[Indian Year Book 2022-23]* Indian Year Book Notes | Chapter 8. Finance

 

Indian Year Book

(2022-23)

Chapter – 8.  Finance

 

THE Ministry of Finance is responsible for administration of fi nances of the government. It is concerned with all economic and fi nancial matters affecting the country as a whole, including mobilisation of resources for development and other purposes. It regulates expenditure of the government including transfer of resources to the states.

 This Ministry consists of fi ve departments, namely,

Ø  Economic Affairs;

Ø  Expenditure;

Ø  Revenue;

Ø  Investment and Public Asset Management; and

Ø  Financial Services.

 

Department of Economic Affairs

 The Department of Economic Affairs is the nodal agency of the government to formulate and monitor country’s economic policies and programmes having a bearing on domestic and international aspects of economic management. A principal responsibility of this Department is the preparation and presentation of the Union Budget (including Railway Budget) to the Parliament and the Budget for the state governments under President’s Rule and union territory administrations.

 

Annual Financial Statement

Ø  The Annual Financial Statement is popularly known as the Budget. It is presented to Parliament by the Finance Minister each year on the fi rst working day of February.

Ø  Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every fi nancial year. This statement titled “Annual Financial Statement” is the main Budget document.

Ø  The Annual Financial Statement shows the receipts and payments of government under the three parts in which government accounts are kept:

Ø  Consolidated Fund,

Ø  Contingency Fund and

Ø  Public Account.

 

Demands for Grants

Ø  The estimates of expenditure from the Consolidated Fund included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants in pursuance of Article 113 of the Constitution.

Ø  Generally, one Demand for Grant is presented in respect of each ministry or department. However, in respect of large ministries or departments more than one demand is presented.

Ø  Each demand normally includes the total provisions required for a service, that is, provisions on account of revenue expenditure, capital expenditure, grants to state and union territory governments and also loans and advances relating to the service.

 

Finance

 Bill At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also presented in fulfi lment of the requirement of Article 110(1)(a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget.

 

A Finance Bill is a Money Bill

 Appropriation Bills

Ø  After the Demands for Grants are voted by the Lok Sabha, Parliament’s approval to the withdrawal from the Consolidated Fund of the amounts so voted and of the amount required to meet the expenditure charged on the Consolidated Fund of India.

Ø  Fund is sought through the Appropriation Bill.

 

Balance of Payments

Ø  India’s current account balance recorded a defi cit in Q3 (October - December) 2020-21.

Ø  Underlying the current account defi cit, was a rise in the merchandise trade defi cit and an increase in net investment income payments.

Ø  Private transfer receipts, mainly representing remittances by Indians employed overseas, declined marginally on a y-o-y basis but improved sequentially .

Ø  Net foreign direct investment (FDI) recorded robust infl ow.

 

 

Sources of Revenue

Ø  The main sources of Union Tax revenue are customs duties; union excise duties, service tax, corporate and income taxes.

Ø  Non-tax revenues largely comprising of interest receipts, dividends/profi ts, fi nes and miscellaneous receipts collected in the exercise of sovereign functions; regulatory charges; and license fees and user charges for publicly provided goods and services.

 

Public Debt and Other Liabilities

Ø  The Public Debt of India is classifi ed into three categories of Union Government liabilities--internal debt, external debt and other liabilities.

Ø  Internal debt for Government of India largely consists of fi xed tenure and fi xed rate government papers (dated securities and treasury bills), which are issued through auctions. These include: market loans (dated securities); treasury bills (91, 182 and 364 days) and 14-day treasury bills (issued to state governments only); cash management bills; special securities issued to the Reserve Bank of India (RBI); compensation and other bonds; and non-negotiable and non-interest bearing rupee securities issued to international fi nancial institutions and securities, issued under market stabilisation scheme with a view to reduce dependency on physical gold and reduce imports.

Ø  External debt represents loans received from foreign governments and multilateral institutions. The union government does not borrow directly from international capital markets. Its foreign currency borrowing takes place from multilateral agencies and bilateral sources, and is a part of offi cial development assistance (ODA).

Ø  At present, the Government of India does not borrow in the international capital markets.

Ø  Other” liabilities, not a part of public debt, includes other interest bearing obligations of the government, such as post offi ce saving deposits, deposits under small savings schemes, loans raised through post offi ce cash certifi cates, provident funds and certain other deposits.

Ø  The Reserve Bank manages the public debt of the central and the state governments and also acts as a banker to them.

Social Sector Programmes

Ø  The fl agship programmes continued to receive high priority.

 Direct Benefit Transfer

Ø  Direct Benefit Transfer (DBT) is a major reform initiative launched by the Government of India to provide an overarching vision and direction to enable direct cash transfer of benefi ts under various government schemes and programmes to individuals.

Ø  Leveraging the gains in the Aadhaar Project, DBT was conceived with the objective of accurately targeting the intended benefi ciaries and enhancing effi ciency, transparency and accountability in delivery of benefi ts/ services under government schemes.

Ø  The mandate of DBT was universalised and extended to cover all central sector schemes and centrally sponsored schemes that have any component of cash benefi t transfer to individual benefit  ciaries .

 

Atmanirbhar Bharat

Ø  Atmanirbhar Bharat, which translates to ‘self-reliant India’ or ‘self-suffi cient India’, is a policy for making India a bigger and more important part of the global economy, pursuing policies that are effi cient, competitive and resilient.

Ø  Under the policy not only should products be ‘made in India’, but the promotion of those products should take place so as to make those products competitive.

Ø  As part of the Atmanirbhar Bharat package, numerous government decisions were taken such as changing the defi nition of MSMEs, boosting scope for private participation in numerous sectors, increasing FDI in the defence sector, etc.

 

Pradhan Mantri Garib Kalyan Yojana

Ø  Pradhan Mantri Garib Kalyan Yojana (PMGKY) which was launched by the Government of India in 2016 was a voluntary disclosure scheme to declare unaccounted for wealth and jewellery.

Ø  The government stressed on the issue to divert the excess wealth of some to the welfare of the poor and the underprivileged. Social benefi ts under the PMGKY was extended to economically vulnerable households till March 2021 in view of the Covid-19 pandemic and related lockdowns.

Ø  Under the scheme, 81 crore individuals are being provided with 5 kilos of rice or wheat and 1 kilo of chana every month. The fresh stimulus includes cash transfers to 20 crore Jan Dhan accounts.

 

 Public Debt

Public debt includes

Ø  internal debt comprising borrowings inside the country; and

Ø  external debt comprising loans from foreign countries, international fi nancial institutions, etc.

 

Green Climate Fund

Ø  The Green Climate Fund (GCF) is a multilateral fund created to support the efforts of developing countries to respond to the challenge of climate change.

Ø  So far, 43 projects have been approved by the Board of the GCF.

Ø  India also has one project approved by the Board with NABARD on “Ground water recharge and Solar Micro Irrigation to ensure food security and enhance resilience in vulnerable tribal areas of Odisha” from 16th GCF Board meeting.

