According to the provisional national income data released by the National Statistical Office (NSO), India’s gross domestic product (GDP) growth accelerated to 6.1% in the January to March 2023 quarter. This has lifted the economy’s growth rate in 2022-23 to 7.2% from the 7% estimated earlier.

Key economic terminologies -

Ø  GDP and GVA are the two main ways to ascertain the country’s economic performance that measures national income.

GDP —

Ø  The GDP is a monetary measure of all final products and services (those purchased by the final user) produced in a country over a certain period.

Ø  The GDP accomplishes this by adding total expenditures in the economy, examining who spent how much, thus, measuring the economy's overall “demand."

Ø  4 key engines of GDP growth — (GDP = C + I + G + NX) -

Ø  Consumption (C)/Private Final Consumption Expenditure (PFCE) — The biggest engine is consumption demand from private individuals.

Ø  Investment (I)/Gross Fixed Capital Formation (GFCF) — The second-biggest engine is the investment demand generated by private sector businesses.

Ø  Government (G)/Government Final Consumption Expenditure (GFCE) — The third engine (11%) is the demand for goods and services generated by the government.

Ø  Net Exports (NX) = Exports minus imports.

Gross value added (GVA) —

Ø  It calculates the same national income from the supply side, by adding up all the value added (value of output minus the value of its intermediary inputs) across different sectors.

Ø  This value added is shared among the primary factors of production, labour and capital.

Ø  By looking at the GVA growth one can understand which sector of the economy is robust and which is struggling.

Ø  How are GDP and GVA related? GDP = (GVA) + (Taxes earned by the government) —

Ø  (Subsidies provided by the government). If the taxes > subsidies it provides, the GDP will be higher than GVA.

Recently released data -

GDP —

Ø  India’s 6.1% GDP growth was the fastest among major economies in the fourth quarter and the prospects look better for this year than they did four months ago.

GVA —

Ø  It is estimated to have risen 7% in 2022-23, compared to 8.8% in 2021-22, with manufacturing GVA growth sliding to just 1.3% from 11.1% a year ago.

Ø  Economists noted that though several sectors delivered a positive surprise, consumption remained weak and the overall growth pattern remains uneven.

Agri, services growth —

The agricultural GVA grew 4%, up from 3.5% in the previous year.

The financial, real estate and professional services sectors saw their GVA grow 7.1%, compared to 4.7% in 2021-22.

The GVA of the trade, hotels, transport, and communication sectors, as well as services related to broadcasting grew 14%, marginally faster than in the previous year.

This means the current economic outcomes are boosted by the farm and services sector.

Takeaways from the recent data -

The 2022-23 GDP growth figures underscored the resilience of the Indian economy amidst global challenges.

Exports of goods and services accounted for 23.5% of GDP, the highest since 2014-15.

The private consumption hit the highest level since 2006-07 at 58.5% and gross fixed capital formation is at the highest point (34% of GDP) since 2013-14.

GVA from the employment-intensive construction sector grew 10% in 2022-23, from 14.8% in 2021-22.

However, the phenomenon of pent-up demand that lifted services through last year and this fiscal year’s first two months will not be strong, and private sector investment has to pick up.

The Reserve Bank of India (RBI) is developing a lightweight and portable payment system designed to operate during catastrophic events.

About Lightweight and portable payment system -

Ø  The RBI has conceptualised this system which it is calling a bunker which is an equivalent of digital payments that can be operated from anywhere by a bare minimum staff in exigencies such as natural calamities or war.

Ø  It is expected to operate on minimalistic hardware and software and would be made active only on a need basis.

Ø  The infrastructure for this system will be independent of the technologies that underlie the existing systems of payments such as UPI, NEFT, and RTGS.

Ø  The system is expected to process transactions that are critical to ensure the stability of the economy, including government and market-related transactions.

Ø  The existing conventional payment systems such as RTGS, NEFT, and UPI are designed to handle large volumes of transactions while ensuring sustained availability.

Ø  As a result, they are dependent on complex wired networks backed by advanced IT infrastructure.

What is NEFT?

Ø  The National Electronic Funds Transfer is an electronic method of transferring money online.

Ø  It enables transferring funds from the account maintained with any bank to any other bank branch, provided the transaction is attempted between the banks that participate in the NEFT payment system.

Ø  The payments made via NEFT are processed and settled half hourly batches and transactions can be performed 24*7.

Ø  Minimum Transfer Value: Rs. 1

Ø  Maximum transfer value: No limit

Ø  Money transfer made through NEFT does not require any additional transaction costs.

What is RTGS?

It stands for Real-time Gross Settlement, which is a payment mode where the money is transferred from one bank account to the other in real time, without any delay.

It is mostly used for transactions of high value.

When using the banking method, RTGS is the fastest possible way to transfer money.

Transactions made through RTGS are processed on a one-to-one basis and transactions can be performed 24*7.

Minimum Transfer Value — 2 lakh

Maximum transfer value — No upper limit is there, but can vary between banks.

