Posts in UPSC CSE – PRELIMS

Dear 24-year-old Basant

Dear 24-year-old Basant,

You’re less than a month away from your UPSC prelims exam and this is your first attempt and you’re excited like a headless chicken. I’m slightly busy today. So I’ll take the easiest route and write to to you in a list form.

1. Don’t read newspaper after D minus 20th day, D day being your exam day.

2. You’ve a tendency to bite more than what you can chew. Try to stick to the bare minimum these days. Don’t read new study materials. Keep revising your notes till you’re bored. And try solving previous years’ question papers in exam-like conditions.

3. Hang “Don’t disturb” sign on the door of your hostel room. Don’t let your friends create emergency for you. Friendships can wait. For the time being.

4. When it comes to UPSC CSE prelims, there are four subject areas in terms of what to do and what to expect.

      1. High investment – low return
      2. Low investment – low return
      3. High investment – high return
      4. Low investment – high return

Category A subject areas need a lot of hard work (you don’t like these subjects or they’re too vast or study materials are difficult to find in the market) and you don’t get too many questions from these subjects in the exam. Category B subject areas need very little work (these are your favourite subjects or you don’t have to read too many pages or study materials are easy to find in the market) and you don’t get too many questions from these subjects in the exam. Category C subject areas need a lot of hard work (you don’t like these subjects or they’re too vast or study materials are difficult to find in the market) and you get a lot of questions from these subjects in the exam. Category D subject areas need very little work (these are your favourite subjects or you don’t have to read too many pages or study materials are easy to find in the market) and you get lots of questions from these subjects in the exam.

Try to plan your preparation and orient your execution according to this classification.

5. You’re good at attracting traffic jams since you were a kid. So make time to visit your exam centre in advance and get a fair idea about its location and its distance from your Brahmaputra Hostel. Please try to reach there 90 minutes before the exam starts. Delhi’s traffic can be tricky. Please don’t take things lightly.

6. Don’t wear new shoes (or clothes) on the D day. You tend to feel uncomfortable in them. Typical of you. And take off your wrist watch once you find your seat and sit down on your chair in the exam hall. You hate wearing a watch. That’s why.

I know you hate faaltu ka gyaan. I’ll still take my chance.

Sincerely yours,

Basant

What internet means to an island economy

What internet means to an island economy

https://www.livemint.com/news/india/what-internet-means-to-an-island-economy-11598278668106.html

(Friends, I’ll show how to take notes from this article a bit later.)

24 Aug 2020 Deborshi Chaki

The Andamans just became one of the last Indian territories to get high-speed net. Will new businesses come up?
While the internet in itself will not solve persistent developmental challenges, it does offer a pathway to amplify economic transformations which are already underway.

MUMBAI : On 10 August, when the Prime Ministerinaugurated India’s first 5G-ready undersea optical fibre cable network between the Andamans and Chennai, life came full circle for Sunil Gupta. Around a year ago, he had made the difficult decision to wind up his startup in Bengaluru, a B2B tech platform for the tourism industry, and return to his hometown Port Blair in order to spend more time with his ageing parents.
“I had to close the company because the internet was dismally slow in Port Blair which makes remote working impossible,” said Gupta, who has since his return has opened a tourist hostel for budget travellers in Wandoor beach about 25km from Port Blair. But with data speeds set to improve dramatically once the undersea cable becomes fully operational, Gupta said that those plans have suddenly changed.

“Once connectivity improves, then it doesn’t really matter whether one is in Port Blair or in Bengaluru, rather the cost of operations will be less in Port Blair,” he said.

The 2,300km submarine optical fibre cable link, a long-standing demand among the local population, will deliver a bandwidth of 2×200 gigabits per second (Gbps) between Chennai and Port Blair, and 2×100 Gbps between capital Port Blair and the other islands. Though the internet arrived in the Andaman and Nicobar Islands via satellite connectivity in the early 2000s, data transfer speeds during all these years have been rudimentary.

While users in the Indian mainland upgraded to superfast digital ecosystems, the islands have remained in the 2G era (Lakshadweep will also get an undersea cable soon). Though technically speaking 4G service is available on the islands, it seldom worked. In the absence of proper connectivity, internet bandwidth, a precious commodity in the islands, was kept largely for the exclusive use of the local government machinery, leaving a large portion of the local population without any form of digital connectivity.

Now, the arrival of the undersea cable is expected to usher in an IT and ITes revolution on the islands. The islands have a high literacy rate of 86.6% and a ready workforce made up of a large English-speaking young population. While the internet in itself will not solve persistent developmental challenges—ranging from geographic remoteness to a heavy reliance on the government for the supply of goods and services—it does offer a pathway to amplify economic transformations which are already underway. The internet may finally offer the islanders a reasonable shot at diversifying beyond tourism.