 

 Economic Growth

Ø  The impositions of strict lockdown and social distancing measures taken to combat the spread of Covid -19 had adversely affected the economy.

Ø  The growth rate of the gross domestic product (GDP) at constant market prices has been estimated to contract by 8.0 per cent in 2020-21, as compared to the growth of 4.0 per cent (1st revised estimates) recorded in the previous year.

Prices

Ø  Headline infl ation based on Consumer Price Index Combined (CPI-C) declined in January 2021 to 4.1 per cent, mainly due to decline in the food infl ation to 1.9 per cent in January 2021 from 3.4 per cent in December, 2020.

Ø  Wholesale Price Index infl ation averaged 0.2 per cent during April-January, 2020-21 and stood at 2.0 per cent in January 2021.

Climate Change

Ø  Climate Change is one of the most compelling global challenges.

Ø  To counter it India submitted its Nationally Determined Contribution (NDC) under the Paris Agreement on a “best effort basis” keeping in mind the developmental imperatives of the country.

Ø  In its NDC, India promised to reduce its emission intensity of GDP by 33 to 35 per cent below 2005 levels by 2030; 40 per cent of cumulative electric power installed capacity would be from non-fossil fuel sources by 2030 and increase its forest cover and additional carbon sink equivalent to 2.5 to 3 billion tons of carbon dioxide by 2030.

Ø  Credit growth stood at 5.9 per cent in 2021.

Ø  The moderation in credit growth in 2020-21 was witnessed in mostly all the sectors, barring services.

Services Sector

Ø  The Covid-19 pandemic, the subsequent lockdown and social distancing measures have had a signifi cant impact on the contact-intensive services sector. During the fi rst half of the fi nancial year 2020-21, the services sector contracted by almost 16 per cent.

Ø  This decline was led by a sharp contraction in all sub-sectors particularly trade, hotels, transport, communication and services related to broadcasting.

Ø  The pace of recovery though after the second Covid wave was seen and is broadly aligned with high frequency indicators that point to a pick in economic momentum with the measured opening up of the economy from June 2020.

Ø  Air passenger traffi c, rail freight traffi c, port traffi c foreign tourist arrivals, and foreign exchange earnings all contracted sharply following the fi rst lockdown which was announced in March, 2020. As the economy gradually entered the unlock phase, most of these indicators showed signs of recovery.

 

Social Infrastructure

Ø  While the Covid-19 pandemic caused its ripples on the economy and on the social sector, governments at the center and states intervened in a timely manner to respond to the pandemic.

Ø   Increase in social service expenditure was witnessed across health, education and other social services sector. Allocation for the health sector during the Covid-19 times fl owed especially towards containment and treatment of the Covid virus.

 

 Major Policy Changes in Banking Regulations Commercial Banks

Ø  Merger of PSBs: consolidation among another 10 PSBs, with Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank as anchor banks came into effect from April 1, 2020. Restructuring of MSME Loans: A one-time restructuring of loans to MSMEs that were in default but ‘standard’ as on January 1, 2019, was permitted, without an asset classifi cation downgrade, subject to certain conditions like aggregate exposure (including non-fund based facilities) of banks and NBFCs to the borrower not exceeding Rs.25 crore.

Ø  Large Exposure Framework: A bank’s exposure under the Large Exposure Framework to a group of connected counterparties was increased from 25 per cent to 30 per cent of the eligible capital base of the bank. The increased limit was applicable up to June, 2021.

Ø  Export Credit: The maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks was increased from one year to 15 months for disbursements made up to July 31, 2020, in line with the relaxation granted in the period of realization and repatriation of the export proceeds to India.

Ø  Monetary Policy Transmission: External Benchmarking of Loans: RBI deregulated the interest rates on advances by SCBs (excluding RRBs).

Ø  With a view to strengthen the transmission of monetary policy, the banks were mandated to link all new fl oating rate personal or retail loans and fl oating rate loans.

 

Banking Sector

The performance of the banking sector (domestic operations), Public Sector Banks (PSBs) in particular, improved in 2018-19. The Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks decreased from 11.2 per cent in March, 2018 to 9.3 per cent in March, 2019 and their Restructured Standard Advances (RSA) ratio decreased to 0.4 per cent in March, 2019 from 0.9 per cent in March, 2018.

 

One-time Restructuring of Loans to MSMEs

Ø  The scheme was made available to MSMEs qualifying certain objective criteria including inter alia a cap of Rs. 250 million on the aggregate exposure of banks and NBFCs to an MSME as on January 1, 2019.

Ø  The restructuring was to be implemented by March 31, 2020 and an additional provision of 5 per cent to be maintained in respect of accounts restructured under this scheme.

 

Insolvency and Bankruptcy Code

Ø  A Bankruptcy Law Reforms Committee was set up in 2014 for providing an entrepreneur friendly legal bankruptcy framework for meeting global standards for improving the ease of doing business with necessary judicial capacity.

Ø  Accordingly, the Insolvency and Bankruptcy Code (IBC), 2016, was brought in.

Ø  The Code aims to promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders by consolidating and amending the laws relating to reorganisation and insolvency resolution .

 

Financial Stability and Development Council

Ø  With a view to strengthening and institutionalising the mechanism for maintaining fi nancial stability, enhancing inter-regulatory coordination and promoting fi nancial sector development, the Financial Stability and Development Council (FSDC) was set up as the apex level forum in 2010.

 

Financial Stability Board

Ø  Financial Stability Board (FSB) was established in 2009 under the aegis of G20 by bringing together the national authorities, standard setting bodies and international fi nancial institutions for addressing vulnerabilities and developing and implementing strong regulatory, supervisory and other policies in the interest of fi nancial stability

 

Infrastructure Financing

Ø  Given the enormity of the investment requirements and the limited availability of public resources for investment in physical infrastructure, it is imperative to explore avenues for increasing investment in infrastructure through various sources.

Ø  In view of this, the government launched the following to mobilise the long-term investment on infrastructure in the country:

Ø  Bank Financing: Banks continue to be the major source of fi nancing infrastructure.

Ø  Institutional Finance: The government has also set up India Infrastructure Finance Company Limited (IIFCL) with the specifi c mandate to play a catalytic role in the infrastructure sector by providing long-term debt for fi nancing infrastructure projects.

Ø  Infrastructure Debt Funds (IDFs): Government of India has conceptualised Infrastructure Debt Funds (IDFs) to accelerate and enhance the fl ow of long-term debt into infrastructure projects to help in the migration of project loans for operating assets from banks to the fi xed income markets.

Ø  Real Estate Investment Trusts (REITs)/Infrastructure Investment Trusts (InviTs): These are trust-based structures that maximize returns through effi cient tax pass-through and improved governance structures.

 

Public Private Partnerships

Ø  Availability of quality infrastructure is a pre-requisite to achieve broad-based and inclusive growth on a sustained basis. Infrastructure is also critical for enhancing productivity and export competitiveness. Given the enormity of the investment requirements and the limited availability of public resources for investment in physical infrastructure, the projected infrastructure investments made it imperative to explore avenues for increasing investments in infrastructure through a combination of public investment and Public Private Partnerships (PPPs).

