FOREWORD

Global growth continues to remain tepid. In US, new data releases are pointing towards a mild

recovery, but not compelling enough to force the Federal Reserve to change its monetary

policy stance. Labour market is recovering slowly and unemployment rate has continued to

decline. However, weak in�ation pressure continues to pose risks for a deferral. The Federal Reserve

is expected to shift gears and increase to Fed Rate only next year now. Elsewhere, economic activity

in Japan, is faltering under the weight of weak private consumption and exports, with both business

and consumer con�dence subdued. Emerging market economies (EMEs) too have been caught in

a vortex of depressed commodity prices, weakening currencies and capital out�ows, which are ac‐

centuating country-speci�c domestic constraints.

On the domestic front, in�ation has continued to remain subdued. Given the downward trajectory

of in�ation and limited upside risks in the wake of benign global commodity prices, the Central Bank

chose to cut interest rates by 50 bps in end‐September 2015. Industry had been hoping for this kind

of reduction given the in�ation and macro-economic conditions, which have not been conducive to

growth. CII is happy to note that the RBI had taken this action recognising the weakness in demand

and the need for a reduction in borrowing rates to drive a recovery. RBI’s action has removed consid‐

erable uncertainty with regard to the direction of borrowing costs faced by industry. The corporate

sector will now be in a better position to drive a recovery in investment and growth.

The issue of �nancial inclusion is emerging as the new paradigm of economic growth. Financial inclu‐

sion is delivery of banking services at an a�ordable cost to the vast sections of disadvantaged and

low income groups. The essence of �nancial inclusion is in trying to ensure that a range of appropriate

�nancial services are available to every individual and enabling them to understand and access those

services. Apart from the regular form of �nancial inclusion intermediation, it may include a basic no-

frills banking account for making and receiving payments, a saving product suited to the pattern of

cash �ows of a poor household, money transfer facilit ies, small loans and overdrafts for productive

personal and other purposes, insurance etc. The present Government has taken many signi�cant

steps in order to boost �nancial inclusion in the country. Jan Dhan Yojana, launch of MUDRA Bank,

Direct Bene�ts Transfer etc are few of such measures. The road ahead is long though and much more

remains to be done.

Chandrajit Banerjee

Director General, CII

EXECUTIVE SUMMARYGlobal TrendsTThe euro zone economy grew faster than expect ‐

ed in the second quarter of 2015, mainly because of

faster growth in Italy and Greece. Seasonally adjusted

GDP rose by 0.4 per cent in both the euro area (EA19)

and the EU28 during the second quarter of 2015, com‐

pared with the previous quarter. In US, meanwhile,

Federal Reserve maintained status‐quo and kept the

Fed funds rate target range unchanged at 0.0‐0.25

per cent in its policy meeting held on September 18th,

2015. The Fed reiterated that rate hike in 2015 looks

tentative as subdued in�ation continues to pose

headwinds. Further, economic activity in US contin‐

ued to expand at a moderate pace. Labour market

recovery, though, weakened slightly in September

2015, unemployment has continued to decline.

Domestic TrendsIn�ation has continued to remain subdued. Given the

downward trajectory of in�ation and limited upside

risks in the wake of benign global commodity prices,

the Central Bank chose to cut interest rates by 50

bps in end-September 2015. To be sure, headline con‐

sumer price index (CPI) in�ation stood at 4.4 per cent

in September 2015, an increase over its August 2015

print, albeit staying within RBIs target range. Core

CPI in�ation (excluding food and fuel) increased in

September 2015 too. However, the subdued domes‐

tic demand coupled with weak international crude

prices is likely to support muted core in�ation in the

coming months. On the global front, global growth

has moderated, especially in emerging market econo‐

mies (EMEs) and G-4 economies, global trade has de‐

teriorated further and downside risks to growth have

increased. Consequently, our exports growth is in

shaky territory, given the fact that bulk of our exports

are going to these economies. Evidently, exports

have now contracted for ninth consecutive months.

In August 2015, the contraction was by 20.7 per cent.

Imports too fell for the ninth consecutive month, de‐

clining by 9.9 per cent in August 2015.

Corporate Performance The corporate results at the end of �rst quarter of

current �scal painted a rather gloomy picture as the

�nancial performance of Indian companies, espe‐

cially manufacturing sector �rms, deteriorated. While

the growth in expenditure costs stood somewhat

curbed, fading growth of net sales as well as contrac‐

t ion in PAT added to the prevalent despair. Growth in

net sales on an aggregate basis stood at a measly 2.8

per cent at the end of �rst quarter of 2015-16, as com‐

pared to 8.8 per cent in the same quarter a year ago.

Both net and gross margins rose mostly fell across all

sectors and on an aggregate basis. This fall mirrored

the contraction in pro�tability and decelerat ing oper‐

ating pro�ts. Struck with uninspiring demand in the

economy, dwindling balance of trade, weak sales and

ever moribund pro�tability, the Indian companies are

trying hard to clutch a straw of hope. There are also

expectations of some serious economic reforms that

would elevate the economy, help pick up sales and

raise the pro�tability for the Indian corporate in the

months to come.

Focus of the Month : Financial Inclusion The concept of �nancial inclusion has special signi�‐

cance for a fast emerging economy such as India, as

it encompasses a large segment of the productive

sectors of the economy under the formal �nancial

network to unleash their creative capacities. Over a

period of t ime, several �nancial and economic policy

measures are being taken by banks in India to im‐

prove access to a�ordable �nancial services through

�nancial education, awareness generation, business

communication networking and leveraging technolo‐

gy. According to the Committee on Financial Inclusion

(Chairman: C. Rangarajan), 2008, “ Financial Inclusion

may be de�ned as the process of ensuring access

to �nancial services and timely and adequate credit

where needed by vulnerable groups such as weaker

sections and low income groups at an a�ordable

cost” . The essence of �nancial inclusion is in trying to

ensure that a range of appropriate �nancial services

are available to every individual and enabling them to

understand and access those services.

GLOBAL TRENDS

Euro Zone Growth Accelerates in 2Q15

The euro zone economy grew faster than expect ‐

ed in the second quarter of 2015, mainly because

of faster growth in Italy and Greece. Seasonally

adjusted GDP rose by 0.4 per cent in both the euro area

(EA19) and the EU28 during the second quarter of 2015,

compared with the previous quarter, according to a sec‐

ond estimate published by Eurostat, the statistical of‐

�ce of the European Union. In the �rst quarter of 2015,

GDP grew by 0.5 per cent in both areas. Compared with

the same quarter of the previous year, seasonally ad‐

justed GDP rose by 1.5 per cent in the euro area and by

1.9 per cent in the EU28 in the second quarter of 2015,

after +1.2 per cent and +1.7 per cent respectively in the

previous quarter.

