 Hey, good morning everyone. This is Aishnami from Chennai Centre. Today in the next few minutes, we are planning to start with the economic survey. The scheme is something like this. We have two volumes of the survey to be covered. We are now going to three the economic survey into three classes. How we have planned is there are like around 10 to 11 chapters in volume one and similarly like around the 10 chapters in volume two. So we will be doing like more than two sessions to complete all the chapters of the two volumes. When you look at the volume one, it is mostly like analytical type and then mostly it will be useful for your mains preparation and for the mains answer rating. The major concept which is throughout the volume one is something upon the wealth creation. The government has taken as the major theme to discuss in volume one. Whereas volume two will be mostly like the class pattern where we would have started studying GDP, then growth and development, then the public finance, then about the money inflation, then about the banking, then about external sector. So when you move on to the volume two, you will be seeing much familiarity with the things what you have already studied in your classroom environment. So our notes has also been prepared in a similar pattern like how we want to like take up the data operation from the economic survey. So let us say two things. Volume one will be mostly for your mains perspective whereas volume two will be mostly with the data and the latest presentations of the economy. And that will be much more important for your volumes aspect because we have to remember many of the trends and the patterns. So today's class, what we have planned is like a few chapters, like four to five chapters of volume one, starting from the first chapter which actually talks about the wealth creation. So what I'll do is I'll complete every chapter and then we'll be like taking a few minutes to see if I could clarify any of your doubts if it is there. Otherwise we move on to the next next chapter. So we are starting with the first chapter in the economic survey volume one. I hope you all have been circulated with the book what we had done as a concise version of the original economic survey. If you have downloaded the chapters from the finance ministry website and if you have it in your soft copy that is fine. Else I hope like you would have received the soft copy of the economic survey from our side. So we are right now going to run through the chapters based upon the content what we have given through the survey from the academy. Now we'll start with the first chapter. The concept is starting with the wealth creation. Basically we all will be wanting to know the basic terminologies and economics. Whereas we say like income, wealth, the earnings, spending, consumption, these are all the several words which we will be learning. Here this has been taken as the wealth creation. Actually whatever we have studied as GDP or the income creation in the country itself has been like mainly moved on to the concept of wealth. If you look in the survey there is no like a specific definition what we can say that this is what is defined as wealth. But generally if you want to tell your economics you can say accumulated income is wealth. The presentation in the first chapter will be going in such a way that all the major financial indicators, the growth in them will all be taken as a presentation for the wealth creation. So we look at like what are all the things which they are talking as the wealth creation and then we are going to see that the key words which is given here as the chapter title, the invisible hand supported by the hand of trust. So you know like the invisible hand is nothing but the market economy and we are going to see like how the economy has been dominated by the market economy or rather if you want to say in a really simpler term, how the economy is getting dominated by the private sector and how the wealth creation is happening through that. However policies have helped for the wealth creation and how they have actually not performed in certain periods or like how they have lost the trust in the economy and how are we now regaining the trust in the economy again upon the private sector. It's like a story like so basically we start with the concept called as the wealth creation, how the wealth has been created in India. And we see like what is the role of the private sector or the market economy in this and then we see like how the private sector is also not able to perform well because of certain reasons. And finally we are trying to see like how the policies should be able to bring back the trust in them and how that performance should be improved so that we can go ahead in doing on this wealth creation. So that's the storyline in which this particular chapter has been built upon. So now the storyline we are going to like substantiate it with the data and the evidences. The first colorful diagram is basically to show you like you can see that on the top this yellow colored thing which is also like you can see in this area this is what we are attributing for India and it is a very, very historical perspective dating back like around several decades and several centuries even. So when you look at that India had been very much dominating in the wealth creation across different countries in the world. So India had been very, very rich in terms of like the resources, in terms of income generation, in terms of the materials available in the country. So that's the first thing which they want to present. The second thing is like they want to say that India's GDP is slowly improving and you will be learning from the news also. Several countries are still struggling to come back out of the recession across the world. But still be here to the news that India is capable of doing like at least five percent, six percent like and talking about the period. Maybe beginning of Jan 5th that's when the economic survey was presented. And I request kindly to the students to keep in the mind like whatever presentation we are doing please run your timeline till up to the month of Jan and 5th. Because post COVID situation any of these things are during this COVID situation the things which I'm going to explain may not be like very, very relating to it. And you know like the survey was presented towards the end of Jan and all these pictures have been showing that India is actually reviving slowly and then it was moving well among the world economies. So if you put all these perspectives into the right now current situation it may be very difficult for me to like even convince you that India is doing very well. But please keep your timeline in your mind somewhere like up to Jan like travel along with the economic survey. Let's look at the facts and the figures and we go to the next year's economic survey we will really know like what is the current situation and how it has impacted on the economy. So coming back to the slides and then looking at these two diagrams which is on the top. This is to tell us like how the GDP of the country has started slowly improving in a very good pace and in a very good growth rate. And they have given the periods like around 2000 after 2000 itself India really saw very good growth of the GDP. The per capita GDP was also improving right now like they can say that India is having somewhere around 132,000 rupees as per capita GDP. Those data we will be able to find from the volume 2 which we will be presenting in the future classes. But basically we want to say that India's GDP is increasing and this is taking as one of the indicators. Where it is showing that wealth creation can be done very well in India because of our income generation capabilities actually improving. So that's the interpretation of these two graphs which we can consider. And there is a chapter in which we are going to completely discuss upon like how the market economy in terms of like the capital market is also performing. This is one of the diagrams I am going to show you like we know what is the sensex and how many companies are represented usually to be 30 like. And Bombay Stock Exchange is the major platform which is running in the country with the capitalization of several companies coming into it. So when you look at this diagram they are just showing like the different 1000 marks and when we were able to cross these 1000 marks. So we can say like from 1986 the efforts had been going on and then we are like looking at 5000 marks, 10,000 marks, 15,000 then 20,000, 25,000. So when we are seeing this diagram has been divided into three different phases we can say that for crossing this 15,000 mark and reaching 20,000 mark it looked like a very long period till up to 2007. I think we took the time and between 2007 and 2014 again the phase two you can see that it was actually a slow down phase. This was like a very good growth phase at that time only slowly we reached the 20,000 mark and in this period of like seven years there was a slow down. From 2014 we started increasing in the capitalization very quickly you can see that there was a jump in the 5000, 5000 mark. It took a very long time here to achieve those things. But post 2014 there had been a very quicker increment in the marks which they were crossing, the sunset crossing that 5000 point mile slope. So this is all to show that the capitalization or the investments are also happening in a very good way in the country which they see as one of the ways how the wealth creation can be. We are anyways going to elaborate more upon the sunsets and the performance of other things in the next few chapters. This is again an evidence to show that like how wealth creation is impacting the economy. You can see that as we are earning more then we can pay more salary to the employers and wealth creation and benefits read by the suppliers. This is all like about the raw materials suppliers see whenever you look like a diagram like this all you have to understand is you look at the x-axis first you are going to see that when the wealth creation is increasing which is kept on the x-axis and the employees salary. So the regular line wherever you are going to see is going to show you the best of it. What is the meaning of this best of it is whenever you are seeing a dot on this line it is like to that level of wealth how much shock salary increase should have happened with the employees. And if you are going to see any of the dot above that line it is going to be seen like you are actually to that level of wealth the salaries which are being paid is actually more and sometimes it is less. But mostly we can see that the wealth is increasing the salaries paid to the employees is actually increased. So right now coming back to the point here again wealth creation and benefits read by the suppliers here also you can see that as the wealth creation is happening. On the supply side also we are able to see that the raw material supply is also increasing. So then we move ahead and then we see how the wealth creation is benefiting. You can see this is about the capital expenditure which means that people are coming forward to like to reinvest more and more like they are wanting to do newer investments. So capital expenditure is also increasing and you can see that foreign exchange reserves are also increasing. We are going to give you enough evidence today through the survey that how they expose and other things which we are doing as a trade with the other countries have actually resulted in higher wealth creation. So this is again further evidence to talk about the wealth creation on the tax collection in the country. You always know that there will be a tax buoyancy where we say like as the income of the GDP is increasing the tax collected will increase. Similarly we are seeing a positive fit here you are seeing it's increasing like as the wealth is increasing the direct tax may mainly the two major direct tax which you all will be knowing will be the income tax and whatever the profits which the companies are going to pay. So those are corporate profit tax and the income tax and the two major direct taxes which the government collects as the major thing. So that is also improving as a wealth collection for the wealth creation that's in place. Now they slowly shift on to the point where they want to say that the invisible hand or the market economy what is its role in contributing to this wealth creation or how is it helping us trade more well. You can see like a post the liberalization policies like we are seeing a time frame of 1990 here and then after 1996-97 they have created a dent kind of a thing here in the diagram. And they are showing a very sharp increase particularly after 2000s and then till up to now it is an increasing line. So this is where they want to say like the policies liberalization policies whatever we have done has actually started helping us to create more wealth and we are going to give you lots of evidence through the surveys for the wealth creation through the privatization