Chapter-8 : Finance
Short Notes or Revision Notes
GIST of India Year Book 2024
Ministry of Finance: Managing India’s Finances
- Oversees economic policy, expenditure, revenue, and resource mobilization.
- Departments: Economic Affairs, Expenditure, Revenue, Investment & Public Asset Management, Financial Services, Public Enterprises.
Department of Economic Affairs (DEA)
- Formulates economic policies and budget.
- Manages macro-economic policies, infrastructure financing, and external relations.
Budgetary Process
- Annual Financial Statement:Presented as per Article 112, details government receipts and expenditures.
- Demands for Grants (DGs):Specify ministry-wise spending estimates (voted upon by Lok Sabha under Article 113).
- Finance Bill:Outlines tax proposals.
- Appropriation Bills:Allow fund withdrawal after DGs approval.
- Supplementary Demands:Address unforeseen expenses.
Revenue Sources
- Central taxes (CGST, income tax) are the main source.
- Distribution between center and states is guided by Finance Commission recommendations.
Public Debt Management
- Categories:Internal (loans, treasury bills), external (foreign sources), other liabilities (savings schemes).
Budget Highlights (BE 2023-24)
- Focus on Vulnerable Sections:
- ₹88,044.21 crore allocated for 100% women-specific programs.
- ₹1,35,175.54 crore for schemes with at least 30% allocation for women.
Economic Performance (2022-23)
- Real GDP growth: 7.2%, surpassing projections.
- Industrial sector growth: 4.4%.
- Banking sector credit growth: 19.7% YoY (July 2023).
Financial Market Regulations
- SEBI mandates sustainability reporting for top 1,000 companies (from 2022-23).
Financial Sector Cybersecurity
- CSIRT-Fin under CERT-In (established 2020) strengthens cybersecurity.
Inflation Trends
- CPI-C inflation for 2022-23: 6.7%.
- CFPI inflation for 2022-23: 6.6%.
Fiscal Responsibility and Budget Management (FRBM) Framework
- Ensures fiscal responsibility through transparent operations, effective monetary policy, and limits on borrowing, debt, and deficits.
Institutional Mechanisms for Financial Stability
- Financial Stability and Development Council (FSDC):Established in 2010.
- Infrastructure Finance System (IFS):Unifies infrastructure policies and promotes private investments.
- Public-Private Partnerships (PPPs):Models like BOT and HAM encourage private participation with streamlined approvals and Viability Gap Funding (VGF).
Holistic Infrastructure Development
- National Monetisation Pipeline (NMP):Aims to unlock ₹6.0 lakh crore through government asset leasing.
- National Infrastructure Pipeline (NIP):Targets ₹111 lakh crore investment across 8,964 projects.
- National Logistics Policy (NLP):Aims to cut logistics costs to 8% of GDP by 2030.
- PM GatiShakti National Master Plan:Facilitates real-time coordination and enhances connectivity.
National Investment and Infrastructure Fund (NIIFL)
- Manages over USD 4.9 billion across four funds, strategically investing in India’s growth sectors.
Indian Ministry of Finance: Key Functions & Initiatives
- G20 Presidency (2023): Focused on “Vasudhaiva Kutumbakam” (world is one family), citizen engagement through Jan Bhagidari activities, hosted over 200 meetings across 50 cities.
- International Cooperation:
- BRICS Expansion (2024): Invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, UAE as full members.
- Collaborates with IMF, World Bank (IBRD & IDA), New Development Bank (NDB) for sustainable development.
- SAARC: Promotes regional cooperation, offers Currency Swap Arrangement for balance of payments issues.
- Department of Economic Affairs:
- Security Printing and Minting Corporation of India Ltd. (SPMCIL): Sole PSU for currency printing, coin minting, and security paper manufacturing.
- Department of Expenditure:
- Oversees public financial management.
- Manages Finance and Pay Commissions, Central Government Accounts.
- Implements financial rules and regulations.
