Economy

Monetary Policies

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Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Objectives of Monetary Policies are:-

  •  Accelerated growth of the economy
  • Balancing saving and investments
  • Exchange rate stabilization
  • Price stability
  • Employment generation

Monetary Policy could be expansionary or contractionary;  Expansionary policy would increase the total money supply in the economy while contractionary policy would decrease the money supply in the economy.

RBI issues the Bi-Monthly monetary policy statement. The tools available with RBI to achieve the targets of monetary policy are:-

  • Bank rates
  • Reserve Ratios
  • Open Market Operations
  • Intervention in forex market
  • Moral suasion

 

 

Repo Rate- Repo rate is the rate at which the central bank of a country (RBI in case of India) lends money to commercial banks in the event of any shortfall of funds. In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

Reverse Repo Rate is the rate at which RBI borrows money from the commercial banks.An increase in the reverse repo rate will decrease the money supply and vice-versa, other things remaining constant. An increase in reverse repo rate means that commercial banks will get more incentives to park their funds with the RBI, thereby decreasing the supply of money in the market.

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.The amount specified as the CRR is held in cash and cash equivalents, is stored in bank vaults or parked with the Reserve Bank of India. The aim here is to ensure that banks do not run out of cash to meet the payment demands of their depositors. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.

CRR specifications give greater control to the central bank over money supply. Commercial banks have to hold only some specified part of the total deposits as reserves. This is called fractional reserve banking.

Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, government approved securities before providing credit to the customers.its the ratio of liquid assets to net demand and time liabilities.Apart from Cash Reserve Ratio (CRR), banks have to maintain a stipulated proportion of their net demand and time liabilities in the form of liquid assets like cash, gold and unencumbered securities. Treasury bills, dated securities issued under market borrowing programme and market stabilisation schemes (MSS), etc also form part of the SLR. Banks have to report to the RBI every alternate Friday their SLR maintenance, and pay penalties for failing to maintain SLR as mandated.

POVERTY

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  • Following elements mainly affect the magnitude of the poverty ration
    • The nutrition norm in the base year
    • Price deflator used to update the poverty line
    • Pro rata adjustment in the number of households in different expenditure classes to determine the number of households below and above poverty line.
  • Agricultural wage earners, small and marginal farmers and casual workers engaged in non-agricultural activities constitute the bulk of the rural poor

Read morePOVERTY

Impacts of Privatization

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Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.
• Privatization has a positive impact on the financial health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt services to the customers and help in improving the overall infrastructure of the country.

DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA

• Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man

 

30.01.18 Meghalaya(MeghalayaPSC) Current Affairs

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NORTH-EASTERN STATES

  • Territorial integrity of North eastern states won’t be compromised: Rajnath

 

  • Territorial integrity of Assam and other northeastern states will not be compromised when the final Naga peace accord is inked, home minister Rajnath Singh assured Assam chief minister Sarbananda Sonowal.

 

  • The insurgent group NSCN-IM’s key demand is to integrate the Naga-inhabited areas of Arunachal Pradesh, Assam and Manipur, which has been strongly opposed by the three states, currently ruled by the BJP.

 

  • The NSCN-IM has been engaged with peace talks with the interlocutor of the central government since 1997 when it announced a ceasefire agreement after a bloody insurgency movement which started in Nagaland soon after the country’s Independence. 

     

    INTERNATIONAL

     

    • ‘Aadhaar’ is Oxford’s first Hindi word of the year

     

    • Dictionaries at the Jaipur Literature Festival.

     

    • ‘Aadhaar’ also becomes the first Oxford Dictionaries Hindi Word of the Year.

     

    • The accompanying shortlisted words include Notebandi, Swachh, Vikaas, Yoga and Bahubali.

     

    ·        India Cheapest Country To Live In After South Africa: Survey

     

    • India is ranked second only to South Africa as the cheapest country to live or retire, according to a recent survey of 112 countries by GoBankingRates.
    • The survey ranked nations on the bases of four key affordability metrics. The metrics are Local purchasing power index, rent index, Groceries index, and Consumer price index.
    • India’s local purchasing power is 20.9% lower, rent is 95.2% cheaper, groceries are 74.4% cheaper, local goods and services are 74.9% cheaper.
    • The top three most expensive countries in the survey are Bermuda (ranked 112), Bahamas (111), and Hong Kong (110).

     

     

    NATIONAL

     

    ·        Economic Survey 2018:  Brief Summary

     

    • The Economic Survey, an annual publication of the Finance Ministry, is presented in both houses of Parliament during the Budget Session. It is a review of the developments in the country’s economy over the previous one year.
    • Sticking to the practice started last year, finance minister Arun Jaitley will present Union Budget 2018 on 1 February.
    • It presents a summary of the performance of the government’s major development programmes undertaken during that period.
    • It also details the main policy initiatives of the government.