as well as the participation of the private sector. So this is another capitalization way like we are saying like we have shown you the data on the census there across the three phases. In the third phase it's very quickly increasing right now the capitalization thing. Similarly we are also wanting to say like mutual funds sector has also started doing very well particularly after 2000 and 2003 you can see a very increasing line. Post to this liberalization period so all of these policies are actually helping us to create more wealth in the country. So this is also they are showing like you can see that there is a green colored bar here where it is written as major ports and public sector but minor ports and private sector. So that's the point what they want to make through this graph. So the private sector though it is a minor port the growth in the ports sector has been very very faster mainly because of these things that they are trying to say that again the wealth creation of the country is improving. And you can see that similarly the volume of cargo which has been handled in the ports across the different years. You can see this the brown colored thing is continuously increasing which is what is the minor ports and which we mentioned as a private sector. Whereas in the public sector though it is seeming to be dominating because it is major ports the kind of the growth which this minor port was having is very very faster. So that's the point which they want to again make like how the policies have helped us to improve our performance in terms of the production as well as in the value. So this is again to show like how much of growth rate is happening across the real sectors like the steel and the cement. I hope you all know like there are the major industries which are being captured through the index of industrial production. So they are all the major things which we always look for IAP index kind of things. In that they are categorizing certain things as like open sectors where they want to call it as a market economy. The closed sector which they want to save which is still with the governments or the public sector's control. You can see the open sectors are all having very good growth rates whereas the closed sector is having a lesser growth rate. Then coming to the growth in freight traffic across open sectors and the closed sectors you can see that closed sector which is about the railways. There are two things which you will have to see always when you are talking about the transportation. One is how many passengers are traveling through the road through the railways. One is the growth rate and the other one is the private thing. Here they are talking about maybe the goods thing so the private thing in which we are seeing that in the road sector which is like where you are seeing. There is a lot of private participation these days who have heard about lots of PPP models. So the point is not here to say that loads are actually belonging to the private sector. The point is only to tell you that private participation has actually increased more in this freight traffic as well as even in the creation of the infrastructure. Whereas in case of your railways you know it is totally still to the public though some parts of it has been handed over to the private. But still it is the major services of the railways sector is still reminding with the public sector. So here you can see that the closest sectors growth is very less whereas the open sectors growth is actually going on very fast. Anybody wanting to ask anything? Slides are not clear. See I will tell you why this. There is a comment here saying like the slides are not clear. What we could do is after this presentation or after this class is over for your reference of these diagrams. We will again post the volume one from the economic survey of the ministry thing itself. There if you enlarge that diagram and if you see them the clarity will be very fine. The book in which we have given since they have pasted it as images I think reading these things may be sometimes be difficult. I will try to give you the diagrams from the economic survey from the finance ministry's website so that clarity can be had once you are finishing the class you will be getting the other questions. And for your kind information there is going to be one test which we are going to do in prelims type like the objective type test. Which will be having questions hundred questions from economic survey as such mostly the data will be asked from volume two once the portions are covered. But there will also be questions from volume one also for the prelims type thing. And the mainster series I hope you all would have like known like we are just starting with the internet series. We will be asking many questions from the economic survey which will help you to frame your answers before going for the examination. I will also give you a set of questions once the classes are over upon this economic survey like what can be the questions which can be asked from the different chapters. There is any doubt in whatever we have said so far you can ask me otherwise. Okay now we look at like I think this is the same this is about the passenger traffic. The last slide we saw about the freight traffic I told you freight is the goods which are being carried passenger is the people who are being carried through the different modes of transportation. And this also you can see that the open sector the transportation is very high whereas the closest sector in the railways. The number of traffic or the passenger traffic improvement is actually lesser only when compared to the road traffic. So all of these diagrams are repeatedly trying to tell us like with the participation of the market economy or open economy or the private sector. The performance of efficiency is actually improving or the income generation and the wealth creation of the country is actually improving. That is the point which they are continuously making through the evidences with the various graphs. Now we come to the other part of this particular chapter we started with saying like the invisible hand is there but it should be supported by the hand of the trust. So we have to understand what is this topic actually trying to tell us. We can see now they have the second part of the chapter where they say breakdown of trust in the earlier years of this millennium. So here they are starting to tell that though the private sector helped us post liberalization to improve the performance of the various sector, the real sector and the capital investments and mutual funds. Since everything was improved but we can see that the corruption perceptions index for India has also started increasing which means like the corruption has started increasing. The governance part, the efficiency part in terms of the administration everything has started slowing down for India. And you can see about the non-performing assets. I am very sure like you all will be reading about the various banks getting into troubles because the corporate sector is like failing to repay the bank and other things. We are going to see again in the banking sector the issues related to it and the solutions which the government as well as RBI has given. But here it is to show you like there are different colored lines which you can see here. These are all the micro industries and then you have MSMEs and then can you see that the red colored line is on the top which is about the large corporate sectors. So the large companies are the large corporate sectors. They are the people who are actually the reasons for the major NPA which is NPA is like they are not able to repay the loans by the larger sectors. So this is becoming a problem. So this is where they want to call it as a lack of trust or losing of trust because the private sector started functioning very well or started improving the efficiency of the economy. But at one point they started like involving in the kind of the bad practices which has resulted in the troublesome situation for the economy. So that is the significance. And similarly you can see that accounting qualities are scores of large defaults. So this is what is the accounting score which is expected but there are many companies which are at different points of time or different points of periods. You can see that the accounting quality is very less than what is actually expected out of these people like the larger companies. So they are becoming the larger defaults. So these are all seen as the lack of trust or the failure of the trust or what we had on them and they are not able to cope on to the extent what we have to in terms of the wealth creation. And you can see like the leading and lagging indicators disclose in the financial statements by large due quarters. This is basically assume that we run a company. We will be having different kinds of investments and different kinds of turnovers creditworthiness, networthiness there will be lots of financial indicators for a company. What the government is going to observe is when the company is performing in the economy they will be telling you to find out whether the company is doing well or is getting inverse trust. The stress can be revealed by many things like the operational expenses will be coming down. Maybe they are not paying back their loans. Maybe the turnovers are becoming less or maybe the networthiness is becoming a negative. So there are lots of stress indicators and there are lots of other leading indicators which will show that the company is not performing well. The tables about these indicators has been presented in the book which you can have a read to it. But they are saying that there are eight indicators. What you have to look at this graph and understand is only one company they have written as company A, B, C, D. There are different kinds of companies. You can see that most of the companies are having more than four to five stress indicators whereas only one company is presenting one indicator out of the eight indicators. So it seems like many of the companies are having we are talking mainly about the large departments. So they are having like more than four to five stress indicators with them. So which means that the large companies are there which are actually supposed to add on the large scale economies to the country. But they are resulting in large defaulting and they are actually starting to trouble the economy. You have heard about the twin balance sheets syndrome. So these corporates are going to pay with these kinds of problems. It is going to result in the problem for the banking system also. Their balance sheet will also be affected. I think we have discussed all these things in the last one. So now that we have identified that these people are not performing well or they are getting it in malpractices or they are not following good practices. Now we are going to say that what is the role of the government in order to go on do this enabling of the trust. So how do we bring them back into efficiency? How do we make them not get into this default and other things? So there are two three things which the survey mentioned. The first thing is it says that avoid policies that crowd out intrinsic motivation. So here we are mainly saying which are all the companies which are getting into this defaulting. They are mostly saying whichever is involved with the financial and the banking sector. Mostly on the financial side they are getting into this kind of a problem. I will tell you one smaller example. Assume that I am a bank who has given a loan to a corporate sector. The corporate sector will be paying back the EMI every month in the property. So when they are doing this the corporate sector has an intrinsic motivation that they should be having a good behavior. They think that they have to do the business well and they have to give it back the loan in time to the banking system. If you are going to go and do more good to this corporate sector they are working with their own intrinsic motivation. Their intrinsic motivation is like I am the corporate sector, I do the business, I do it well. I have money, I pay it back to the bank. So I am doing everything in time. How the bank should now react to me? It should select the EMI from me and then at one point the loan should be closed. But at times if the bank is going to come and give, going to give me more loans because I am doing very well in the past in history. Or if it is going to give me for a lower rate of interest. I am going to say that don't have the economic incentives to the people who are actually working with the intrinsic motivation. That is what they are saying, crowding out the intrinsic motivation. If you are going to give the policies in such a way that you yourself are crowding out that good behavior in the corporate. Ultimately you are going to result in a default. So don't do that kind of a policy. So if they are behaving well through that intrinsic motivation that they have to repay it and they are doing it. Allow the economy to work in the normal way. Don't