[Summary] Budget & Economic Survey 2018 Gist for the

UPSC IAS/IPS Interviews

mrunal.org/2018/02/summary-budget-economic-survey.html

​February​ ​2​, ​2018

1. Prologue
2. Pillar1: Banks & NBFCs
3. Pillar2: Budget / Public Finance
4. Pillar3: Balance of Payment & International Trade
5. Pillar4: Sectors of Economy
4A: Agriculture
4B & C: Mfg & Service Sector
4D: GDP [ES18v1c1 and v2c1]
4F: Inflation
6. Pillar5: Infrastructure & Environment
Environment
7. Pillar6: HDI
HDI: Education
HDI: Health
HDI: Gender empowerment
HDI: “Ease of Living”
8. Conclusion: Modi government & Indian Economy

Prologue
Since many aspirants will be facing interviews of UPSC / GPSC and other state PCS
exams in February-March, therefore I’ve quickly assembled a summary of budget
and economic survey for their reference, before I begin my lecture series in a
systematic manner.
Haste makes waste, so I don’t claim this article being ‘best’ among my products. It
covers following areas:
Economic Survey volume1 (entirely-but I’ve written only interview-related important
points here).
Economic Survey volume2 (only first chapter. Because rest of the chapters are
mostly data-tables for last years’ economic events. That much information overload =
bad cost:benefit for interview prep.)
Budget-2018: Major announcements covered.
FREE Download Links for Budget & Economic Survey documents: English | Hindi

In this summary, I’ve not written full forms or given background theory-connectives, because
the target audience is Interview candidates. They should be well aware of that…. if not, then
watch my BES17 Lecture series again.

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 इस बार कु छ खास नया माल नही है. CEA Arvind Subramanian is neither repeating many old things, nor proposing new things.

Pillar1: Banks & NBFCs

1. RBI to have Uncollateralized Deposit Facility to absorb excess liquidity. (banks can
park surplus funds overnight just like European Central Bank.)
2. 80k crores on PSB recapitalization. Strong RRB can raise $ from market, RBI to
handover NHB to Government.
3. RBI, SEBI to encourage corporate bond market. ~25% of Corporate borrowing from
there. Unique IDs to enterprises for tracking loans, schemes and Ease of Doing Biz.
4. Post office, NSC, PPF acts to be more people friendly. SEBI, Securities Act to have
more teeth.
5. Blockchain tech. to promote digital economy, but Bitcoin & Cryptocurrencies declared
“not-legal tenders”. Government to take action against their use in illegal activities.
6. Three Public sector Insurance Cos: National Insurance Company Ltd., United India
Assurance Company Ltd and Oriental India Insurance Co. Ltd will be merged into a
single insurance entity, and later its shares will be listed.
7. Hybrid instruments for VCF and Startup. (Hybrid= debt and equity)
8. Financial inclusion: Already 60 cr. Jan-Dhan accounts. More efforts to link them
with PM Jivan Jyoti, Surakasha Bima, Fasal Bima. + new Health insurance scheme
of Rs.5 lakh per BPL/rural family per year.
9. New policy / reforms for: MSME-NPA, MUDRA refinancing via NBFCs, Angel Funds /
VCF.

Above things were from Budget, below is from Economic survey:

ES18v1c3: After 2000, India’s savings and investment rates falling :-(
For Mobilizing saving (into financial instruments): we’ve done: demonetization,
drive against black money.
For mobilizing Investment: we’ve done FDI, Ease of Doing Biz, Bank
recapitalization, I&B Code. But we must focus more on attracting investment, for 8-
10% GDP growth rate.
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 ES18v1c1: crony socialism to stigmatized capitalism:
Twin Balance sheet Syndrome (TBS), Infosys-TATA board battles. Greater demand
for state intervention.
TBS: Banks reluctant to lend. Many PSBs making losses in past 3 years.
Recapitalization increases fiscal deficit. I&B work in progress, FRDI bill proposed.
Presently Stock price boom but when it’s corrected there could be capital outflow.
Domestic investors will get angry because 1) gold is unattractive 2) Post-
demonetization FD rates down. If then to appease middle-class if government hikes
the Small Savings Schemes interests before election then Fiscal deficit targets will be
missed :-(

Pillar2: Budget / Public Finance

Figures: Ascending Descending

Direct Taxes: Corporation > Income Tax > STT
Indirect Taxes: CGST > Union Excise > Customs > GST compensation Cess >
IGST.
Subsidies: Food > Fertilizer (Urea) > LPG > Kerosene. (Major subsidies~1.4% of
GDP)
Salaries: President (5L) > Vice President (4L) > Governors (3.5L); MP salaries
revised with inflation every 5 year.
Deficits Targets for 2018-19: RD: 2.2%, FD: 3.3%; PD: 0.3% of the GDP. Debt to
GDP: 40%
Disinvestment Targets: 80k Crore (Last Year 72,500 cr). New ETFs, incl. Debt-
ETFs planned. Air India to be privatized.