     

    • The  Survey sees FY19 GDPgrowing 7-7.5% vs 75% in FY18.

     

    • The Due to higher expected increase in imports, net exports of goods and services are slated to decline in 2017-18.

     

    • The Exports biggest source of the boost to growth.

     

    • It points out that the GDP growth has averaged 7.3% for the period from 2014-15 to 2017-18, which is the highest among the major economies of the world.

     

    • Demonetisation helped share of financial saving to rise.

     

    • The ratio of domestic saving to GDP reached 29.2 percent in 2013 to a peak of 38.3 percent in 2007, before falling back to 29 percent in 2016.

     

    • The Sanitation coverage in rural India increased substantially from 39 percent in 2014 to 76 percent in January 2018. With the launch of Swachh Bharat Mission (Gramin) on October 2, 2014, the sanitation coverage in rural India increased substantially.

     

    • So far, 296 districts and 307,349 villages all over India have been declared Open Defecation Free (ODF).

     

    • India is gradually improving its performance in Science and Technology. In 2013, India ranked 6th in the world in scientific publications. Its ranking has been increasing consistently. The growth of annual publications between 2009 to 2014 was almost 14%. This increased India’s share in global publications from 3.1% in 2009 to 4.4% in 2014 as per the Scopus Database.

     

    • The foreign exchange reserves grew by 14.1% on a year-on-year basis from the end of Dec 2016 to end of Dec 2017.

     

    • The forex reserves as per 2016-17 were estimated at USD 370 billion. It grew to USD 409.4 billion in 2017-18.

     

     

     

    ·        VINBAX: India and Vietnam hold first military exercise in Jabalpur

     

    • The India-Vietnam Bilateral Army Exercise (VINBAX-2018)was conducted at Jabalpur in Madhya Pradesh.
    • It is the first military exercise between the two countries.
    • The six-day-long military exercise (from January 29 to February 3, 2018) was conducted as part of joint training undertaken with friendly foreign countries by Indian Army.
    • VINBAX-2018 was Table Top Exercise to carry out training for Peace Keeping Operations under United Nations (UN) mandate.
    • The Defence ties between India and Vietnam have been on an upswing with the primary focus being cooperation in the maritime domain.

    ·        International Bird Festival To Be Held In Dudhwa National Park

     

    • A three-day international bird festivalwill be held at the Dudhwa National Park, Lakhimpur Kheri, Uttar Pradesh in February 2018 with nearly 200 leading ornithologists expected to attend.
    • The purpose of the international bird festival is to promote eco-tourism in Dudhwa and to give it a distinct international identity besides highlighting its traditional Tharu arts, culture, and heritage.

     

    ·        Asias biggest auto testing track inaugurated in Madhya Pradesh

     

    • Union Minister Babul Supriyo and Madhya Pradesh Industrial minister Rajendra Shukla inaugurated Asia’s biggest auto testing track in Pithampur of Dhar district, Madhya Pradesh.
    • The country’s research and development activities in the sector of automobile engineering and technology will get a boost, due to the construction of the auto testing track in Pithampur.
    • Pithampur will emerge as a hub of the automobile industry in future.
    • Union Minister further mentioned that the state government has provided 4 thousand acre land to NATRiP and the National Auto Testing Track has been developed on 3 thousand acre land.
    • Automobile units can be established by the industrialists on the remaining one thousand acre land.

     

    ·        Sandeep Lamichhane Becomes 1st Nepal Player To Get IPL Contract

     

    • Sandeep Lamichhane became the first cricketer from Nepal to land a deal an IPL contract.
    • He was picked by Delhi Daredevils in the player’s auction.
    • The 17-year-old, the only Nepal player in the IPL auction, was sold at his base price of Rs 20 lakh.
    • The leg-spinner rose to prominence with a successful outing at the 2016 U-19 World Cup where he guided Nepal to a creditable eighth place.
    • He hogged the limelight by becoming the second-highest wicket-taker in the tournament with 14 scalps in six innings.

Meghalaya Public Finance And Fiscal Policy

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Meghalaya Public Finance And Fiscal Policy

The state of Meghalaya, along with all the other states in the NER, has been given special category status by the central government. Special category status is accorded to a state with certain characteristics that necessitate stronger than normal hand-holding by the central government. The predominant characteristics relate to geographic terrain, specifically hilly or mountainous tracts.