GLOBAL TRENDS

GDP growth by Member States

GDP increased in all member states for which data are

available for the second quarter of 2015, except France

where it remained stable. The highest growth com‐

pared with the previous quarter was recorded in Latvia

(+1.2 per cent), Malta (+1.1 per cent), the Czech Repub‐

lic, Spain and Sweden (all +1.0 per cent), followed by

Greece and Poland (both +0.9 per cent), Slovakia (+0.8

per cent), Estonia, Croatia, Lithuania, Slovenia and the

United Kingdom (all +0.7 per cent). The lowest growth

rates were registered in the Netherlands, Austria and

Romania (all +0.1 per cent).

GDP Components and Contributions to Growth

During the second quarter of 2015, household �nal con‐

sumption expenditure rose by 0.4 per cent in both the

euro area and the EU28 (after +0.5 per cent and +0.6

per cent respectively in the previous quarter). Gross

�xed capital formation declined by 0.5 per cent in the

euro area and 0.1 per cent in the EU28 (after +1.4 per

cent in both zones). Exports rose by 1.6 per cent in

both the euro area and the EU28 (after +1.0 per cent

in both zones). Imports increased by 1.0 per cent in the

euro area and by 0.8 per cent in the EU28 (after +1.5

per cent and +1.6 per cent). Household �nal consump‐

t ion expenditure had a positive contribution to GDP

growth both in the euro area and the EU28 (+0.2 and

+0.3 percentage points). Gross �xed capital formation

had a negative contribution to GDP growth in the euro

area (-0.1 pp) and was neutral in the EU28 (0.0 pp). The

contribution of the external balance to GDP growth

was positive for both zones, while the contribution of

changes in inventories was negative.

Going forward, with oil prices remaining benign along

with ongoing improvements in labor market, consump‐

tion is expected to be an important growth driver in the

second half of the year.

US Fed Defers Rate Hike In line with our expectations, the US Federal Reserve

maintained status‐quo and kept the Fed funds rate tar‐

get range unchanged at 0.0‐0.25 per cent in its policy

meeting held on September 18th, 2015. In the accompa‐

nying statement, it was mentioned that “ in determining

how long to maintain this target range, the Committee

will assess progress--both realized and expected--to‐

ward its object ives of maximum employment and 2 per

cent in�ation. This assessment will take into account a

wide range of information, including measures of labor

market conditions, indicators of in�ation pressures and

in�ation expectat ions, and readings on �nancial and in‐

ternational developments. The Committee anticipates

that it will be appropriate to raise the target range for

the federal funds rate when it has seen some further

improvement in the labor market and is reasonably con‐

�dent that in�ation will move back to its 2 per cent ob‐

jective over the medium term” .

The median Fed funds rate projection for 2015 was low‐

ered to 0.375 per cent as compared to 0.625 per cent in

the June project ion. The projections for 2016 and 2017

project ions have been revised lower to 1.375 per cent

(prior 1.625 per cent) and 2.625 per cent (prior 2.875

per cent) respectively, suggesting a very gradual pace

of rate hikes. Meanwhile, the 2018 Fed funds rate (pub‐

lished for the �rst t ime) stands at 3.375 per cent.

The policy statement highlighted risks from recent glob‐

al and �nancial market volatility, stat ing that “ (these de‐

velopments) may restrain (US) economic act ivity some‐

what and are likely to put further downward pressure

on in�ation in the near term” . Fed Chair Janet Yellen, in

the post policy statement, stated that given the softer

expected in�ation path (on account of global risks and

Dollar strength), further developments in labour mar‐

ket and incoming economic data will remain key in any

policy decision. However, the Committee rea�rmed its

stance that in�ation will gradually move towards the 2

per cent target in the medium term as transitory impact

of lower energy and import prices dissipates.

In the Summary of Economic Projections (SEP) that ac‐

companied the statement, the FOMC revised higher its

projection range for GDP growth in 2015. This is in line

with the upbeat Q2 2015 growth print and upward revi‐

sions to the Q1 2015 GDP growth. The unemployment

rate projection meanwhile, was revised slightly lower

across the board (2015-2017). In�ation projection for

2015 was revised lower as well.

GLOBAL TRENDS

When the Committee decides to begin to remove pol‐

icy accommodation, it will take a balanced approach

consistent with its longer‐run goals of maximum em‐

ployment and in�ation of 2 per cent. The Committee

currently anticipates that, even after employment and

in�ation are near mandate-consistent levels, economic

conditions may, for some time, warrant keeping the

target federal funds rate below levels the Committee

views as normal in the longer run. On balance, the Fed‐

Nonfarm payroll employment increased by lower than

expected 142K in September 2015, and the unemploy‐

ment rate was unchanged at 5.1 per cent. The August

print was revised lower to 136K (from 173K earlier). The

Analysing the revisions since July 2015, a sharp drop was

seen in the private payrolls which slipped from 195K job

additions in July to 118K in September. Within private

payrolls, service‐providing segments posted the steep‐

est drop since July with lower job additions witnessed

across the board. The manufacturing sector (within

private goods-providing) continued to be a drag on job

gains. Meanwhile, government payrolls failed to pro‐

vide any cushion, though the losses remained capped.

Employment rose in health care and information, while

mining lost jobs. Thus far in 2015, nonfarm job growth

eral Reserve is expected to shift gears and increase to

Fed Rate by only next year now.

Voting for the FOMC monetary policy action were: Ja‐

net L. Yellen, Chair; William C. Dudley, Vice Chairman;

Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis

P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and

John C. Williams. Voting against the action was Je�rey

M. Lacker, who preferred to raise the target range for

the federal funds rate by 25 basis points at this meeting.

July print was revised down as well, taking the total

July-August revisions to -59K. The less volatile three-

month average NFP print declined to 167K (prior: 201K).

The below 200 �gure displays cause for concern as la‐

bour market recovery seems to have slipped o� t rack.

has averaged 198K per month, compared with an aver‐

age monthly gain of 26K in 2014.

In September, average hourly earnings of all employ‐

ees on private nonfarm payrolls, at $25.09, were lit t le

changed (-1 cent), following a rise of 9 cents in August

2015. Over the past 12 months, average hourly earnings

have risen by 2.2 per cent.