 

Information Dissemination

Ø  DEA maintains a website dedicated to PPPs, to provide information related to PPP initiatives in the country. The website serves as a hub of information on PPP initiatives and contains related policy documents, government guidelines issued for mainstreaming PPPs.

Ø  These include information on the institutional mechanisms for speedy appraisal of PPP infrastructure projects and the schemes for fi nancial support to PPP projects.

 

G20

Ø  The G20 was formed in 1999, as a forum of Finance Ministers and Central Bank Governors, in recognition of the fact that there was a major shift in the global economic weight from the advanced economies to emerging market economies (EMEs).

Ø  G20 rose into true prominence in 2008 when it was elevated from a forum of Finance Ministers and Central Bank Governors to that of the G20 Heads of Nations in order to effectively respond to the global fi nancial crisis of 2007-2010.

 

BRICS

Ø  The BRICS nations or Brazil, Russia, India, China and South Africa form the fi ve key pillars of southsouth cooperation and are the representative voice of emerging markets and developing countries in the global forums such as the G20.

Ø  BRICS Bank is also known as New Development Bank.

 

United Nations Development Programme

Ø  The United Nations Development Programme (UNDP) is the largest channel for development cooperation in the UN.

Ø  The overall mission of the UNDP is to assist the programme countries through capacity development in Sustainable Human Development (SHD) with priority on poverty alleviation, gender equity, women empowerment and environmental protection.

 

 South Asian Association for Regional Cooperation

Ø  The South Asian Association for Regional Cooperation (SAARC) is a regional organisation that aims to promote economic, social, cultural, technical and scientifi c cooperation in South Asia.

Ø  Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka.

 

SAARC Development Fund (SDF)

Ø  SDF was established in 2008 by the SAARC countries to improve the livelihood of the people and to accelerate economic growth, social progress and poverty alleviation in the region.

 

Bilateral Cooperation

Ø  Department of Economic Affairs also deals with Bilateral Development Assistance from G-8 countries, namely USA, UK, Japan, Germany, Italy, Canada and Russian Federation as well as the European Union.

Ø  The Division also deals with the work relating to extension of Lines of Credit to developing countries.

 

Bilateral Offi cial Development Assistance

Ø  India has been accepting external assistance from bilateral partners in the form of loans, grants and technical assistance for development of infrastructure, social sector and for enhancement of knowledge/ skills of Indian nationals at both Centre and state level.

 

International Monetary Fund

Ø  India is a founder member of the International Monetary Fund (IMF), which was established to promote a cooperative and stable global monetary framework.

Ø  At present, 188 nations are members of the IMF. Since the IMF was established, its purposes have remained unchanged but its operations — which involve surveillance, fi nancial assistance and technical assistance — have developed to meet the changing needs of its member countries in an evolving world economy.

 

World Bank

Ø  India is a founder member of the International Bank for Reconstruction and Development (IBRD) which along with International Development Association (IDA) is referred to as the World Bank. IBRD has 189 member countries. It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries, as well as coordinates responses to regional and global challenges.

 

International Finance Corporation

Ø  International Finance Corporation (IFC), a member of the World Bank Group, focuses exclusively on investing in the private sector in developing countries.

Ø  The IFC’s investments in India are spread across important sectors like infrastructure, manufacturing, fi nancial markets, agri business, SMEs and renewable energy.

 

New Development Bank

Ø  The New Development Bank (NDB) has been instituted with a vision to support and foster infrastructure and sustainable development initiatives in emerging economies. The founding members of the NDB — Brazil, Russia, India, China and South Africa (BRICS).

Ø  The purpose of the Bank is to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries. India is one of the largest borrowers from the Bank in the sectors of transport, health, water and fi nancial sectors.

 

 Asian Infrastructure Investment Bank

Ø  Asian Infrastructure Investment Bank (AIIB) is a Multilateral Development Bank (MDB) set up to foster sustainable economic development, create productive assets and improve infrastructure in Asia through fi nancing of infrastructure projects.

Ø  India is one of the founding members and the second largest shareholder.

Ø  India along with 20 other countries signed the Inter-Governmental Memorandum of Understanding (Moll) for establishing the AIIB in Beijing.

 

International Fund for Agricultural Development

Ø  International Fund for Agricultural Development (IFAD) is a specialized agency of the United Nations, based in Rome.

Ø  IFAD is the only specialized global development organisation exclusively focused on and dedicated to transforming agriculture, rural economies and food systems.

Ø  At present, IFAD has 177 member countries. India is a founder member of IFAD and a key contributor.

Ø  It is dedicated to eradicating poverty and hunger in rural areas of developing countries.

 

Global Environment Facility

Ø  The Global Environment Facility (GEF) operates as a mechanism for international cooperation for the purpose of providing new and additional grant and concessional funding

to meet the agreed incremental costs of measures to achieve agreed global environmental benefi ts.

 

Asian Development Bank

Ø  Asian Development Bank (ADB) envisions a prosperous, inclusive, resilient, and sustainable Asia and the Pacifi c, while sustaining its efforts to eradicate extreme poverty in the region.

Ø  ADB assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development. It has 68 members (including 49 regional and 19 non-regional members), with its headquarters in Manila, Philippines.

 

Currency and Coinage

 Security Printing and Minting Corporation of India Limited

Ø  Security Printing and Minting Corporation of India Ltd. (SPMCIL) is the only PSU under the Department of Economic Affairs. It was formed after corporatisation of nine units, i.e., four mints, four presses (two currency note presses and two security presses) and one paper mill which were earlier functioning under the Ministry.

Ø  It is engaged in the manufacturing of security paper, minting of coins, printing of currency and bank notes, non-judicial stamp papers, postage stamps, travel documents, etc.

 

National Investment and Infrastructure Fund

Ø  The Government of India has put investment in infrastructure as one of the core elements of its economic programme.

Ø  National Investment and Infrastructure Fund (NIIF) was created with the aim to attract equity investments from both domestic and international sources for infrastructure development in commercially viable projects, both greenfi eld and brownfi eld, including stalled projects.

 

International Investment Treaties and Framework

Ø  India initiated the exercise to negotiate and enter into Bilateral Investment Treaties (BITS)/ Bilateral Investment Promotion and Protection Agreements (BIPAs) with other countries as a part of the comprehensive economic reforms programme which was initiated in 1991.

Ø  A BIT is essentially an international treaty which increases the comfort level and boosts the confi dence of the investors by assuring a minimum standard of treatment and non-discrimination in all matters while providing for an independent forum for dispute settlement through arbitration.

Ø  In turn, BITs are expected to project India as an attractive foreign direct investment (FDI) destination as well as protect outbound Indian FDI abroad.

 

 Department of Expenditure

Ø  The Department of Expenditure is the nodal department for overseeing the public fi nancial management system in the central government and matters connected with state fi nances. It is responsible for the implementation of the recommendations of the Finance Commission and Central Pay Commission, monitoring of audit comments/observations and preparation of central government accounts.

