs as stock transfers within firms. That is, intra-
firm stock trade is high relative to arms-length trade.

Another way of gauging the magnitude of trade is to

compare countries internal trade with their international
trade. Indias internal trade is about 1.7 times its
international trade of 32 per cent of GDP.
Relationship between inter-state trade
and manufacturing
There is a strong correlation between a states
manufacturing share of GSDP and its trade
volumes (as a per cent of GSDP)

82
Patterns of Inter-State Trade: Arms-length trade
84
 Openness to Intra-firm trade
Goa, Gujarat and Maharashtra, relative to
other states, are as open to intra-firm trades
as they are to arms-length trades.
Madhya Pradesh stands out as having much
higher intra-firm trade than inter- firm trade,
possibly owing to its central location in the
country, making it ideally suited to logistics
supply chains.

85
Openness to Interstate Trade (Exports + Imports):
Intrafirm Trade

86
Patterns of Inter-State Trade
Inter-Intra Firm Trade Comparison
 Is Indian Inter-State trade unusual?
Formal Evidence from a Gravity Model

Distance has some negative effect

Adjoining states tend to trade more
GDP increases means trade increases
Hindi language is not a barrier

88
 Why does India Trade So much?
The current structure of domestic taxes as well as
area-based tax exemptions might actually bias
economic activity towards more internal trade.
The Central Excise Act exempts manufacturing in
certain states from excise duty, including all the
North-eastern states, Sikkim, Jammu and
Kashmir, Uttarakhand, Himachal Pradesh and
Kutch in Gujarat.
CST and VAT
89
 CST and VAT
Case 1: CST discourages inter-state trade when
firms can receive input tax credits for in-state
purchases

Case 2: CST promotes trade when input tax

credit is not given to the firms for in-state
transactions

90
 Conclusion
The analysis does leave open the possibility
that some proportion of Indias internal trade
could be a consequence of current tax
distortions, which are likely to be normalized
under the GST.

91
 12. INDIA ON THE MOVE AND CHURNING: NEW
EVIDENCE

When a person is enumerated in census at a

different place than his/her place of birth, she/he
is considered a migrant
Migration of people for work and education has
been a phenomenon that accompanies the
structural transformation of economies, and has
paved the way for the release of surplus labour
from relatively low-productive agricultural
activities to sectors enjoying higher productivity.

92
 Estimates of migration
Based on a straightforward reading of the
2001 Census, is that the stock of migrants in
India is low (around 33 million)
Analysis here pertains to
Migration in India by analysing 2001 and 2011
Census data (Cohort Based Metric Migration)
Railway passenger traffic flows data provided by
the Ministry of Railways.

93
Baseline Census Data: Migration Levels and Growth

94
 Major Findings
India is increasingly on the move and so are Indians.
The growth rate of migrants rose spectacularly to 4.5 per
cent per annum, while the workforce growth rate actually
fell
A breakdown by gender reveals that the acceleration of
migration was particularly pronounced for females.
In the 1990s female migration was extremely limited, and
migrants were shrinking as a share of the female workforce.
But in the 2000s the picture turned around completely:
female migration for work not only grew far more rapidly
than the female workforce, but increased at nearly twice
the rate of male migration.

95
 Cohort-based Migration Metric (CMM)

Less developed states have OUT MIGRATION

More developed states have IN MIGRATION 96
97
Railway Passenger Data Based Migration Metric

98
 Key findings
Monthly data was obtained from the Ministry of
Railways on unreserved passenger traffic
between every pair of stations in India for the
years 2011-2016.
The key idea is to use net annual flows of
unreserved passenger travel as a proxy for work-
related migrant flow.
Net flows at the All-India level have averaged
close to 9 million, peaking around 2013-14,
considerably above levels suggested by the
Census.

99
Magnitude and patterns of migration

100
 Findings continued
Figure shows the net flows for the 26 states.
Positive (negative) numbers denote in (out)-
migration.
The largest recipient was the Delhi region, which
accounted for more than half of migration in
2015-16, while Uttar Pradesh and Bihar taken
together account for half of total out-migrants.
Maharashtra, Goa and Tamil Nadu had major net
in-migration, while Jharkhand and Madhya
Pradesh had major net out-migration
101
 Way forward
Portability of food security benefits, healthcare,
and a basic social security framework for the
migrant are crucial potentially through an
interstate self registration process.
Inter-state co-ordination of migrant welfare
schemes
Financial inclusion for migrant workers-
encourage the integration of labour markets in
India
102
13. THE OTHER INDIAS: TWO ANALYTICAL NARRATIVES
ON STATES DEVELOPMENT

Development experience of state close to ocean

is advanced Eg. Gujarat, Maharshtra, TN,
Karnataka, Kerala, AP
So, greater focus of policy and research
attention in comparison to other states the so
called other states
These states include not just hinterland India
(the India rivers) but also the India of forests,
and natural resources and of special category
status.
 Three Interesting and
different models of development
1. Development based on manufacturing Guj,
TN
2. Remittance reliant mode of development;
Kerala
3. Precocious India model based on
specializing in skilled services (Karnataka, AP,
TN)
 Other statesare relatively less successful because of
less attention

Their two models of development

1. Based on aid or special status applicable to
special category states NE states and J&K
2. Based on natural resources
eg. Jhar, Chhattis, Odisha, Raj, Guj
 Issue 1: Impact of Redistributive Resources
Poor countries lack capital.
Foreign aid is the solution
For many years India accepted foreign aid, but
tried to rely on its resources as much as possible.
What is the problem in Receiving aid?

