Tag: Economic survey

Economic Survey 2023 | ‘India has made significant progress in gender equality’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India has made significant progress in promoting gender equality, and has a value of 0.490 on the Gender Inequality Index (GII), the Economic Survey 2022-2023 stated, highlighting the performance of the government’s policies. This score is a remarkable improvement compared to the South Asian region’s average value of 0.508 and is close to the world average of 0.465, and has got India a rank of 122 among over 190 countries.

The improved GII score comes after the government’s commitment to promoting gender equality through inclusive growth, social protection, and gender-responsive development policies. The country’s investments in these initiatives have led to a reduction in multidimensional poverty and an improvement in the status of women in society, said the survey tabled in the Parliament on Tuesday.

The government has launched several major initiatives in the past few years aimed at reducing the gender gap and empowering women in all aspects of social, economic, and political life. The following are some of the key initiatives that have been launched in recent years:

1. Beti Bachao Beti Padhao (BBBP) – The BBBP campaign was launched in 2015 with the aim of ensuring the protection, survival, and education of the girl child.
2. Mahila Shakti Kendra (MSK) – The MSK program was launched in 2017 to empower rural women with opportunities for skill development and employment.
3. Working Women Hostel (WWH) – The WWH initiative was launched in 2015 to provide safe and secure accommodation for working women in urban areas.
4. Scheme for Adolescent Girls – This scheme was launched in 2014 with the aim of empowering girls in the age group 11-18 and improving their social status through nutrition, life skills, home skills, and vocational training.
5. Sukanya Samriddhi Yojana – Launched in 2015, this is an investment scheme that gives interest on investment that can be used for higher education or marriage expenses of the girl child

However, women’s participation in the labor force still remains low, and there is a significant pay gap between men and women. India’s score of 0.490 in 2022 also registers a slight slippage from 0.493 in 2021.

Also read: Economic Survey 2022-23 shows India has sufficient forex reserves to finance the CAD

The past few years have been challenging for the world, with the aftermath of the Covid-19 pandemic and the Russia-Ukraine conflict having a significant impact on human development globally.

According to the United Nations Development Programme (UNDP), 90 percent of countries recorded a reduction in their Human Development Index (HDI) in 2020 or 2021, marking the first time in 32 years that human development has stalled worldwide.

In India, the situation is not much different, with the country ranking 132 out of 191 countries and territories in the 2021/2022 HDI report. India’s HDI value of 0.633 in 2021 places it in the medium human development category, which is lower than its value of 0.645 in 2019.

The country has seen the HDI fall significantly in the last two years. The ranking fell to 130th in 2020. This is a drop from its 2019 ranking of 129th, with a score of 0.645, among 189 countries.

India’s position and trends in the global HDI 2021:

Despite this setback, India’s HDI value continues to exceed South Asia’s average human development and has been steadily increasing towards the world average since 1990.

One of the main reasons for India’s progress in human development is the priority given to investment in social infrastructure. The government has made significant efforts to ensure universal health and education, and this has played a crucial role in the country’s progress towards a better future.

Also read: India’s Economic Survey shifts the narrative to ‘quality of life’

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey 2023 | India’s civil aviation sector booms with ‘great potential’ — air travel rebounds

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The country’s civil aviation industry has “great potential” because of rising middle-class demand, increased disposable incomes, and favourable demographics. Air travel has also recovered since the relaxation of the coronavirus pandemic-related curbs, according to the Economic Survey.

The survey for 2022-23, tabled in Parliament on Tuesday, listed various factors that are helping the civil aviation sector, including the UDAN scheme, which has considerably enhanced regional connectivity through the opening of airports in the hinterland.

Under the UDAN (Ude Desh ka Aam Naagrik) scheme, which is aimed to facilitate/ stimulate regional air connectivity by making it affordable, the total number of tourism routes has increased to 59 and presently, 51 are operational.

Also read: Economic Survey: India’s progress in tackling climate change

“The civil aviation sector in India has great potential owing to growing demand from the middle class, growth in population and tourism, higher disposable incomes, favourable demographics, and greater penetration of aviation infrastructure,” the survey said.

With the containment of COVID-19 infections and the lifting of travel restrictions worldwide, the survey said, air travel has rebounded.

While in FY21, there was a considerable decline in air traffic — a fall of 54 percent — and passenger traffic handled — a decrease of 66 percent — last financial year witnessed a recovery.