Turning to measures from the household survey, the

unemployment rate held at 5.1 per cent in September

2015, and the number of unemployed was little changed

Nonfarm Payroll Data for US Paints a Grim

Picture

GLOBAL TRENDS

at 7.9 million. Among the unemployed, 2.1 million, or

26.6 per cent, had been unemployed for 27 weeks or

more, lit t le changed from the prior month. The labor

force participation rate decreased to 62.4 per cent in

With US economy on its gradual economic recovery

path and recent hawkish commentary by Fed o�cials

(Fed Chair Janet Yellen and New York Fed President Wil‐

liam Dudley), a December lift-o� remains on the table.

September 2015; it had been 62.6 per cent for the pri‐

or 3 months. The employment-populat ion ratio edged

down to 59.2 per cent over the month after showing

litt le change for the �rst 8 months of the year.

This is further supported by the fact that majority of the

Fed members (13 of 17) continue to see an interest rate

hike in 2015. However, the odds of a December policy

tightening reduce in light of the downbeat labour mar‐

ket data.

DOMESTIC TRENDS

Easing Business

The recent Cabinet decision to amend the Arbitra‐

t ion and Conciliat ion Act 1996 is one of the bold‐

est reform measures; it will go a long way in facili‐

tating the ease of doing business in India.

One of the key factors impacting India’s low ranking in

the World Bank’s report on Ease of Doing Business is

to do with legal structures and the arbitration process.

India’s judicial system takes an average of 1,420 days to

resolve a commercial dispute. On the other hand, coun‐

tries with a high ranking take only 4 to 6 months.

The proposal to bring in a new Bill seeks to address this

issue by introducing �xed time-lines for resolut ion of ar‐

bitration cases. The imposition of a 12-month cap to set ‐

tle disputes, extendable by a maximum of six months,

will immediately reduce the long list of pending cases

in the courts.

Simultaneously, the government is planning to increase

the number of courts with commercial courts being set

up separately to look at dispute resolut ion. These meas‐

ures will come as a major boost to industry and will help

India improve its position in the ranking order.

Dispute Sett lements

This decision comes at a time when several projects

across crucial infrastructure sectors are stuck midway

with unsettled claims running into thousands. The twin

approach of introducing caps on the time‐line and the

fee for arbitrators will ensure speedy settlement of dis‐

putes and will also act as a deterrent to prolonging cas‐

es. Early dispute resolution will help cash �ows of com‐

panies, thus helping them to ensure timely payment to

banks, undertake new projects, and avoid projects turn‐

ing into NPAs.

DOMESTIC TRENDS

The new norms will provide for faster dispute resolution

by putting a cap on time limit of 1 year, extendable by six

months on consent of the parties. This process currently

takes approximately 6-8 years. Amendment of section

34 will restrict the condit ions to challenge the arbitral

award under

Public policy guidelines and amendment to section 36

will ensure that mere �ling of applicat ion for challenging

the arbitration will not be enough to stay the execution

of the award.

The cap on fee of the arbitrators proposed in the new

norms will save the companies from paying huge

amounts as fees for arbitrat ion; earlier the arbitrators

were paid based on number of sittings which encour‐

aged them to prolong the settlement process impacting

both time and cost.

Empowering the Tribunal

The amendment to the Arbitration Act will empower

the arbitral tribunals further and enable them to grant

all kinds of enforceable interim measures; currently

only the courts have the power to do this. Moreover,

this will prevent obvious cases to be appealed further.

Some additional amendments that will further stream‐

line ease of doing business could possibly include: pro‐

vision of a fast track mechanism subject to mutual con‐

sent; any further legal challenge to be made only after

arbitrat ion award is paid/deposited in court; removal of

pre-de�ned nominations of potential members.

While the e�ect of the amendment may be seen only

two or three years after of enactment, this reform

would certainly enable India to attract foreign invest‐

ments and help revive sectors crucial for rebooting In‐

dia’s growth story. Going forward, India can aim to be

a global centre for arbitration like Singapore, Dubai and

London.

This art icle appeared in The Hindu Business Line dated September 2, 2015. Online version of the art icle can be accessed

from: http://www.thehindubusinessline.com/opinion/easing-business/art icle7608284.ece

DOMESTIC TRENDS

Growth in industrial production surprised on the up‐

side, with the Index of Industrial Production (IIP) rising

sharply by 6.4 per cent in August 2015 as compared with

revised growth of 4.1 per cent in the previous month.

The favourable base e�ect has boosted the IIP growth

in August 2015, as the IIP growth was subdued at 0.5 per

cent in August 2014. Manufacturing and capital goods

were the primary drivers of this strong print registering

6.9 per cent and 21.8 per cent respectively. Consumer

goods sector output which had remained anaemic

in July 2015, surprised on the upside in the reporting

Growth in the eight core sectors — coal, crude oil, natu‐

ral gas, re�nery products, fertiliser, steel, cement and

electricity — grew by 2.6 per cent in August 2015 after a

growth of 1.1 per cent in July 2015, mainly on account of

expansion in crude oil, fertilisers, cement and electric‐

ity output. Total growth in the core sectors, which has a

weightage of nearly 38 per cent in the Index of Industri‐

al Production (IIP), during the April-August period stood

at 2.2 per cent from 5.6 per cent in the corresponding

period of 2014-15.

Electricity generation, commanding the highest weight‐

age at 10.3 per cent, rose robustly by 5.6 per cent during

the month under review, whereas steel production, the

second most important component as per weightage,

contracted 5.9 per cent in August .Distilling of re�nery

month on the back of onset of festive season demand.

The uptick in consumer goods was due to a sharp in‐

crease in consumer durables, which continued to show

improvement as passenger vehicles sales etc posted

recovery. On a cumulative basis, industrial production

growth has improved at higher pace of 4.1 per cent in

April‐August 2015 compared with 3 per cent in the corre‐

sponding period last year. In FY16, we expect industrial

production to grow at a higher rate as compared to the

previous �scal on the back of improving global condi‐

tions and policy aided domestic upturn

products, the third most important component as per

weightage, was higher by 5.8 per cent last month. The

crude oil extraction, which has a 5.2 per cent weight‐

age, was higher by 5.6 per cent during the month under

review in comparison to the data for August 2014. Its

cumulative index during April-August 2015-16 stood at

0.5 per cent over the corresponding period of previous

year.

Natural gas output accelerated to 3.7 per cent in Au‐

gust 2015 against 5.9 per cent fall in July 2015. This is

the �rst month of the year when natural gas production

has shown an increase. Production of cement increased

to 5.4 per cent in August 2015 as compared to 1.3 per

cent in the previous month. Cumulat ively, it increased

by over one per cent in the year till date over the cor‐

responding period last year.