- Financial Management Initiatives:
- Public Financial Management System (PFMS) for efficient fund transfer.
- Bharatkosh for online deposits of Non-Tax Receipts to the Government.
- e-Bill Processing System for online claim submission and real-time tracking (launched in 2022).
- Single Nodal Agency (SNA) and Central Nodal Agency (CNA) Models for streamlined fund allocation.
- Treasury Single Account (TSA) and SNA-TSA Model for optimized fund flows.
- Budget Highlights (2023-24):
- Three-fold increase in capital expenditure to ₹10 lakh crore.
- Interest-free loans to states.
- Finance Commission: Provides grants-in-aid to states as per recommendations.
- Tax Administration:
- Central Board of Direct Taxes (CBDT): Apex body for direct tax laws (voluntary compliance, non-adversarial administration).
- Strong Direct Tax Collections (FY 2023-24): Growth of 20.66% at ₹1 crore.
- Abolition of Dividend Distribution Tax to boost equity market.
- Central Board of Indirect Taxes and Customs (CBIC): Formulates policies for customs, excise, GST, and border controls.
Indian Ministry of Finance: Boosting Financial Services
- GST and Technology Adoption:
- CBIC uses technology to streamline GST, improve collection, and combat evasion.
- Customs modernization initiatives like Turant Customs promote transparency and efficiency.
- Enforcement and Financial Intelligence:
- Directorate of Enforcement (ED) tackles economic offenses.
- Financial Intelligence Unit-India (FIU-IND) combats money laundering and terror financing.
- Central Bureau of Narcotics (CBN) regulates opium cultivation and enforces drug laws.
- Customs, Excise and Service Tax Appellate Tribunal (CESTAT) facilitates dispute resolution.
- Government Agencies:
- Department of Financial Services (DFS) manages financial programs and social security schemes.
- Reserve Bank of India (RBI): Central bank for issuing currency, regulating monetary policy, and enhancing banking sector resilience.
- Banking Sector Reforms:
- Insolvency and Bankruptcy Code (IBC) and CRILC for improved lending practices and governance.
- Improved asset quality, credit growth, and profitability in the banking sector.
- NARCL resolves stressed assets, NaBFID facilitates infrastructure financing.
- Digital Initiatives in Banking:
- Digital Banking Units (DBUs) for promoting digital banking and financial inclusion.
- Account Aggregator (AA) framework for user-controlled financial data sharing.
- e-DRT project for online case-related information and e-filing in Debts Recovery Tribunals (DRTs).
- EASE 5.0 reforms focus on digitalization, big data, and customer offerings in Public Sector Banks (PSBs).
- Rural Banking Initiatives:
- Regional Rural Banks, NABARD, Ground Level Agriculture Credit, and Kisan Credit Card scheme support rural development and agriculture.
- Atma Nirbhar Bharat Abhiyan Initiatives:
- Promotes agriculture, animal husbandry, and INR invoicing for international trade.
- Covid-19 Relief Measures:
- Emergency Credit Line Guarantee Scheme (ECLGS) provides financial support to MSMEs and businesses during the pandemic.
- Insurance Sector Reforms:
- Increased FDI cap to 74% for attracting investment and fostering growth.
- Social Security Schemes:
- Pradhan Mantri Vaya Vandana Yojana (PMVVY) offers assured pensions for senior citizens.
- PMJJBY and PMSBY provide life and accident insurance coverage.
- Atal Pension Yojana (APY) offers pension benefits for unorganized sector workers.
- Pension Fund Regulatory and Development Authority (PFRDA) regulates National Pension System (NPS) for orderly growth.
- Government Initiatives for Micro-Enterprises:
- PM Mudra Yojana (PMMY) offers collateral-free credit up to ₹10 lakh.
- Stand-Up India promotes entrepreneurship among SC/ST and women.
- Disinvestment and Economic Growth:
- Strategic disinvestment and new PSE policy aim to unlock economic potential of Public Sector Enterprises (PSEs).
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