GSDP OF MEGHALAYA:

The Gross State Domestic Product (GSDP) is likely to underestimate income in Meghalaya, which is characterised by subsistence agriculture and a significant dependence of people on community forests for meeting various needs.The real GSDP of Meghalaya grew at a trend rate of 5.93 per cent per annum between 1999–2000 and 2007–08 (at 1999–2000 prices). The population of Meghalaya during the same period grew at a trend rate of 1.39 per cent per annum. Real per capita GSDP of Meghalaya thus grew at 4.48 per cent per annum during that period.Meghalaya Public Finance And Fiscal Policy

Low population density accords certain natural advantages from (potentially) larger availability of terrestrial resources, but several disadvantages from the point of view of ensuring reach of public services to a sparse population. For example, Meghalaya reports a lower literacy rate and a higher poverty ratio than that of the NER as a whole. Trend growth rate of aggregate GSDP for Meghalaya and NEREAM(the north-east region excluding Assam and Meghalaya)  stood, respectively, at 5.99 and 7.35 per cent per annumbetween the years 1999– 2000 and 2005–06.Meghalaya thus has a significant head start (as compared to NEREAM) in its effort to catch up with the average all India per capita GDP.

Growth component over period 2000- 2006:-

  • There has been some decline in the share of agriculture and allied sectors, as also in the service sectors.
  • In 1999–2000, the mining and quarrying sector contributed almost two-fifths of industry GSDP in Meghalaya, but the share has gradually declined to about onethird in 2005–06.

 

INVESTMENT FOR ACCELERATING GROWTH:-

Improving the standard of living of the people would require sustained increases in per capita income levels. Given the current levels of income, this will require a significant acceleration in growth rate. If by 2030 the people of Meghalaya are to achieve living standards comparable to the rest of India, their per capita GSDP would need to grow at an average rate of 11.5 per cent.

The North Eastern Region: Vision 2020, an illustrative scheme for accelerating the growth process of Meghalaya shows:-

Average Annual Growth Rate (%) till 2029-30:–

Required GSDP CAGR (%)–9.92

Projected Population CAGR (%)–1.04

Implied Per Capita GSDP Growth (%)–8.88

Projection of Investment Requirements to Achieve Economic Target by 2030:-

Required CAGR (%) of GSDP:-

2012-13 to 2016-17 = 9.45

2017-18 to 2021-22  =10.25

2022-23 to 2026-27 = 10.25

2026-27 to 2029-30  =10.25

Required Investment to Achieve Growth Target In Crores, 2009-10 Prices:-

2012-13 to 2016-17  =28937

2017-18 to 2021-22  =50097

2022-23 to 2026-27  =81603

2026-27 to 2029-30  =71882

Required Investment as Percentage of GSDP:-

2012-13 to 2016-17  = 34.8

2017-18 to 2021-22  =37.2

2022-23 to 2026-27  = 37.2

2026-27 to 2029-30  =37.2

Meghalaya requires a massive investment as well as significant increase in productivity if it desires to achieve a standard of living somewhere near that of the rest of India by 2030. Investment requirements may be met from savings and borrowings, both government and private.

In the case of the government, capital expenditure is of the nature of investments and may be financed from current revenues (tax and non-tax), but only if there is revenue surplus (zero revenue deficits). In the eight year period, from 2000–01 to 2007–08, Meghalaya was revenue surplus in six years (all but 2001–02 and 2004–05). However, the revenue surplus is barely 2 per cent of GSDP and can at best cover only a small fraction of the additional investment requirements. Even with optimistic assumptions on the ICOR(increment capital output ratio), the (desirable) investment rate averages about 37 per cent of GSDP. Thus other feasible avenues of resources have to be rigorously explored.

A possible source of investment lies in additional government borrowing, which adds to government public debt either through public accounts or other internal and external borrowings. This in turn results in an increase in the fiscal deficit in government accounts. Between 2000–01 and 2007–08, the fiscal deficit for Meghalaya has varied between 1.1 per cent and 6.3 per cent of GSDP (with an average of 3.8 per cent) In years of revenue surplus, the full measure of fiscal deficits may, arguably, be assumed to finance capital expenditures or new investments. Thus, revenue surplus and budgetary borrowing together allow for (on an average) about 5 per cent of GSDP as new investment or capital expenditure. In fact, capital expenditure as derived from budgets averaged less than 4.5 per cent of GSDP between 2000–01 and 2007–08.

It appears that less than 15 per cent of investment needs are being met from public sources. The remainder of investment has to come from the private sector. In many cases, this can be facilitated through public-private partnerships.

GROWTH OF REVENUE AND EXPENDITURE:-

Between 2000–01 and 2007–08, total revenues for Meghalaya show the lowest rate of 12.13% growth as compared to15.71%  the NER or NEREAM . Growth rates of total revenues reflect a similar picture even for a longer period between 1987–88 and 2007–08(11.47% for Meghalaya and 12.24% for NER) . Further, for the period between 2000–01 and 2007–08, the rate of growth of each category of revenue (tax, non-tax, grants-in-aid, and contributions) in Meghalaya trails the rate of growth of the respective components for NEREAM.

