Transforming India through Sabka Saath, Sabka VikasDRAFT 1.0NOT FOR CIRCULATION

Government of India

Transforming India through Sabka Saath, Sabka Vikas

•Sabka Saath, Sabka Vikas (Development for All)Framework

•Transformation Architecture

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•Transformation Architecture

•Achievements To Date

•Road Ahead

We are at a Profound Moment in India’s History

Economic Crisis

Aspirational India

Decisive Mandate in 2014 Elections- Inspiring Leadership of the

Prior to 2014 Elections

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Dysfunctional Political System

Aspirational India Leadership of the PM- Stable BJP/ NDA government- New Hope for All

Macroeconomic Stabilization Achieved in 18 Months

Quarterly GDP Growth(%) CPI Inflation(%)

70 bps 380 bps

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Quarterly GDP Growth(%) CPI Inflation(%)

Annual Fiscal deficit(% of GDP) Quarterly net FDI ($B)

60 bps30%

Source: RBI database, Mid year economic analysis 205-16, Analyst reports

Now India is the only BRICS left standing…

Quarterly Real GDP Growth (%) Exchange Rate ($)

5

8%Real GDP Growth %

6.7 7.3

3.2

7.4 6.9

80

100

Indexed to March '14 ($)

ChinaIndia

5

-5

-3

0

3

Mar-14

1.12.1

Sep-15

SouthAfrica

-3.7-4.5

1.2

40

60 SouthAfricaBrazil

Russia

Source: EIA database, Bloomberg

Stabilization Achieved through Deft Economic Management

• Quality of government expenditure – public investments (up ~31% in Apr-Nov ’15 compared to last year)

• Collection efficiency & buoyancy in receipts - increased excise &

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• Collection efficiency & buoyancy in receipts - increased excise & tax on fuel

• Close co-ordination with RBI to achieve macro stabilization

Strategy

“Sabka Saath,

Sabka Saath, Sabka Vikas (Development for All) FrameworkCore Principles

Hard Assets

Pro-Poor-poverty eradication as a moral imperative

Pro market- pro competition and innovation

Build India’s productive capacity through an investment-driven supply-side approach

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“Sabka Saath, Sabka Vikas”Hard Assets

Soft Assets

Transportation, Manufacturing, Power, Housing, Telecom Empowerment not entitlement

Minimum government, maximum governance – rule based, policy driven decision making

StrengthenTeam India! – Cooperative federalism

Education, Skill-Building, Judicial System, Regulatory Institutions, Entrepreneurial Ecosystem

Kisaanon kiSamriddhiSustainable Agriculture

Ek Behtar JindagiQuality-of-Life ImprovementsYuvaon ko RojgaarMassive Employment Generation

Garibon kaUddhaarPoverty Eradication

Transformation Architecture for IndiaSabka Saath, Sabka Vikas

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Build infrastructure through public investmentsRobust financial system6

Transparent and predictable tax regime7

Co-operative federalism8

Gover

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Refor

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9Desh kiPragati

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Poverty Eradication:Achievements to DateAadhaar card• Unique ID; Efficient direct benefit transfer for MGNREGA & other subsidies• Nearly ~92% of adult population coveredJan-Dhan Yojna:• Zero balance account with benefits like insurance (upto Rs. 30,000) focusing on the unbanked• ~19 Cr accounts have been opened, that have a balance of ~Rs.30,000 CrPradhan Mantri Jeevan Jyoti Bima Yojana:• Life insurance scheme for all between age group of 18 to 50; ~2.9 Cr have been enrolled as of Dec 2015Pradhan Mantri Suraksha Bima Yojana• Accident insurance scheme for all between age group of 18 to 50; ~9.3 Cr have been enrolled as of Dec 2015

UniversalSocial Security(Central programs)

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of Dec 2015Atal Pension Yojana• Defined benefit scheme targeted at workers in un-organized sector (88% of labour force), promising monthly income between Rs.1,000-5,000;15 Lakh subscribers enrolled to date