go and give policies in such a way that you are economically incentivizing them. Which will ultimately result in the larger amounts of the default. So that is one of the things which they want to say. The second thing is reducing information as a symmetry. There is transparency in the process of anything like running the corporate, running the banking system, running anything. Then the information between the producers, the consumers, the creditors, everybody that is clear. Then this kind of a breaching the trust will not happen. So the last thing is about enhancing quality of supervision. So here we are going to say that one is like making more data available, more transparency in the data of the corporate sector, of the banking sector, of the government sector, everything. Information as a symmetry means there is no enough information between the producers and the consumers and other stakeholders in the economy. So we have to reduce that. So transparency itself will ensure the correctness of the performance. And the last thing is about enhancing quality of supervision, which the government has to definitely do. I think the government's role is expected mainly in this part where we have to do the regulatory work and the supervisory work in a proper way and identify the problems in the right time so that these kinds of issues with the private sector will not happen. Somebody has asked, ma'am, since the economy has been disrupted after Corona, how do we approach economy per prillums? This previous year's economic patterns still relevant for prillums and mains. Yes, of course, all the questions may not be relevant to the present situation. Of course, there can be questions which come out of the present situation. Maybe they can ask some more on the science and technology side because they may ask you about the Corona and how it has been dealt in the medical possible way. Mains aspect, there can be large number of questions which we are going to help you. But right now survey is considered as one of the latest authenticated data and the details from the government. So let us legitimately make an effort to complete the survey as such, what is being done there. And slowly we will move on from there to the current affairs because I already told you survey has been presented by the end of January. So let us not cross the timeline and then try to understand the things posing it into the current situation. I'm telling you again if you're going to combine these two things on study survey, my suggestions just read survey as a book. That's what can be done in the present situation. Anything which is about the Corona, whatever the government policies are being coming up right now should be read as a current. Yes, Kavya, what is your question? Ma'am, can you please explain what is information asymmetry? Information asymmetry is assume that I am a share broker and assume that you are an investor. I have to tell you, I will be the person who will be going and investing your money across a different, you know like we invest in different companies. I can't tell you that you invest only in one company. I can take like one lakh rupees from you and I'll be going and distributing this investment across different companies, right? Though the decision of investing across the different companies lies with me, I have to tell you like the 10 different companies performance and then give you maximum information to you. And on your behalf, I have to go and make that decision. If I don't give you enough information, I make the decision on my own that's called as information asymmetry. The person who is investing, the person who is helping facilitating the investment, I'm just giving this only as a smaller example. I'm telling you this information asymmetry can be between the private sector, the producers, and the consumers, and the government, and the regulatory mechanism. Everywhere there will be an information asymmetry, right? If there is no enough information how the company is actually performing, we won't be able to control the company's performance. So we don't want to get them into correction. We don't want to get them into a bad performance. So there should be enough data. Assume that a balance sheet is being asked by a company to be presented. It has to give all the details. So if it doesn't give, then there is no transparency. Then there is a situation of information. What is intrinsic motivation? I'll tell you with the smaller examples. Assume you and me, we both are going for a competition, right? It's a running competition. Like probably you are running with an intrinsic motivation where you think like you are getting a happiness, a passion out of what you are doing. You are saying like I have to run and then personally I should get a good performance. I have to do a good performance. Whereas when you're talking about the extrinsic motivation, you will be running with one frustration where you say that I have to prove to the world that I will be the winner. So there is a mild difference between these two motivations. Intrinsic motivation is basically seen as an inner feeling where you try to behave in a very good way. You want to do it with a passion. You want to do it in a good performance. You want to do it with a good positive note. What we are saying, the companies when they want to do this kind of intrinsic work, they want to do a good behavior. What is a good behavior? I do business. I am earning profits. I am paying my EMI. This is my normal behavior. What the corporate or what the banking system can do to the corporators, because the pillow is continuously paying the EMI in a very proper manner, the banking system may come and offer you a higher loan amount at a lower rate of interest. Because the government's policies may enable the banking system to do such a thing to the corporate sector. In this case, you yourself are giving me a scope for doing an over presentation. So if you are giving me a loan at a lower rate of interest, maybe at one point at a time, I will not be able to pay back the loan. And you are crowding out my good behavior. So they are saying that don't go and spoil the intrinsic motivation of the corporate sector by giving economic incentives. Who is giving this economic incentive? It is from the government side. So they are saying that don't do such kind of a policy. So you are also creating a situation that these people can get into a bad behavior. So you shouldn't be creating such policies. Ma'am, but then when we talk about intrinsic motivation from what I understood, I somehow feel like it is very subjective. And with situation, the definition could change. Is it possible? The example that you gave, if we are dispersing loans at a lower rate of interest, it could actually curtail intrinsic motivation. But at a different scenario under different economic circumstances, couldn't intrinsic motivation be given by dispersing out loans at a lower rate of interest? See, here you have to make the subtle difference between the priority sector lending. You would have studied about agriculture, MSMEs, export promotions, vulnerable section, they are all like belonging to the priority sector lending. But then also we are actually giving loans at a lower rate of interest. There are very many situations then these people they have not paid back the loans. I think that is not the point in this part of the survey, what we are talking is about the large deep waters. Because we showed you the evidence in the previous two slides, who are the people who are defaulting the most? So we don't want to encourage a culture among the larger corporate sectors saying that you are large and then you are doing very good. And therefore I want to help you by giving you more loans. I think that's the main point which crowding out the intrinsic motivation. See, there are two types of defaulters again. Some are called as willful, some are called as non-willful. I think here they are talking mostly about the... So therefore to the large deep waters we are trying to put a hold on it. So now that's the essence of the first chapter. As we started with the concept, we said something about the wealth creation. Then we gave the evidence of the wealth creation is doing good to the economy. Then we slowly moved on to the concept that the private sectors have started reaching the trust or they are failing the trust. And then we are saying how have we found out how they are failing the trust. We have taken up indicators like the non-performing assets and accounting quality scores all those things. Now we are going back to the point of the final suggestion that we are saying we should enable the trust so that the private sector will again start functioning. So that completes the title of this chapter where we are trying to help the invisible hand with the hand of trust. Next chapter which is upon the entrepreneurship and wealth creation of the grassroots. This is a very interesting chapter where they want to tell like how newer businesses have come into picture in India or rather I would call it as newer firms. And how these number of firms have increased the income level at the district level. So that's the word that grassroots which is going to mean here. Most of the analysis in the chapter has been taken up at the district level. So we are all very familiar with the GDP gross domestic product. Here they will be mentioning the word called as gross district domestic product. So they'll say something like GDP. So first let us get into this world level scenario that they are going to say like world bands this entrepreneurship data. And you can see that India is here with the red line. And after 2014 the number of new firms of the entrepreneurship level in India is increasing. You can see this word as new firms register. So how many number of new firms are getting registered year after year it is continuously increasing. So it's actually in a good trend. Now you can see that growth in new firms in India over time. So this is a diagram again which tries to show to you how 2014 how the number of new firms registration has deeply increased. And this is again a decomposition of this particular graph. The second graph which is figure 2B where you can see that agricultural manufacturing services infrastructure they have categorized to them into 3, 4 sectors as such. And you can see that agriculture number of firms are very less. Manufacturing and infrastructure they are also lesser but better than the agricultural number of firms. But you can see from 2006 slowly the number of firms in the services sector have been tremendously increasing. So that is the point which they want to make. So service sector is the one which is actually prospering very well in terms of registration of the new firms. So as I told you now we are coming into this word which is called as GDDP. Estimation of the impact of entrepreneurial activity on GDDP. They have given a data in the survey saying like if there is a 10% increase in the entrepreneurial activity, 1.8% of the GDDP increases in a year. You know like how we calculate the growth rate. So there is an improvement in the districts growth rate like by around 1.8% when 10% of the firms are registering more. See you have to understand that the X and the Y axis are slightly different. One we are talking in terms of the money value. Another one we are talking in terms of the number of new firms. I have not mentioned that these new firms are like large corporate sectors or anything. We are only saying they can be even like MSME sectors. But it is only to tell that more number of firms are getting registered in a district like around the 10% increase is happening. 1.8% increase in the values happening in terms of the income generally. So now we get back to the point. I think I have made the point. Assume that this is Chennai district. We have 100 firms here. If more number of firms 10% increase. So we are getting 110 firms. The 10 new firms I am not giving any description whether it is big, small or those things. 