Tax related announcements

1. Tax buoyancy has improved. 90k cr more collected compared to the scenario two
years ago.
2. No. of Tax-filers increased, though “compliance” behavior is not appreciative. Non
salaried professionals hardly paying IT in ~7k to 35k range.
3. Income tax Slabs: Not changed (5-10-20-30%). (New) 40k Std. deduction. But
transport & Medical exemptions removed.
4. Elderly: No IT or TDS on interest income upto Rs.50k (earlier 10k), Upto 50k
deduction for health insurance premium, upto Rs.1 lakh for critical illness. Pradhan
Mantri Vaya Vandana Yojana (LIC): 8% return for upto Rs.15 lakh till March 2020.
5. 25% corporation tax for Companies with turnover upto Rs.250 cr (earlier only 50
cr.) Companies given deduction for hiring new people. [previous rules tweaked]
6. Cess on Income Tax & Corporation Tax Cess: 2% Primary Education + 1%
Secondary & Higher education + (new) 1% Health cess to finance the new health
insurance scheme for BPL/Rural.
7. Securities: 15% short term CGT + (new) 10% Long term CGT, if profit more than 1
lakh. Equity Mutual Funds: 10% distribution tax.
8. Gift City (IFSC): certain securities removed from Capital Gains Tax (CGT), There will
be Alternate Minimum Tax (AMT) instead of MAT. New regulator for Gift city.
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 9. Black Money: Trusts can’t pay more than 10k in cash. Stricter rules for TDS
compliance. Every entity doing transactions of Rs.2.5lakh or more must get PAN,
incl. its office bearers.
10. Farmers FPO: 100% deduction for next 5 years. This will help in Op. Greens and
Pradhan Mantri Kisan SAMPADA Yojana (Scheme for Agro-Marine Processing).
11. To reduce Tax terrorism: E-assessment for direct taxes. Customs Act’62
amendments for implement WTO’s Trade Facilitation Agreement (TFA). Customs to
have authority for advance ruling.

ES18: v1c1 and v2c2

Fight against Black money successful, we got 65,000-Rs. 90,000 crores more in IT
collection. [Negative: Dem+GST = 18 lakh new tax filers. But most in the 2.5 lakh
slab.]
GST: Yet to be stabilized. But, data also helps in finding more about informal vs
formal sector of economy and employment level.
Attacking Corruption & Weak Governance has its fallouts. E.g. Demonetization=
informal sector jobloss. I&B Code: companies might shutdown & jobloss. “Auction
cancelled, Tax-terrorism”: Foreign investors reluctant. We should rely more on using
incentives and carrots than on sticks
CEA repeating things from last 2 years i.e. poor services -> citizens “exit” or become
“free rider” -> Government’s accountability decline. Compared to Brazil and
Germany, our State governments and Rural local bodies not collecting adequate
taxes on their own. So, they rely more on FC devolution. Aid curse and resource
curse, due to lack of accountability.

Pillar3: Balance of Payment & International Trade

Budget: Gold monetization scheme and Outward FDI to be reformed. GIFT city IFSC
to have separate regulator.
ES18v1c1 identified International Risks to Indian Economy:
War in Korean peninsula
Political unrest in Middle East (Iran domestic, GCC boycotting Qatar), Chinese
slowdown, OPEC-Russia oil cuts.
Advanced Economies recovering and coming out of zero interest rate regimes-
consequently flight of capital could happen.