• ‘Housing for All by 2022‘; Interest subvention on housing loans to beneficiaries belonging to economic weaker section (EWS) including slum-dwellers and low income groups (LIGs)• ~20,472 new homes approved for construction (July ’15); 9 citizen sector organizations and 15 businesses have joined the HFA India initiative

Food Security(Central programs)

Housing(Central programs)

• ~67% of Indian population (~82 Cr beneficiaries) to be allocated 5kg grains/month at highly subsidized prices• Direct benefit transfer (DBT) scheme for kerosene to be launched in April, 2016

Sustainable Agriculture:Achievements to datePradhan MantriKrishiSinchaiYojna

• Scheme is to improve agricultural productivity:- Expand cultivable area under assured irrigation- Improve on-farm water use efficiency to reduce wastage of water- Enhance adoption of precision-irrigation and other water-saving technologies• Rs. 50,000 Cr from central budget for the next five years

Soil HealthCard• Document quality of soil to identify its macro and micronutrients, acidic level, and organic content – to enhance agriculture productivity • Over 34 Lakh SHCs issued; target of ~14 Cr

• Interest Subvention Scheme for agriculture credit – incentive for timely payments of

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AgricultureCredit• Interest Subvention Scheme for agriculture credit – incentive for timely payments of farm loans with additional interest waiver of 3%• Target of Rs. 8.5 Lakh Cr for agriculture credit during current fiscal• Rural Infrastructure Development Fund to be raised to Rs. 25,000 Cr

MinimumSupportprices• Minimum support price (MSP) for rice increased by Rs. 50 per quintal in the 2015-16 season - 3.6% increase over the MSP of Rs.1,360 declared last year• Raised the MSP for all pulses and Rs. 200 per quintal bonus over the Commission for Agricultural Costs and Prices proposal

Crop Insurance• Significantly lowered premiums for crop insurance -1.5% on rabi crops, 2% on kharif crops and 5% on commercial/horticultural crops• Process improvements to reduce delays and leakages in payment of compensation through direct transfers

Massive Employment Generation:Achievements to DateMake In India

• Eased FDI norms in 15 major sectors - Automobile, Aviation, Biotechnology, Chemicals, Construction, Food Processing, etc• India top destination for greenfield investment in the first half of 2015-attracted ~$3 billion more than China and $4 billion more than the US• Reputed global players have committed large investments eg, Foxconn ($5 Bn), Softbank ($ 10 Bn)

Skill India• Incent skill training by providing financial rewards• 1,000 centres across all States and UTs covering 50,000 youth in 100 job roles across 25 sectors; 40 Cr people will be trained in various skills by 2022• New Start Up policy; first comprehensive policy to promote entrepreneurship

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Start Up and Stand Up India

• New Start Up policy; first comprehensive policy to promote entrepreneurship• Rs 10,000 Crore India Aspiration Fund • Simplified policy environment including easier entry and exit, self certifications, tax benefits and faster and cheaper patent applications, etc.

Mudra Yojana• Micro-unit development and refinance agency (MUDRA) – to increase credit flow to the MSME sector • Loans amounting to Rs 71,312 Cr have been disbursed to 1.73 Cr borrowers to date

Ease of doing business

• Process for industrial licensing & other clearances simplified and made online • DIPP implementing the eBiz project, which will establish a single platform for business and investment related service• 98 point action plan for states to improving “Ease of doing business” finalized; Central govt. to evaluate states based on the implementation of the plan• India moved 12 spots up in the world bank’s “Ease of doing Business” list

Quality-of-Life Improvements:Achievements to DateClimate Change Treaty

• Agreement to combat climate change agreed by 195 nations in UNFCC held in Paris • Agreement aims to contain global temperature rise and while strengthening ability to deal with impacts of climate change without compromising on economic development

Faster Environment clearances

• Amended several key aspects of the Environment Impact Assessment (EIA) Notification, 2006 to improve ease of doing business- Exemption have been offered to certain kinds of buildings and construction projects from seeking environmental clearances.

• Mission to develop 100 cities in five years, with central govt. funding of Rs.

