Spreading Jam across India’s Economy

The Economic Survey 2015-16 presented in the Parliament by the Union Finance Minister Shri Arun Jaitley emphasizes that JAM Trinity –Jan dhan, Aadhaar, Mobile- can help government to implement large-scale, technology-enabled and real-time Direct Benefit Transfers (DBTs) to improve economic lives of India’s poor. First variety of JAM- PAHAL scheme of transferring LPG subsidies via DBT -has reduced leakages by 24 per cent. Economic Survey suggests that while deciding where next to spread JAM, policymakers should consider the challenges of beneficiary identification, distributor opposition and beneficiary financial inclusion. Spreading JAM to other areas will reduce leakages and provide more fiscal space to the Government.

JAM Components:

Economic Survey divides JAM into three components-

1.      Identification or First-Mile:  Identification of beneficiaries by government

2.      Transfer or Middle-Mile: Transfer of fund to beneficiaries by government

3.      Access or Last-Mile: Access of fund by beneficiaries

                                                                            

Identification:

First-mile deals with identification of beneficiary. This layer has issues of ghost and duplicate names due to administrative and political discretion and use of pre-Aadhaar database.  It is easier to implement the JAM for universal scheme than targeted one as identification will be easier. Identification of household-individual connection is important to note here as some schemes target at household level like JDY and some at individual level like Aadhaar. Aadhaar can help in better identification of the beneficiaries.

Transfer:

Middle-mile deals with the challenges of payment where government transfer benefits to the banks. But lack of bank accounts and its information with government put hindrances in the middle-layer connectivity. Main issue in this layer is of within-government coordination and dealing with supply chain interest groups.  Jan Dhan can help beneficiaries to have bank accounts.

Access:

Last-mile layer faces issues of lesser Bank penetration, mostly in rural areas. It deals with actual transfer of money from Bank to Beneficiary accounts. It also deals with issues of exclusion of genuine beneficiaries. Mobile can inform about benefits and also allow easier fund transfer.

Where next to spread JAM?

Economic Survey argues that policymakers should decide where to apply JAM based on two considerations of-

1.      Amount of leakages and,  

2.      Control of the central government.

If amount of the leakages in a given scheme/area is huge then it can be next target for introduction of JAM as subsidies with higher leakages will have larger returns from introducing JAM. Similarly control of central government will reduce administrative challenges of co-ordination and political challenges of opposition by interest groups.

Based on these two criteria- leakages and central government control-Survey suggests fertilizer subsidies and within-government transfers as two most promising areas for introduction of the JAM.

                          

JAM Preparedness Index:

Further economic survey has formulated JAM-Preparedness Indices for Urban and Rural areas in each state. It uses Aadhaar penetration, basic bank account penetration and Banking Correspondents (BC) density as indicators for the indices. It has also prepared Biometrically Authenticated Physical Update or BAPU-Preparedness Index, using Aadhaar penetration and Point of Sale machines as indicators, for each state and has compared Rural-JAM Preparedness Index with BAPU-Preparedness Index. It has found that many states are having higher scores in BAPU-Preparedness Index as compared to Rural JAM-Preparedness Index. Thus it suggests use of BAPU as short-term solution to reduce the leakages in these states, till states are well prepared for introduction of the JAM.

Conclusion:

Introduction of DBT in LPG and MGNREGS have proved that use of JAM can considerably reduce leakages, reduce idle funds, lower corruption and improve ease of doing business with the government. Despite huge improvements in financial inclusion due to Jan Dhan, JAM Preparedness indicators suggest that there is still long way to go. Center can invest in last-mile financial inclusion via further improving BC networks and promoting the spread of the mobile money.  In the meantime models like BAPU can be used as an alternative to reduce the leakages.

2015 - Landmark Year for India in Climate Change Initiatives

Economic Survey 2015-16 tabled in Parliament  by the Union Finance Minister Shri Arun Jaitley states that the year 2015 has been a landmark year for India in terms of climate change initiatives both nationally and internationally. At the International level, India played a crucial role in the climate change talks and agreement under United Nations Framework Convention on Climate (UNFCCC) in Paris in December 2015, and the launch of International Solar Alliance. India also submitted its ambitious Intended Nationally Determined Contributions (INDC) to the UNFCCC on 2nd October 2015. The Economic Survey which was tabled today in the Parliament by the Union Finance Minister Shri Arun Jaitley has listed down, along with these achievements, the various other contributions and initiatives taken by India in dealing with climate change and promoting sustainable development. 