IIP Growth Stays Heal thy in August 2015

DOMESTIC TRENDS

On the sectoral front, growth of manufacturing sector,

which constitutes over 75 per cent of the index, acceler‐

ated to 6.9 per cent in August 2015 compared with 4.6

per cent growth in the previous month. In terms of in‐

dustries, �fteen (15) out of the twenty two (22) industry

groups (as per 2-digit NIC-2004) in the manufacturing

sector have shown positive growth during the month

of August 2015 as compared to the corresponding

month of the previous year. The industry group ‘Furni‐

ture; manufacturing n.e.c.’ showed the highest positive

growth of 90.8 per cent, followed by 40.8 per cent in

‘Electrical machinery & apparatus n.e.c.’ and 19.5 per

cent in ‘Wearing apparel; dressing and dyeing of fur’. On

the other hand, the industry group ‘Tobacco products’

showed the highest negative growth of (-) 9.5 per cent,

followed by (-) 9.1 per cent in ‘Publishing, printing & re‐

production of recorded media’ and (-) 9.0 per cent in

‘Radio, TV and communication equipment & apparatus’.

Electricity output continued to grow at robust rate of

grew at a higher rate of 5.6 per cent in August 2015 as

compared to 3.5 per cent in the previous month. Min‐

ing output accelerated to 3.8 per cent, after growing at

an anaemic rate of 0.9 per cent in July 2015. The recent

auction of coal mines by the government could pro‐

vide some impetus to coal production in the months to

come.

On the use‐based front, the volatility in capital goods

continued. Capital goods grew at a healthy rate of 21.8

per cent in August 2015, which was a considerable in‐

crease from July’s upwardly revised 10.6 per cent

growth rate. However, it is di�cult to conclusively de‐

termine the sustainability of capital goods output as

it continues to be a signi�cantly volatile component.

In sharp contrast to last month, growth of consumer

goods accelerated to 6.8 per cent as compared to an

anaemic growth to the tune of 0.9 per cent posted in

July 2015 primarily on account of the negative print on

non-durables. Consumer durables showed strong posi‐

tive growth for the third month in a row at 17.0 per cent.

Non‐durables moved out of red territory in August 2015

as it posted 0.4 per cent growth rate as compared to

contract ion to the tune of 4.6 per cent in July 2015. No‐

tably, non durables have a signi�cant share in IIP at 21.4

per cent. Basic and intermediate goods posted positive

growth.

DOMESTIC TRENDS

WPI in�ation was in the negative territory for the 5th

month of this �scal year as it fell to -4.95 per cent from

-4.05 per cent in July 2015 as major commodity prices

continue to fall. The WPI in�ation has seen a broad –

base deepening due to several factors such as declining

crude oil prices due to supply glut and low demand from

world’s major economies which have not only brought

down retail prices of petroleum products but have also

helped producers’ cut down on transportation costs. As

a result fuel in�ation has continued to contract for the

last ten consecutive months. Sustained decline in WPI is

good news for corporate as WPI is input price for manu‐

facturing process.

Retail in�ation as measured by consumer price in�ation

(CPI) increased to 4.4 per cent in September 2015, as

compared to revised 3.7 per cent on the back of an un‐

favourable base e�ect. It however stayed within RBI’s

target range. The sequential momentum of headline

CPI index halved to 0.5 per cent on month—on-month

basis. This was primarily attributable to slower pace of

increase of food CPI by 0.7 per cent month-on-month

as against prior of 1.7 per cent on month‐on‐month ba‐

sis. In�ation pressures remained contained across ma‐

jor food sub-components, except for pulses, which re‐

mained elevated at ~30 per cent. Meanwhile, in�ation

in other proteins i.e. milk, egg, meat and �sh, slipped

to record low of 5.1 per cent. Core in�ation increased to

OutlookIndustrial production grew at a robust rate in August 2015 on the back of healthy growth rate in manufacturing and

capital goods sector. An upturn in capital goods production seems underway, clear evidence of a revival in invest‐

ment demand, which would need to build on the tentative indications of unclogging of stalled investment projects,

stabilising of private new investment intentions and improving sales of commercial vehicles. The government is

aware of this situation and has already taken a number of policy and reform init iat ives. We are hopeful that the ini‐

t iatives taken by the government in terms of expedit ious project clearances, simpli�cation of procedures and new

investment announcements as well as the ‘Make in India’ init iat ive would improve the order book position, revive

demand and help e�ect a turnaround in the investment cycle.

In�at ion Remains Under Check

DOMESTIC TRENDS

Primary products continued to face de�ation to the

tune of -3.7 per cent in August 2015. Primary food ar‐

t icles which had recorded in�ation in June 2015, once

again showed de�ation in the reporting month - to the

tune of -1.1 per cent. Prices of onions rose by 65.3 per

cent in August 2015 from -0.49 per cent in July 2015

pushing up food in�ation. However, the continued

moderation in potato prices to ‐51.2 per cent in August

2015 more than compensated vegetables’ price to -21.2

per cent for August 2015 , a tad higher from -24.4 per

cent in July 2015. Further, prices of pulses and fruits also

showed some increase in August 2015. Pulses prices

have been climbing up since last six months, reached

36.5 per cent in August 2015 compared to 35.8 per cent

in July 2015. Prices of fruits increased in August 2015 to

-1.3 per cent from -4.5 per cent in July 2015. However,

going forward, there are upside risks to food in�ation

on the back of the expected fall in food grain produc‐

t ion due to unseasonal rainfalls in March and April 2015

4.3 per cent as against prior of 4.1 per cent. However,

the subdued domestic demand coupled with weak in‐

ternational crude prices is likely to support muted core

in�ation in the coming months. On balance, the over‐

and weak spatial distribution of rainfall so far. Further,

primary non-food in�ation which had moved into the

negative territory in July 2015, after recording in�ation

in the previous month, continued to remain there in Au‐

gust 2015 too.

De�ation in fuel sector stood at -16.5 per cent in August

2015 as compared to ‐12.8 per cent in the month before.

Both petrol and diesel too showed de�ation during the

month. Benign crude oil prices have helped to keep fuel

prices in check in the last couple of months.

Manufacturing sector too posted de�ation by a large

clip for the sixth consecutive month in August 2015 to

the tune of -1.9 per cent as compared to -1.1 per cent

in the previous month. Non‐food manufacturing or core

in�ation, which is widely regarded as the proxy for de‐

mand‐side pressures in the economy remained subdued

at -1.9 per cent during the month as compared to -1.0

per cent during the previous month.

all in�ation situation in the Indian economy remains

benign on the back of weak global commodity prices,

Government steps and limited impact witnessed of de‐

�cient monsoon on food prices.