The tax-GSDP ratio of Meghalaya increased from 7.14 per cent in 2000–01 to 11.61 per cent in 2007–08. Similarly, the tax-GSDP ratio for NEREAM has also increased from 6.54 per cent in 2000–01 to 11.24 per cent in 2007–08. Thus, despite the higher growth rate of GSDP and buoyancy in taxes, the tax-GSDP ratio for NEREAM is lower than for Meghalaya. But it is also apparent that in the last decade or so, NEREAM has been gradually catching up with Meghalaya, which is possibly losing its pre-eminent position in the NER. Alternatively, one may interpret this as an improvement in balanced development of the NER.Thus, capital expenditure in Meghalaya is critically straining existing infrastructure, with consequent social and economic costs in terms of growth and employment. This feeds back into revenue mobilisation performance as observed with a deceleration in tax revenues for Meghalaya. An urgent redressal of this situation appears to be desirable.

STRUCTURE OF REVENUE AND EXPENDITURE:-

  • The differences in growth rates of the components of revenue and expenditure have resulted in significantly altering their structure in the last decade. Thus, the share of grantsin-aid and contributions, which constituted more than two-thirds of revenues for Meghalaya in 2000–01, has declined to about 56 per cent in 2007–08.
  • For Meghalaya the share of tax revenues (in total revenues) increased from about one-quarter in 2000–01 to more than one-third in 2007–08. The share of non-tax revenues has shown some increase over the period, but remains less than 10 per cent.
  • In Meghalaya, the share of revenue expenditure in total expenditure increased by about 3 percentage points, with an equivalent reduction in the share of capital expenditure.
  • Segregating tax revenues into own-tax revenues and share in central taxes shows that between 2000–01 and 2007– 08, for Meghalaya, there is some decline in the proportion of own-taxes.
  • In contrast to the revenue expenditure scenario, non-developmental capital expenditure entails only a small proportion that was less than 5 per cent of total capital expenditure in 2000–01. This proportion appears to be rising but remained less than 10 per cent in 2007–08. The remainder (above 90 per cent) is being incurred as developmental capital expenditure.
  • Almost 60 per cent of developmental revenue expenditure in Meghalaya was incurred on social services in 2000–01. But this proportion has been declining and is close to one-half in 2007–08.
  • Developmental revenue expenditure on economic services has increased in Meghalaya.

Differences in the growth rates of components of revenue and expenditure have affected their structures. In turn, this has affected the structure of deficits. From the beginning of the last decade, revenue deficits showed a decline, and for the NER states as a whole, revenue deficits were quickly transformed into surplus that has been rising. This reversal of deficits to surplus also has to do with the promulgation of fiscal responsibility and budget management (FRBM) acts, duly incentivised by the recommendations of the Twelfth Finance Commission. Unfortunately, the effort appears more to satisfy accounting prudence than to influence expenditure efficiency and effectiveness that improves outcomes. Among several causes impacting GSDP of a state and its consequent resource mobilisation capacity, issues in extant governance in the state play a critical role. The present polity of the state of Meghalaya does not present itself as a coherent, synchronised, and harmonious institution. In particular, this impacts not only the direction of public expenditure, but more so its effectiveness. Analogously, it presents difficulties in exercising tax or revenue efforts, with consequent influence on scope, level, and coverage of public services.

OUTLOOK OF MEGHALAYA ECONOMY IN RECENT PAST AND FUTURTE ASPECT OF GOVERNMENT INVESTMENT:-

The GSDP at current market prices for the year 2013-14, 2014-15, 2015-16 and 2016-17 was estimated at  22,938.24 crore, 24,408.07 crore,  26,745.23 crore and  29,566.90 crore respectively, registering an annual percentage growth of 6.41 percent, 9.58 percent and 10.55 percent respectively. At constant (2011-12) prices, the GSDP of the state during the same period was estimated at 20,725.71 crore, 21,151.83 crore,  22,507.01crore and ` 24,004.75 crore with corresponding annual growth of 2.06 percent, 6.41 percent and 6.65 percent.

The share of Primary Sector (Agriculture, Livestock, Forestry, Fishery and Mining & Quarrying) at current market prices accounted for 23.25 percent, 18.48 percent, 18.24 percent and 17.74 percent during the year 2013-14, 2014-15, 2015-16 and 2016-17. During the same period, its share of GSDP at constant (2011-12) prices were 23.77 percent, 19.28 percent, 19.02 percent, 18.61 percent.

The Secondary Sector contributed 24.38 percent in 2013-14, 26.14 percent in 2014-15, 26.36 percent in 2015-16 and 26.08 percent in 2016-17 to the GSDP at current market prices. At constant (2011-12) prices, its contribution were 25.79 percent, 26.99 percent, 26.74 percent and 26.31 percent during the same period.

The Service/Tertiary Sector being the major contributor towards the economy of the state contributed 47.60 percent in 2013-14, 49.19 percent in 2014-15, 48.93 percent in 2015-16 and 49.54 percent in 2016-17 to the GSDP at current market prices. At constant (2011-12) market prices, its contribution during the same period were 45.91 percent, 47.83 percent, 48.29 percent and 49.11 percent respectively.