“The current financial year has further shown a rebound, with both passenger and cargo movement close to the pre-COVID-19 levels. The total number of passengers carried in December 2022 stood at 150.1 lakh, which was 106.4 percent of the pre-Covid level (average for 11 months from April 2019 to February 2020).”

“During November 2022, total air cargo tonnage stood at 2.5 lakh MT, which is 89 per cent of the pre-Covid levels,” the survey said.

Also read: Economic Survey 2023: Housing prices beginning to firm up after 2-yr COVID lull

The government has also approved Rs 4,500 crore for the revival of existing unserved/ underserved airports/airstrips of the state governments, Airports Authority of India (AAI), public sector undertakings and civil enclaves.

In-principle approval has also been granted for the setting up of 21 greenfield airports.

More than one crore air passengers have availed themselves of the benefit of the UDAN scheme since its inception.

An amount of Rs 104.19 core has already been reimbursed to the Airport Authority of India in the form of viability gap funding (VGF) during FY21 and FY22 towards the UDAN.

While mentioning bank credit, the survey said there was a decline in credit to shipping and aviation.

“Uncertain growth prospects in the global markets and uneven credit allocation to the transport sector led to a decline in credit to the shipping and aviation sector by 7.9 percent and 8.7 percent, respectively, in November 2022,” it said.

The survey noted that sectors like inland water transport and civil aviation that have significant untapped potential are also being encouraged sufficiently.

Parallelly, the focus is also on improving coordination among different stakeholders and ministries. This will help resolve compliance issues and increase the efficiency and effectiveness of investments, it added.

In her first address to the joint sitting of the Parliament on Tuesday, President Droupadi Murmu said India has become the third largest aviation market in the world and is growing rapidly, with the number of airports increasing to 147 from just 74 in 2014.

Also read: Economic Survey 2023: India aims 45% reduction in emission intensity of its GDP by 2030 from 2005 levels

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey: India’s progress in tackling climate change

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India has enhanced its climate action “manifold” despite the adverse effects of COVID-19 pandemic, said the latest Economic Survey tabled in the country’s Parliament on Tuesday, ahead of the annual budget.

The survey identified climate change as a global “hot-button issue” that is critical to India’s economy and its goals. It added that India currently spearheads one of the “most robust climate actions” through its Nationally Determined Contributions (NDC) under the Paris Agreement.

Here’s the progress in the eight missions under the National Action Plan on Climate Change (NAPCC):

National Solar Mission: India reached a solar power capacity of 61.62 GW installed by October 2022. The country also achieved its target of receiving 40 percent of installed electric capacity from non-fossil fuels by 2030, ie., nine years ahead of schedule.

National Mission for Enhanced Energy Efficiency: The government reported that it has integrated its development goals with its “ambitious” climate action goals in the form of higher energy saving targeting of 6.63 million tonnes of oil equivalent notified in the PAT cycle-VII in October 2021. A PAT or Perform, Achieve, Trade scheme is a regulatory instrument to reduce energy consumption in energy intensive industries with an associated market-based mechanism to enhance cost effectiveness through certification of tradable conserved energy, the International Energy Agency explains.

National Mission on Sustainable Habitat: The government made 721 kilometres of metro rail network operational by August 2022. Additionally, 6.28 million toilets in individual homes and a over 621,000 community and public toilets were constructed by April 2022.

National Mission for a Green India: The government has set aside Rs 626.96 crore to meet its afforestation targets over an area of 2.1 lakh hectare. Afforestation is the process of establishing new forests on land not previously forested.

National Water Mission: The ‘Jal Shakti Abhiyan: Catch the Rain’ focusing on rainwater harvesting and conserving was launched in March 2022. The Ministry of Jal Shakti which took on the nation-wide campaign was allocated Rs 86,189 crore in the 2022 Budget.

National Mission on Strategic Knowledge for Climate Change: Twelve Centres of Excellence for climate change were created and strengthened in June 2021.

National Mission for Sustaining Himalayan Ecosystems: An inter-university consortium was constituted and eight major research and development programmes were initiated.

National Mission for Sustainable Agriculture: The government met key targets for financial year ending March 2023 of covering 0.15 lakh hectare under organic farming and 1 million hectare under micro irrigation.

Furthermore, the Chief Economic Adviser, Anantha Nageswaran, also lauded the government’s efforts to expand the area under mangroves through the implementation of the National Coastal Mission Programme on ‘Conservation and Management of Mangroves and Coral Reefs.’