DOMESTIC TRENDS

Exports growth disappointed for the ninth consecutive

month, contracting by a bigger clip of ‐20.7 per cent to

US$21.3 billion in August 2015 as against contraction to

the tune of 10.3 per cent in July 2015. Subdued global

demand and falling commodity prices have been con‐

stantly pushing down India’s exports. Cumulatively,

April-August 2015 saw exports dropping to 16.3 per

cent on-year compared with a 5.6 per cent rise in the

same period last year. Fall in exports was seen across

commodities. Engineering goods - India’s biggest ex‐

port commodity group having 22 per cent share – saw

their exports declining by a hefty 29.1 per cent in August

2015. Export growth of Gems & Jewellery – third biggest

export item, slowed down for the third consecutive

month to 2.7 per cent. Services sector exports grew by

an anaemic 0.3 per cent August 2015.

Imports too contracted by 9.9 per cent to US$33.7 bil‐

lion in August 2015, compared to prior month’s contrac‐

t ion of 10.3 per cent. While crude oil imports declined

42.6 per cent amidst sharp fall in international crude oil

prices, gold imports registered a growth of 140.1 per

cent. The latter trend is likely to be maintained in the

near future with the onset of fest ive season in India. Cu‐

mulatively for April‐August 2015, overall imports shrunk

by 11.6 per cent.

OutlookThe WPI index has declined for the tenth consecutive month indicating slackness in economic activity across sec‐

tors. Given that CPI in�ation has remained more-or-less range bound in RBI’s target range, it rea�rms the mod‐

eration of in�ation print which in turn would have a bene�cial impact on in�ationary expectations. CII hopes this

(easing in�ation) would provide the requisite space to RBI to continue with its rate easing cycle in its forthcoming

monetary policy announcement to provide a �llip to growth.

Weak EXIM Performance Cont inues

DOMESTIC TRENDS

The consistent fall in exports has been exerting upward

pressure on the trade de�cit which clocked US$12.5 bil‐

lion in August 2015 compared to US$10.7 billion last year.

Consequently, India’s current account de�cit for Q1FY16

widened a bit to 1.2 per cent of GDP as compared to the

previous print of 0.2 per cent. However, it has narrowed

In a signi�cant move, RBI chose to reduce the key repo

rate by 50 bps in its fourth bi‐monthly monetary policy

meeting held on September 29th, 2015. The policy repo

rate under the liquidity adjustment facility (LAF) now

stands at 6.75 per cent. Consequently, the reverse repo

rate under the LAF will remain unchanged at 5.75 per

cent, and the marginal standing facility (MSF) rate and

the Bank Rate at 7.75 per cent. The RBI in its policy state‐

ment indicated that it will continue to provide liquidity

under overnight repos at 0.25 per cent of bank‐wise

NDTL at the LAF repo rate and liquidity under 14-day

term repos as well as longer term repos of up to 0.75

per cent of NDTL of the banking system through auc‐

tions. In addition, it has allowed for a gradual increase

in the limit on foreign portfolio investments in central

and state government bonds. Also, the ceiling for bank

investments under the held‐to‐maturity category will be

reduced over time from 22 per cent to 21.5 per cent.

In what was an extremely objective communication

of determinants of monetary policy, the RBI acknowl‐

edged broadly three factors which shaped this action.

‐ First, the bulk of their preconditions had been

when seen against the outturn in the same period last

year. Though improving domestic competit iveness

through structural reforms is crucial to improve exports

performance, we believe that can only materialize in

the medium term. In the near term, a weaker Rupee can

act as a catalyst to revive competitiveness.

achieved so far. Most importantly, in�ation has de‐

clined signi�cantly and while their focus is now pre‐

dictably shifting towards the 5 per cent target by

end FY17 however, their expectation of 4.8 per cent

in the last quarter of FY17 is an optimistic outcome.

- Second, the RBI thinks that domestic demand has

to pick up further to take up the slack from weaken‐

ing global demand and also it was felt that a strong‐

er policy signal would help support capex recovery.

- Finally, the RBI thinks that the government will

manage �scal goals carefully and improve spending

quality. These factors support the RBI’s stance to

remain as accommodative as is possible.

Regarding the future outlook on its stance, RBI men‐

tioned that while its stance will continue to be accom‐

modative, the focus of monetary action for the near

term will shift to working with the government to en‐

sure that impediments to banks passing on the bulk of

the cumulative 125 basis points cut in the policy rate are

removed. The Reserve Bank will continue to be vigilant

for signs that monetary policy adjustments are needed

to keep the economy on the target disin�ationary path.

RBI Reduces Interest Rates by 50 bps

DOMESTIC TRENDS

Regarding growth, the Central Bank was of the view

that in India, a tentative economic recovery was under‐

way, but was still far from robust. In agriculture, sown

area had expanded modestly from a year ago, re�ecting

the timely and robust onset of the monsoon in June, but

the southwest monsoon is currently de�cient by 14 per

cent – with production-weighted rainfall de�ciency at

20 per cent. Nevertheless, the �rst advance estimates

indicate that food grain production is expected to be

higher than last year, re�ecting actions taken to contain

the adverse e�ects of rain de�ciency through timely

advisories and regular monitoring of seed and fertiliser

availability. Rural demand, however, remained subdued

as re�ected in still shrinking tractor and two-wheeler

sales. Manufacturing had exhibited uneven growth in

April‐July, with industrial activity slowing sequentially in

July, although it has been in expansionary mode for the

ninth month in succession. However, external demand

conditions have turned weaker, suggesting a more per‐

sistent drag from lower exports and cheaper imports

due to global overcapacity. This contributes to continu‐

ing domestic capacity under‐utilisation, decelerating

new orders and a rising ratio of �nished goods inven‐

tories to sales.

RBI noted that “ the underlying economic activity re‐

mained weak on account of the sustained decline in

exports, rainfall de�ciency and weaker than expected

momentum in industrial production and investment ac‐

t ivity. With global growth and trade slower than init ial

expectations, a continuing lack of appetite for new in‐

vestment in the private sector, the constraint imposed

by stressed assets on bank lending and waning business

con�dence, output growth projected for 2015-16 was

marked down slightly to 7.4 per cent from 7.6 per cent

earlier”.

On in�ation front, its glide path is very encouraging as

the RBI felt that government policy measures and the

sustained fall in crude prices will o�set any Rupee de‐

preciation concerns. Taking all this into considerat ion,

in�ation is expected to reach 5.8 per cent in January

2016, a shade lower than the August projection. The 5.8

per cent target by January 2016 and the expectat ion of

4.8 per cent by Q4-FY2017 is quite reassuring and may

open up room for further accommodation contingent

on realization.