 

 Controller General of Accounts

Ø  The Controller General of Accounts (CGA), in the Department of Expenditure, is the Principal Accounting Adviser to Government of India and is responsible for establishing and maintaining a technically sound Management Accounting System.

 

Public Financial Management System

Ø  The Public Financial Management System (PFMS) is a web-based online software application designed, developed, owned and implemented by the CGA with the aim to provide a sound public fi nancial management system by establishing a comprehensive payment, receipt and accounting network.

 

Non-Tax Receipt Portal

Ø  The objective of the Non-Tax Receipt Portal (NTRP), is to provide a one-stop window to citizens/corporates/ institutions/other users for making online deposits of Non-Tax Receipts (NTR) which are payable to the Government of India.

 

Institute of Government Accounts & Finance

Ø  The Institute of Government Accounts & Finance (INGAF) is the training arm of the Controller General of Accounts.

 

Central Pension Accounting Office

Ø  The Central Pension Accounting Offi ce (CPAO) was established in 1990 for Payment and Accounting of Central (Civil) Pensioners and pension to freedom fi ghters etc.

Ø  CPAO is a subordinate offi ce under the Offi ce of the Controller General of Accounts, Ministry of Finance.

Ø  It has been entrusted with the responsibility of administering the scheme of payment of pension to central government (Civil) pensioners through authorised banks.

Ø  Its core functions are: issue of Special Seal Authorities (SSAs) authorising payment of pension in fresh as well as revision of pension cases to the CPPCs (central pension processing centres) of pension disbursing banks; preparation of Budget for the pension grant and accounting thereof; maintenance of data bank of central civil pensioners containing all details indicated in the PPOs and Revision Authorities; and handle the grievances of central civil pensioners.

 

Arun Jaitley National Institute of Financial Management

Ø  The Arun Jaitley National Institute of Financial Management (AJNIFM) was set up in 1993 as an autonomous body to impart training to offi cers recruited by the Union Public Service Commission through the annual Civil Services Examination and allocated to the various services responsible for managing senior and top management posts dealing with accounts and fi nance in the Government of India and to develop as a Centre of Excellence in the areas of fi nancial management and related disciplines, not only in India but also in Asia.

Ø  The Institute adheres to norms prescribed by the All India Council for Technical Education (AICTE) in respect of faculty qualifi cations and strength.

 

Revision of General Financial Rules

Ø  The General Financial Rules (GFRs) are rules and orders dealing with matters involving public fi nances.

 

Department of Revenue

Ø  The Department of Revenue exercises control in respect of revenue matters relating to Direct and Indirect Union taxes through two statutory boards namely, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC).

Ø  The Department is also entrusted with the administration and enforcement of regulatory measures provided in the enactments concerning Central Sales Tax, Stamp duties and other relevant fi scal statutes.

Ø  Control over production and disposal of opium and its products is vested in this Department.

 

Goods and Services Tax Legislative Development

Ø  GST was implemented in the country in July 2017. Subsuming of various central indirect taxes and levies such as central excise duty, additional excise duties, excise duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as countervailing duty, special additional duty of customs, and central surcharges and cesses so far as they relate to the supply of goods and services.

Ø  Coverage of all goods and services, except alcoholic liquor for human consumption, is meant for the levy of Goods and Services Tax.

 

Goods and Services Taxes

Ø  The Constitution was amended to provide concurrent powers to both center and states to levy Goods and Services Tax (GST) on goods and services.

Ø  Subsequently, the GST Council comprising the Union Finance Minister, MoS, Finance and Finance Ministers of all states, is empowered with making all policy decisions on GST.

Ø  More than 17 taxes and 13 cesses have been subsumed in GST, making India —”One Nation One Tax”.

 

Indian Stamp Act

Ø  The Indian Stamp Act, 1899, is a fi scal statute laying down the law relating to tax levied in the form of stamps on instruments recording transactions.

 

 Central Board of Direct Taxes

 Direct Taxes

Ø  The Central Board of Direct Taxes (CBDT), created by the Central Boards of Revenue Act 1963, is the apex body entrusted with the responsibility of administering direct tax laws in India. It is the cadre controlling authority for the Income Tax Department (ITD).

Ø  With modern information technology as a key driver, the CBDT has implemented a comprehensive computerisation programme in the Income Tax Department. The programme is aimed to establish a taxpayer friendly regime, increase the tax-base, improve supervision and generate more revenue for the government.

Ø  The endeavour is to promote voluntary compliance by taxpayers and create a non-intrusive and non-adversarial tax administration.

 

Abolition of Dividend Distribution Tax (DDT)

Ø  In order to increase the attractiveness of the Indian equity market and to provide relief to a large class of investors in whose case dividend income is taxable at the rate lower than the rate of DDT, the Finance Act, 2020 removed the Dividend Distribution Tax under which the companies shall not be required to pay DDT from 2020-21. The dividend income shall be taxed only in the hands of the recipients at their applicable rate

 

Personal Income Tax

Ø  In order to reform personal income tax, Finance Act, 2020 has provided an option to individual taxpayers for paying income-tax at lower slab rates if they do not avail specifi ed deductions and exemptions.

 

International Financial Services Centre (IFSC)

Ø  Various tax incentives have been provided for units located in International Financial Services Centre (IFSC) in order to make it a hub for fi nancial services in the world.

Ø  Further incentives have been provided in the Finance Act 2021, like tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessor, tax incentives for relocating foreign funds into IFSC and allowing tax exemption for the investment division of foreign banks located in IFSC.

 

Legislative Changes

 Changes in Personal Income-Tax Rates

Ø  In order to encourage more people to come within the tax net, and also to reduce the burden of taxation on honest taxpayers and salaried employees, who are showing their income correctly, the tax rate for individual assessees earning incomes between Rs. 2.5 lakh to Rs. 5 Iakh was reduced to 5 per cent from the earlier rate of 10 per cent.

 

Changes in Corporate Income-Tax Rates

Ø  In order to make MSME companies more competitive as compared to large companies and also to encourage fi rms to migrate to company format, tax rate for smaller companies with annual turnover up to Rs. 50 crore in the Financial Year 2015-16 was reduced to 25 per cent.

Ø  Percentage-wise, this will benefi t 96 per cent of companies in this category.

 PAN Quoting Mechanism

Ø  Statutory provision for deduction of tax at source (TDS) at higher rate of 20 per cent, or the applicable rate whichever is higher in case of non-quoting of Permanent Account Number (PAN) is made under Section 206AA of the Income Tax Act since April 2010.

Ø  PAN acts as a common thread for linking the information in the departmental database.

 

Promoting Digital Transaction

Ø  A new Section, 269ST was inserted in the Income Tax Act which inter alia restricts acceptance of cash of two lakh rupees or more in the circumstances specifi ed therein, through modes other than an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.

 

Promoting Digital Payments for Small Unorganised Businesses

Ø  In order to promote digital transactions and to encourage small unorganised businesses to accept digital payments, Section 44AD of the Income Tax Act has been amended to reduce the existing rate of deemed total income of 8 per cent to 6 per cent in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

 

Aadhaar in PAN Application Form and Return of Income

Ø  A new Section 139AA has been inserted in the Act. With this, every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017 quote Aadhaar number or Enrolment ID of Aadhaar application form in the return of income and PAN application form.