A decade long wait

Located around 1,200km from the Indian mainland in the Bay of Bengal, the Andaman and Nicobar Islands, a former prison colony, carefully chosen for its sheer inaccessibility and remoteness, served as a natural prison for more than a century. The nearest continental landmass from the Andamans is the coast of Myanmar, which is about a day’s journey by sea from the capital Port Blair.

The island group is India’s largest union territory and is centrally administered by the union government through a lieutenant governor, the highest-ranking official of the local administration. The islands are scattered across an 800km zone from north to south. The main island clusters of Andaman and Nicobar are separated by high seas and lie to the north of the Malacca Strait, a busy sea route through which one-third of the world’s sea trade passes. Over the years, the islands have emerged as a sought-after tourist destination as well as a strategic point in the Bay of Bengal for the defence forces and currently serves as the headquarters of India’s first tri-services command, which is headed by all the three services on a rotation basis. While the National Optical Fibre Network (NOFN) initiative began in 2011 to provide broadband connectivity to over 200,000 gram panchayats across all 26 states and union territories, it did not include the Andaman and Nicobar Islands due to technical challenges. Telecom providers in the islands, therefore, were left to rely on expensive satellite connectivity to provide 2Mbps speeds. The high cost meant digital connectivity remained out of reach for a large section of the population.

3G services provided by the state-run BSNL and by private operators worked only intermittently. Uploading a single file could take hours. “For years, it was simply impossible for local businesses in the islands to stay competitive due to the lack of proper connectivity,” said M. Vinod, president of the Andaman and Association of Tour Operators. “Right from managing flight and hotel bookings online to accepting payments digitally, everything was a big challenge,” he said, adding: “But we expect things to be markedly better in the coming months.”

Lt General A.K. Singh, former lieutenant governor of the islands who played a key role in getting the project sanctioned, agrees. “It is a defining moment, a game-changer in multiple fields—education, health, governance, e-initiatives. The feeling of isolation which prevailed among the people will reduce; business opportunities will enhance. The islands are well placed for establishing call centres & BPO industry. The people are multilingual and there are no labour issues. In anticipation of the undersea cable, we had started foreign language classes to prepare our people. The possibilities are immense,” he told Mint.

The idea of optic fibre connectivity to the islands was first introduced by the erstwhile Planning Commission in 2010, following which it constituted a technical committee for studying the existing available bandwidth, future requirement and the strategy to be adopted for providing adequate bandwidth through reliable connectivity to the islands.

The technical committee after conducting several rounds of discussion with stakeholders such as the Indian Space Research Organisation (Isro), the ministry of defence and the local administration submitted its report to the Commission in January 2011. In its report, it proposed provisioning submarine optical fibre connectivity to six major islands which include Port Blair, Havelock, Little Andaman, Car Nicobar, Kamorta and Campbell Bay and satellite connectivity for other islands.

As per the proposal, the six islands were to be connected through one of the existing consortium cables passing through the region to the Indian mainland. Based on the report of the technical committee, the Planning Commission, in April 2011, conveyed its in-principle approval for laying the undersea optical fibre cable to connect the six major islands. Soon after, the Andaman and Nicobar administration prepared a proposal and invited bids for implementation of the project including its operation and maintenance for 15 years on a turnkey basis. The financial bids of the project were first opened in March 2013, with an initial estimated project cost of ₹413.55 crore. However, the project went into cold storage soon after and was revived only in 2016 under the Modi government.

A strategic asset

In addition to improving digital connectivity to the islands, the project is expected to provide heft to India’s strategic ambitions in the Indian Ocean region, where China’s dominance has been on a steady rise.

Over the years, the Chinese have steadily increased their presence in neighbouring Myanmar. In 1992, China is believed to have established a SIGINT (signals intelligence) gathering station on Great Coco Island to monitor Indian naval activity and missile launches in the Bay of Bengal. In addition to that, the Chinese are believed to have constructed an airstrip in the islands for surveillance-related purposes.

“The Andaman Nicobar Islands are like an unsinkable aircraft carrier of India in a very strategic location in the Bay of Bengal, overlooking the sea lines of communication (SLOCS) and the Malacca Straits,” said Lt. General Singh. “Communication was a huge challenge even for our defence forces. The three-tier security around the islands will be greatly facilitated. The west coast of the islands, which is very sparsely inhabited, can now be continuously monitored using technology,” he added.