To meet the demands of affordable climate finance, India has also mobilised private capital to issue green bonds. According to the latest available data from Securities and Exchanges Board of India, 15 Indian corporates have issued green bonds worth Rs 4,539 crore from 2017 to September 2022. These bonds generate proceeds for investment in environmentally sustainable and climate-suitable projects.

What are the Centre’s goals?

India has a Net Zero Pledge to achieve net zero emissions by 2070 which was announced by Prime Minister Narendra Modi in November 2021 at COP26. Net zero implies the cutting of greenhouse gas emissions to as close to zero as possible.

The updated NDC aims to reduce emissions intensity of its GDP by 45 percent by 2030 from 2005 levels, the survey reported.

Under the National Green Hydrogen Mission, India aims to be energy independent by 2047. The Economic Survey announces that the country aims to have about 50 percent cumulative electric power installed capacity to be derived from non-fossil fuel-based energy sources by 2030.

ALSO READ: Economic Survey 2023 | Government expects inflation to cool off but slowly

The economic survey also hopes that India will use the G20 presidency to achieve coordinated solutions to key issues of global concern such as adequate climate finance. Leaders met at the summit to discuss the role of the G20 common framework in helping with debt resolution. International Monetary Fund’s First Deputy Managing Director Gita Gopinath, however, pointed out that developing countries will need “much higher financing” to adapt to climate change and contribute to climate mitigation.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Global economic factors, recessionary fears in advanced economies led to FPI sell-off: Eco Survey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Global economic factors such as inflationary pressures, monetary tightening by central banks, and recessionary fears in advanced economies exerted pressure on FPIs to sell in Indian markets, Economic Survey 2022-23 said on Tuesday.

In addition, investors were sitting on gains from Indian stocks that could be realised to offset losses elsewhere, the survey noted.

These factors led to foreign portfolio investors (FPIs) pulling out a net amount of Rs 16,153 crore from the Indian capital markets during April-December FY23 as compared to an outflow of Rs 5,578 crore in the year-ago period, with both equity and debt segments witnessing net outflows.

Segment-wise, FPIs made a net withdrawal of Rs 11,421 crore from equity markets and Rs 12,400 crore from debt markets. On the other hand, they invested a net amount of Rs 8,662 crore through debt Voluntary Retention Route (VRR) during the period under review.

However, on account of strong macroeconomic fundamentals of the Indian economy and the improvement in market risk appetite from time to time, assets under custody of FPIs increased despite the outflows driven by global factors, the survey said.

Total assets under custody with FPIs increased by 3.4 per cent to Rs 54 lakh crore at the end of November 2022 as compared to Rs 52.2 lakh crore at November-end 2021.

Unfazed by withdrawal by FPIs, Indian stock markets gave positive return during April-December 2022 as investments by Domestic Institutional Investors (DIIs) acted as a countervailing force against FPI outflows, rendering the Indian equity market relatively less susceptible to large-scale corrections.

Also Read: Economic Survey 2023 | Domestic pharmaceutical market to reach $130 billion by 2030

The Indian stock market saw a resilient performance, with the bluechip index Nifty 50 registering a return of 3.7 per cent during April-December 2022, and BSE benchmark Sensex closing 3.9 per cent higher at the end of December 2022, from its closing level on March 31, 2022.

Even among major emerging market economies, India outperformed its peers in April-December 2022, while global stock markets declined because of geopolitical uncertainty.

“Net DII inflows and net investment by mutual funds in equities were observed during FY23 (until November 2022),” the survey said.

The 42-member mutual fund industry saw net inflows to the tune of Rs 70,000 crore in 2022 (till November) as compared to Rs 2.5 lakh crore a year ago.

Despite the lower net inflows compared to last year, the mutual fund industry’s assets under management (AUM) rose 8.1 per cent to Rs 40.4 lakh crore at the end of November 2022, on year-on-year basis, thanks to the market performance.

This year’s mutual fund flows included a net inflow of Rs 90,000 crore in the equity-oriented schemes and Rs 1,091 crore in solution-oriented schemes. However, net withdrawal of Rs 1.1 lakh crore was seen from the debt schemes as well as Rs 13,649 crore from hybrid schemes.

As per the survey, outflows from liquid funds and hybrid schemes were mainly affected by increasing interest rate cycles, liquidity requirements and advance tax commitments by corporates.