 

Ease of Compliance for Taxpayers No 17R for specifi ed senior citizens

Ø  Through Finance Act, 2021, a new section 194P has been inserted to the Income-tax Act, 1961 (the Act) to provide that in case of senior citizens of the age 75 years or above having only pension income and interest income only from the account(s) maintained with a bank in which they receive such pension, then such senior citizens shall not be required to fi le their Income Tax Returns (ITR).

 

Relaxation to NRIs

Ø  When Non-Resident Indians (NRI) return to India, they have issues with respect to their accrued incomes in their foreign retirement accounts due to a mismatch in taxation periods.

 

Faceless Appeals

Ø  Faceless Appeal Scheme has been launched in 2020. The Scheme provides a fully faceless procedure for appeals to Commissioner of Income Tax (Appeals). Like the Faceless Assessment Scheme, it allows the taxpayers to fi le their documents in an electronic mode and thereby save them from the hassles of physically visiting the Income Tax Department.

 

Faceless Penalty

Ø  Faceless Penalty Scheme, 2021 was launched to impart greater effi ciency, transparency and accountability to the procedure for imposition of penalty.

Ø  The Scheme eliminates the physical interface between the Income-tax offi cials and the taxpayers and provides for optimal utilisation of resources and a team-based mechanism for imposition of penalty by one or more income-tax authorities with dynamic jurisdiction.

 

 Faceless /TAT

Ø  The Finance Act, 2021 has empowered the government to notify a scheme for the purposes of disposal of appeals by the Appellate Tribunal so as to impart greater effi ciency, transparency and accountability by eliminating the physical interface between the Appellate Tribunal and parties to the appeal in the course of appellate proceedings to the extent technologically feasible, optimising utilisation of the resources through economies of scale and functional specialization and introducing an appellate system with dynamic jurisdiction.

 

Reduction in Time for Income Tax Proceedings

Ø  The Finance Act, 2021 has reduced the time-limit for re-opening of assessment to 3 years from the earlier 6 years.

 

 Pre-fi lling of Income-tax Returns

Ø  In order to make tax compliance more convenient, pre-fi lled DR have been provided to individual taxpayers. The ITR form now contains pre-fi lled details of certain incomes such as salary income. 

Ø  The scope of information for pre-fi ling is being further expanded by including information such as interest, dividend capital gains, etc.

 

Taxpayer Registration

Ø  Permanent Account Number (PAN) is a 10-digit alpha-numeric number allotted by ITD to taxpayers. It enables ITD to link all transactions of the taxpayer with the Department. Income Tax Department has allotted more than 50 crore PAN.

Ø  ITD has implemented the integration of the PAN allotment process with incorporation of a company through the e-biz portal.

Ø  A facility for instant allotment of PAN (on near to real time basis) is available for those applicants who have a valid Aadhaar number and have mobile number registered in Aadhaar.

 

Payment of Taxes

Ø  The Online Tax Accounting System (OLTAS) facilitates near real time reporting, monitoring and reconciliation of tax payments made by taxpayers through banks. e-payment of taxes has been enabled through net banking and ATMs and nearly 89 per cent of tax is collected through this mode facilitating payment of taxes anytime from home/offi ce without having to go to a bank branch.

 

Electronic filing of Income Tax Returns and other forms

Ø  The e-fi ling website provides facility for online fi ling of Income tax returns and various types of forms including audit reports, applications and informational statements by taxpayers. This facility is free of cost to taxpayers. e-fi led returns now account for more than 99 per cent of total returns fi led with the Department.

 

Centralised Processing of Income Tax Returns

Ø  Centralised Processing Centre for Income tax returns (CPC ITR) at Bengaluru leverages the availability of data in the electronic format.

Ø  CPC ITR provides a comprehensive and end to end solution to taxpayers to process the return using rules as per provisions of the Income Tax Act in an automated environment to compute the fi nal refund or tax due for the taxpayer.

 

Taxpayer Facilitation and Assistance

Ø  Aaykar Seva Kendras (ASKs) were set up under Sevottam as a single window computerized service mechanism for centralized receipt of returns, applications, grievances and distribution of dak in various Income Tax Offices

 

Computer Assisted Scrutiny Selection (CASS)

Ø  Income Tax Department has been leveraging data analytics and risk assessment for promoting voluntary compliance and deterring tax evasion.

Ø  The Department has been implementing Computer Assisted Scrutiny Selection (CASS) for selecting cases for scrutiny (audit). The suggestions received from fi eld formations and the outcome in cases selected in prior years are reviewed by a cross functional committee (including representatives from assessment, investigation, intelligence, international taxation, transfer pricing, risk assessment, systems) to refi ne the scenarios and parameters.

 

Non- Filers Monitoring System (NMS)

Ø  The Income Tax Department has implemented the Non- Filers Monitoring System (NMS) which assimilates and analyses in-house information as well as transactional data received from third-parties, including Statements of Financial Transaction (SFT), Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) statements, Intelligence and Criminal Investigation (I&CI) data etc., to identify such persons/ entities who have undertaken high value fi nancial transactions but have not fi led their returns.

 

Insight System

§  An integrated data warehousing and business intelligence platform has been been put in place to enable ITD in meeting the three goals namely,

Ø  To promote voluntary compliance and deter noncompliance;

Ø  To impart confi dence that all eligible persons pay appropriate tax; and

Ø  To promote fair and judicious tax administration.

 

Income Tax Business Application

Ø  The Income Tax Business Application (ITBA) project commenced in 2013.

Ø  The objective of ITBA was to e-enable all internal business processes so that offi cers and staff are able to increase their effi ciency by bringing information and work at a single place for decisions making and reduce drudgery in reporting, correspondence and internal approvals.

 

TDS Reconciliation Analysis and Correction Enabling System (TRACES)

Ø  TRACES is a web-based application of the Income Tax Department that provides an interface to all stakeholders associated with TDS administration.

 

Going Paperless

Ø  By procuring Digital Signature Certifi cates for all offi cers, it is being ensured that any message/letter/ notice or order can be composed in the module, converted to PDF format which can be digitally signed by the Offi cer and sent directly to the taxpayer through Email.

Ø  Simultaneously, all papers submitted by taxpayer would be converted to electronic form in ITBA

 

New Initiatives

§  Transparent Taxation: Honouring the Honest

Ø  A ‘Transparent Taxation’ platform titled “Honouring the Honest” was launched in 2020.

Ø  The platform comprised faceless assessments, faceless appeals and a taxpayer’s charter.

Ø  The reforms are part of the government’s attempt to honour ‘honest’ taxpayers of the country and to make the tax system ‘seamless, faceless and painless’.

 

§  Taxpayers’ Charter

Ø  The taxpayer’s charter, provides for responsibilities of the Income-Tax Department towards taxpayers and also lists duties of the taxpayers.