CII’s ViewpointCII appreciated and welcomed the RBI’s decision to reduce interest rates by 50 basis points. Industry was expecting

this kind of reduction given the in�ation and macro economic conditions, which provide stability and con�dence to

RBI. CII was happy to note that the RBI had taken this action recognising the weakness in demand and the need for

a reduction in borrowing rates to drive a recovery. RBI’s action had removed considerable uncertainty with regard

to the direction of borrowing costs faced by industry. The corporate sector will now be in a better position to drive

a recovery in investment and growth. CII also welcomed the decision to reduce SLR by 0.25 per cent every quarter

t ill March 31 2017, as this will steadily improve liquidity in the banking system

CORPORATE PERFORMANCE

Corporate Performance in 1QFY16

The corporate results at the end of �rst quarter of

current �scal painted a rather gloomy picture as

the �nancial performance of Indian companies,

especially manufacturing sector �rms, deteriorated. A

lower than expected 7.0 per cent GDP growth in the

reporting quarter could not salvage the cause, even as

the rate cuts by the RBI provided some respite. On one

hand, the ambitious “ Make in India” campaign is yet to

translate into hard numbers, and on the other hand, In‐

dia has been struggling to keep face in the international

t rade arena. While the growth in expenditure costs

stood somewhat curbed, fading growth of net sales as

well as contract ion in PAT added to the prevalent de‐

spair.

The analysis factors in the �nancial performance during

the �rst quarter of 2015-16 of a balanced panel of 2422

manufacturing companies (excluding oil and gas com‐

panies) and 1167 service �rms extracted from the Ace

Equity database.

Growth in net sales on an aggregate basis stood at a

measly 2.8 per cent at the end of �rst quarter of 2015-16,

as compared to 8.8 per cent in the same quarter a year

ago. In fact the growth in net sales has been deceler‐

ating now for the past four quarters straight now. The

growth of net sales for manufacturing �rms was as low

as 0.5 per cent during the quarter as compared to 8.8

per cent in the same quarter a year ago. Firms in the ser‐

vice sector fared no better, with their net sales growing

at a softened pace of 6.4 per cent in the �rst quarter of

current �scal as compared to a growth of 8.8 per cent in

the same quarter in the previous year. The low net sales

of �rms were re�ective of the lack of ample demand in

the economy, a scenario that has been persistent for

quite some time now. The slowing demand in the exter‐

nal markets has been doing no good either.

CORPORATE PERFORMANCE

On an aggregate basis, total expenditure deceler‐

ated sharply to 3.1 per cent in the reporting quarter as

against a growth of 11.2 per cent in the corresponding

period of 2014-15. While costs for the manufacturing

sector contracted by 0.3 per cent as compared to 10.5

per cent in the same quarter a year ago, those in the

service sector too dropped to 8.7 per cent as compared

to 12.3 per cent in the �rst quarter of 2014-15. This came

as a breather and fairly cushioned the severe impact of

lower net sales growth during the quarter. Amongst the

various components of total expenditure, the growth

in wages and salaries stood at 8.5 per cent in the �rst

While moderation in growth of expenditure has to

some extent mitigated the impact of the current bout

of economic crisis characterized by falling growth in net

sales, the reduction was not large enough to provide

cushion to the bottom-line of the corporate. Conse‐

quently, there was de-growth witnessed in pro�t after

tax (PAT) in the �rst quarter of 2015-16 on an aggregate

quarter of current �scal as compared to 7.3 per cent re‐

corded in the corresponding period of 2014-15. Encour‐

agingly, growth in interest costs decelerated to 8.3 per

cent in the reporting quarter as against 14.0 per cent in

the same quarter of 2014-15. This mirrors the reduction

in the interest rates by the RBI in the recent months.

The brightest spot for the companies came from the

fact that growth in raw material cost contracted by 1.7

per cent in the reporting quarter as compared to a posi‐

t ive growth of 10.6 per cent seen in the same quarter of

2014-15. Since, raw material cost has the largest share in

total expenditure cost, its decline is indeed a good news

for the �rms.

basis as PAT contracted by 9.2 per cent in the April-June

2016 quarter as compared to a growth of 25.2 per cent

in the �rst quarter of 2014-15. PAT contracted for manu‐

facturing �rms by 18.6 per cent in the �rst quarter of

current �scal as compared to a growth of 33.9 per cent

in the same quarter of last year. The service sector also

lagged behind as PAT witnessed de-growth by 0.8 per

CORPORATE PERFORMANCE

cent in the reporting quarter as against a growth of 18.3

per cent seen in the corresponding quarter of last year.

Operating pro�ts (PBDIT) too followed fairly similar

trends and on an aggregate level, the growth in oper‐

ating pro�ts fell to the tune of 4.3 per cent in the �rst

quarter of 2015-16 against a growth of 10.9 per cent over

Our analysis shows that both net and gross margins

rose mostly fell across all sectors and on an aggregate

basis, with the exception of a minuscule improvement

in gross margins in service sector and on an aggregate

basis. This fall mirrored the contract ion in pro�tability

Over the past nine quarters, while net sales and expend‐

iture has mostly followed a downward trend, pro�tabil‐

ity has displayed wide �uctuations. A period of positive

growth which lasted four quarters saw PAT growing to

the corresponding period of 2014-15. The �gures were

worse for the manufacturing sector, wherein, operat‐

ing pro�ts contracted by 0.9 per cent as compared to a

posit ive growth of 12.4 per cent a year ago. For the ser‐

vice sector, operating pro�ts witnessed only a marginal

decline to 9.0 per cent as compared to 9.6 per cent in

the same quarter in 2014-15

and decelerating operat ing pro�ts. For the �rst quarter

in the current �scal, while the net margin stood at 7.6

per cent on an aggregate basis, down by 1.1 percentage

points in year on year terms, for manufacturing and ser‐

vices, it stood at 5.5 per cent and 10.7 per cent respec‐

tively.

as much as 25.8 per cent in the second quarter of pre‐

vious �scal year, only to drop in the negative territory

wherein it has been hovering in double‐digit negative

�gures for the last three quarters, much to the concern

of the industry.

CORPORATE PERFORMANCE

Struck with uninspiring demand in the economy, dwin‐

dling balance of trade, weak sales and ever moribund

pro�tability, the Indian companies are trying hard to

clutch a straw of hope. E�orts are in force by �rms to

improve their own production e�ciencies and employ

cost e�ective measures to tide over the current di�cult

times. Simultaneously, there are also expectations of

some serious economic reforms, some of which have

already come in form of necessary rate cuts by the RBI,

that would elevate the economy, help pick up sales and

raise the pro�tability for the Indian corporate in the

months to come.