Also Read: Economic Survey 2023: Housing prices beginning to firm up after 2-yr COVID lull

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey 2023: Housing prices beginning to firm up after 2-yr COVID lull

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Housing prices have started to firm up after a two-year COVID lull and unsold inventories have declined on rise in demand, the Economic Survey said on Tuesday, as it anticipated a decline in prices on the back of a cut in import duties on many construction materials.

India’s residential market has witnessed recovery this fiscal on pent-up demand with increase in housing sales despite impediments like rising interest rates on home loans and appreciation in property prices, said the Survey which was tabled in Parliament.

Also read | Economic Survey makes a case for startups to shift domicile to India, calls it ‘reverse flipping’

The release of “pent-up demand” was reflected in the housing market, as demand for housing loans picked up, the Survey noted.

“Consequently, housing inventories have declined, prices are firming up, and construction of new dwellings is picking up pace and this has stimulated innumerable backward and forward linkages that the construction sector is known to carry,” the document said.

Housing prices have risen due to an increase in the construction cost amid Russia-Ukraine war that hit global supply chain, the survey said.

The Russia-Ukraine conflict affected the supply chain, resulting in price escalations of key building materials like steel, thereby increasing the overall construction cost and resulting in a rise in housing prices, it added.

The Wholesale Price Index for cement, lime and plaster has increased from 127.1 in December 2021 to 137.6 during December 2022, indicating an uptick in the input cost for construction.

“Going forward, the recent government measures, such as the reduction in import duties on steel products, iron ore, and steel intermediaries, will cool off the construction cost and help to check the rise in housing prices,” said the report.

The Survey document noted that vaccinations have facilitated the return of migrant workers to cities to work in construction sites as the rebound in consumption spilled over into the housing market. This is evident in the housing market witnessing a significant decline in inventory overhang.

Quoting housing brokerage PropTiger data, the survey said the inventory overhang — which refers to the estimated time period developers are likely to take to sell off the unsold inventory, based on the current sales velocity — fell to 33 months in the third quarter of FY’23 from 42 months last year.

The universalisation of vaccination coverage has a significant role in lifting the housing market as, in its absence, the migrant workforce could not have returned to construct new dwellings.

Also read | Economic Survey | India’s credit initiatives boost agri growth — A look at key schemes

Apart from housing, construction activity, in general, has significantly risen in FY23 as the much-enlarged capital budget (capex) of the central government and its public sector enterprises is rapidly being deployed.

Elaborating on the state of the realty sector, the Survey said “the Real Estate sector has witnessed resilient growth in the current year, with housing sales and the launch of new houses surpassing in Q2 of FY23 the pre-pandemic level of Q2 of FY20.” It pointed out that the onset of the COVID pandemic accentuated a slowdown in every economic space, and the real estate sector was no different.

Project delays, deferment of big-ticket purchases, stagnation of property prices, and scarce funding for developers induced slackening of demand, the survey said, adding that the situation was further aggravated by the associated lockdown and migration of workforce involved in the sector to their natives.

The work-from-home model had an impact on the demand for office space requirements by the corporates.

“The Pandemic, however, brought about a change in individual home buyers’ sentiment in favour of owning a house. With the easing of curbs, there was an increase in interest in the residential housing sector and more so in the readily available and affordable segment.

“The hybrid work mode with the privileges of working from anywhere encouraged first-time home buyers to move away from the conventional metros, and this brought about a pent-up demand in the residential real estate markets of Tier II and III cities,” the survey said.

Improvement in affordability in response to measures taken by the government during the pandemic, such as lower interest rates, reduction in circle rates, and cut in stamp duties on transaction of sale/purchase of immovable property and the extension of the Real Estate Regulation Act (RERA) also played a significant role in post-pandemic rebound of the realty sector.

Notwithstanding the current impediments, such as rising interest rates on home loans and an increase in property prices, the realty sector has witnessed resilient growth in the current year, it pointed out.

Housing sales and the launch of new houses in Q2 of FY23 surpassed the pre-pandemic level of Q2 of FY20. The unsold inventory stood at 8.5 lakh at the end of 2022 with 80 percent of the stocks under various stages of construction.

“This comes on the back of sustained sales momentum as the sector steadily recovers from the impact of the pandemic,” the survey said.

Also read | Economic Survey 2022-2023 hits and misses

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey 2023 | Domestic pharmaceutical market to reach $130 billion by 2030

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Economic Survey 2023 projects that India’s domestic pharmaceutical market will reach $130 billion by 2030, sustained by the country’s continued growth in the industry despite the COVID-19 pandemic.