 

Faceless Appeal Scheme, 2020

§  Vivad se Vishwas Scheme

Ø  A large number of disputes related to direct taxes arepending at various levels of adjudication from Commissioner (Appeals) level to the Supreme Court.

Ø  These tax disputes consume a large part of resources both on the part of the government as well as taxpayers and also deprive the government of the timely collection of revenue.

Ø  With these facts in mind, an urgent need was felt to provide for resolution of pending tax disputes which will not only benefi t the government by generating timely revenue but also the taxpayers as it will bring down mounting litigation costs and efforts can be better utilized for expanding business activities.

Ø  Direct Tax Vivad se Vishwas Act, 2020 was enacted in 2020 under which the declarations for settling disputes are being fi led.

Ø  Depending on the type of the pending dispute, a proportion of the total tax, interest and penalty demanded, needs to be paid under the scheme for settlement.

 

Improving the Ease of Doing Business for Start-ups

Ø  To provide a cohesive ecosystem to the start-ups, various taxation related issues have been addressed. A dedicated Start-up cell has been constituted under a member of the CBDT for sorting out the grievances and taxation related issues of start-ups.

 

Document Identifi cation Number (DIN)

Ø  With a view to bringing greater transparency in the functioning of the tax-administration and improvement in service delivery, all notices and orders of Income Tax Department are generated electronically on systems with a computer-generated DIN.

Ø  Thus, all communications to the taxpayers by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, investigation, penalty, prosecution, rectifi cation, approval shall be issued from October, 2019 onwards with a computer-generated DIN duly quoted in such communication.

 

Major Citizen Friendly Initiatives Aayakar Sewa Kendra

Ø  The setting up of ASKs is a step in this direction. Aayakar Sewa Kendra (ASK) is the single window system for implementation of Citizen’s Charter of the Income Tax Department and a mechanism for achieving excellence in public service delivery.

Ø  All communications as well as returns received in ASK mandate timely disposal which can be monitored and reviewed at the highest level.

 

Aayakar Setu

Ø  The use of smart phone is increasing day by day.

Ø  With the objective to enhance taxpayer services and mobile access experience, a mobile app (available on Android/10S platform) and responsive version of the Tax Payer Services (TPS) section at the national website called “Aayakar Setu” was launched.

 

§  TDS SMS alert Scheme

Ø  CBDT has put in place a mechanism for real-time communication to taxpayers (deductees) about information of TDS deduction/deposit by their respective employers or deductors.

Ø  In order to provide better taxpayer services by providing timely and accurate data to the taxpayers, the scheme for SMS alert to the salaried employees on a quarterly basis has been launched.

 

Publicity Campaigns

Ø  For the last many years, the Department has shifted its communication strategy to portray itself, not, as a purely enforcement agency but also as a taxpayer facilitator, service provider and major contributor in nation building.

Ø  This strategy has allowed the Department to communicate effectively with the taxpayers acknowledging their contribution in building a secure, progressive and developed nation.

Ø  Several publicity campaigns were carried out which included campaigns for awareness of due dates of payment of advance tax, fi ling of returns, fi ling of TDS statements and issuance of TDS certifi cates, fi ling of annual information return etc.

 

 Social Media

Ø  The Department has stepped into publicity campaigns through social media channels since 2015 as per the approved Social Media policy.

Ø  Social Media activities are also being regularly undertaken through the offi cial Twitter account, i.e., #IncomeTaxIndia.

Ø  This strategy has allowed the Department to communicate effectively with the taxpayers acknowledging their contribution in building a secure, progressive and developed nation.

 

Central Board of Indirect Taxes and Customs

Ø  Central Board of Indirect Taxes and Customs (CBIC), (erstwhile Central Board of Excise & Customs) is a part of the Department of Revenue.

Ø  It deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise Duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC’s purview.

Ø  Dispute Settlement and Appeal: The Offi cers of Customs, Excise and Service Tax have powers to adjudicate cases under the Customs Act, 1962, the Central Excise Act, 1944 and Service Tax Laws (Finance Act, 1994).

Ø  The appellate machinery comprising the Commissioners (Appeals) deals with appeals against the orders passed by the offi cers lower in rank than Commissioner of Customs and Central Excise.

 

International Cooperation on Tax Matters India’s Association with OECD

Ø  The Organization for Economic Cooperation and Development (OECD) is an organization of 34- member countries who are signatories to the Convention on the Organisation for Economic Cooperation and Development.

Ø   Tax issues have always been an important part of OECD’s overall activities and are undertaken by the committee on fi scal affairs and its subsidiary bodies. The Indian delegates have been participating in the meetings of working parties and task force in view of the prominent role of OECD in development of international standards in the areas of international taxation, transfer pricing and exchange of information.

 

Tax Inspectors Without Borders (TIWB)

Ø  India has been supportive in capacity building in tax matters in developing countries.

Ø  The Tax Inspectors Without Borders (TIWB) Programme has been jointly launched by UNDP and OECD and is intended to support developing countries to strengthen national tax administrations through building audit capacity and to share this knowledge with other countries.

Customs

Ø  Indian Customs has always been at the forefront when it comes to adopting cutting edge technology for providing better services in respect of both cargo and passengers. The policy adopted by Customs is directed towards the twin goals of Make in India and AtmaNirbhar Bharat.

Ø  The tariff structure has been calibrated so as to achieve furtherance of economic activity and employment generation in the domestic market.

 

 Enterprise Data Warehouse

Ø  CBIC is one of the fi rst government departments to have implemented an Enterprise Date Warehouse, a central repository of clean and consistent and near real time data pertaining to Customs, Central Excise and Service Tax.

 

Directorate of Enforcement

Ø  Directorate of Enforcement was (ED) set up at New Delhi in 1956 for enforcement of the provisions of the Foreign Exchange Regulation Act (FERA), 1947.

Ø  FERA, 1947 was later replaced by Foreign Exchange Regulation Act, 1973. FERA was a Criminal Act, which provided for fi ling of prosecutions in a court of law, besides adjudication of violations by the Adjudicating Authorities.

Ø  FERA was repealed in 2000 and replaced with Foreign Exchange Management Act, (FEMA). Subsequently, the Directorate was also entrusted with the responsibility of implementing the Prevention of Money Laundering Act, 2002 (PMLA).

Ø  Under the PMLA, the Directorate can initiate investigations only after a Law Enforcement Agency books a case under one of the offences listed in the Schedule to the Act.

 

Financial Intelligence Unit-India

Ø  Financial Intelligence Unit-India (FIU-IND) is the central national agency for receiving, processing, analysing and disseminating information relating to suspect fi nancial transactions.

 Narcotics

§  Narcotics Control

Ø  The Narcotics Control Division administers the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), which prohibits, except for medical and scientifi c purposes, the manufacture, production, possession, sale, purchase, transport, warehouse, use, consumption, import interState, export inter-State, import into India, export from India or transhipment of narcotic drugs and psychotropic substances.

§  Central Bureau of Narcotics

Ø  The Central Bureau of Narcotics (CBN) headed by the Narcotics Commissioner is headquartered at Gwalior.