SECTOR IN FOCUS

Make in India and the Potential for Job Creation

IntroductionThe average GDP growth in the manufacturing sector

was 9.52 per cent in the early nineties when the eco‐

nomic reform process was init iated. Thereafter, from

1996-97 onwards a decline in manufacturing sector GDP

was witnessed till 2001‐02. From 2002‐03 there was a re‐

vival and the sector recorded an average double digit

growth of 10.1 3 per cent during the period from 2005-06

to 2009-10. But from 2010-11 onwards again a decline in

GDP growth was witnessed with the sector recording

a negative growth of 0.7 4 per cent in 2013-14. To give a

boost to the manufacturing sector growth and to make

the sector globally competitive, the government had

announced the National Manufacturing Policy in 2011.

The policy envisaged enhancing the share of manufac‐

turing to GDP from 16 to 25 per cent and to create 100

million jobs by 2022. The policy envisages the Centre

to provide an enabling framework and incentives for

infrastructure development on a PPP mode and the

State Governments to be encouraged to adopt the in‐

strumentalit ies provided in the policy viz; setting up

of National Investment and Manufacturing Zones, ra‐

t ionalization and simpli�cation of business regulations,

incentives for small & medium enterprises, industrial

training and skill up gradation measures among others.

However, the manufacturing sector growth continued

to be a cause of concern. With nearly 63 per cent of the

population in the working age group (15-64 years) the

Prime Minister in his Independence Day Speech in 2014

invited the world to ‘Make in India’, ‘Manufacture in In‐

dia’ and indicated that growth of manufacturing sector

is must for employment generation of the youth.

The Make in India init iative announced o�cially in Sep‐

tember 2014, aims to facilitate investment, foster inno‐

vation, enhance skill development, protect intellectual

MS. SUNITA SANGHI, ADVISER Labour & Employment & HRD Division in NITI Aayog

MS. A. SRIJA1 Director, Labour & Employment in NITI Aayog

1 The authors wish to acknowledge the contribution of Mr. Shrinivas Shirke, former Research O�cer of NITI Aayog in contributing to the NSSO unit

level data analysis and in preparat ion of the Tables & Graphs. Views expressed are personal and not of the institut ion they represent .2 Calculated from Press Release on Summary of macroeconomic aggregates at constant(2004-05) prices, 1950-51 to 2013-143 ibid4 ibid

&

SECTOR IN FOCUS

property and build best in class manufacturing infra‐

structure and convert India into a manufacturing hub

of the world. In this paper an attempt has been made

to see the employment potential of the Make in India

initiative.

Manufacturing in IndiaThe manufacturing sector in India is heterogeneous

with a preponderance of small unregistered manufac‐

turing units accounting for almost 80 per cent5 of the

employment in the sector with GDP contribut ion of just

4.5 per cent in 2012-13. In other words the growth of the

manufacturing sector is led by registered manufactur‐

ing. The average GDP growth in manufacturing sector

during the period from 2000‐01 to 2012‐13 was 7.5 per

cent of which registered sector recorded an average

growth of 8.7 per cent and unregistered sector an aver‐

age growth of 5.2 per cent 6.

Despite the industrial policy reforms init iated since 1991

some of the major hurdles in manufacturing sector

growth remained viz. poor infrastructure, bureaucrat ic

delays, high cost of capital, delays in land acquisition,

labour laws etc . The earlier attempt to set up Special

Economic Zones to speed up manufacturing growth

met with limited success due to these hurdles. In the

Global Competit iveness Index 2014-15 India is in the 71st

position out of a total of 144 countries. In the Global In‐

novation Index 2015 India ranks 81 out of a total num‐

ber of 141 countries. As per the World Bank’s Ease of

Doing Business Ranking 2015 India is ranked 142 among

189 countries. The ranking of the sub-indicators of the

Ease of Doing Business Index viz; start ing a business

(158th rank), dealing with construction permits (184th

rank), getting electricity (137th rank), registering prop‐

erty (121st rank), getting credit (36th rank), paying taxes

(156th rank), trading across borders (126th rank), enforc‐

ing contracts (186th rank) and resolving insolvency (137th

rank) only validates the earlier mentioned hurdles as

still existing and sti�ing manufacturing growth. Dur‐

ing 2014-15 a slew of measures have been init iated to

simplify these hurdles and to bring about ease of doing

business in India.

The “ Make in India” init iat ive 7 focuses on 25 key sectors

and is based on four pillars, which have been identi�ed

to give boost to entrepreneurship in India, not only in

manufacturing but also other sectors. The four pillars

are:

• New Processes: ‘Make in India’ recognizes ‘ease of

doing business’ as the single most important fac‐

tor to promote entrepreneurship. A number of ini‐

tiatives have already been undertaken to ease busi‐

ness environment.

• New Infrastructure: Government intends to de‐

velop industrial corridors and smart cities, create

world class infrastructure with state‐of‐the‐art tech‐

nology and high‐speed communication. Innovation

and research activities are supported through a fast

paced registration system and improved infrastruc‐

ture for IPR registration. The requirement of skills

for industry are to be identi�ed and accordingly de‐

velopment of workforce to be taken up.

• New Sectors: FDI has been opened up in Defence

Production, Insurance, Medical Devices, Construc‐

tion and Railway infrastructure in a big way.

• New Mind set: In order to partner with industry in

economic development of the country Government

shall act as a facilitator and not a regulator.

The Government has started the e-biz portal which is a

one‐stop arrangement for entrepreneurs for online reg‐

istration, �ling returns, seeking licence etc. The portal

synchronises the functions of six Government depart‐

ments viz; the DIPP, DGFT, CBDT, RBI, ESIC, EPFO, Min‐

istry of Corporate A�airs and Petroleum & Explosives

Safety Organization at the pan-India level.

Labour reforms have been initiated such as in the Ap‐

prentices Act, 1961 the provisions have been simpli�ed

to enable even the MSME sector to take apprentices,

extending apprentice training to non‐technical courses,

allowing apprenticeship training in informal trades etc.