The Per Capita GSDP at current market prices stood at  73,168/-,  75,228/-,  81,765/- and  88,497/- during 2013-14, 2014-15, 2015- 16 and 2016-17 showing an annual increase of 4.18 percent, 7.26 percent and 8.23 percent. The estimates of per capita GSDP at constant (2011-12) prices were  66,111/-,  66,058/-,  68,808/- and  71,849/- with the corresponding annual growth of -0.08 percent, 4.16 percent and 4.42 percent.

Overview of the State Government Finances:

During 2015-16, the Revenue Surplus increased to  695.40 crore as compared to  176.42 crore during 2014-15 on account of increase in Revenue Receipts brought about mainly by higher revenue realization from the State’s Own Tax Revenue and increase in the State’s Share of Central Taxes against a marginal increase of 1.53 percent in Revenue Expenditure.

The Revenue Surplus is estimated to reduce to  386.90crore during 2016-17 (RE) on account of higher estimated revenue expenditure. The lower Revenue Surplus during 2014-15 has also affected the Fiscal Deficit during the year, increasing the fiscal deficit to  978.44crore as compared to  382.18 crore during 2013-14. The Fiscal Deficit reduce to  554.76crore during 2015-16 (Actual) due to estimated higher devolution of Central Taxes. The Fiscal Deficit during 2016-17 is estimated to increase to  1089.75crore on account of higher revenue expenditure.

The Primary Deficit of  572.84crore during 2014-15 reduced to  88.88 crore during 2015-16 (Actual). The same is, however, estimated to increase to  538.46crore during 2016-17.

  • The Revenue Surplus during 2015-16 is higher than that of 2014-15 on account of higher than proportionate increase in revenue receipt as compared to expenditure. The revenue surplus is estimated to reduce during 2016-17 as the revenue receipts is estimated to increase by 28 percent over 2015-16, whereas the revenue expenditure is estimated to increase by 35 percent.
  • With regard to deficit indicators, the fiscal policy of Government continues to be guided by the principle of gradual adjustment. The performance in respect of revenue surplus during the ensuing year and the rolling targets are in line with the revised roadmap of fiscal consolidation, as amended in 2015 and significant improvement is expected over the medium-term. The fiscal deficit will breach the statutory limit of 3 per cent of GSDP during the ensuing fiscal 2017-18 and rolling targets for the next two years. However, efforts to contain the fiscal deficit to within feasible limits will be initiated through revenue and expenditure management measures.
  • As per the Statement, the fiscal deficit of the State during 2014-15 was 4.01 percent of GSDP due to the fall in the State’s Own Revenue. However, the fiscal deficit greatly improved during 2015-16 to 2.07 percent of GSDP with the increase in State’s Share of Central Taxes in view of the recommendation of the Fourteenth Finance Commission. However, the Fiscal Deficit is estimated at 3.69 percent during 2016-17 as a result of lower estimated receipt from Share of Central Taxes and Grants as well as State’s Own Tax Revenue. The fiscal deficit is estimated at 3.80 percent of GSDP during 2017-18 on account of anticipated higher revenue expenditure.
  • The total liabilities as a percentage of GSDP from 2014-15 to 2017-18 (BE) are above the limit of 25 percent recommended by the Fourteenth Finance Commission. However, the ratio is sought to be reduced during the two year projections.

Fiscal Outlook for 2018-19 and 2019-20:-

The parameters of the Government’s medium term fiscal projections are the FRBM limits and the budget estimates. These are, however, subject to fluctuations depending on the state of the economy and central transfers, which directly affect the fiscal performance of the State. As explained earlier the fiscal deficit target of 3 per cent of GDP was mandated to be maintained throughout the award period of the Fourteenth Finance Commission (2015 – 2020), as per amended FRBM Act. The FD for 2018-19 and 2019-20 has therefore been assumed at 3.45 and 3.06 per cent of GSDP respectively.

  1. Receipts:

(a) Revenue Receipts:

The State’s Own Tax and Non Tax Revenue has increased from  1,282.51crore in 2014-15 to 1,285.41 crore in 2015-16 and is estimated to further increase to  1,734.71 crore in 2016-17 and  2,071.75 crore in BE 2017-18.

The State’s Share of Central Taxes has increased from  1,381.69crore in 2014-15 to  3,276.46 crore in 2015-16. The same is estimated to increase further to  3,668.82 crore during 2016-17 and  4,339.22 crore during 2017-18 as the Fourteenth Finance Commission has recommended an increased share of tax devolution to from 32 per cent to 42 per cent of the divisible pool, and a higher ratio recommended for the State out of the sharable taxes.