Pillar4: Sectors of Economy

4A: Agriculture
Farm loan target: 11 lakhs (Last year 10 lakhs). Lessee cultivators will be covered.
2x farm income by 2022 ke liye 1.5 x MSP. FCI’s working capital to be raised via debt
& equity for this.
GrAM gramin haats. Because small-marginal farmers can’t bring their produce to
APMC / E-NAM. These GrAM haats will be connect via PM Gram Sadak Yojana.
Organic farming ke liye Women SHG.
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 Op. Greens for Tomato Onion Potato (TOP). National Bamboo Mission. (Bamboo
already removed from the legal definition of ‘trees’ to reduce inspector-raj.)
Fishermen and Animal Husbandry-walla to get Kisan Credit card and new funds.
Farmers to sell surplus electricity from solar panels in their farms to DISCOMMs.
RURAL Infra ke liye: SBM ,Ujjawala, Saubhagya electricity, PM Awas Yojana, PM
Krishi Sinchai yojana, NRLM … all these schemes’ funds and targets increased.
Total rural infra Expenditure: 14 lakh crores.
ES18v1c6: For both for economic and social development, people need to be moved
out of farms and villages. (Sir Arthur Lewis and Dr. Ambedkar).
Extreme weather events affect agro. climate impact is twice on unirrigated farms than
irrigated.
With higher temperature and shorter rainfall: income fall- 15-18% (irrigated), 20-25%
(unirrigated).
Just like GST, we need cooperative federalism against Agricultural distress.

Or, as BASANTI would put it: “रहेने वाले सहेर के हो, लेिकन समजदार हो! #Pro-Rural-Budget-2018”

4B & C: Mfg & Service Sector

EPF rules tweaked to create new jobs, provide relief to women workers.
PM Kaushal Kendra in every district. Package for textile sector.
World Bank’s Ease of Doing Business Report (EODB), 2018: Rank #100 (^30) But
enforcing contracts, we are behind Pakistan, Congo and Sudan. Therefore,
ES18v1c9 talks about how to reform judicial system to reduce case pendency. Just
like Cooperative Federalism: similarly there should be cooperative separation of
powers i.e. Judiciary vs (Executive|Legi) should not interfere or encroach upon each
other’s domain. [Self-Study the chapter for more points, even for GSM2]

4D: GDP [ES18v1c1 and v2c1]

Positive observations
2017-18: 6.75% growth rate. Per capita income: 1,11,782 Rupees (Current price) |
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 86,660/- @constant price (2011). IIP improved.
2018-19: Growth rate projected at 7 to 7.5% [+0.5% if exports pickup.]
Moderate level of inflation, CAD, FD.
IMF: Post-GFC recovery is occurring in major economies. Indian economy is now 2.5
trillion dollar economy – seventh largest in the world.
World Bank Ease of Doing Biz 2018: 130->100th rank.
Moody Rating: BAA3->BAA2.
Global Innovation Index-2017: 66->60.
Forex reserve at $409 cr.

Negative observations
2016 vs 2017: While most sectors recorded positive growth, but Agro ~5% -> 2.1%
Pre-GFC boom catalysts were 1) private investment 2) exports, but both are not upto
picking up at present.
“economic convergence,” whereby poorer countries have grow faster than richer
countries and closed the gap in standards of living. Since 80s, India began catching
up. But this has not resulted into labour shifting from agro to mfg, unlike Japan and
S.Korea. Now, 4 challenges:
1. Anti-globalization
2. structural transformation and pre-mature deindustrialization
3. HR-challenges (ASER, Skill Development)
4. Climate changes hurting agro.
Post-demonetization: less cash economy, growth is recovered but not to full
potential.
Global hunger report: India very poor performer.
RESIDEX: house-prices inflation in majority of the cities, even Post-Demonetization.

4F: Inflation
OPEC-Russia Oil cut deal: 12% hike in oil prices expected in 2018. If hike is passed
on, there will be inflation. RBI’s 2-4% CPI target already breached on Dec’17 (5.2%).
Fiscal Deficit to aggravate when there are excise-cuts to absorb oil price hike before
election.
CAD also increasing due to oil prices.

Pillar5: Infrastructure & Environment

NHAI to turn its road assets into SPV for monetization. Encourage Fast-tag and “Pay
as you use tolls.”
New: Sela Pass tunnel for Arunanchal Pradesh. Rest is just mention of Existing
initiatives like PRAGATI portal for monitoring infra progress, BHARATMALA, Smart
City, AMRUT, HRIDAY.
Railway: Focus safety, unmanned crossing, CCTV, wifi; broad gauge conversion,
Mumbai & Bengaluru local train network to be strengthened. A’bad Bullet traine ke
liye Vadodary academy. Rail University at Vadodara.
Aviation: (existing) UDAN for cheap regional flights. Now, NABH Nirman: five times
more airports will be built to handle billion trips a year.
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 Digital Infrastructure: 5G test Bed @IIT,Chennai. NITI program for AI, DoT mission
for Cyber physical systems; Digital India: 2x funds, broadband and wifi for rural
Indians under BHARATNET.