10% more increase whereas this will be resulting in 1.8% of the GDP. If we are having like 500 crores of the GDP that is going to increase by 1.8%. So the value increase will be much higher than the number of firms. So you cannot say that 10% increase is resulting in only 1.8% because the GDP will be in crores of money. You should be able to perceive the increase which can happen by the particular graph what we have given in this stage. And then this is India map where they are trying to tell you a distribution of the new firms across districts. You can see that the darker the general interpretation can go like this. The darker the color the more number of firms have been registered in that particular area. But the only good point which the survey wants to raise is throughout India across the districts that have been registration of the new workers. So that is a positive point which the survey wants to report. Though we can see like in Maharashtra area and some western belt and some southern belt and some northern belt. You will be able to see more registration of the firms. But still we can say that the brown color has been distributed across the country. So that is the point which they want to make. And then we mentioned about different kinds of firms getting registered. So the first one is agricultural, then the manufacturing, then the services and then the infrastructure. So you can see like when compared to the past 3 years back more number of firms are getting registered either in the manufacturing or in the services sector. Infrastructure is slightly lesser than that. And agricultural sector is trailing behind all the other three sectors. And growth in new firms across regions over time. So they have given the four different regions of the country. South India, North India, East India and West India. You can see the North India is on the top. South India is catching up with the West India in the recent past. That's what we can see. They both are merging the blue color and the orange color. Whereas East India is actually still lower in terms of the number of firms. Even in the recent past. Somebody must be suddenly thinking this graph is something different from the previous graph what was shown. The previous graph we showed like the infrastructure and we want to recall that. You will be thinking manufacturing and infrastructure by hand in hand pure and then the services sector, the growth, the number of new firms have been increasing very fast. Of course they have given it up to the period of 2018 post 2016 it is quickly increasing. Here they are comparing it with the, compared to the three years back what is the current situation. So maybe that particular increase alone they are looking at in this particular. Now we are going into the details of like which part of India is actually doing well in which sector is what is being discussed in these graphs. You can see that in the agricultural activity. Some parts of the central India and some parts of the Northeast India they are doing very good in those new registrations of the firms in agriculture. We are talking about firms in agriculture there could be different types of firms some of them they could be cooperative kind of thing. Cooperative societies some of them could be private sector the private kind of firms registration and agricultural sector is mostly happening in the Northeast area. Where they are capable of like giving more of the tea kind of tea plantation crops kind of a thing. So the firms are getting into more private sector kind of a registration in Northeast whereas it is more of the cooperative kind of thing in the middle of the country. Looking at the manufacturing sector you can see that the registrations are happening more in the western as well as in Maharashtra area and in some parts of South India and then some parts of Northeast also. So this is where the manufacturing sector is actually getting dominated. We are talking about entrepreneurial capability of districts in different kinds of sectors. And you can see in terms of the services sector it is mostly the North India like Uttar Pradesh, Delhi, Haryana. These kinds of areas they are actually getting dominated. Kerala is also in the dark colored one. Tamil Nadu parts of Tamil Nadu is in dark colored one. So the service sector is not uniformly across the country which is getting dominated mostly in the North and we have also mentioned about Tamil Nadu. Coming to where we are talking about the infrastructure again you can see only parts of the country which are actually focusing upon the western belt, the eastern belt. They are now improving lots of infrastructure in these belts. So these are all the distribution of the entrepreneurial capability of the districts across the different regions of the country. And so now if you look at there is a red color line which is coming down which is the unemployment rate. You can see that as much as the entrepreneurial activity are improving either it is in the manufacturing sector or it is overall entrepreneurial activity. And you say entrepreneurial it could be agriculture, manufacturing, infrastructure, service sector. Any of these things it is showing a negative association with the unemployment rate which means it results in the reduction of the unemployment rate. So all of these things you can take it as a level of the district. So we are mentioning about the GDP. So similarly you can say that these unemployment rates are falling down even at the district level or at the grass root level. Now the second concept which the chapter wants to talk to you is about the determinants of the entrepreneurial activity. First thing what we have said is the number of firms registration in the country has increased. So we are increasing the entrepreneurial activity. The second thing we have said about how this entrepreneurial activity is distributed across different regions of the country. And now we are trying to say that how this entrepreneurial activity is increasing and what are the reasons behind this increase across the districts. Why certain districts are doing very well in manufacturing some in the service sector all those things differences are there. But overall how the new firms registration is actually happening that there should be certain basic reasons why it is happening. One of the things which they want to present is some of the literacy on entrepreneurship. If you carefully look at this diagram we can see that there is a dent at the particular percentage after which the entrepreneurial activity is increasing at a very higher rate. And so we says that 72 percentage of the people they are becoming illiterate and the level of education is actually becoming higher. That's when we can see that this entrepreneurial activity of a particular district is increasing very fast. That's the interpretation of this diagram. Then we see number of colleges on the entrepreneurship. Here also we are going to see that there is a positive increase. More than 36 number of institutions this is only to represent that more. So how much more is like more than like 30-35 institutions that are there in the particular district. Then also they are going to tell that the entrepreneurial activity or the ability of a particular district increases fast. So we can see that these are the determinants and we are going to continue with the determinants of entrepreneurial activity. The other two major things what they want to say is one is about the market access and entrepreneurship. So if there is a good connectivity by the car roads you can see like around 75 percentage of the roads are car roads. You can see that the number of firms which are getting registered or the entrepreneurship is actually increasing. And you should also see that distance from large centers and entrepreneurship. So if you are closer to an urban center closer means like within 42 kilometers you have a good number of firms which are getting registered. But as the distance is going away and away we are seeing that the line is actually becoming lesser. So the entrepreneurship now you can summarize with the four things. One is like level of literacy number of colleges. Of course this is going to enable the literacy and you can talk about the market access and distance from large centers. So these are all seen as determinants of entrepreneurial activity at the district. So now they are summarizing how we have to improve the entrepreneurial activity at the district level. So as we have said like literacy levels should improve. The schools and the colleges we are having more in number it will result in more entrepreneurship. And I would request you to go back and look into the survey. They have mentioned the word called us already the engineering colleges have gone into privatization or rather like more number of private colleges are performing well in the promotion of engineering and other kinds of the colleges degrees. They are suggesting for privatization of education. So I hope this point has been raised in the context of saying that more literacy levels or the more levels of education should be improved. But this is a point which is given in the economic survey so you can make note of it. The government itself is actually mentioning about privatization should be promoted in the education sector if we have to improve the levels of education and the entrepreneurial ability. So that's there in the chapter I'll mark it and send it to you. Other than that better connectivity of the villages as I told you like car boats have to improve and access to the good centers, the urban centers will also improve it. Apart from this the regulatory things which the government has to do is that ease of doing business and then you are regulating the labor laws in a better way. Those are all the things which will be definitely improving the entrepreneurial ability in the panopaturing sector. So this is basically to tell you like India has a very good entrepreneurial ability which is coming up in the recent past particularly after 2014 also. And the distribution is across the country, across all the districts and they are giving the ability in different sectors across the different parts of the country. And they are giving certain reasons for the entrepreneurial ability like how it can be improved. And finally they are making certain policy situations if we work upon these determinants definitely we will be able to improve the entrepreneurial ability across the country, across the sectors. So that's the essence of the second chapter. Okay so now we are moving on to the third chapter. Here it's a very interesting chapter which is going to tell you about like pro-business and pro-crony policies. Pro-crony is a word which has been a thing which comes in the news very repeatedly and it's also a very favorite word of UPSC. It has asked questions like what do you think about croning capitalists and how is it getting promoted in the country, do you favor it, all those things. So in this chapter how the chapter has been designed us. First half of the chapter they want to tell us that how the pro-business policies in India have actually resulted in the increased wealth creation. So they just want to still maintain that the major thing to be reflected repeatedly. So the pro-business policies how it has positively benefited the country is the discussion for the half of the chapter. After which the discussion comes on the pro-crony policies which were followed in the criminal and as a result of which what were the negative impact which happened. And after the pro-crony again we have now come back to the pro-business policy. So that's what the survey wants to establish. Some of the pro-crony policies how it has negatively impacted the economy they are giving some examples and then they are finally coming to the point that pro-business policies only should be followed, pro-crony policies should not be followed. So that's the essence of this particular chapter. So here is where they are actually picking up the sensex as a base point and then the construction of the index and several other facts and details about it. As evidence to tell that how India has followed a lot of pro-business policies. We give you the evidence you will start understanding. I think this graph we saw it as part of our first chapter. So here you can see that in the initial phase the sensex increase that the 5000 mark increasing was a bit slower. Now we have said in the recent past the 5000 point milestone has been crossed very quickly. So that's the essence of this particular graph. We'll take it forward and see like how this sensex construction is changing over a period of time. This is a graph where you can see that there is a blue colored line and then there is a red colored line. You can see that from the point 1986 and then you can see from the point 1997. The point here is sensex is having 30 major companies in it as a representation. We want to understand the 30 major companies how long are they remaining within that 30. So the 30 is not fixed. Depending upon the performance of the companies there will be a circulation among the different companies. See Bombay Stock Exchange is there. There are like hundreds and thousands of companies registered. Let us take an example as that there are 500 companies which have registered with the Bombay Stock Exchange. Which are top performing those 30 will be taken into the representation of the sensex. So from the period of 1986 which is this blue line. The constituents sensex constituents which means that who are the companies which were there in the 30 and becoming form of the part of the sensex. They remind the same whatever may be the number of years. So here if you see the steel you should put it as 1986 and then for the next 8 to 9 years the constituents remain the same. But the red colored line is going to tell you that put this as 1996 from then onwards like for the next 10 years. The past few months they kept on changing. It did not remind the same. See if I was a company who was there in the sensex once in 3 years, once in 4 years, once in 5 years. I was like moved out of the sensex