Finance Minister Nirmala Sitharaman tabled the survey during a joint session of the Parliament of India on Tuesday.

India ranks 3rd in global production of pharma products by volume and 14th by value, the survey reported. It is also the largest global provider of generic medicines contributing 20 percent of global supply and is the leading vaccine manufacturer with a 60 percent market share.

“The Indian pharmaceutical industry plays a prominent role in the global pharmaceutical industry,” the survey said.

ALSO READ: Economic Survey 2023: Top 10 key highlights

The domestic pharmaceutical market was estimated at $41 billion in 2021 and expected to reach $65 billion by 2024. It is further expected to reach $130 billion by 2030.

India’s pharmaceutical exports achieved a 24 percent growth in FY21, driven by COVID-19 demand for critical drugs and other supplies in 150 countries, and sustained growth in FY22 despite global disruptions.

“The performance of pharma exports in FY22 has been robust, sustaining growth despite the global trade disruptions and drop in demand for COVID-19-related treatments. Carrying forward this growth momentum, drug and pharmaceutical exports during April-October 2022 was 22 percent higher than the corresponding pre-pandemic period of FY20,” it said.

Foreign investment in the pharma sector has also increased, crossing the $20 billion mark in September 2022.

FDI inflows reached $699 million by September 2022 after increasing four times over since 2017. This bump was supported by investor-friendly policies and positive outlook for the industry, the pre-Budget document said.

ALSO READ: Economic Survey 2023 | Electronics industry records 4x growth in last three years

The government regulates drug prices through National Pharmaceuticals Pricing Policy and provides affordable generic medicines through Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP).

The Department of Pharmaceuticals and the National Pharmaceuticals Pricing Authority has fixed ceiling prices of 119 formulations under the National List of Essential Medicines (NLEM) until December 31, 2022. In addition, retail prices for 2,196 formulations have been fixed under the Drugs (Prices Control) Order, 2013, the survey added.

“Until December 31, 2022, ceiling prices for 890 formulations of 358 drugs/medicines across various therapeutic categories under the NLEM 2015 have been fixed by the National Pharmaceuticals Pricing Authority,” the survey said.

By the end of 2022, over 9,000 Pradhan Mantri Bhartiya Janaushadhi Kendras were opened under the PMBJP across India offering 1759 medicines and 280 surgical devices.

With agency inputs.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey 2023: India aims 45% reduction in emission intensity of its GDP by 2030 from 2005 levels

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The economic survey has highlighted the increasing reliance on renewable energy for power production. The share of renewable energy as part of installed power capacity grew to 29 percent in 2021-22 from 12 percent in 2014-15. As on September 30, 2022, the government had sanctioned the entire target capacity of 40 Giga Watts (GW) to develop 59 solar parks in 16 states. The total electricity generated in FY 22 was 17.2 lakh GWh compared to 15.9 lakh GWh in FY21.

The industrial power capacity increased from 460.7 GW on March 31, 2021, to 482.2 GW on 31st March 2022. India aims to reduce the emissions intensity of its GDP by 45 percent by 2030 from the 2005 levels as well as achieve 50 percent of the cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.

The government aims to reduce fossil fuel imports by over Rs 1 lakh crore and create more than 6 lakh jobs by installing at least 5 million metric tonnes (MMT) of Green hydrogen production capacity per annum. On its path to achieving net zero emissions by 2070, India aims to add renewable energy capacity of 125 GW by 2030 to abate nearly 50 MMT of annual GHG emissions.

Also Read: Economic Survey says India EV sales will hit 1 crore mark annually in seven years

India’s updated nationally determined contribution (NDC) from 2015 also aims to create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030 and better adapt to climate change by enhancing investments in development programmes in sectors vulnerable to climate change; particularly agriculture, water resources, the Himalayan region, coastal regions, and health and disaster management.

The Central Electricity Authority (CEA) has projected the optimal generation capacity mix to meet the peak electricity demand and electrical energy requirement for 2029-30, with the likely installed capacity expected to be more than 800 GW of which non-fossil fuel would be more than 500 GW. CEA has also estimated that the average emission rate will decline by around 29 percent by 2029-30 compared to 2014-15 and a drop in emissions rate per kWh from 0.71 in 2017-18 to 0.51 in 2029-30.