Other Central transfers such as grants for Central Sector and Centrally Sponsored Schemes, NEC, NLCPR and EAPs, etc. reduced from  3,764.08 crore in 2014-15 to  2,481.25 crore in 2015-16. This is, however, estimated to increase to  3,577.32crore in 2016-17 and  4,868.83 crore BE 2017-18. Consequent to the recommendations of the Fourteenth Finance Commission, the Centre has stop releasing grants to the State for financing its plan schemes and the State is required to meet such requirements out of the fiscal space provided by the higher tax devolution from the fiscal 2015-16.

  1. 2. Expenditure:

The total expenditure of  7,426.46crore in 2014-15 increased to  7,616.96 crore in 2015-16. The estimated expenditure of  10,103.19 crore in 2016-17 has been increased during the course of the year through additional allocations made by way of supplementary demands for grants, thereby enhancing its expenditure allocations over the budget estimates. Efforts are being made to maintain the fiscal deficit targets for the year through continuation of the extant economy measures, budgetary cut and restrictions on Non Plan expenditure. The total expenditure for 2017-18 is estimated at  12,537.81crore.

(a). Revenue Expenditure: the expenditure has increased marginally by 1.53 percent from 6,251.86 crore in 2014-15 to 16,347.72 crore in 2015-16. The revenue expenditure is estimated to increase to  8,593.95crore in 2016-17 and further to 110,647.63 crore in BE 2017-18. The major components of the revenue expenditure of the Government include Interest Payments, Maintenance expenditure, Subsidies, Salaries and Pensions.

Consequent to the merger of Plan and Non-Plan classification of expenditure by the Government of India from the fiscal 2017- 18, the State Government has also made a similar shift from the Budget of 2017-18.

Fiscal Policy for the ensuing financial year:

The fiscal policy for 2017-18 will continue to be guided by the objectives of the FRBM Act, that is to generate revenue surplus and reduce fiscal deficit and build up adequate surplus for discharging the liabilities and for developmental expenditures; (b) pursue policies to raise non tax revenue with due emphasis on cost recovery and equity; (c) prioritize capital expenditure and to pursue an expenditure policy that would provide impetus for economic growth with social equity and improvement in poverty reduction and human welfare.

  • Tax Policy:The collection out of the State’s Own tax and Non Tax Revenue during the 3rd quarter of 2016-17 was about 93 percent of the Budget Estimates for the quarter. Continuing with its efforts of revenue augmentation, the State will endeavour to improve its revenue collection in 2017-18 through periodic review, identification and introduction of new revenue collection measures.
  • Expenditure Policy: Expenditure will be focused on economic growth with social equity and improvement in poverty reduction and human welfare, the Government will continue with its policy of providing adequate resources for sectors such as education, health & family welfare, agriculture & allied activities, rural development and transport infrastructure apart from making adequate provision for meeting committed liabilities such as salaries, pension, interest payment and repayment of loans and advances.

The Fifth Meghalaya Pay Commission constituted by the Government to examine the existing structure of emoluments, etc is expected to submit its report by mid-term 2017-18, it is anticipated that the recommendation of the Pay Commission will cause additional financial implication for the State Government.

  • Borrowings:In 2015-16 the market borrowings of the State was This is estimated to increase to 948.30crore in 2016-17 and  1,025.00 crore during 2017-18. Other sources of borrowings constitute loans from financial institutions, Central Government loans for EAPs and Public Account.
  • Consolidated Sinking Fund: During 1999-2000 the Government constituted a “Consolidated Sinking Fund” for redemption and amortization of open market loan. In 2015-16 the Government has appropriated an amount of 38crore from revenue and credited to the Fund for investment in the Government of India Securities. The outstanding as at the end of 2016-17 is estimated at about 383.56crore.
  • Contingent and other Liabilities: Though at present there is no statutory limit as to the outstanding amount of contingent liabilities, the State is committed to restricting the issue of guarantees, except on selective basis where the viability of the scheme to be guaranteed is assured and the scheme is beneficial to the State. To service contingent liabilities arising out of the invocation of State Government Guarantees, the Government has constituted the Meghalaya Guarantee Redemption Fund managed by the Reserve Bank of India. During 2015-16 an amount of 74crore was transferred to the fund account.

The State has, amongst other things, great economic prospect in tourism and agriculture and allied sectors. However, the comparative advantage in these sectors can be leveraged, provided necessary logistics in terms of economic infrastructure like road connectivity, scheme-convergence, capacity building, financial assistance to prospective entrepreneurs etc,  which require substantial investment, both for creating assets and maintenance of existing ones, are in place. This requires the State Government to earmark adequate financial resources over and above normal government expenditures for State intervention in these crucial sectors through State development schemes.

Thus state of Meghalaya is on its right path to fiscal prudence and FRBM limit without compromising growth potential and business environment. State is also a role model for other states in terms of environment protection.