repeatedly. So they have said that churning and they have made use of a word constructive destruction. That is the word which they want to make use here. Constructive destruction. What is constructive here? The chance for many other companies who can come into the sensex they kept on increasing. So there is no guarantee like this blue colored line where the constituents remind the same. Constitutes started churning and that word they are mentioning here as what is constructive destruction. Or they want to call it as creative destruction. Now the question now comes into our mind which are these companies which are coming into this replacing the older ones. So here are the lots of evidences which you can see. In 1991 you saw that the manufacturing sector firms, the blue line is the manufacturing and services sector were very less. But you can see in the latest period you can see that the service sector firms are more into the sensex than the manufacturing sector. Similarly in terms of capitalization, capitalization is like how much money have you generated by selling the shares in the sensex or in the BSE. That you can see the manufacturing sector was dominating in 1991. But now you can see 55% of the amount which is being capitalized through the capital market is mostly for the company services sector. So here we are trying to prove a point that more number of companies are getting into the place as constituent within the sensex. And the kind of companies which are coming into the sensex started moving towards more towards the service sector and they are also generating large amount of capital through the capital market. And then you are seeing two more graphs in this page where you can see the highest to the lowest to firm market capitalization ratio and sensex. Say for example I gave you an example 500 companies are there in the Bombay Stock Exchange. There could be larger companies that could be smaller companies. The ratio of the largest to the smallest it was even as high as 100. But now the ratio has reduced to 1 to 12. You can see this here the ratio has actually reduced. So the survey actually mentions the data as the concentration of the firms in the sensex of actually the larger to smaller ratio has actually fallen down. And it is like 1 to 12. And similarly the market capitalization it's not being done by just by one particular company or a few companies. It is being one company if it is taking the market capitalization it can take like only up to 12% or less than 15%. So the concentration of the firms in terms of the number in terms of the market value generated everything has actually decreased. This is again showing to us something called as the competition is increasing across the firms which are getting into the Bombay Stock Exchange. Are we clear in these four graphs what we wanted to tell? So new firms have come into the picture. The size of the firms between the larger and the smaller have declined. The concentration has declined. All of this concept we want to call it as a creative destruction and constructive destruction. And we are happy about this process because when newer things come into the picture or the newer companies come into the picture of sensex the top 30 numbers. The economy is perceiving it as newer ideas, newer technologies, newer processes. They are all getting introduced to the people. And as a result of which more number of people the concentration has also come down. The competition is increasing because the competition is increasing and newer things are being obtained by the economy. Quality will be improved and the prices will be reduced. So these are all the benefits which they see when the pro-business policies are happening. So here they are showing again how this inside the service sector which are the specific sectors which are actually dominating the sensex. We can see that like around the IT and financial sector dominating almost like around the real concentration. This is by count, count means the number of firms which have gotten to it. By value also IT sector and the financial sector are increasing. And new sectors which emerged in the sensex following liberalization. Apart from the IT, we can see that the financial sector, the new pollowed line is the largest now. Pollowed by the red colored one which is the information technology. You also have energy sector phones into it. And you have consumer staples. And there are lot of other colors. So there are lots of other than the manufacturing sectors. There are lots of other sectors which have come into the picture including the healthcare and the real estate which are coming now into the sensex. So there is a churning of the companies inside the sensex. So this is what it is being given as a three key insights by the economic survey. It says like dominant firms are dominant only for one fifth of the time that there are pre-liberalization partners. Which means that they can be dominant only for three, four years. Once in three, four years they will be shut out and another newer form will get into the sensex. So they were not permanently dominant like people in the kind of pre-liberalization period. And we are getting new sectors, new technologies, new ideas and products. This is called as the process of creative destruction. And the difference between the largest and the smaller firms are shrinking. This we said that the competition is actually increased. So here is where the diagrammatic presentation is given by the survey where we are trying to say pro-business policies are good for the country because these are all the newer things benefits which the country has achieved. For which it says like the competition has increased, business resource allocation has increased and citizens welfare is maturing. Whatever we said in the pro-business, you can put it exactly opposite to that which will become the pro-pro. Which means that you are not actually promoting competition. You are trying to give some preferential treatment to some of the companies which you know. And the resource allocation will definitely get into a trouble if you are only favoring some of the companies. And if you are favoring somebody, then it is not going to result definitely in improving the welfare of the people. It is definitely only going to reduce the welfare of the people. So we are going to show you some examples how this pro-crony policies are actually affecting the efficiency of an economy. So far what we have done is how the pro-business policies which have promoted so many companies to come up very well across the different sectors and the representation through the senses we have discussed. Now let us go and look at how the pro-crony policies which we want to call it with the word wealth destruction. The earlier word for the pro-business policies we may use of the word creative destruction or constructive destruction. Whereas in pro-crony policies we are calling it as wealth destruction. We are actually eroding the wealth. So now what we are going to say is you can have certain evidences pro-crony. In the previous slide we said like some of the forms which may receive preferential treatment. This preferential treatment given forms are named with a particular name which is called as connected forms. Say for example this is one way for an example which we are mentioning that there is a party which is facing an election. It wins the election and then it is giving the laying of the road to a particular connected form. How will be the efficiency of that particular form doing? So it is given by a preferential treatment and these kinds of forms between 2007 and 2010 they have mentioned that in the sensex or in the equity index they have done very abnormal profits with an increase in 7% but the survey claims like from 2010-11 where we started doing only pro-business policies and we did not want to do the pro-crony policies. They started actually under performing by 7.5%. So when we are not giving them preferential treatment they are not actually efficient enough to compete with others and do a good job. They are actually inefficient. So we are not supposed to promote a particular connected form. Only because we are connected to them we shouldn't be assuming that they are efficient. So this is one of the ways how we can show that the wealth is actually getting destructed because of the connected forms. And this is another example which the survey gives you. You can see first in the title, this is like for the coal block allocations. Actually in the first chapter itself we were seeing like there were lots of open sectors and there were closed sectors. Open sectors we had examples in the country and other things. Closed sectors we saw the example of coal. So here let us assume that if the coal block allocation by the government is being done through the discretionary allocation which is the pro-crony policy or if it is being done through the competitive option which is the current policy. So in this period how this discretionary allocation was resulting in the eroding of the wealth. So that is what we are going to see. You can see here purchase of the capital goods and the equipment. After the related party transactions were given with the coal block allocation you can see that the capital goods equipment purchase has drastically increased by the related party transaction because this is the discretionary allocation. Similarly you can see that the operational expenses paid by the related party transaction after its allocation with the discretionary allocation that has also increased. And similarly operational income that has also become different. Whereas when you see the companies which are being competitively allocated with the coal block for this allocation you can see that post the allocation also these companies are not going and purchasing capital goods just because they have been allocated with the coal block allocation. So there is not much of a difference between the pre and the post period and similarly the operational expenses of these parties have also not drastically increased when compared to the pre period. Here you can see the bars are very different. Whereas the heights of the bars free and the post it is not very different. And similarly the operational income which is being earned by these parties when they are allocated through the competitive options it is not very different between the free and the post. So the point made in this particular graph is these people are doing mainly because they are being allocated with the coal block allocation they are being given with a higher amount of resources and it is done by a preferential treatment. Whereas the competitive options they are really spending only to the extent what is actually required. So this is also one of the evidences which the survey wants to give to show that how the pro-prony policies are actually not being good to the economy. So this is a pro-prony this is a pro business. So you spoke about companies not dominating for a longer period and your companies getting chances and constructive churning. But then don't you think wouldn't this lead to a lower faith in the economy because no entrepreneur gets into the market thinking okay it's just 3 years and then I might fizz out. Wouldn't this actually clearly crowd out the intrinsic motivation of an entrepreneur? See this is only increasing competition. We are not asking the company to go out of the market. We are only saying somebody is becoming better than you. See, Sensex is actually a representation of the top 30 companies. If somebody else is doing better than you, you can't stop them from doing better than you. If you want to be in part of the Sensex, you have to improve your performance continuously. It is not under performance actually a relative situation. Compared to the other company which is doing very good, where am I? So this crony capitalism, obviously it clearly has all negative effects. Is there any positive to it? As of now, as part of the market economy, we don't want to attribute anything positive to it. Except if there is a monopoly situation that only one particular company has the efficiency to do it and you choose that particular company to do it. That's not the feature because India is a mixed economy. We have a large number of private as well as the public players here. So this is not definitely going to help us. So these diagrams are now trying to show you like how these people who were given with crony policies how they have even become individual reporters and how many number of crores of money has been owed by these people who actually were given with a favorite policy. And this diagram again is represented in the lower diagram in a different way. They have put this red color bar to show that how much of wealth has been destroyed by the willful decoders. The meaning of that is I have taken loan, I have not given back the loan. I am a very large corporate sector. I have been given this particular work through a pro crony policy. The allocation by the government has been given to me by a preferential treatment. And I have