Economic Survey 2015-16 further states that India has played an important role in the 21st Conference of Parties (COP 21) under the UNFCCC and adoption of the Paris Agreement in December 2015. The Paris Agreement sets a roadmap for all nations in the world to take actions against climate change in the post-2020 period. Also, Prime Minister Shri Narendra Modi played a leading role at COP 21 in the launch of the International Solar Alliance (ISA), and also volunteered to host its Secretariat. ISA will provide a special platform for mutual cooperation among 121 solar-resource-rich countries in the world. 

Economic Survey highlights that as on 4 January 2016, with 1593 out of 7685 projects registered under Clean Development Mechanism (CDM) of UNFCCC, India has the second highest number of projects registered under CDM which further shows its commitment to fighting climate change. 

Economic Survey notes that in the domestic front, India has continued to take ambitious targets in its actions against climate change. As a part of its contributions to global climate change mitigation efforts, India announced its Intended Nationally Determined Contributions (INDC) which including other efforts has set itself an ambitious target of reducing its emissions intensity of its GDP by 33-35 percent by 2030, compared to 2005 levels, and of achieving 40 percent cumulative electric installed capacity from non-fossil fuel-based energy resources by 2030. 

Apart from the National Action on Climate Change (NAPCC), a new mission on Climate Change and Health is currently under formulation and a National Expert Group on Climate Change and Health has been constituted. The Economic Survey also talks about the National Mission on Coastal Areas (NMCA) for integrated coastal resource management and the proposed waste-to energy mission which are the other major components of India’s domestic actions against climate change.

Economic Survey also talks about the National Adaptation Fund for Climate Change (NAFCC) which has been established with a budget provision of Rs 350 crore for the year 2015-16 and 2016-17, and the National Clean Energy Fund (NCEF) which is supported by the cess on coal. The Survey notes that India is one of the few countries around the world to have a carbon tax in the form of a cess on coal. 

Economic Survey 2015-16 further points out the progress on the renewable energy front in India by highlighting the ambitious targets of achieving 40 percent cumulative electric capacity from non-fossil fuel-based energy resources by 2030. Underlining India’s commitment to clean energy the first Renewable Energy Global Investment Meet and Expo (RE-INVEST) was organized in Feb 2015 to provide a platform for the global investment community to connect with stakeholders in India. 

Another ambitious program of the government is the Development of Solar cities Program under which 56 solar cities projects have been approved. The Economic Survey further lists the National Offshore Wind Energy Policy 2015 to help in offshore wind energy development, as yet another major renewable energy policy. 

Labour Force participation Rate higher in Rural Areas than Urban Areas, significantly lower for females than males

The Economic Survey (2015-16) states that the proportion of economically active population (15-59 years) has increased from 57.7 per cent to 63.3 per cent during 1991 to 2013, as per Sample Registration System (SRS) data for 2013.

 As per the Economic Survey, the employment growth in the organized sector (Public and Private combined) increased by 2% in 2012 over 2011, while it increased by only 1% in 2011 over 2010. The annual growth rate of employment for the private sector was 4.5 % in 2012 over 2011 whereas the public sector registered a marginal growth of 0.4 % in the same year.

The Fourth Annual Employment-Unemployment Survey conducted by the Labour Bureau during the period January 2014 to July 2014 has shown that the Labour Force Participation Rate (LFPR) is 52.5 % for all persons. However, the LFPR for rural areas stands at 54.7% which is much greater than that for rural areas i.e. 47.2 %. The LFPR for women is significantly lower than that for males in both rural and urban areas. As per the Survey, the Unemployment Rate is 4.7 % in rural areas and 5.5% in urban areas. The total unemployment rate reported is 4.9% as per the Labour Bureau Survey. These figures are much higher than the all India unemployment rates of the National Sample Survey Office (NSSO, 2012-11) which reported unemployment rate of 2.3% for rural areas, 3.8% for Urban Areas and 2.7% for India as a whole.