Meghalaya Trade & Commerce

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Meghalaya Trade & Commerce

The basic objective of economic reforms was to improve productivity growth and competitiveness in the Indian manufacturing sector. These reforms were aimed at making Indian manufacturing sector more efficient and technologically up to date, with the expectation that these changes would enable Indian manufacturing sector to achieve higher and sustainable growth. The government started to deregulate the Indian economy with a liberalization programme, focused on the investment pattern, trade policies, the financial sector, taxation and public enterprises.

In recent times, Industrialization has become the catch word of the midtwentieth century and industrial development of the under developed countries or developing countries like India. One of the great world crusades of our times, the Less Developed Countries (LDCs) hope to find in it a solution their problems of poverty, insecurity, overpopulation, backwardness, illiteracy etc. They consider it a panacea for all the evils of their social and economic life. In fact, the essence of economic development of an LDC like India consists essentially in the growth of industrialization.

Realizing the importance of industrialization, once Pt. Jawaharlal Nehru rightly remarked, “Real progress must ultimately depend on industrialization”. His vision was to see India in the group of developed nations of the world and industrialization was the only key to restructure the economy and to achieve sustained growth. Indian economy is a basically an agriculture based economy. It has been evident from the experience of the most of advanced countries that growth based upon agriculture sector will not be sustainable growth.

After studying such behavior of terms of trade they made their belief that for the agriculture based economies terms of trade would always become unfavorable in long run because;

  1. a) The income elasticity of export-goods of agricultural countries is low, while the income elasticity of import-goods is very high. As in case of domestic demand, the demand for agricultural products in other countries, in particular advance countries, is very low. In fact, developed countries have surpluses in agriculture products for exports. As against this, the demand for the import of manufactured goods by LDCs is very intense; and
  2. b) With the advancement of technology, input-output coefficients are declining and most of primary products which were used as raw material are replaced by the industrial cheaper raw material.

On the other hand, if we develop only tertiary sector and ignore industrial sector then there may be tendency of inflation in the economy and this inflation may lead to deceleration economic growth. Therefore, industrialization is the only method to achieve sustained economic growth. Moreover, economic history demonstrates that to eliminate a country’s techno-economic backwardness it is necessary to develop the industrial sector and then to diversify it over a wide range of area and activities. Industrialization is a process of economic organization characterized by rapid setting up of industries and has invariably been the accompaniment of economic development. Nevertheless, economic development should not be treated synonymous with industrialization because industrialization is only a part of the whole process of economic development.

 

TRADE

Meghalaya is dominantly depend on agriculture and commercial forest industry. The major crops of Meghalaya are potatoes, rice, maize, pineapples, bananas, papayas, spices, etc.

In addition to the central government’s incentives for investments in the northeast region, the state offers a host of industrial incentives. The natural resources, policy incentives and infrastructure in the state favour investments in the tourism, hydroelectric power, manufacturing and mining sectors. Mineral, horticulture, electronics, IT, agro-processing and tourism have been identified as the thrust sectors for industrial development. The state has abundant natural resources, which offer significant avenues for investment. About 14 per cent (3,108 square kilometres) of Meghalaya is covered by bamboo forests and the state is one of the leading bamboo producers in the country.

The Commerce & Industries Department of Meghalaya & its constituent unit, Meghalaya Industrial Development Corporation, are jointly responsible for the development of industrial infrastructure in the state

Meghalaya has an established tradition of high-quality weaving. Around 15, 900 families are involved in handloom activities in the state. There are eight handloom production centres, 24 handloom demonstration – cum – production centres, 24 weaving training centres and a state –level handloom training institute (Mendipathar, East Garo Hills) in the state.

Meghalaya, with abundant deposits of coal, limestone, kaolin feldspar, quartz, granite, industrial clay and uranium and a small deposit base of sillimanite, bauxite, base metals and apatite has great industrial potential.

Meghalaya has a climate that supports agricultural and horticultural activities. The state offers potential for investment in these areas.

Meghalaya Planned Development

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Meghalaya Planned Development

Planned Development: Meaning and Necessity

When Independence came, India had a slender industrial base. Millions of her rural people suffered under the weight of a traditional agrarian structure. A long period of economic stagnation, against the background of increasing pressure of population, followed by the burdens of the Second World War, had weakened the Indian economy, so the states. There was widespread poverty. The partition of the country had uprooted millions of people and dislocated economic life. Productivity in agriculture and industry stood at a low level. In relation to needs the available domestic savings were altogether meagre. The promise of freedom could only be redeemed if the economic foundations were greatly strengthened. The Constitution established equal rights of citizenship, and these had now to be expressed through rising levels of living and greater opportunities for the bulk of the people. It was essential to rebuild the rural economy, to lay the foundation of industrial and scientific progress, and to expand education and other social services. These called for planning on a national scale, encompassing all aspects of economic and social life, for efforts to mobilise resources, to determine priorities and goals and to create a widespread outlook of change and technological progress. Thus, planned development was the means for securing with the utmost speed possible, a high rate of growth, reconstructing the institutions of economic and social life and harnessing the energies of the people to the tasks of national development.