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Smart Cities• Mission to develop 100 cities in five years, with central govt. funding of Rs. 45,000 cr & equal contribution from states

Metro and Ring roads• Metro operations planned in over 50 cities across India

- Chennai and Jaipur metro began operations in June 2015; Metros in Kochi and Hyderabad are expected to open next year• Multiple ring road projects to decongest cities

SwachhBharat• Achieve universal sanitation coverage, improve cleanliness and eliminate open defecation in India by Oct 2019• 39 Lakh individual household latrines and 479 community sanitary complexes constructed as of Sept, 2015

Building Infrastructure Through Public Investments: Achievements to Date• Ujjwal Discom Assurance Yojana (UDAY) - revival package for electricity distribution companies (discoms), significant investments in building IT infrastructure for ongoing monitoring of discoms• Promoting Renewable Energy- Launched Global Solar Alliance of over 120 countries to promote solar energy • 4319 villages electrified since August ‘15; Target to electrify 18,452 by May, 2018 • Coal India output to hit record 550MT in fiscal 2016; Rs 17,000 Cr savings expected• Rs. 8.5 Lakh Cr investment in the next 5 years• ~7,000-km-doubling projects and 4,000-km gauge conversion fast tracked in 2015• Bids for developing 400 railway stations in India on the PPP model

Energy

Railways

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• Bids for developing 400 railway stations in India on the PPP model• Rs. 40,000 cr investments for manufacturing 1,000 diesel and 800 electric locomotives

• Sanctioned projects worth 5.6 Lakh Cr; 2.7 Lakh Cr to be for 20,000 kms of NHDP over next three years• Total highway construction for 2015 over 6,000 km (highest ever recorded)• ~20 km roads built every day – set to reach 30km per day

Roads

Digital India

• Significant improvement in infrastructure and connectivity to offer Government services online • Schemes of over Rs 1 Lakh Cr including Digital Locker, e-education, e-health, e-sign and national scholarship portal

Robust Financial System:Achievements to Date• 23 new banking licenses awarded to new players

- 2 universal banks, 11 Payments Banks licenses and 10 Small Finance Banks• FDI limit in insurance increased to 49%• 2-factor authentication removed from transactions below Rs 2000

• Indradhanush program to revitalize public sector banks- Seven elements include appointments, bank Board Bureau, capitalization, de-stressing, empowerment, framework of accountability and governance reforms

• Committed recapitalization of Rs 70,000 Cr, assurance on further infusion, if needed • Regular asset quality review by RBI and MoF to strengthen bank balance sheets

Banking and Insurance

Revitalizing Public Sector Banks

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• Revised AIF norms for Attracting – PE investments increased by 67% to reach 1.26 Lakh Cr in 2015 • Composite caps on foreign investments to create uniformity and simplicity in foreign investments• Phased increase in investment limit for FPIs in govt. securities• Policy framework for Masala bonds

Increasing PE/VCInvestments

Bankruptcy • Comprehensive new regime for efficient resolution of bankruptcy• Bill already tabled in the Lok Sabha

Regulatory Institutions • Forwards Market Commission, the commodities market regulator merged with the Securities and Exchange Board of India (SEBI)

Transparent and Predictable Tax Regime:Achievements to Date

• Phased reduction in basic rate of corporate tax to 25% along with rationalization of exemptions to boost investments • Set-up Easwar committee to change direct tax law, report submitted, under review• Accepted recommendation of a panel (led by AP Shah) that minimum alternate tax (MAT) should not be imposed on overseas portfolio investors

• Biggest indirect tax reform since 1947, leading to efficient economic integration of India• Approved by Empowered Committee, passed in the Lok Sabha and awaiting Rajya Sabha approval

GST

Corporate Taxes

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(MAT) should not be imposed on overseas portfolio investors retrospectively• CBDT signed 30 advance pricing agreements to reduce tax litigation• Commitment on no retrospective taxation