Aid increases resource dependency.

Since revenues flow in from outside ,recipient
countries may fail to develop their own tax
bases or their institutions more generally.
It is institutions ,tax revenues and incentives
that have been found to be critical for growth,
much more than overall resource availability
Aid may lead to Dutch Disease
 Redistributive Resource Transfer: Evidence
from Indian States
Aid in Indian context
Fund received by state governments from
different channels
1. A share of central taxes
2. Plan and non- plan grants
3. Plan and non- plan loans and advances
These funds constitute gross devolution to states
and this entire amount is not aid
 Gross devolution
Gross devolution entails a strong redistributive
element.
Centre to state tax transfers
Grants
However Redistributed resources from the centre
differ from traditional aid in two aspects
1. These are intra-country transfers and do not
augment overall national disposable income like
foreign aid does
2. The donor- recipient relationship very different
because these states benefiting from transfers are
part of national governance structures that
determine them
109
Redistributive Resource Transfer (RRT)
Redistributive Resource Transfer (RRT) to a
state is defined as gross devolution to the
states adjusted for the respective states share
in aggregate GDP.
 The top 10 recipients are: Sikkim, Arunachal
Pradesh, Mizoram, Nagaland, Manipur,
Meghalaya, Tripura, Jammu and Kashmir,
Himachal Pradesh and Assam (all Special
Category states)

111
 Results
Higher the RRT
The slower is growth
The smaller is the share of manufacturing in GSDP
The lower in own tax revenues
RRT CURSE
Greater transfers given in response to the observation that
performance has been lagging
Controlling for whether a state is landlocked or not ,larger
RRT inflows seem to have no positive impact on per capita
GSDP growth, and may negatively impact manufacturing
share ,fiscal effort and governance.
 Issue 2: Impact Of Natural Resources
Economies with abundant natural resources
tend to grow less rapidly than resource scarce
economies

Economic geographer Auty coined the phrase

RESOURCE CURSE.
 3 possible channels of causation
1. The exploitation of natural resources
generates rents, which lead to rent-seeking
(the voracity effect) and increased corruption
2. Natural resource ownership exposes
countries to commodity price volatility, which
can destabilise GDP growth
3. Natural resource ownership like foreign aid
-- makes countries susceptible to Dutch
Disease
 NATURAL RESOURCES AND
EVIDENCE FROM INDIAN STATES

The mineral resource rich states are: Jharkhand,

Chhattisgarh, Odisha, Rajasthan and surprisingly
Gujarat (because of on- shore petroleum, natural gas
and lignite)
 Poverty trends for the mineral-rich states
Mineral rich states seem relatively successful. Their
poverty ratio fell by around 31 percentage points
over nearly two decades, compared with 28.5
percentage points in the other states.
But the Scheduled Tribes (ST) population of the
mineral-rich states, which actually forms the
predominant population in these areas, saw only a
17 percentage point decline in poverty, smaller than
the 22 percentage points fall in the other states.
 Resource-rich states, especially Jharkhand,
Chhattisgarh and Odisha (with the exception of
Gujarat) are at low levels of per-capita GSDP, with
low levels of monthly per-capita expenditure.
As figure 7a shows, the negative relationship is being
driven by the top four mineral rich states Jharkhand,
Odisha, Chhattisgarh and Rajasthan.
 Relationship between share of manufacturing
and per capita mineral value is weak.It can be
called as resource curse.

118
 Fiscal efforts
Another indicator that can identify resource curse is
the extent of fiscal effort made by respective states
(captured by the share of OTR in GSDP), which is
expected to decline over time in the wake of excess
reliance on non-tax revenue from natural resources.

119
 Conclusion
1. Infrastructure and Connectivity-"RRT curse" and
"natural resource curse" could be a result of poor
connectivity in particular and poor infrastructure -
physical, financial, and digital.- Improve
infrastructural facilities
Policy recommendations for RRT Curse
1. Redirect a certain portion of RRT and channel the
resources directly to households as part of a
Universal Basic Income (UBI) scheme
2. Conditioning transfers on fiscal performance
3. Making governance- contingent- the capacity of
states to utilize funds optimally plays an important
role.
Policy recommendations for Natural Resources Curse

1. Improve governance to ensure a more productive use

of the resources.
2. Citizen engagement in sharing the fruits of resource
extraction
3. With the intention of ensuring that the revenue from
minerals are utilized for the development and welfare
of the citizens of the concerned states, Establishment
of the Mines and Minerals (Development and
Regulation) Amendment Act, 2015 included:
District Mineral Foundation (DMF) for districts affected by
mining related operations.
122
123
124
125
126
127
128
129
130