Also Read: Economic Survey | India’s credit initiatives boost agri growth — A look at key schemes

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey makes a case for startups to shift domicile to India, calls it ‘reverse flipping’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Economic Survey has made a case for startups to shift domicile to India and has recommended regulatory action and “solution –focused strategies” that will discourage startups from moving abroad in the search of a conducive regulatory environment.

The Survey observed that many Indian firms are establishing headquarters abroad, particularly in locations with favorable legal and tax systems. The survey notes that the process of “Flipping” refers to transferring the full ownership of an Indian company to a foreign entity, along with the transfer of its IP and data. This effectively converts the Indian firm into a 100 percent subsidiary of the foreign entity, with its founders and investors retaining ownership through the foreign entity by exchanging all shares.

As per the survey, startups often “Flip” early on due to commercial, tax, and personal considerations of their founders and investors. While, some companies “Flip” because their main market is overseas, others do so due to investor preferences or to access capital markets for better valuations and funding opportunities. In the past, better IP protection, tax treatment of licensing revenue, and flexible corporate structures have also been reasons for “Flipping”.

Looking at reversing the trend of entrepreneurs leaving India, the survey says that reversal of ‘flipping’ can be achieved through collaboration among government agencies and other stakeholders.

Also Read: Economic Survey 2023 estimates real GDP to be at 6-6.8%

The survey has recommended the following measures to accelerate ‘Reverse Flipping’:

1. Simplifying the process for grant of “Inter-Ministerial Board (IMB) certification” for start-ups.
2. Further simplification of taxation of Employee Stock Options (ESOPs).
3. Simplifying multiple layers of tax and uncertainty due to tax litigation.
4. Simplifying procedures for capital flows: Many countries, such as US and Singapore, have easier corporate laws, with lesser restrictions on the inflow and outflow of capital and treatment of hybrid securities.
5. Facilitating improved collaboration and partnerships with established private entities to develop best practices and state-of-the-art start-up mentorship platforms.
6. Exploring the incubation and funding landscape for start-ups in emerging fields like social innovation and impact investment.

In recent years, the startup community has called for simplification of tax policies on employee stock ownership plans, more favorable laws on capital movement, and equal tax treatment for both listed and unlisted companies.

The Economic Survey’s observations come amid discussions in the startup community about the costs of moving a company back to India. PhonePe, a decacorn that recently relocated to India, described the process as a “stiff shock.”

Also Read: Economic Survey | India’s credit initiatives boost agri growth — A look at key schemes

PhonePe’s CEO, Sameer Nigam, stated that at least 20 unicorns are interested in moving back to India if the regulatory and tax environment improves. He explained that moving back to India is treated as a capital gains event for existing investors and requires a fresh valuation and payment of taxes, which resulted in “a loss of Rs 8,000 crore ($1.1 billion) for PhonePe’s investors“.

He also pointed out that early-stage startups face the challenge of convincing employees to accept a reset of their stock options, as well as the risk of losing accumulated losses in tax savings. Nigam stated that the Indian law needs to change to make it more attractive for startups to move their domicile to India.

The survey highlights India’s booming startup scene, placing it among the largest in the world. Indian startups generated over 900,000 direct jobs in 2022, a 64 percent increase from the average of the previous three years, as per the survey. Nearly half of startups hail from Tier 2 and Tier 3 cities, demonstrating the abundant potential at the grassroots level. Although government support has made starting a business easier, start-ups still face challenges like funding, generating revenue, limited access to supportive infrastructure, challenging regulations, and complex tax structures.

Also Read: Economic Survey 2023 | Electronic industry key driver for manufacturing output, records 300% growth in last two years

The Survey noted that, destinations like Singapore and the UAE have designed their policies and tax structures to attract companies to establish holding companies and regional headquarters by offering tax benefits for dividends received by a subsidiary. In Singapore, there are no taxes on dividends paid to resident or non-resident shareholders. The UAE also doesn’t impose withholding taxes. The Netherlands provides participation exemptions on dividends and capital gains for companies meeting certain shareholding thresholds, however, these exemptions are not available in India and relocating existing structures to India triggers capital gains tax. However, the abundance of capital through the thriving private equity and venture capital ecosystem, changes in rules against round-tripping, and the advancement of India’s capital markets have slowed down the practice of “flipping” and have encouraged companies to consider “reverse flipping”.

2023 is expected to be a challenging year for the global economy, and startups are navigating tough waters as well. Venture capital investments dropped to $24 billion in 2022, down from the record $35 billion in 2021, which can be seen as a reset for all metrics. Investors are now demanding profitability and rethinking valuations following the decline of newly-listed tech companies.