The Union Cabinet has approved the formation of an Inter-Ministerial Committee (IMC) for facilitation of the “world’s largest grain storage plan in cooperative sector”. 

Storage of Food grains in India -

Ø  The procurement, storage, and distribution of food grains is undertaken by the Food Corporation of India (FCI), along with agencies of the state governments.

Ø  The availability of food grains (even in adverse weather conditions or otherwise) at the country level has further been ensured with a carefully designed food security system by the government.

Ø  This system has two components: (a) buffer stock, and (b) public distribution system.

Buffer Stock –

Ø  Buffer Stock is the stock of food grains, namely wheat and rice, procured by the government through the FCI.

Ø  The FCI purchases wheat and rice from the farmers in states where there is surplus production.

Ø  The farmers are paid a pre-announced price for their crops. This price is called Minimum Support Price (MSP).

Public Distribution System –

Ø  The food procured by the FCI is distributed through government regulated ration shops among the poorer section of the society.

Ø  This is called the Public Distribution System (PDS).

Ø  At present, India’s foodgrains production is around 3,100 lakh tonnes while the storage capacity is only about 47% (1,450 lakh tonnes) of the total output.

What are the challenges and solution with foodgrains storage?

Ø  In August 2021, Standing Committee on Food, Consumer Affairs, and Public Distribution (Chair: Sudip Bandyopadhyay) submitted its report on challenges associated with foodgrains storage in India.

Ø  Along with identification of challenges, the committee also suggested solutions for the same.

Procurement –

Ø  The Committee observed that most of the procurement operations for foodgrains are carried out by state agencies. The share of FCI in direct procurement is less than five percent.

Ø  The Committee recommended that the central government and FCI should assist the state governments in creation of adequate infrastructure for effective procurement.

Decentralised Procurement –

Ø  Under the Decentralised Procurement Scheme (introduced in 1997-98), the state governments utilise the foodgrains procured locally from within the state for distribution under various schemes.

Ø  In case of excess procurement in any state, the foodgrains are handed over to FCI for storage or distribution to other states.

Ø  The Committee observed that even after 23 years of the inception of the scheme, it has been undertaken by only 8 states in case of wheat, and 15 states in case of rice.

Ø  The Committee recommended that the Department of Food and Public Distribution should encourage the adoption of the scheme in non-traditional states.

Refusing Procurement at Centres –

Ø  The Committee noted that lower staff posted at procurement centres sometimes refuse to procure on non-bonafide technical reasons, such as moisture content in the produce.

Ø  This causes great hardships to the farmers, thus leading to distress sale.

Ø  It recommended that foodgrains should not be rejected on flimsy grounds if they conform to the Fair Average Quality norms.

Storage Capacity –

Ø  The Committee noted that despite various audits for optimum utilisation of storage capacity, the utilisation of hired storage facilities is still very high.

Ø  Meanwhile, the FCI-owned facilities remain under-utilised.

Ø  The Committee recommended FCI to maximise utilisation of owned facilities before hiring.

Ø  Hiring should be done only if absolutely necessary to minimise the cost incurred in paying rent.

Construction of Godowns –

Ø  The Committee observed that FCI could not achieve the targets for construction of godowns in 2020-21.

Ø  It recommended expediting the ongoing construction projects, particularly in the northeastern states, Jammu and Kashmir, Andaman and Nicobar Islands, and Lakshadweep.

Damaged Foodgrains –

Ø  The Committee noted a very high value of damaged foodgrains during 2017-20 (Rs 12.6 crore).

Ø  It noted that damaged foodgrains accrued mainly due to pest attacks, exposure to rain, floods, leakages in godowns, procurement of poor quality stocks, and negligence of officials.

Ø  It also noted a very slow movement of foodgrains to distribution centres, which leads to huge piling of foodgrains and rotting.

Ø  The committee recommended creation of storage capacity in: (i) major wheat producing states (e.g., Haryana and Punjab), and (ii) other states (e.g., Maharashtra, Tamil Nadu, and Rajasthan) where non-cultivable land may be available for this purpose.

Transit Losses –

Ø  The Committee noted that despite various initiatives of the Department to reduce storage and transit losses of foodgrains, transit losses are still very high (Rs 281 crore during AprilOctober 2020).

Ø  It recommended that strict action should be taken against negligent officials to hold them accountable for unjustified losses.

Ø  It recommended FCI to strengthen its vigilance mechanism in coordination with states and ensure proper functioning of monitoring mechanisms.

Role of the Committee and significance of the plan -

Ø  The committee will lay guidelines for creation of infrastructure such as godowns, for agriculture and allied purposes, at selected ‘viable’ Primary Agricultural Credit Societies (PACS).

Ø  Under the plan, the government will create 700 lakh tonnes of grain storage capacity in the cooperative sector over the next five years.

Ø  With this plan, farmers will now get modern grain storage facilities in their blocks through PACS, so that they will be able to get fair prices for their grains.