When conceived, it was also suggested that the undersea cable connectivity be extended from Kolkata to the Andamans, in addition to Chennai. The resulting ring-like structure will reduce downtime of the optic fibre cable significantly, which takes a relatively long time to repair and restore given the complexities involved. Additionally, Trai had also suggested that the connectivity from Kolkata may be used to route traffic from the entire North-Eastern region of the country directly to Chennai, bypassing the large fault-prone terrestrial part of the international connectivity from Kolkata to Chennai. Trai had further argued that the optimum fibre network may also be used to provide connectivity to the South Asian Association for Regional Cooperation (Saarc) nations such as Nepal, Bhutan and Bangladesh. Further, connectivity could be extended beyond Chennai to Sri Lanka and the Maldives via submarine cable. Experts say that the project, if extended by another 1000km eastward, will open up a host of opportunities for India in the Asean region and help counterbalance China. With this, experts feel that countries such as Myanmar, Laos, Cambodia, Vietnam too will eventually connect their respective digital highways with the project.

In conclusion

With digital connectivity already up significantly in several pockets in the Andaman and Nicobar Islands due to the cable, the transformative impact of the project has begun showing results.

The islanders say that dealing with rising covid-19 cases, which poses an extinction threat to the indigenous tribes of the island, will be relatively easier now. In the absence of proper connectivity, locals claim that the infections have been on a steady rise as people are forced to venture out for daily chores risking themselves and others. Alongside, students who have returned to their homes from the mainland continue to sit out of online classes in the absence of internet connectivity. But that may not be for long. With digital connectivity set to improve, it is the service sector which harbours the highest level of anticipation and hopes regarding newer job opportunities and new possibilities.

“When I arrived (in the islands) in July 2013, I witnessed first-hand the great challenges faced by the people there. Communication was one of them,” said Lt General Singh. “To see the project get complete is very satisfying,” he added. In the long-run, it may also turn out to be an important milestone in India’s long-standing Look East policy, an effort to cultivate extensive economic and strategic relations with the nations of Southeast Asia in order to bolster its standing as a regional power.

Above all, the long-awaited project will create a sense of integration and confidence among the islanders, who are living in one of India’s remotest corners and who have until now been disadvantaged and deprived of their ‘right to internet access’–a fundamental right no less.

India’s turning point: An economic agenda to spur growth and jobs – The 2020 McKinsey Report

McKinsey Global Institute

India’s turning point: An economic agenda to spur growth and jobs

August 26, 2020 | Report

(Friends, I’ll discuss how to take notes from this report a bit later.)

https://www.mckinsey.com/featured-insights/india/indias-turning-point-an-economic-agenda-to-spur-growth-and-jobs

A clarion call is sounding for India to put growth on a sustainably faster track and meet the aspirations of its growing workforce.

By Shirish Sankhe, Anu Madgavkar, Gautam Kumra, Jonathan Woetzel, Sven Smit, and Kanmani Chockalingam

India is at a decisive point in its journey toward prosperity. The economic crisis sparked by COVID-19 could spur reforms that return the economy to a high-growth track and create gainful jobs for 90 million workers to 2030; letting go of this opportunity could risk a decade of economic stagnation. A new report from the McKinsey Global Institute identifies a reform agenda that could be implemented in the next 12 to 18 months. It aims to raise productivity and incomes for workers, small and midsize firms, and large businesses, keeping India in the ranks of the world’s outperforming emerging economies.

TABLE OF CONTENTS

India needs rapid GDP growth to create at least 90 million nonfarm jobs by 2030

Three ‘growth boosters’ can spur $2.5 trillion of economic value and 30 percent of nonfarm jobs

To capture frontier opportunities, India needs to triple its number of large firms

Six areas of targeted reform can raise productivity and competitiveness

Financial-sector reforms can help India meet its $2.4 trillion capital requirement

The central government, states, and business sector will need to act together

Section 1

India needs rapid GDP growth to create at least 90 million nonfarm jobs by 2030

A clarion call is sounding for India to put growth on a sustainably faster track and meet the aspirations of its growing workforce. Over the decade to 2030, India needs to create at least 90 million new nonfarm jobs to absorb the 60 million new workers who will enter the workforce based on current demographics, and an additional 30 million workers who could move from farm work to more productive nonfarm sectors. If an additional 55 million women enter the labor force, at least partially correcting historical underrepresentation, India’s job creation imperative would be even greater.

For gainful and productive employment growth of this magnitude , India’s GDP will need to grow by 8.0 to 8.5 percent annually over the next decade, or about double the 4.2 percent rate of growth in fiscal year 2020. Given the uncertainties about economic outcomes during the COVID-19 pandemic, our analysis looks at scenarios beginning in fiscal year 2023, although many of our proposed actions would start well before then, and in fact be implemented in the next 12 to 18 months.