Ø  The administrative control of the department lies with CBIC while its operational functions are monitored by the Department of Revenue, the nodal department entrusted with the task of policy decisions over control over narcotic drugs, psychotropic substances and precursor and essential chemicals used in the manufacture of the Narcotic Drugs and Psychotropic Substances (NDPS).

 

Government Opium and Alkaloid Factories

Ø  The Government Opium and Alkaloid Factories (GOAF), under the administrative control of the Department of Revenue, are engaged in the processing of raw opium for export purposes and manufacture of opiate alkaloids.

 

Customs, Excise and Service Tax Appellate Tribunal

Ø  Customs, Excise and Service Tax Appellate Tribunal (earlier known as Customs Excise and Gold (Control) Appellate Tribunal) was formed as a quasi-judicial body to hear appeals from the orders and decisions passed by the Commissioner/ Commissioner (Appeals) of Customs, Central Excise and Service Tax.

Ø  The Tribunal is also having appellate jurisdiction on Anti dumping matters and such matters are heard by special bench headed by the President, CESTAT.

 

Department of Financial Services

Ø  The Department of Financial Services (DFS) is mainly responsible for policy issues relating to Public Sector Banks (PSBs) and Financial Institutions including their functioning, appointment of Chairman, Managing Director and Chief Executive Offi cers (MD & CEOs), Executive Directors (EDs), Chairman cum Managing Directors (CMDs), legislative matters, international banking relations.

 

Banking

Ø  Banking industry is crucial to the economy of any nation as it channel ises savings and investments to provide capital for economic growth. In India, banks have played a vital role in fi nancial inclusion of the general population by providing access to basic fi nancial services to unbanked households and formal credit to the agriculture sector and micro-enterprises.

Ø  Public Sector Banks (PSBs) are the mainstay of the Indian banking industry. PSBs and PSB-sponsored Regional Rural Banks (RRBs) have dominant market presence and constitute 78 per cent of the bank network of Scheduled Commercial Banks (SCBs).

 

Reserve Bank of India

Ø  The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on April 1, 1935 in accordance with the Reserve Bank of India Act, 1934. Following India’s independence on 15 August 1947, the RBI was nationalised on January 1, 1949.

Ø  As the central bank of India, RBI is an independent apex monetary authority which regulates banks and provides important fi nancial services like storing of foreign exchange reserves, control of infl ation, and monetary policy report.

Ø  It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors which has: the governor; four deputy governors; two fi nance ministry representatives; ten government-nominated directors to represent important elements of India’s economy; and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi.

 

National Bank for Financing Infrastructure and Development

Ø  The Government has introduced the National Infrastructure Pipeline, a fi rst of-its-kind exercise with a focus on sectors such as energy, rods, urban infrastructure and railways and covering all projects, greenfi eld and brownfi eld.

Ø  Therefore, National Bank for Financing Infrastructure and Development (NABFID) has been established as a unique development fi nancial institution exclusively for infrastructure.

 

 Reforms in Banking Sector

Ø  As per RBI, reasons for the spurt in stressed assets in India in recent years include, among others, aggressive lending, loan fraud and wilful default in some cases.

Ø  To address the problem, in December 2015, the Government imple mented a comprehensive 4R’s strategy of Recognizing NPAs transparently, Reso lution and recovery, Recapitalizing PSBs, and Reforms in the fi nancial system and PSBs.

 

Consolidation of Public Sector Banks

Ø  The consolidation of PSBs aims at enhancing the effi cacy of the banking sector by creating strong and effi cient banks.

Ø  By leveraging economies of scale and synergies, the amalgamated entities have improved their fi nancial capacity to support economic growth by lending and operational effi ciencies through increased thrust on the adoption of technology.

Ø  It improved their ability to raise funds from the market: 98 per cent of resources raised from the market by PSBs in Financial Year 2020-21 has been by amalgamated entities.

 

Digital and data-driven banking

Ø  Reforms in PSBs have resulted in led to substantial headway in intro ducing digital and data-driven banking: (i) enhancement of access to mobile and Internet banking by PSBs (ii) enablement of digital retail loan request initiation through digital channels in all large PSBs (iii) implementation of Government’s Jeevan Pramaan initiative for pensioners to enable them to update their annual life certifi cate online, etc.

 

e-RUPI

Ø  The digital payment solution e-RUPI, a cashless and contactless instrument for digital payment, was launched in 2021 which is going to play a substantial role in making Direct Benefi t Transfer (DBT) more effective in digital transac tions in the country and will give a new dimension to digital governance.

 

 e-DRT Project

Ø  The e-DRT project to digitize the functioning of all 39 Debt Recovery Tri bunals (DRTs) and 5 Debts Recovery Appellate Tribunals (DRAYS) has been imple mented with the support of the National Informatics Center (NIC).

Ø  The e-DRT project has automated the full cycle of workfl ow of DRATs and DRTs, which has brought transparency and increased their effi ciency. It has enabled the Tribunals to ensure online availability of case-related information.

Doorstep Banking

Ø  Apart from Digital Banking through Net/Mobile Banking and other elec tronic channels, PSBs started Doorstep Banking, as a part of Enhanced Access for Service Excellence (EASE) Reforms, in 100 centres to provide the convenience of banking services to the customers at their doorstep through the universal touchpoints of Call Centre, Web Portal or Mobile App.

 

 Regional Rural Banks

Ø  The Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976, to create an alternative channel to the cooperative credit structure and to ensure suffi cient institutional credit for the rural and agriculture sector.

Ø  RRBs are jointly owned by Government of India, concerned state government and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively

 

Agriculture Credit

Ø  In order to boost the agriculture sector with the help of effective and hassle-free agriculture credit, the government has been fi xing annual targets for ground level agriculture credit by Scheduled Commercial Banks, Regional Rural Banks (RRBs) and Cooperative Banks.

 

Kisan Credit Card

Ø  The Kisan Credit Card (KCC) scheme was introduced in 1998-99, as an innovative credit delivery system aiming at adequate and timely credit support from the banking system to the farmers for their cultivation needs including purchase of inputs in a fl exible, convenient and cost effective manner.

Ø  The scheme is being implemented by all cooperative banks, RRBs and public sector commercial banks throughout the country.

 

Rural Infrastructure Development Fund

Ø  The central government established a fund to be operationalised by NABARD, namely, the Rural Infrastructure Development Fund (RIDF), which was set up within NABARD by way of deposits from Scheduled Commercial Banks operating within the country from the shortfall in their agricultural/ priority sector/weaker sections lending.

Ø  The fund has since been continued, with its allocation being announced every year in the Union Budget.

Ø  Over the years, coverage under the RIDF has been broad-based, in each tranche, and at present, a wide range of 34 activities are fi nanced under various sectors.

 

 Insurance

Ø  Insurance, being an integral part of the fi nancial sector, plays a signifi cant role in India’s economy. Apart from protection against mortality, property and casualty risks and providing a safety net for individuals and enterprises in urban and rural areas, this sector encourages savings and provides long-term funds for infrastructure development and other long gestation projects of the country.