Environment
GOBAR-DHAN: Galvanizing Organic Bio-Agro Resources Dhan for management
and conversion of cattle dung and solid waste in farms to compost, fertilizer, bio-gas
and bio-CNG.
Burning Crop residue = Delhi pollution. So, funds & Subsidy for neighboring states’
farmers.
Namami Gange, Villages made ODF free. (although nothing major-new)

Pillar6: HDI

HDI: Education
DIKSHA portal to upgrade teachers’ skill. Because we’ve enrolled kids under RTE but
their learning outcomes have not improved (ASER).
More Ekalavya Residential schools for ST kids.
“RISE” scheme to promote research in Higher education institutes
PM Research Fellow Scheme for B.Tech so they do PHD and teach on weekly
basis.
ES18v1C8: talks about Importance of Science Tech in national development. India’s
achievement so far. But we are underspending on R&D. Brain-drain, Patent delays,
Basic research neglected. Problems remedies given in the chapter, self study it for
GSM3 & Essay.

HDI: Health
‘‘Ayushman Bharat”: For improving primary, secondary and tertiary care system.
Both prevention and health promotion.
National Health Protection Scheme: Rs.5 lakh cover per poor family per year for
secondary and tertiary care hospitalization. (This will be world’s largest scheme).

HDI: Gender empowerment

ES18v1c7: Per capita income or development levels wise NE < Punjab & Haryana,
yet NE better on Gender indices. So, development is not an ‘antidote’ to gender
inequality.
If women employments increases, it’ll help family and economy. But, Women don’t
have control over their body- contraception, their labour participation rate very poor.
We need to create more jobs in textile, footware and those industries should shift to
smaller towns.
Sex selective abortion and neglect of girl child= results in 63 million missing women
Son meta preference i.e couples will not stop breeding till a son is born = 21 Million
“unwanted girls”- They’re neglected in food & education.
Notable steps by the Modi-government: Sukanya Samriddhi FD, BBBP but Survey
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 not measured its success.

HDI: “Ease of Living”

PM Ujjwala Yojana gives LPG connection to BPL. Target increased.
Saubhagya Yojna for electricity connections to poor.
Passport @doorstep, interviews removed from group C/D. Jan Aushadhi centres for
cheap generic medicines, stent price curtailed….ye sab Ease of Living hai.
150th birth anniversary of Gandhi in 2019 so Rs.150 cr under PM chaired committee
for event management in latest budget.
ES18v1c1: We need to change mindset also: toilet users have to be increased, not
just number of toilets. If we give free Gas and electricity connections but users don’t
have money to pay bills later on? Hence, “income support / DBT” also necessary.

Conclusion: Modi government & Indian Economy

ES18v2c1 gives overview of the notable steps initiated by Modi Government so far
(apart from GST, Demonetization):

1. Agro: Soil health card, Pradhan Mantri Krishi Sinchayee Yojana(PMKSY), Fasal
Bima
2. Mfg: Make in India programme, Start-up India and Intellectual Rights Policy. Anti-
dumping on Chinese gods; PM Mudra yojana for MSME.
3. Labour: 38 Acts-> 4 codes.
4. Infra: BHARATMALA, SAGARMALA, BHARATNET, UDAN. Rail budget merged.
5. Electricity: Ujjawal DISCOM Assurance Yojana (UDAY), DD Gram Jyoti,
Saubhagya(Pradhan Mantri Sahaj Bijli Har Ghar Yojana), was launched in September
2017 to ensure electrification of all remaining willing households in the country in
rural and urban areas. Pradhan Mantri Ujjwala Yojana: LPG connection to BPL. Then
Ujjawala plus+ Yojana for poor not under SECC.
6. Girls: BBBP, Sukanya Samriddhi Yojana. Health: SBM.
7. Intl cooperation: SDG adopted, Voluntary national review given in 2017, Intl. Solar
Alliance, Paris agreement ratified.

Budget2018 speech: Modi now focusing on:

1. Strengthening agriculture and rural economy

2. Healthcare for poor.
3. Tax reliefs for senior citizens.
4. Infrastructure creation and cooperative federalism.

For Government jobs interviews, these much information should be at your lips. For
Prelims and Mains point of view, we’ll be studying these things in a detailed manner, later
on.

yes I’ll be doing the BES-18 “GREEN” series this time. I’ve chosen green color because
both in the budget and economic survey, noting much new to teach: so, it’s going to save a
lot of slides, printouts & mental-effort for the aspirants. So, it’s “Eco-friendly” green

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BES18.. [Although I’m open to suggestions on other colors as well, Do share thoughts in
the comments below!] And stay Tuned to Youtube.com/c/TheMrunalPatel….

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