Net employment would need to grow by 1.5 percent per year from 2023 to 2030, similar to the average rate that India achieved from 2000 to 2012, but much higher than the flat net employment experienced from 2013 to 2018. At the same time, India will need to maintain productivity growth at 6.5 to 7.0 percent per year, the same as it achieved from 2013 to 2018. The two objectives are not contradictory; indeed, employment cannot grow sustainably without high productivity growth, and vice versa.

If India fails to introduce measures to address pre-pandemic trends of flat employment and slowing economic growth, and does not manage the shock of the crisis adequately, its economy could expand by just 5.5 to 6.0 percent from 2023 to 2030, with a decadal growth of just 5 percent and absorb only about six million new workers, marking a decade of lost opportunity .

India has a successful track record to draw on: over the past three decades, the country has been one of just 18 outperforming emerging economies to achieve robust and consistent high growth. Pro-growth reforms lifted productivity and helped the country weather shocks and cycles. Real GDP growth has averaged 6.8 percent annually since 1992, and it has been inclusive; economic prosperity has brought significant improvement in living standards. Since 2005, more than 270 million people have escaped extreme poverty.

Yet India’s economy was already showing signs of weakness before the COVID-19 crisis; in the aftermath of the global financial crisis, its main demand engines of domestic private investment and global demand have stalled. Bank credit to industry slowed, and the proportion of nonperforming assets to total assets tripled to more than 9 percent in the period from fiscal year 2012 to 2019. Exports declined as a share of India’s GDP from 25 to 19 percent between 2013 and 2019. Gross domestic savings and household savings slowed, while labor-force participation fell from 58 to 49 percent between 2005 and 2018. Core sectors, including manufacturing and construction, showed signs of stress.

In order to recover to a high-growth path, India’s sectoral mix would need to move toward higher-productivity sectors that also have the potential to create more jobs. And, within individual sectors, a move toward new business models that harness global trends could drive productivity and demand.

We find that the manufacturing and construction sectors could achieve the largest acceleration in sector GDP growth relative to the past. In the coming decade, manufacturing productivity has the potential to rise by about 7.5 percent per year, contributing more than one-fifth of the incremental GDP in our estimates. Construction could add as many as one in four of the incremental gross jobs. In addition, both labor-intensive and knowledge-intensive sectors will have to sustain and improve on their past strong momentum. We estimate that about 30 million farm jobs could move to other sectors by 2030 as part of a high-growth strategy.

Section 2

Three ‘growth boosters’ can spur $2.5 trillion of economic value and 30 percent of nonfarm jobs

India needs to leapfrog ahead to achieve the employment and productivity growth needed. Fortunately, it has many opportunities to do so. Global trends such as digitization and automation, shifting supply chains, urbanization, rising incomes and demographic shifts, and a greater focus on sustainability, health, and safety are accelerating or assuming a new significance in the wake of the pandemic. For India, these trends could manifest as three growth boosters that become the hallmarks of the post-pandemic economy. Within these three growth boosters, we find 43 potential business opportunities that could create about $2.5 trillion of economic value in 2030 and support 112 million jobs, or about 30 percent of the nonfarm workforce in 2030.

This theme offers as much as $1 trillion in economic value. To achieve this, India will need to work now to grasp opportunities presented by forces such as rising wages in other parts of Asia, trade conflicts, and efforts to make supply chains more resilient. Rising flows and volumes of data suggest demand for a range of offshored and nearshored services. Greater affluence and leisure time and a focus on health and safety will also open up opportunities to produce and sell more manufactured goods and services.

India would need to raise its competitiveness in high-potential sectors like electronics and capital goods, chemicals, textiles and apparel, auto and auto components, and pharmaceuticals and medical devices, which contributed to about 56 percent of global trade in 2018. India’s share of exports in these sectors is 1.5 percent of the global total, while its share of imports is 2.3 percent. It could also build on its traditional strength in IT-enabled services to reflect digital and emerging technologies like artificial intelligence (AI) and machine learning–based analytics. The country also has an opportunity to develop high-value agricultural ecosystems, healthcare services for India and the world, and high-value tourism.

Growth booster 2: Efficiency engines for India’s competitiveness

The business models in this grouping can eliminate inefficiency in areas that underpin a competitive economy: power, logistics, financial services, automation, and government services. In each case, opportunities for value-creating market-based models could emerge, generating about $865 billion in economic value by 2030. Examples include next-generation financial services, such as innovation in digital payment offerings, new flow-based lending products, asset resolution and recovery models that could make insolvency processes more streamlined and effective, and a larger range of risk capital investment vehicles such as alternative investment funds. Automation of work and Industry 4.0 could bring greater efficiency; for example, about 60 percent of manufacturing-sector output could leverage predictive maintenance, smart safety management, and product design. These in turn can lift productivity in plants and factories by 7 to 11 percent. Many workers in these roles will require retraining and redeployment, and some may be displaced. Other opportunities exist in efficient mining and mineral sufficiency; high–efficiency power distribution, which could reduce power tariffs to commercial and industrial customers by 20 to 25 percent; and a push to greater e-governance.