 Life Insurance Corporation of India

Ø  Life Insurance Corporation of India (LIC) was established by an Act of Parliament called the Life Insurance. Corporation of India Act, 1956. It is governed by the Insurance Act, 1938, LIC Act, 1956, LIC Regulations, 1959 and Insurance Regulatory and Development Authority Act, 1999.

 

Social Security Schemes Atal Pension Yojana

Ø  The Atal Pension Yojana (APY) was launched in May 2015, to address the longevity risks among the workers in unorganised sector who are not covered under any statutory social security scheme.

Ø  The APY is focused on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA).

Ø  Any Indian citizen between 18-40 years of age can join through their savings bank account/post offi ce savings account.

Ø  Minimum pension is guaranteed by the Government of India to the subscriber at the age of 60 years, with a minimum monthly contribution.

Ø   After the subscriber’s demise, the spouse of the subscriber shall be entitled to receive the same pension amount as that of the subscriber until the death of the spouse.

Ø   After the demise of both the subscriber and the spouse, the nominee of the subscriber shall be entitled to receive the pension wealth, as accumulated till age 60 of the subscriber.

 

Pradhan Mantri Jeevan Jyoti Bima Yojana

Ø  Government announced three ambitious social security schemes pertaining to the insurance and pension sectors, namely Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and the Atal Pension Yojana (APY) to move towards creating a universal social security system, targeted especially for the poor and the under-privileged.

Ø  PMJJBY is a one-year life insurance scheme, renewable from year to year, offering coverage of 2 lakhs for death due to any reason and is available to people in the age group of 18 to 50 years (life cover up to 55 years of age) having a bank account who give their consent to join and enable auto-debit.

Ø  It involves convenient bank account linked enrolment with implementation in IT mode, and premium payment through auto-debit from the bank account of the subscriber.

 

Pradhan Mantri Suraksha Bima Yojana

Ø  The Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a one-year personal accident insurance scheme, renewable from year to year, offering coverage for death/disability due to an accident and is available to people in the age group of 18 to 70 years having a bank account who give their consent to join and enable auto-debit.

Ø  Under the said scheme, risk coverage available will be 2 lakh for accidental death and permanent total disability and 1 lakh for permanent partial disability.

Ø  It involves convenient bank account linked enrolment with implementation in IT mode, and premium payment through auto-debit from the bank account of the subscriber.

 

Pradhan Mantri Jan Dhan Yojana

 With a view to increasing banking penetration and promoting fi nancial inclusion and with the main objective of covering all households with at least one bank account per household across the country, a National Mission on fi nancial inclusion named as (PMJDY) was announced in 2014.

 

§  Objectives of PMJDY include:

Ø  universal access to banking facilities for all households across the country through a bank branch or a fi xed point business correspondent (BC) within a reasonable distance; and

Ø  to cover all households with at least one basic bank account with RuPay Debit card having in-built accident insurance cover of 1 lakh

 

National Pension System

Ø  With a view to providing adequate retirement income, the National Pension System (NPS) was introduced. It has been made mandatory for all new recruits to the government (except armed forces).

Ø  The features of the NPS design are: self-sustainability, portability and scalability. Based on individual choice, it is envisaged as a low cost and effi cient pension system backed by sound regulation.

Ø  As a pure ‘defi ned contribution’ product, returns would be totally market driven. The NPS provides various investment options and choices to individuals to switch over from one option to another or from one fund manager to another, subject to certain regulatory restrictions.

 

Swavalamban Scheme

Ø  To encourage the workers in the unorganised sector to save voluntarily for their old age, an initiative called Swavalamban Scheme was launched in 2010.

Ø  It is a co-contributory pension scheme whereby the central government contributes a sum of Rs. 1,000 per annum in each NPS account opened having a saving of Rs. 1,000 to Rs. 12,000 per annum.

 

 Rural Housing Fund

Ø  The Rural Housing Fund was set up in 2008-09 to enable primary lending institutions to access funds for extending housing fi nance to targeted groups in rural areas at competitive rates.

 

Pradhan Mantri Mudra Yojana

Ø  There are a large number of small business units, estimated at around 5.77 crore in the informal sector, running small manufacturing, trading or service businesses, who fi nd it diffi cult to access formal systems of credit. The loan requirement of these units is generally below Rs. 10 lakh.

Ø  Micro Units Development and Refi nance Agency Limited (MUDRA), is a refi nance institution set up by the government for development of micro units by extending funding support to encourage entrepreneurship in India, mostly from non-corporate small business sector.

Ø  Under the guidelines of PMMY, MUDRA has launched three innovative products namely Shishu, Kishor, and Tarun, which signifi es the stage of growth and funding needs of the micro units or entrepreneur. MUDRA shall refi nance through state level institutions, NBFCs, MFIs, regional rural banks, nationalised banks, private banks and other intermediaries.

 

Credit Guarantee Fund for Skill Development

Ø  To guarantee the loans and advances up to 1.5 lakh (term loan) or any other limit as may be decided by the settler, sanctioned and disbursed by the lending institutions without any

collateral security and/or third-party guarantees.

 

Department of Investment and Public Asset Management

Ø  The Department of Disinvestment and Public Asset Management (DIPAM) is one of the departments under the Ministry of Finance.

Ø  The mandate of the Department includes all matters related to management of central government investments in equity including disinvestment of equity in central Public Sector Undertakings; decisions on the recommendations of administrative ministries, NITI Aayog, etc., for disinvestment including strategic disinvestment; all matters related to Independent External Monitor(s) for disinvestment and public asset management and fi nancial policy in regard to the utilisation of the proceeds of disinvestment channelised into the National Investment Fund.

 

 New Public Sector Enterprise Policy

Ø  The New Public Sector Enterprise Policy (PSE) was designed to discover true economic potential of entities in the hands of private investors.

Ø  Under the new PSE policy, the public sector commercial enterprises have been classifi ed as strategic and non-strategic sectors.

Ø  Strategic sectors delineated are based on the criteria of national security, energy security, critical infrastructure, provision of fi nancial services and availability of important minerals.

Ø  The 4 broad strategic sectors have been proposed as—atomic energy, space and defence; transport and tele communication; power, petroleum, coal and other minerals; and banking, insurance and fi nancial Services.

 

Framework for Asset Monetisation

Ø  An institutional framework for monetisation of non-core assets, led by DIPAM was also approved in 2019. The framework covers monetisation of identifi ed non-core assets of CPSEs under strategic disinvestment, immovable enemy property under the custody of Custodian of Enemy Property (CEP1), MHA.

 

Bharat Bond

Ø  Bharat Bond Exchange Traded Fund (ETF) was launched in 2019 which was the fi rst instrument of its kind based on high-quality public-sector bonds. The second tranch was launched in 2020. The two tranches received huge response from all sections of investors especially retail investors.

 

National Investment Fund

Ø  Government constituted the National Investment Fund (NIF) into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelised.

Ø  The corpus of NIF was to be of a permanent nature and NIF was to be professionally managed to provide sustainable returns to the government, without depleting the corpus.

 

 

 

 

 

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