lost the money because I did not do well. When I have lost the money in such a way, they have put this in middle of the budget allocation to the different sectors just to show to us how much money has been destroyed by them. And you can see here health education and social protection which is the next bar. So 136 and 138. So the amount which has been destroyed by the willful decoders is almost equivalent to the amount which the budget is allocating for the health and education and the social protection. So you may be listening from the news that India is not allocating more than like 1 percentage or 3 percentage for education and the health sector. When we are bothered about the allocation is very less, somebody else is destroying the amount which is equivalent to that tune of the GDP. So that is the point which they want to make through the graph here. So these are all the negative impacts what we see as a result of the pro crony policies. Again this is to show you like comparing between the willful defaulters and the non defaulters how these people have behaved if they are being given the pro crony policies. Basically they are willful defaulters. The meaning of that is they had been assigned with the work, they were given lots of resources, they were not able to perform and therefore they are now not doing well. They have become defaulters. Outstanding loans is very high among the, the diagram is not very clear right. All the red colored ones they are all like the willful defaulters. All the green colored ones are for the non defaulters. You can see like how transparent they are, disclosures, percentage of the promoter holdings. Again what these willful defaulters they do is assume that I am a company and I am going to start a newer project. Assume that I had been assigned with some particular work from the government by the preferential treatment and I am going to start a new project based upon that. And if I am a new pro, if I am starting a new project I may be raising some funds from the people also or from other sources also by selling shares for that particular project. These people they have a behavior. They sell for more than 50% of the shares to the people and or to the other investors and then they take the money. So one they are getting a preferential treatment from the government also they are getting the funds. Other is they are taking the money from the investors also. In both ways when they are failing and they are becoming the willful defaulters they are siphoning of the money from different sites and they may be giving loans to their own loan parties. So it is like siphoning money from different things and then they are promoting their own personal interest. So these are all the things other dynamics which are going into the people who have been given with the preferential treatment through the pro-growing process. So promoter holding they are doing it a lot and outstanding loans are given to the related parties. So that is also higher than these non-defaulters. Disclosures, this is like non-defaulters. The panel B they are trying to compare it with the distressed defaulters. Distressed defaulters is like they actually got into a real problem and they were not able to be back. Compared to them also you can see that this promoter holding which means like you are going and giving the money to somebody else whom you know but you will be selling the shares to the people you will be taking money from the government and you siphon of the money and give to your own promoters. So that is again high even with them and net outstanding loans you can see here it will be very high when you are looking at the related parties. So there are lots of mall practices which are being followed by the companies which are being given with any kind of a project through the preferential treatment. So here there are certain characteristics of them they are tending to be more opaque opaque means there will not be transparency we have been talking about information assembly from the beginning so these people will not be telling us what they are actually doing and then as I told you pledging 50% of the share holding to the lenders even the distressed defaulters do only 30% and the non-defaulters if I run a project not more than 10% I should be selling as a share value and then taking it from the public but these people they will go even up to 50% of the share holding to the lenders and then they will be making larger loans to the related parties they will be siphoning off the money from the public and the banks these are all the some of the characteristics of the defaulters so they are all the result of the pro-prone policies which happen. So now what actually we should do is we should be promoting the pro-business policies as indicated by the sunsets where there were good churning of companies property dinners improving good pricing the consumers were able to get good quality they were able to get so that is what is actually required there should not be any discretionary allocation which is actually called as the pro-prone policies which will hurt the market which will be promoting while narrow business interest mainly maybe because of their own interest the political parties may be giving it to the business people and it is going to result only in reducing the welfare of the people so these are the negatives of the pro-prone policies public sector monopoly, governments monopoly need not be seen as a pony capitalism because it is not government cannot be giving a potential treatment to itself see basically we see public sector we can call it as inefficiency of the public sector but if you are not doing as a public sector work if you are not doing a job by the government itself when you are giving it to the private when you are giving it to the private there should be a competitive environment in which the vote should be given it should not be saying like I pick one private sector and I give this job to them so that is what we want to call it as a pro-prone somebody is asking what is the 20th percentile and 70th percentile in the graph it is like if you have any hundred number we can divide it into even if you are talking about the population it should be 25 people what do they want to say 75% of the people what do they want to say so that is how the presentation is actually being given so that is one of the questions colleges and schools increase entrepreneurship or privatization of schools or colleges will increase entrepreneurship this is a very difficult question in the sense like colleges and schools we expect that the public education should actually improve say for example if you take the medical field there are colleges which are from the government side there are colleges which are from the private side also both of them are going to give out to doctors but the cost of producing the doctors are very different between the government and the privatization so if the economy's overall affordability level is improving people can join the privatization or the private colleges and then start doing the education what they want to do and then they can get into a better entrepreneurship but as far as privatization world is coming into education the cost of education is definitely going to increase this is one of the reasons why I was worried when it was mentioned in the economic survey that privatization was actually suggested for the education team and as such education and health sectors are the areas where we expect the government to do more particularly in the present COVID situation we would have understood like how can this actually be a very big public goal we'll come back to that so now let us move on to the chapter 4 where we are going to talk about the government's intervention and how it is actually hurting the economy rather than helping it so this is a good title where they have given and they have analyzed some of the policies of the government like 3-4 examples where they have given and they are trying to tell like in case the economy is maturing and if it is transforming itself where it can take more private sector players in the areas where the government used to do the government should think about it and then it should also be opening it up because in the name of government intervention it should not be resulting in hurting of the market so that is what is expected as the outcome from this particular chapter so let us... related party agreements are same as chronic capitalism so they are trying to give these kinds of names like connected firms, related party agreements all to represent the chronic capitalism chronic capitalism basically is promoting only a fewer business sector in the country by doing a preferential treatment the meaning of pro-chronic and chronic capitalism is almost like doing a policy and what is the result of it pro-chronic policy results in chronic capitalism so that is how the point should be seen somebody has asked me the point as chronic capitalism versus pro-chronic so pro-chronic policies will result in chronic capitalism that is how it can be seen now we get back to the chapter 4 so I have told you the context in which the chapter has been taken up so now I will go and see the evidences which the chapter wants to give about the how the market economy is that how much of government intervention is there in it because of the government's intervention how the economic freedom is affected and we slowly move into the case studies where the government intervention has actually resulted in hurting the economy so there are 4 case studies which we are going to see so first with this particular diagram is only to show us that you can see that India is in grey colour thing so relative economic freedom they are saying like it's actually unfree like it's not very free it's unfree so they are having lots of indicators like index of economic freedom index of global economic freedom global street journal centre for civil society there are various organizations which are releasing various indices all these indices are only trying to tell us that country, our country is actually is unfree in terms like we have lots of rules and regulations and restrictions where we are not able to do a good economic freedom what do you mean by economic freedom is basically you should have your own choice of selecting the goods and services country in purchasing them so you should be having enough freedom or the ability to buy the goods and services are we really having that much of an economic freedom we are comparatively unfree so that's the description here looking at this diagram index of economic freedom with the density of new business registration with more entrepreneurial activities happening of course the economic freedom will improve so that is what is this diagram's implication and this diagram is trying to tell you that if ease of doing business the correlation between the different things of this course with the economic freedom so you can see that the tallest bar is the ease of doing business so if you are going to give them a better business environment if you are going to allow them to do the business with ease then the economic freedom is going to increase if the economic freedom increases then the choice of selecting the goods and services to the consumers will also increase so what we have to do based upon this slide is we should be promoting more business registration and we should also give them the ease of doing business situation so that economic freedom can be improved and the choice can be improved to the person so the demand can be met in a better way in a particular country so that is what is the baseline of this and all of these diagrams are showing you that how many patents have been applied and how many patents have been granted you can see that if more patents are applied and more patents are granted then you will be having more economic freedom I already defined economic freedom as you should be having more choice or more freedom ability to select the goods and services patents means you know like newer things are coming in the picture newer innovation is coming in the picture so that is also one of the things which is represented through this diagram where you can see that the economic freedom is going to increase when the global innovation index is increasing so that is the best of it here so as the level of innovation is increasing the economic freedom is also increasing so similarly we are saying here as the number of patents applied and granted are increasing we can see that more economic freedom can be achieved so you have to give a better business environment more businesses have to come into picture more innovation has to come into picture when all of these things are happened then you can expect that the economy will be having more economic freedom so this is for the private sector as such to say that how the economic freedom can be improved now we are going to the second part of this chapter or the crux of the chapter where we are going to present some of the case studies in which the presence of the