Unicorns such as Byju’s, Bharat-PE, Swiggy, Sharechat and Meesho have all reported substantial losses, leading to a shift away from growth at any cost. To improve unit economics and conserve cash, many highly-funded, high-value startups have had to lay off employees. Over 20,000 workers were let go by Indian startups at last count.

For our ball-by-ball coverage of the Economic Survey 2023, please click here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic survey 2023: Unemployment rate slips below pre-pandemic level and worker participation improves

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Economic Survey 2022-2023 tabled by Union Finance Minister Nirmala Sitharaman in the Parliament on Tuesday states that labour markets have recovered beyond pre-COVID levels, in both urban and rural areas, as shown by supply-side and demand-side employment data. Unemployment rate fell from 5.8 percent in 2018-19 to 4.2 percent in 2020-21, it said

According to the survey, the Periodic Labour Force Survey (PLFS) shows that the urban unemployment rate for people aged 15 years and above declined from 9.8 percent in the quarter ending September 2021 to 7.2 percent one year later (quarter ending September 2022). It states that the urban unemployment rate is at a four-year low.

“This is accompanied by an improvement in the labour force participation rate (LFPR) as well, confirming the emergence of the economy out of the pandemic induced slowdown early in FY23,” the Economic Survey said.

Employment in nine major sectors has increased by 10 lakh over the year
2021-22 as per the QES.

As per current weekly status (CWS), labour market indicators recovered from 2019-20 (July-June) to 2020-21, and for both males and females, with improvement in employment indicators. Region-wise, while rural labour market indicators have been improving for both males and females, the urban labour market is slightly behind pre-COVID levels in 2020-21 (July-June).

The Labour Force Participation Rate for males has gone up to 57.5 percent in 2020-21, as compared to 55.6 percent in 2018-19. Female Labour Force Participation Rate has gone up to 25.1 percent in 2020-21 from 18.6 percent in 2018-19. There is a notable rise in Rural Female Labour Force Participation Rate from 19.7 percent in 2018-19 to 27.7 percent in 2020-21.

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Quarterly urban employment data shows progress beyond pre-pandemic levels as the unemployment rate declined from 8.3 percent in July-September 2019 to 7.2 percent in July-September 2022.

Reflecting rising formalisation of employment, net addition to Employees’ Provident Fund Organisation (EPFO) payroll has moved upwards after rebounding from COVID-19 with the majority share coming from the youth, the Economic Survey said. EPFO based net payroll for all industries is on the rise with 105.4 lakh in FY23 (till Nov) against 78.6 lakh in FY20.

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It added that year-on-year (YoY) decline in monthly demand for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) work is emanating from normalisation of the rural economy due to strong agricultural growth and a swift bounce-back from COVID-19.

Catch Economic Survey 2022-2023 highlights here 

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Economic Survey | India’s credit initiatives boost agri growth — A look at key schemes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Economic Survey 2022-23, tabled in the Parliament by the Union Minister of Finance and Corporate Affairs Nirmala Sitharaman a day before Budget 2023 is announced, noted that India’s agriculture sector has over 4.6 percent over the last six years. The Survey takes a look at these schemes and provides recommendations going forward.

It said that the performance of the agriculture sector remains critical to growth and employment in the country. Investment in the sector must be encouraged through an affordable, timely and inclusive approach to credit delivery, the Survey said.

“It may be noted that more than 75 per cent of rural female workers are employed in the agriculture sector. This implies a need to upskill and create employment for women in agriculture-related sectors such as food processing. Here, the self-help groups (SHGs) can play a crucial role in shaping rural women’s potential into concrete developmental outcomes of financial inclusion, livelihood diversification, and skill development,” the Survey said.

Let’s take a look at the government’s key schemes:

PM Kisan scheme

It is a central sector scheme to supplement the financial needs of land-holding farmers. The financial benefit of Rs 6,000 per year is transferred into the bank accounts of farmer families through DBT. About 11.3 crore farmers were covered under the scheme in its April-July 2022-23 payment cycle. The scheme, through a span of over three years, has successfully provided assistance of more than Rs 2 million to crores of needy farmers.

Many studies and findings indicate that the PM KISAN scheme has helped farmers towards productive investment in agricultural activities, the survey said.