The Government has taken several measures including Labour reforms to improve the employment situation in the country as well as employment conditions for women. Some of the recent Labour reforms include the Payment of Bonus (Amendment) Act 2015, National Career Services Portal, Shram Suvidha Portal and Universal Account Number Facility.

The National Policy on Skill Development and Entrepreneurship 2015 aims to ensure ‘Skilling on a large Scale at a Speed with high Standards and promote a culture of innovation based entrepreneurship to ensure sustainable livelihoods’. The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) proposes to cover 24 lakh Indian youth with meaningful, industry relevant, Skill Based Training under which 5.32 lakh persons have already been enrolled. Of this number, 4.38 lakh have successfully completed training throughout India.

In addition, the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), a placement-linked skill development scheme for rural youth who are poor, as a skilling component of the National Rural Livelihood Mission (NRLM) has also been launched. During 2015-16, against a target of skilling 1.78 lakhs candidates under the DDU-GKY, a total of 1.75 lakh have already been trained and 0.60 lakh placed till November 2015.

With a view to increasing the scope of employability among differently-abled persons, the Government has launched a National Action Plan (NAP) for skill training. The plan has target of skilling 5 lakh differently-abled persons in next three years. Plans are also on the anvil to extend the NAP with an online skill-training platform with a target of 5 lakh every year.

Under Mahatma Gandhi National Rural Employment Guarantee Scheme, about 3.63 crore households have been provided employment of 134.96 crore person days during the Current Financial Year (as on 01.01.2016). Of this, 76.81 crore person days or 57% were availed of by women.

The Survey has expressed concern at the reported low rates of workforce participation for females. The level of financial inclusion of women in terms of number of women with bank accounts still remains low in India. However, it is noteworthy that there are women achievers in the financial sector, with leading nationalized banks and financial institutions headed by women, says the Economic Survey.

 The Time Use Survey (TUS) being conducted in select states on a pilot basis has revealed the hidden contribution of women to the economy in the form of unpaid work. PUS is proposed to be extended to all states to design gender sensitive policies for employment and to make women’s work visible, says the Survey.

HIGHLIGHTS OF ECONOMIC SURVEY 2015-16

Indian economy would grow by between 7.0 per cent and 7.75 per cent in the 2016-17 fiscal year that starts on April 1.

Fiscal Deficit 

• 2016-17 expected to be challenging from fiscal point of view; time is right for a review of medium-term fiscal framework
• 2015-16 fiscal deficit, seen at 3.9 per cent of GDP, seems achievable
• Credibility and optimality argue for adhering to 3.5 per cent of GDP fiscal deficit target

Inflation 

• CPI inflation seen around 4.5 to 5 per cent in 2016-17
• Low inflation has taken hold, confidence in price stability has improved
• Expect RBI to meet 5 per cent inflation target by March 2017
• Prospect of lower oil prices over medium term likely to dampen inflationary expectations

Current Account Deficit 2016/17 current account deficit seen around 1-1.5 per cent of GDP

Currency 

• Rupee's value must be fair, avoid strengthening; fair value can be achieved through monetary relaxation
• India needs to prepare itself for a major currency readjustment in Asia in wake of a similar adjustment in China
• Rupee's gradual depreciation can be allowed if capital inflows are weak

Banking & Corporate Sector 

• Estimated capital requirement for banks around 1.8 trillion rupees by 2018-19
• Proposes to make 700 billion rupees available via budgetary allocations during current and succeeding years in banks
• Government could sell off certain non-financial companies to infuse capital in state-run banks
• Corporate, bank balance sheets remain stretched, affecting prospects for reviving private investments
• Underlying stressed assets in corporate sector must be sold or rehabilitated

Taxes 

• Tax revenue expected to be higher than budgeted levels in 2015-16
• Proposes widening tax net from 5.5 per cent of earning individuals to more than 20 per cent
• Favours review and phasing out of tax exemptions; easiest way to widen the tax base not to raise exemption thresholds

For more details on the Economic Survey 2015-16: Click here