public sector itself is affecting this economic freedom first few slides we said about the patents the innovation, the business environment the business registrations all those things those are all pertaining to the market economy how economic freedom can be improved now we are going to say that this is a public sector but this public sector how is it actually affecting the economic freedom so we are going to pick up four examples and then we are going to talk so we will first start with the essential commodities act lots of changes are coming to the act very frequently but as of now the original act what is the crux of the act is to tell you that pertaining to these major commodities which are included in the act like some of the agricultural commodities pulses and other things diesel carers and other things you should not be stocking more than a particular limit so over stocking is non-formated it will be taken like coding so you are not supposed to do that they are all essential commodities you can have a stock only up to a particular limit so how this particular policy is affecting the economy so they are giving the various ways how this is actually affecting it is reducing the producer's profit in the sense like if I am a person who is wanting to stock on it I am not allowed to stock more than a particular thing then I won't be investing anything upon my processing or storage facility that is also seen as disincentivising or reducing the investment in the storage if I store it and then give it in an appropriate time then maybe my profits will increase but that is not being allowed and inhibits the vibrant commodity derivative markets if you store only you will be able to give it in the future so that is also not actually happening because development of agricultural value change so for storage processing if these things are all improved particularly storage is improved it will be definitely making the raw materials available to the next and next stage but because this essential commodities do not allow us to stock up more than a particular amount what happens is if I have more than the stock what the government says now I have to operate into the market as a result of which the prices will fall down now the prices will fall down this is what exactly happened with the audience which is also written in the economic survey say for example in the month of September of 2019 they said you should not hold the stock more than a certain amount so then all these people they were supposed to give up the onion in the month of October itself by the time November came the production actually inflow of the onion reduced so again the prices started increasing so the price volatility could not be addressed even after the essential commodities act coming into the picture and having a say upon the stock what is to be held by the producers as well as the retailers who are in the picture so that is what has been given as the diagram here so potato and onion they are being seen as like how the production stock and the stock limit is being imposed and how the prices are actually fluctuating you are not able to control the price fluctuation by limiting the stock so the original purpose with which the essential commodities act has been brought into picture itself at times fails because you are not able to stabilize the prices rather the prices become volatile because of this very behavior and disintensifying the the storage facilities is yet another major thing which this easy is actually right so these are all potato and onion limitations so that is the major worry about the essential commodities act where we want to say that how this is resulting in having multiple impacts like this the second case study is about drug price controls under essential commodities act we will come back to this slide in a minute what they have done is they have taken a case study of two major drugs in this one when you are talking about drug price control they are now going to talk about the essential medicines like the essential commodities they are going to say there are certain basic essential medicines you can see the national list of essential medicines and these medicines have to be priced only under according to the drug price control order so now we are going to see a situation before this listing of essential medicines was brought in under this DPCO how were the prices of it and how the prices were brought changed of course to this DPCO so that is the thing which we are going to see they have taken two medicines one is glycomet which came under price control which means it was brought under DPCO and glymeprex mf which was not under the price control so when it was in a pre this drug price control order situation the glymeprex which was like was having a higher price when compared to the glycomet but after this glycomet was brought under the drug prices control order that price actually increased when compared to the glycomet so this is what we say that the market intervention by the government has actually hurt the economy instead of helping it so now we want to understand how come we are trying to say that this particular glycomet surprise should be according to the government's intervention it is going to tell you away how it has to be priced but how come this is becoming higher than the earlier situation and it was not brought under control so this always says an evidence that per mg up to 99 rupees there has been an increase in the pricing of the drugs which have been brought under the DPCO essential medicines list and compared to the medicines which are not under the DPCO say for example this glymeprex mf it was increasing only by 25 rupees per mg whereas for the glycomet which came under the DPCO it was an increase up to 99 rupees so now comes the question why this difference why earlier it was less why now it is actually increasing so that is where this particular box item is going to help you they are going to say in like until 2013 that was some method which is called as the maximum allowable post manufacturing expenses this is something like assume that I am producing a particular medicine I produce I have a producer cost after I produce I have to take it in the market so there will be lots of cost involved in packing it, labeling it and then marketing it through the pharmaceutical industry and then reaching it to the consumer so whatever was there there is a cost to it and this cost can be added like around like 50% or up to 100% you can add it and make it as a full cost of the particular medicine but this method was replaced by another method which is opposed to this implementation of drug price control order where they said like assume in this room there are like 50 producers of the same medicine or like the medicine which is coming under the essential medicine so the glycomet what they are saying is if these companies are all folding more than 1% share in the total market what are the prices which they have kept the market price say for example the production cost and every cost is like around 50 rupees but if I set the price as 55 rupees I call it as the markup I am going to markup my own profits so I am going to consider all of these companies which are inside this room which is having more than 1% share in the total market and how much markup all these people are keeping an average of that that is what is the price which I am going to set for the essential medicines because they are all the major players in the particular field and I want to take into consideration the average price of these people who have set up for this particular medicine so like this when the methodology was changed from before to the after actually it has resulted in increasing the price of the medicines which are there in the essential medicines list rather than going down right so this is one of the issues which they are raising as the government's intervention which has resulted in troubling the economy as such and you can see that the effect of DPCO on prices and quantity consumed of regulated drugs regulated is which brought into DPCO so you can see that formalities that came under the DPCO pricing before and after you can see that the pricing has actually increased very much whereas those which did not come under this thing the price increase was only lesser and this is about the quantity this is about the pricing this is about the quantity the quantity increases only like comparable a little bit of increase only has happened for the medicines which are brought under the DPCO whereas which were not brought under DPCO also it was only comparable increase here because it was brought under DPCO there was not a huge increase and here you can see that the prices in terms of hospitals versus retail outlets here is there is a small benefit which has happened in the hospitals the price has actually increased very drastically for the essential medicines which are being sold from the hospitals but when you are comparing it with the retail outlets the price of the essential medicine has increased only through a lesser extent whereas the price of the medicines which are not under the essential risk it has increased a lot so the only benefit what the DPCO has seen literally from this graph is that in retail outlet situation essential medicines price increase was there but it was lesser when compared with the medicines which are not under the DPCO so that is the only major benefit or a small part of it which the economics claims that by DPCO this only has been achieved positively but in the rest of all other occasions particularly in the hospital situation the price of the essential medicines have increased very high and compared with the medicines which are not brought under the DPCO so this is another situation where the government actually has by intervention hurt the economy so now the third thing is a much known very close to our heart thing where we know like the intervention in the grains market where government is going to go and procure the grains from the farmers and it will keep it in a food corporation of India there will be one stocking up of all the grains and then it will be given through the public distribution system I think in many other occasions also you would have studied about this as a major agricultural issue because we are procuring at a price and then we are almost offering at a very lower price and this is resulting in a very huge food subsidy but instead of giving this kind of a food subsidy where you are piling up huge amount of stock and then transportation cost and then giving it through the public distribution system but not giving the quality with all these problems because of government's intervention in the grains market the alternative suggestion which the survey is saying like instead of intervening in this particular way why don't you just go and give the cash transfers to the people so that they will be able to buy a better quality things in the sense like not on the public distribution system it should be given with the cash transfers this will also reduce the bill on the food subsidy for the government part so those are the suggestions which are given we are going to see one by one so here the government procure 40 to 50% of the markets of plus and you can see from Punjab and Haryana situation how much they are going on like increasing in giving the rice and the wheat here after a year and this is the buffer stocks with the food corporation of India you can see that there is a norm you can see in numbers how we are storing which is very high than the norm which is close to right you can see 45.8 million tonnes of wheat instead of 27 million tonnes which has to be stored for rice also it is 28 million tonnes of rice against the 13.25 million tonnes of the prescribed norm so we are definitely storing very high so the storage cost is also high the quality of the grains also go low after this they have to transfer it to the states for the distribution through the public distribution system finally when it goes through the PDS it goes at very really lower cost or lower cost right so now we are coming back to the overall picture in the country and they are saying actually the consumption of the cereals the rice and the wheat is actually declining but the production is going on increasing so please note this particular point which we are giving at the end of the slide farmers are producing for policies and not demand so the rice and the wheat is not exactly what people demand these days but because the government is going on offering higher price the production is going on increasing so farmers are not actually bothered about what is the demand but they are only working for the policies which are being offered by the government so that is the essence of this slide where we want to say that the supply and the demand are actually mismatching so this is why the alternative suggestions are given for it saying like if the investment subsidies to the farmers don't want to cure and then give them the price rather you can give them money to buy more investment facilities