Growth booster 3: New ways of living and working

Indian businesses can create economic value of about $635 billion by 2030 if they can tap into the shifting preferences of Indians aspiring to a higher standard of living. Safer, higher-quality urban environments, cleaner air and water, more convenience-based services, and more independent work in the new ideas-based economy are all opportunities to create millions of productive jobs in service sectors. Among other examples, India has the opportunity to introduce a robust planning approach for its top cities, which have low capital investment per capita and are less productive than they should be. In retail, if India could increase the share of e-commerce and modern trade to 20 percent and establish digitally enabled supply chains, this could generate $125 billion in economic value by 2030 and lift the productivity of 5.1 million storekeepers and e-commerce workers. Climate change mitigation and adaptation also are creating opportunities, such as more energy-efficient buildings and factories. India could more than triple its renewable energy capacity, from 87 gigawatts to 375 gigawatts, and increase the share of wind and solar energy in power generation from about 7 percent to best-in-class 30 percent. Finally, digital communication services provide opportunities in universally available, affordable, high-speed internet connectivity and fast-growing digital media and entertainment ecosystems.

Section 3

To capture frontier opportunities, India needs to triple its number of large firms

Large companies with revenues exceeding $500 million have been significant drivers of growth and innovation in India and other outperforming emerging economies. India has about 600 such firms. They are 2.3 times more productive than midsize firms, account for almost 40 percent of total exports, and employ 20 percent of the direct formal workforce.

Compared with corporate peers in some other emerging economies, however, India has fewer large firms relative to GDP. Large Indian firms contributed revenues equivalent to 48 percent of nominal GDP in 2018. That is 1.5 to 1.6 times less than China, Malaysia, and Thailand—and 3.5 times less than South Korea.

India’s large firms have also not achieved their productivity or profitability potential. Overall productivity levels are on average one-tenth to one-quarter those of peers in other “outperformer” economies. And their profitability, measured as return on assets, has declined since 2012, from 1.9 to 1.2 percent. Profits are also concentrated: just 20 of the country’s large firms contribute 80 percent of the total profit.

One factor underlying these trends is that India has a “missing middle” of midsize firms that typically grow into formidable competitors of larger rivals. For example, peer-emerging economies have almost twice as many midsize firms per trillion dollars of GDP.

The upward mobility of small and midsize firms matters because it influences the degree of competitive pressure to which large firms are subjected. The higher such pressure, or contestability, the greater the likelihood that only the most efficient and high-performing firms will survive at the top. In some other emerging economies, it is harder for big firms to stay at the top. In China, for example, 66 percent of companies in the top quintile of firms by economic profit have been replaced over the past two decades. In India, by contrast, only 57 percent of top companies were replaced. In some sectors in India, including automotive and chemicals, the figure is even lower.

In order to achieve higher, system-wide productivity, India would need to raise the level of contestability and enable 1,000 or more midsize and small firms to scale up to large firms, and 10,000 or more small firms to scale up to midsize. That in turn will require capital: we estimate that these firms will need about six times the amount of capital currently used, of which about half needs to be risk capital.

Section 4

Six areas of targeted reform can raise productivity and competitiveness

To seize the frontier business opportunities—and help increase the productivity and competitiveness of India’s firms—we outline reform options on six key themes:

Introduce sector-specific policies to raise productivity in manufacturing, real estate, agriculture and food processing, retail, and healthcare

We estimate these sectors could contribute $6.3 trillion of GDP in 2030, compared to $2.7 trillion in 2020. Of this total, the manufacturing sector has the potential to generate $1.25 trillion of GDP in 2030, more than double the $500 billion it accounted for in 2020. Putting in place a holistic policy framework with three components would be a key step forward. First is a stable and declining tariff regime, with inverted duty structures removed. Second, building well-functioning port-proximate manufacturing clusters, with free-trade warehousing zones, faster approval processes, and more flexible labor laws. Third, providing incentives, which are targeted, time bound, and conditional, and reduce the cost disadvantage India faces in comparison with other outperforming emerging economies.

The construction sector has the potential to more than double its GDP to $550 billion, from $250 billion in 2020. In the real estate sector, homeownership could be encouraged by rationalizing stamp duties and registration fees to reduce costs to buyers, and offering greater tax incentives. Regulatory amendments in tenancy and rent-control policies could bring additional investment into rental stock construction. Large-scale affordable-housing contracts could enable modern construction methods that can increase productivity and reduce costs.