To provide the good life to the four hundred million people of India and more is a vast undertaking, and the achievement of this goal is far off. But no lesser goal can be kept in view, because each present step has to be conditioned by the final objective. Behind the plans that are drawn up is the vision of the future, even as the Indian people had a vision of freedom and independence during the long years of their national struggle, and there is faith and confidence in that future. Fully conscious of existing difficulties the people have also the conviction that these difficulties will be overcome. The experience of the last ten years of planning and the large social and economic changes that have already taken place have brought a conviction that India/State can look forward with assurance to sustained economic progress. Even in this ancient land, for so long governed by tradition, the winds of change are blowing and affecting not only the dweller in the city but also the peasant in his field. At each stage, new conflicts and new challenges arise. They have to be met with courage and confidence. There is an excitement in this changing face of India as the drama of India’s development plans unfolds itself.

The more immediate problem is to combat the curse of poverty, with all the ills that it produces, and it is recognised that this can only be done by social and economic advancement, so as to build up a technologically mature society and a social order which offers equal opportunities to all citizens. This involves basic social and economic changes and the replacing of the old traditional order by a dynamic society. It involves not only the acceptance of the temper and application of science and modern technology, but also far-reaching changes in social customs and institutions. To some extent, recognition of this twofold aspect of change has been present in the Indian mind for generations past. Gradually it has taken more concrete shape and has become the basis for planning.

In the Constitution the basic objectives were set forth as “The Directive Principles of State Policy”. Among those ‘Directive Principles’ were those

“The State shall strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of national life”.

Further that—

“The State shall, in particular, direct its policy towards securing—

  • that the citizens, men and women equally, have the right to an adequate means of livelihood;
  • that the ownership and control of the material resources of the community are so distributed as best to sub serve the common good;
  • that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.”

These general principles were given a more precise direction in December, 1954, when Parliament adopted the ‘socialist pattern of society’ as the objective of social and economic policy. This concept, which embodies the values of socialism and democracy and the approach of planned development, involved no sudden change, and had its roots deep in India’s struggle for freedom.

The leading features of the pattern of development envisaged in the Five Year Plans may be briefly stated. The basic objective is to provide sound foundations for sustained economic growth, for increasing opportunities for gainful employment and improving living standards and working conditions for the masses. In the scheme of development, the first priority necessarily belongs to agriculture; and agricultural production has to be increased to the highest levels feasible. The Five Year Plans provide for a comprehensive and many-sided effort to transform the peasant’s outlook and environment. The growth of agriculture and the development of human resources alike hinge upon the advance made by industry. Not only does industry provide the new tools, but it begins to change the mental outlook of the peasant. There can be no doubt that vast numbers of the peasantry today in India are undergoing this change of outlook as they use new tools and experiment with new methods of agriculture. Even the coming of the bicycle in large numbers to the villages of India is not only a sign of higher standards, but is a symbol of new and changing attitudes. Agriculture and industry must be regarded as integral parts of the same process of development. Through planned development, therefore, the growth of industry has to be speeded and economic progress accelerated. In particular, heavy industries and machine-making industries have to be developed, the public sector expanded and a large and growing cooperative sector built up. The public sector is expected to provide specially for the further development of industries of basic and strategic importance or in the nature of public utility services, other industries being also taken up by Government to the extent necessary. State trading has also to be undertaken on an increasing scale according to the needs of the economy. In brief, in the scheme of development, while making full use of all available agencies, the public sector is expected to grow both absolutely and in comparison and at a faster rate than the private sector.

The meaning of the term Meghalaya refers to ‘abode of clouds’. Meghalaya is one of the seven sister states of India and with Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland and Tripura, for the north-eastern India. Meghalaya is also known as Meghalaya Plateau.

Listed below are some incredible facts about the fastest growing state, Meghalaya:

  • Meghalaya was created as an autonomous State by virtue of Assam Reorganisation (Meghalaya) Act, 1969 and North East Areas (Reorganisation) Act, 1971
  • Meghalaya has rich deposits of limestone, coal, uranium, etc and has an area spread of 22,429 square kilometres
  • Meghalaya has seen some of the largest downfalls in poverty in India. In Meghalaya, the percentage of population below the poverty line was 17.1 percent in 2009-10 which fell to 11.9 percent in 2011-12
  • Meghalaya has the second-lowest unemployment rate in India, after Gujarat, with 0.4 percent in rural areas and 2.8 percent in urban areas as per the record of 2011-12
  • Mawlynnong in Meghalaya is the cleanest village in India
  • The eight north-eastern states, seven sister states and the eighth being Sikkim, are the fastest growing states in India. According to a research by IndiaSpend, by reducing their dependence on agriculture and allied activities, and increasing the rate of education, the state has been prospering for years

 

 

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