for their crops and they should become crop neutral don't promote only rice and wheat or the cereals and similarly the National Food Security Act would be restricted to about 20% there is a procurement of such a high amount of the surplus is also mainly because they are trying to distribute a lot to the PDS to the varieties of the population or the larger section of the population in the country so if we can cover only restricting to about 20% then this procurement requirement will also come down and efficiency will also improve we have given a table in the economics survey book what we have given to you in which there are lots of country examples where people have restricted themselves in giving this kind of grain subsidy facility to the bottom section of the society and which has actually disrupted an improvement of the efficiency in the performance of the subsidy as well as reallocation of the resources to other effectors so that is the suggestion here and consumers to be given with the dbt cash transfer instead of me going and getting the raise I can be given with the cash transfer so that I will be having more economy to buy the different kinds of products which I would like to buy and then better policies for agricultural marketing trade and distribution all of these things may need to promote crop diversification as I told earlier farmers are actually producing for the policies not for the demand so if you want to promote the crop diversification then you will have to attend to the other policies of agriculture also instead of doing the market intervention only in terms of the procurement and the price policies the policies could be concentrating on agricultural marketing trade and distribution in a different way so that crop diversification can also happen right so that is the third case today and the fourth one is about the debt waiver in case of your debt waiver there are lots of reasons why the government will want to do the debt waiver the main reason we all of us know like mainly they will want to do it for the promotion of the particular government policies during the times of election but basically the economic points of it is to look at as the debt to servicing cost will come down assume the time of armour I have taken the loan and then I have been paying the EMI and if this debt to waiver comes the EMI so servicing is coming up and my loan will be completed so my balance sheet is clear my loan borrowing capability in the future actually improves and my current income will also improve because this money which I was repaying it as an interest to the bank I will be allocating it to something else and then I will be able to earn more so these are the benefits which are actually seen when I talk about the concept of debt waiver so this is one section of the society or one view of the society when we talk about the debt to waiver now economic service trying to pick up the debt to waiver which was done in the year 2008 and we have seen how this has impacted upon the farmers who are holding two hectares and above for whom only partial waivers were given and two hectares and below to whom full waivers were given so this is the comparison full waivers partial waivers full waivers are the debt to waiver beneficiaries partial waivers though they were like only above say for example I am holding 2.02 hectares and not so different from the person who bought full waiver but still I won't be getting the full waiver I will be getting only the partial waiver so there are policy deficiencies but still now we are going to see between these two categories whether the debt to waiver really benefited the farmers who bought full waiver for them so here is where the evidence which they want to say you can see from this diagram there are different panels the post program post program is after doing the debt to waiver what happened the right hand side of the panel you can see that they are the partial waivers the people who are having more than 2 hectares the left hand side of the panel you can see them as the full waiver farmers so now you can see that when you compare the debt has come down for the full waiver farmers the second panel shows like formal credit the debt has been waived but for this reason have they gone ahead with more formal credits that did not happen you can see that the formal credit taken by the fully debt waived farmers is lesser consumption is also lesser and then consumption of the durable commodities is also lesser informal credit yes they are still going behind the informal credit and then if you look at the savings savings is also lesser investment is also lesser productivity is also lesser so this is what is defined by the survey saying like full waiver beneficiaries consume less, save less invest less and they are less productive even after the waiver can compare to the partial beneficiaries so as such the debt to waiving is not helping in any way right it is not even promoting the formal credit in the future it is only seen as a temporary relief for the farmers it is not giving a permanent solution for what actually the farmers are to be given right so the negative impacts are further like this if we do the debt waivers very frequently it may result in these people taking the loans and assuming that it will be waived off in the future so it is destroying the credit culture investments and productivity show minor variations like there is no improvement as such in them so the cost output is too high we are actually giving them a huge debt to waiving but the investments and productivity are not improving as we are expecting to happen in the future sometimes it is seen purely as an election so these are the negative things so what we want to tell after looking at all the 4 different cases are when we see that the market competitive markets are very good in allocating the resources we have to rethink about areas in which government interventions are happening now if that particular area like the food grains market or the drug prices or the drugs market if everything is competitive enough to offer the same drug at a lower price government by its intervention should not come into the picture and start quoting the market because markets can keep a check on the price it can use the resources efficiently it can encourage innovation it will look as consumer centric and maximizes the welfare right so this is what the essence of this chapter by government intervention if there is actually a result of loss in the economic welfare those areas should be cut tail and it should be now given back to the market ma'am we have said that this PDA system and all should be edit based and all but the corona has proved us wrong the system can go to the rural people or the people like they can't buy food grains and all so totally different time I completely agreed to public distribution system was one of the major things which helped people at the time of COVID because not many shops were allowed to get open we are talking so much about the formal economy we are asking everybody to come into formalized economy of organized sector actually lots of grocery shops which were not even registered they are the people who really wanted to come into formalized economy so whatever we have learned so far there had been lots of contradictions right now what is happening in the economy so again I am telling you the survey is in a particular context just read it as the book you can always give your own interpretations according to the recent thing we have developed a set of questions for the COVID situation economic questions I will share all those questions the survey is completed then we can pick up these things the government is now saying don't intervene unless and until the government intervened through the public distribution system many of the poorer families wouldn't even have got food grains at this moment because the total market economy is closed so we don't have answers from the survey to the current situation so I request all the students to please understand this I am not talking anything about the current situation in combination with the economic survey what we are right now undergoing this survey what survey says needs particular context read it thank you when we spoke about production agricultural production being on the basis of policies and not on the basis of demand but don't you think the government policies actually resonate the demand could you actually give an example here see government is trying to procure and stock a lot of food grains which is more than the norms which are prescribed that is what we saw in that particular data if 13 million tonnes of rice is required to be procured government has to stock up 25 million tonnes so basically if it is a market economy I will not be producing more than what is actually demanded which means like my prices we get into trouble but government does this mainly to supply it keep it in stock and supply it through the public distribution system it has its own justifications to do it but this is not helping because the moment you say like you are offering a higher price and then taking it from the farmers the food subsidy increases and what about the price what the government says more than this price only the price is going to happen in the retail market for the food grains and so you are slowly causing a situation which is called as food inflation food inflation can be fluctuating when you are talking about the vegetables and fruits and other things but food inflation will not come mainly because of your rice or wheat but slowly the food inflation is happening over a period of time in a subtle way mainly because of the price policies what the government is following so these are all the other impacts which are happening through the procurement of the thing and if you think that the government is procuring only for the demand then it should also do an equivalent procurement of the pulses and other things because rice and wheat alone will not be sufficient for the population the population had been demanding pulses for so many number of years and till now 70% of the pulses we are only importing from other countries and what the government has really done about this importing of the pulses will not have an answer so the government is actually not doing according to the demand of the population it is doing according to its funding so mom can we actually say that the current economics actually talks negatively about the previous system it says are just in alternative ways it is not saying like you just remove the system because it still says like put the public distribution system exactly to the bottom the percentage of the population and if you go and see the percentage of the people who are poorer in the country if you look at the poverty ratio it will also coincide with this 20% but by telling about the various various methods like various identification of the population we are actually saying 60% of the population can be covered through the public distribution system so this is unwarranted this is not required actually so that resources can be reallocated to something else so we can do a better choice so that's the point this is being so it talks about basically marginally reducing the holding of PDS ah lifting the beneficiary just give to the 20% bottom 24% of the population we will continue with the next few chapters probably in the next class what I will do is I will be posting the slides whatever we have done so far I think we have gone up to 50 chapter but today we have done 4 chapters in the next class I will be continuing with the rest of the chapters and completing them if you have any doubts you can mail to me there are some questions are we unfree due to the stress of developed nations we are not unfree due to the stress of developed nations we are unfree because of our own rules and regulations in the country I am going to present a chapter on the ease of doing business how it has improved and we are also going to show how we are still having lots of constraints in terms of what we have to do in order to do the business transportation communication anything so that chapter will help you understand how we are being stressed and then we are becoming unfree right and essential drugs price by the government or by the company essential prices will be decided by the government but it will be taking the price data from the different companies who are producing this particular drug an average of all the market prices it is going to consider and it is going to decide the price so it is decided by the government by taking the data from the companies so that is how the essential prices that prices are decided why the government is procuring and required it will always have its own like unforeseen situation justifications to store more grains but there should be a norm how much more it can store sometimes it is really very high like 2 times 3 times and all is like not justifiable but that is what the government does this is the end of the session I will be continuing the classes in the next session