India also has the potential to generate up to $95 billion in high-value agricultural exports, with growth driven predominantly by livestock and fisheries, pulses, spices, fruits and vegetables, horticulture, and dairy, among others. Possible reforms include changing the Agricultural Produce Marketing Committee Act to ensure barrier-free interstate trade and amending the Essential Commodities Act to deregulate the supply and distribution of agricultural commodities. The government announced these reforms as part of its COVID-19 package, but they will require the support of specific policies implemented at the state level.

In retail, if traditional models are to give way to a larger share of e-commerce and modern trade, India will need a level playing field across trade formats, which would imply minimal regulatory intervention and a foreign direct investment policy that is agnostic to business models and products.

In healthcare, India’s potential to increase access to quality healthcare and attract medical tourism will require ramped-up spending and investment from the public sector. India currently spends about 3.5 percent of GDP on healthcare, but we estimate that it could nearly double spending to 6.4 percent of GDP in line with benchmarks. India could also increase healthcare productivity by enabling new business models, including telemedicine.

Unlock land supply to reduce the cost of residential and industrial land use

Buying a home is financially out of reach for many Indians, and the high cost of land is a key reason. For companies, high-cost land puts a brake on expanding productive capacity. We estimate that, by enacting several key reforms, India has the potential to reduce land costs by 20 to 25 percent and increase the supply of land available for construction. Steps toward achieving this could include mapping out 20 to 25 percent of public and state-owned enterprises’ land that is suitable for construction and currently underused, and leasing out portions at affordable prices to private developers.

Create flexible labor markets with stronger social safety nets and more portable benefits

A more vibrant economy will require more flexible labor markets. India continues to place labor restrictions on manufacturing companies, which encourages small firms to remain small. The government could consider reviewing the various laws on the books and examine options to improve labor-market flexibility. Barriers to flexibility could be removed by providing more freedom to manufacturing companies to shape the size, composition, and skills of the workforce, in line with evolving needs.

Reduce commercial and industrial (C&I) power tariffs through new business models in power distribution

Various reform measures could help reduce C&I power tariffs by 20 to 25 percent. These include a shift to franchising models or privatization of power distribution companies in the top 100 cities; the introduction of cost-reflective tariffs for C&I customers and direct-benefit transfers for subsidies; and a focus on smart-meter penetration. While the government announced some of these reforms as part of its COVID-19 package, they may require the support of specific policies implemented at the state level.

Monetize government-owned assets and increase efficiency through privatization of more than 30 state-owned enterprises (SOEs)

Large-scale privatization could more than double productivity and potentially contribute between 0.2 and 0.4 percentage points annually on average to GDP. Privatization would need to be accompanied by an appropriate institutional framework and effective competition. In all, India has about 1,900 state-owned enterprises, of which we estimate about 400 could be privatized. Potential proceeds could be $540 billion between 2020 and 2030 (Exhibit 5). We estimate that just 2 percent of all SOEs could yield as much as 80 percent of all potential proceeds.

Improve the ease and reduce the cost of doing business

India has made significant progress in the World Bank rankings for ease of doing business; the country rose from 130th overall in 2016 to 63rd in 2020. However, Indian companies still face obstacles ranging from delayed payments for public procurement to tedious and slow processes for obtaining permits. Construction permits, for example, take 106 days, almost double the time in peer emerging markets. These and other issues could be resolved if the government adopted global best practices in relevant areas. For example, to simplify and expedite tax payments, a one-stop shop for a range of taxes could be set up. An “e-governance for business” mission at the state-government level could improve the ease of doing business at the local level.

Section 5

Financial-sector reforms can help India meet its $2.4 trillion capital requirement

We estimate the total capital requirement for this reform agenda at about $2.4 trillion in 2030, compared with about $865 billion in fiscal year 2020. Small and midsize companies will need access to more than $800 billion in capital in 2030. India will also need to finance government expenditure, budgeted in the range of 26 to 29 percent of GDP each year. A triple focus will enable investment to return to about 37 percent of GDP, the level India has achieved in high-growth periods in the past, from 33 percent in fiscal year 2020:

Channel more household savings to capital markets

India can meet the bulk of its investment requirement through domestic sources of capital if it succeeds in raising the household savings rate to 19 percent of GDP from the current 17 percent and, within household savings, to raise the flows to financial rather than physical assets to 11 percent of GDP in 2030, from 7 percent in 2018. That amounts to annual average growth of 12 percent in the pool of capital available for financial intermediation (rather than invested in land or gold). Net foreign capital inflows would also need to rise to about 3 percent of GDP from 1.8 percent. Of this, net foreign direct investment would need to increase to $120 billion (1.8 percent of GDP) from about $30 billion (1.1 percent), in line with peers in Asia. Beyond the sums required, India would need to ensure that a higher share of household financial savings flows to productive firms through a deeper capital market. The overall depth of financial markets in India is about 140 percent of GDP versus an average of about 240 percent among peers.