Agriculture Infrastructure Fund (AIF)

AIF is a financing facility operational from 2020-21 to 2032-33. Under this, a provision of Rs 1 lakh crore for 2020-21 to 2025-26 has been made, and interest subvention and credit guarantee assistance will be given until 2032-33.

Since its inception, an amount of Rs 13,681 crore has been sanctioned for agriculture infrastructure in the country, covering more than 18,133 projects. These include 8,076 warehouses, 2,788 primary processing units, 1,860 custom hiring centres, 937 sorting and grading units, 696 cold store projects, 163 assaying units and around 3613 other kinds of post-harvest management projects and community farming assets, the survey said.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

PMFBY is currently the largest crop insurance scheme in the world regarding farmer enrolments, averaging 5.5 crore applications every year and the third largest in terms of the premium received. The scheme promises minimal
financial burden on the farmer, with them paying only 1.5 percent and 2 percent of the total premium for the Rabi and Kharif seasons, respectively, with Centre and State Governments bearing most of the premium cost.

During the last six years of its implementation, farmers paid a premium of Rs 25,186 crore and received claims amounting to Rs 1.2 lakh crore (as of October 31, 2022).

The acceptability of the scheme amongst the farmer can be ascertained from the fact that the share of non-loanee, marginalised, and small farmers have increased by 282 percent since the scheme’s inception in 2016, the survey said.

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Mission for Integrated Development of Horticulture (MIDH)

Several expert groups have identified horticulture as a high-growth area and a source of buoyant income and improved resilience for farmers. The scheme to promote horticulture covering fruits, vegetables, root and tuber crops, spices, flowers, plantation crops etc., was introduced in 2014-15.

The interventions include introducing improved varieties and quality seeds, incentives for plantation crops, cluster development, and post-harvest management. According to third advance estimates (2021-22), a record production of 342.3 million tonnes in an area of 28.0 million hectares was achieved.

The government has identified 55 horticulture clusters, of which 12 have been selected for the Cluster Development Programme (CDP) pilot phase. This programme is designed to leverage the geographical specialisation of horticulture clusters and promote integrated and market-led development of pre-production, production and post-harvest activities, including the entire
supply chain, the survey said.

National Agriculture Market (e-NAM) Scheme

India launched the National Agriculture Market (e-NAM) Scheme in 2016 to create an online transparent, competitive bidding system to ensure farmers get remunerative prices for their produce. Under the e-NAM Scheme, the government provides free software and assistance of Rs 75 lakh per APMC mandi for related hardware, including quality assaying equipment and the creation of infrastructure like cleaning, grading, sorting, packaging, compost unit, etc.

As on December 31, 2022, more than 1.7 crore farmers and 2.3 lakh traders have been registered on e-NAM portal 8.17 Climate-Smart Farming Practices: This is slowly gaining acceptance with farmers using clean energy sources like solar for irrigation. The farmers have been incentivised to transfer electricity generated through solar to the local grid.

Crop yield prediction models using artificial intelligence and drones for monitoring soil and crop health have been initiated. Smart farming also enables crop diversification, which will help farmers reduce their dependence on monsoons for water. There are over 1,000 agritech start-ups in India. These assist farmers in improving farming techniques, the survey said.

Kisan Credit Card (KCC) scheme

The Kisan Credit Card Scheme (KCC) was introduced in 1998 for farmers to empower them to purchase agricultural products and services on credit at any time. As of December 30, 2022, banks issued Kisan Credit Cards (KCC) to 3.89 crore eligible farmers with a KCC limit of Rs 4,51,672 crore. With the Government of India extending the KCC facility to fisheries and animal husbandry farmers in 2018-19, the number of such cards in the fisheries and animal husbandry sector has also grown.

As a result of the initiatives taken and the measures to strengthen existing policies, there has been a consistent increase in the agriculture credit flow over the years, exceeding the target every year for the past several years. In 2021-22 also, it was about 13 percent more than the target of Rs 16.5 lakh crore. The target for the flow of credit to agriculture for 2022-23 has been
fixed at Rs 18.5 lakh crore.

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To ensure that the farmers pay a minimal interest rate to the banks, the Government of India has introduced the Interest Subvention Scheme (ISS), now renamed Modified Interest Subvention Scheme (MISS), to provide short-term credit to farmers at subsidised interest rates. Under this scheme, short-term agriculture loan up to Rs 3 lakh is available at 7 percent per annum to farmers engaged in Agriculture and other Allied activities, including Animal Husbandry, the survey said.

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