• Fresh and revitalized systems/ technology in tax administration with online tax filing facility and fast refund processing• Refunds less than Rs. 50,000 approved automatically resulting in faster processing• Single window clearance for customs • Simplification of tax code and filing process• New appraisal system for tax officials with increased focus on quality and less on meeting tax collection targets

Taxes

Tax Administration

Co-operative Federalism:Achievements to Date• States to get higher share of central taxes as per the 14th Finance Commission’s recommendation, 42% of the divisible pool to states during 2015-16 to 2019-20, compared to 32% earlier• States will receive Rs 5.79 Lakh Cr of the Centre’s expected gross tax receipts of Rs 15.67 Lakh Crore

Devolution to states

• Refocused planning commission as Niti Aayog• NITI to include leaders of India's 29 states and seven union territories• Regular review operations of central govt. schemes in statesNITI Aayog

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• Launched PRAGATI platform for the PM to hold monthly meetings to review the progress of key projects with Union Government. Secretaries and Secretaries of StateCentre-State Coordination

• States to drive Labour law reforms including those related to employment; Rajasthan, Madhya Pradesh and Gujarat have started amending state laws • Competitive federalism – active competition among states to attract investments through global investor summits

Statesempowered to drive land and labour reforms

Governance Reforms:Achievements to Date

Effective Subsidy Management

• Deregulation of price of diesel and petrol• PAHAL initiative for effective distribution of LPG subsidy; ~14 crore customers covered and Rs. 25,000 crore saved• Aadhaar-based direct benefit transfer (DBT) of subsidies leveraging biometric technologies for better targeting

Better Procurement Policies • New Defence procurement procedure to focus on 'Make in India, redefined offsets

Transparent Natural Resource Allocation • Transparent and effective allocation of the minerals ( coal, bauxite etc.) and telecom spectrum

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Faster project approvals • Facilitated clearances for 42 stalled projects worth Rs 1.15 lakh Cr since the Budget for 2015-16; highway projects account for half of the 42 projects

Revitalize PPP model • Kelkar committee for revitalize the PPP model to drive policy changes

Policies

Six High Impact Reform Initiatives Accomplished

Universal social securityEffective subsidy targeting

Make in India

Big Bang

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Massive increase in public investmentsStart up India

New Fiscal Architecture

Big Bang Reforms

YoY Domestic Airline Passengers Indian Ecommerce Market Size

Economic Recovery Gaining Momentum

20% market67%

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YoY Domestic Passenger Vehicle Sales

YoY Domestic Airline Passengers Indian Ecommerce Market Size

Annual Consumer Durable Sales growth(%)

7%

Source: Analyst reports, Euro monitor, DGCA, ASSOCAM, India Ratings & Research. $1=Rs 60 used for conversions

190bps

Monsoon Rainfall(% of LTA)Monthly Brent crude prices

But Some Sectors Face External Challenges

-64%

20

Monsoon Rainfall(% of LTA)

Monthly Exports Monthly Commodity Index

Monthly Brent crude prices

Source: EIA, Nasdaq, BSE, RBI database, Index of last day for each month

-27% -30%

Stresses in Banking System Reflect Toxic Legacy Assets

Impaired Balance Sheet Credit Growth Slowdown

80

100

69.077.1 82.1

Break-up of outstanding credit for SCB (Rs. Lakh crore)

12%

10-14CAGR

9%

14-16ECAGR

RetailIndustryServicesAgriculture

21

0

20

40

60

FY10

38.1

FY11

45.1

FY12

53.3

FY13

60.5

FY14

69.0

FY15 FY16YTD

16%

17%

16%

15%

7%

9%

Note: Outstanding credit for each financial is the average of opening and closing balance. FY16-YTD data is until Nov, 2015 Source: Analyst reports, RBI database

Road Ahead: Much More to Come …•Goods And Services Tax•Bankruptcy Code•Real Estate Legislation•Deepening And Expansion Of Social Security Schemes

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•Strengthening Agriculture Through Better Irrigation •Affordable Housing •Smart Cities•Banking Reforms And Consolidation• EXECUTION, EXECUTION, EXECUTION