Reduce credit intermediation costs

The average commercial borrower in India has seen continued high real interest rates, which are more than five percentage points higher than in other outperforming emerging economies. India can reduce its cost of financing by taking steps to reduce the cost of credit intermediation in the banking system. Streamlining public finances, as described in the section below, would help end the “crowding out” of funding by government and also allow market-linked interest rates on government small savings schemes. Other measures include setting up a “special assets bank,” backed by private-sector funding, to help tackle resolution of NPAs. Among several international precedents for such action is Sweden’s establishment of a “bad bank” in the early 1990s.

Streamline public finances to allocate capital more efficiently

We estimate that India has the potential to save about 3.6 percent of GDP on an annual basis, on average over fiscal years 2021–30. These savings could come from a range of measures, including more efficient subsidy and social spending; proceeds from privatization of state-owned enterprises; monetizing assets including roads, railways, ports, airports, power infrastructure, and telecom towers; greater tax buoyancy, particularly driven by faster growth; power-sector reforms; and market-linking small-savings rates.

Section 6

The central government, states, and business sector will need to act together

About half of the reforms identified in this report can be enacted through a policy or law. Other reforms will require the government to implement initiatives and projects. While the central government’s pro-growth vision and agenda are essential, state governments have a critical role to play. They will need to implement roughly 60 percent of the reforms. Business leaders also have a major responsibility for realizing the high-growth agenda.

The starting point will be a clear and sharp vision, arrived at by the central government in alignment with the business community. For a reform agenda to endure across multiple years, an institutional body could steward the process under the chairmanship of the prime minister, with the right level of empowerment, including for resource allocation, and technical- and domain-specific expertise.

State governments will need to set their visions and blueprints to address key pro-growth priorities. The choices would vary by state depending on local endowments, such as agricultural resources, educated professionals, and port-proximate land. It would also depend on the distance of the state from the productivity frontier and the urgency of bridging the gap, for example, in areas like power-sector distribution losses, logistics cost, and the quality of urban infrastructure. States could then create powerful demonstration effects by taking a few of these ideas and making them work, at scale, in select areas.

Finally, India’s business leaders would need to raise aspirations and commit to productivity growth through a set of frontier business ideas. Businesses need to develop a long-term value creation mindset coupled with a strong performance-oriented culture; both of these create stakeholder value in the long term. A set of winning capabilities are essential if firms are to emerge as large, high-growth, globally competitive businesses. These include customer-centric innovation that focuses on developing expertise in next-generation ideas and greater localization in India; operational excellence and scalable platforms that can cut unnecessary costs; an embrace of automation and emerging AI technologies; the ability to win in discontinuities, including by disregarding established business practices and models to solve problems, and fostering creativity and nimbleness; using well-executed mergers, acquisitions, and partnerships to help scale up; and the ability to build a strong trust-based brand to attract capital, customers, and employees.

The COVID-19 pandemic is just the latest in a line of events that have focused public attention on how companies behave. Exemplary performance—including through well-executed mergers, acquisitions, and partnerships; clear reporting; strong accountability; transparency; a focus on ethical values; brands built based on trust, and purpose—will become even more important in the decade ahead.

ABOUT THE AUTHOR(S)

Shirish Sankhe is a senior partner in McKinsey’s Mumbai office, where Kanmani Chockalingam is a consultant; Anu Madgavkar is a partner in the McKinsey Global Institute, where Jonathan Woetzel, a senior partner in the Shanghai office, is a director and Sven Smit, a senior partner in the Amsterdam office, is a director and cochair; and Gautam Kumra is a senior partner in the Delhi office and the managing director of McKinsey India.

This report was edited by Peter Gumbel, editorial director of the McKinsey Global Institute.

Prelims on 4th October – A few tips

For my young friends taking the Prelims exam in October.

1. Try lots of mock tests in exam-like conditions. Ignore mock test questions focusing on data or numbers or dates.

2. Play a percentage game. Be a Sampras, not an Agassi. Negative marking can ruin your hard work.

3. Solve previous years’ UPSC questions. 5 to 20 years’. You decide. Ignore the ‘dated’ questions.

4. Revise till you get bored. Everyday. Focus on why, not on what.

5. Find time for economy, geography, science and environment and other high yield areas. Revise well.

6. Don’t worry about how you fare in solving mock test papers. Worry about how you approach the ‘why’ questions in them.

7. Wake up early and hit the bed by 10:30 PM. Be a Rahul Dravid. Not everyone is an Ian Botham.

8. No music while studying. Exam halls don’t give you DJs.

9. Boyfriends and girlfriends can wait. Parents can wait. Whatsapp gyaan can wait. Stay focused. Manage your time stealers smartly.

10. Take care of your mental health. Don’t ignore it. Reach out to a therapist if you feel stressed out.

11. Protect your mornings, evenings and nights’ sleep from devices, Whatsapp and “Beta, doodh ley aanaa”.

Run-up to Prelims, October 2020 – 3

For my young friends taking the Prelims exam this October

1. Prelims is a game of elimination. You’re supposed to eliminate the three least probable choices out of four options given on the page (on the page, not in your head). Once you read a question, go for the two least probable choices and eliminate them from your consideration. Now, after this first step, you should make it a contest between the two options left and weigh them against one another. That’ll increase the probability of your picking up the correct answer and save time and reduce your stress level.

2. Divide the questions into three imaginary (but useful) categories. 

  • A – the easiest 50 questions in General Studies Paper I (and the easiest 40 questions in General Studies Paper II),
  • B – relatively difficult 30 questions in General Studies Paper I (and relatively difficult 25 questions in General Studies Paper II) and
  • C – the most difficult 20 questions in General Studies Paper I (and the most difficult 15 questions in General Studies Paper II)

If you’re a reasonably good student, you should be able to solve the A category questions without sweating and gasping too much. Try to attempt these questions first. Don’t get stuck with the questions that you find difficult in your first reading (B and C category questions). You can always come back to them once you’re done with the A category questions.

3. Please do remember, if you skip a question on the question paper (on the page, not in your head), you must skip it on the Answer Sheet. Don’t use your black ball pen to darken the circle meant for the question number (you’re skipping at the moment) on the Answer Sheet. 

4. Once you’re done with the A category questions, come back to the question number 1 on the question paper and start looking for the B category questions. 

Apply the basic technique of elimination while attempting the B category questions. Eliminate the two least possible options out of four. While weighing the rest two against each other, please focus on the why (as against how, what and when) in the question. 

5. After you’re done with the B category questions, come back to the question number 1 on the question paper and start looking for the C category questions.

This is where negative marking comes into play. (If a candidate gives more than one answer it is treated as wrong answer. If a question is left blank, there is no penalty for that question.) 

While attempting a question without being absolutely confident about the correct answer, please keep these questions in mind.

How many questions (that you’re attempting to answer) belong to the C category?

What is the possibility of all your answers to the C category questions going wrong?

How much will you earn by attempting these C category questions in the final analysis? (For each question for which a wrong answer is given by the candidate, one-third of the marks assigned to that question are deducted as penalty. That is, three wrong answers will eat away one right answer)?

6. Prelims is a percentage game. Play like Pete Sampras. Not like Andre Agassi. 

7. Do a mental calculation while tackling the C category questions. For every four C category questions, you must get at least one answer correct. Otherwise, you’ll end up ruining your final score, thanks to negative marking. 

8. Here is my favourite analogy from cricket.

Bat like Rahul Dravid while attempting the A category questions. Be absolutely sure of where your off stump is. Darken the circles carefully on the Answer Sheet. Skip the difficult question on the Answer Sheet while skipping it on the question paper. Don’t rush yourself through just because you find the questions easy. Don’t lose your wicket to a long hop.

Bat like VVS Laxman while attempting the B category questions. Put a premium on your wicket while playing your shots. Respect the bowler (the difficult questions) without compromising your natural instinct. Don’t play across the line. 

Bat like MS Dhoni attempting the C category questions. Take the match to the last over. Play a percentage game. Let the bowler blink first. Allow yourself to fail (that is, allow yourself to not attempt the questions that are way too difficult). Don’t fret over the questions you decide to not attempt. 

9. The exams are a daylight affair. Your body and mind need to primed for the D-day. You can’t keep staying awake at night week after week and expect your body and mind to be in top shape on the exam day. Please use your nights for long, uninterrupted sleep. 8 hours, as the doctors say. 

10. Don’t listen to music while studying. Not good. Sorry, Spotify.

Here is what research says. (Musliu, Arian & Berisha, Blerta & Latifi, Diellza & Peci, Djellon. (2017). The Impact of Music on Memory. European Journal of Social Sciences Education and Research. 10. 222. 10.26417/ejser.v10i2.p222-227.   

http://10. 222. 10.26417/ejser.v10i2.p222-227