The Labour Laws (Exemption from Furnishing Returns

& Maintaining Registers by Certain Establishments)

Amendment Act, 2014 extends the provisions of the Act

to units holding up to 40 workers instead of 19 work‐

5 Productivity, E�ciency and Competit iveness of the Indian Manufacturing Sector, RBI Study No. 376 Calculated from Press Release on Summary of macroeconomic aggregates at constant(2004-05) prices, 1950-51 to 2013-147 PIB press release 27-February-2015

SECTOR IN FOCUS

ers and the number of labour laws exempted has been

increased from the present 9 to 16. In addition the fol‐

lowing labour laws viz; the Industrial Disputes Act,1947,

The Minimum Wages Act, 1948, the Contract Labour

(Regulat ion of Employment & Conditions of Service)

Act, 1971 may also be taken up for reform. The proposed

Reforms in the Employees’ Provident Fund & Miscella‐

neous Provisions Act, 1952 would extend social security

bene�ts under EPFO to the unorganized sector as well

as to more number of units within the organised sector.

The Government is also trying to bring in amendments

in some of the so called grey areas such as the indirect

tax regime by bringing the Goods & Service Tax through

a Constitution (122nd Amendment) Bill 2014, the Right

to Fair Compensation & Transparency in Land Acquisi‐

t ion, Rehabilitation and Resett lement (Second Amend‐

ment) Bill 2015 with the ultimate goal of simplifying the

ease of doing business in India.

The number of people entering (0+) the labour force as

a proportion of population has decreased from around

45 per cent in 2004-05 to 40 per cent in 2011-12 (Table-1).

Even among the economically active age group there

has been a decline in labour force participation from

around 76 per cent in 2004-05 to 63 per cent in 2011-12.

This decline was mainly due to the withdrawal of the

economically active females from the labour force dur‐

ing this period. The workforce participation rate i.e. the

workforce as a proportion of the population also de‐

creased from around 45 per cent in 2004-05 to around

39 per cent in 2011-12. The other characteristic feature

of the Indian workforce is that nearly 74 per cent are in

the rural areas with only 26 per cent in the urban areas.

The init iatives announced under Make in India have

started creating a positive investment climate and there

was a 48 per cent growth in FDI equity �ows during the

period from October 2014-April 2015. But to understand

the impact of Make in India init iatives on job creation, it

is necessary to look at the labour market scenario.

Labour market scenario

India enjoys demographic advantage wherein almost

63 per cent of the population is in the economically ac‐

tive age group. In other words, the child dependency

and the old age dependency ratio are low as compared

to the economically active population which if produc‐

tively used can have a multiplier impact on growth and

employment. However, the declining Labour Force

Participation Rate both for 0+ age group and 15-64 age

group is a cause of concern. Table 1 provides in nutshell

the labour market scenario.

Further males account for 72 per cent of the workforce

while females account for only 28 per cent.

Besides the low participation rate, the education pro�le

of the workforce is also dismal with nearly 55 per cent

having education below primary of which nearly 30 per

cent are illiterate. About 28 per cent have education up

to secondary and the workforce with higher secondary

and above quali�cation is only 17 per cent.

The sectoral distribution of the workforce (Graph-1)

highlights that in keeping with the structural transfor‐

mation of the labour market the proportion of work‐

force in agriculture has come down from 58.5 per cent

in 2004-05 to 48.9 per cent in 2011-12. But the shift is into

SECTOR IN FOCUS

the low paid construction sector where the proportion

of workforce increased from 5.6 per cent to 10.6 per

cent during the same period. The manufacturing sector

witnessed an increase of only 0.9 per cent from 11.7 per

cent to 12.6 per cent during this period. The net increase

in the service sector was only 3.6 per cent. Even if we ac‐

Hence, we have a predominantly rural workforce with

low levels of education and therefore low skill levels

posing a challenge before the Make in India Imitative.

The following section examines the transition of this

workforce to the manufacturing sector for employ‐

ment.

Make in India and Employment Trends

The 25 sectors covered under the Make in India ini‐

t iative include Automobile & Automobile Components

(merged as NIC code 2 digit level is the same), Avia‐

count for the shift of manufacturing activity to the ser‐

vice sector the net increase in service sector is only mar‐

ginal compared to the decline in the agricultural sector.

In other words, the absorption of the shift of workforce

from agriculture to manufacturing and services sector

in India is very minimal.

t ion, Biotechnology, Chemicals, Construction, Defence

Manufacturing/Space (merged as NIC code 2 digit level

is the same), Electrical Machinery, Electronic Systems,

Food Processing, IT & BPM, Leather, Media & Entertain‐

ment, Mining, Oil & Gas (merged as NIC code 2 digit lev‐

el is the same),Pharmaceuticals, Ports, Railways, Roads

and Highways (merged as NIC code 2 digit level is the

same),Renewable Energy & Thermal Power (merged

as NIC code 2 digit level is the same),Textiles and gar‐

ments, Tourism & Hospitality, Wellness. The employ‐

ment trends under the Make in India sectors maybe

seen in Table-2.

SECTOR IN FOCUS

The total employment generated in the Make in India

sectors was 39.66 million in 2004-05 which increased

by 164 per cent to 104.89 million in 2011-12, mainly due

to the big jump in the construction sector. The employ‐

ment created in the Make in India sectors as a propor‐

t ion of total employment was 8.6 per cent in 2004-05

and 22 per cent in 2011‐12.

As maybe seen in Table-3 there has been an increase in

employment in the IT/BPO, text ile and leather sectors.

However, it is worthwhile to mention that in the Make

in India barring construction, tourism, wellness, food

Although it is too early to assess the impact of the Make

in India initiative on employment, as per the result of

the last Quarterly Employment Survey in Select Sectors

conducted by Labour Bureau reveals an increase in em‐

ployment in some of the sectors covered under Make

in India.

processing and the leather industry the rest of the sec‐

tors are capital intensive industries requiring skilled la‐

bour. Table-4 shows the educational pro�le of the work‐

force engaged in the Make in India sectors.

SECTOR IN FOCUS

The sectors that were able to absorb workforce with

education level up to primary was construction, food

processing, leather, mining, oil & gas, textiles & gar‐

ments, tourism and chemicals. The sectors where India

is aiming to become global leaders such as automobile,

aviation, bio‐technology, defence manufacturing, elec‐

tronics, IT, wellness etc are highly skilled sectors re‐

quiring a workforce with educational quali�cations of

at least higher secondary and above. This, therefore,

raises the immediate challenge of reskilling and upskill‐

ing the existing workforce to upgrade their skills as well

as skilling the new entrants to the labour force. Apart

from this, the need also arises for identifying alternate

labour intensive sectors where the workforce with low

education and skill levels can be engaged.

Way Forward

The policy init iative of setting up �ve industrial cor‐

ridors across the length and breadth of the country

when implemented would convert the cities/towns in

the pathway into manufacturing hubs. The �ve indus‐

trial corridors viz; Delhi-Mumbai Industrial Corridor, Am‐

ritsar-Kolkata Industrial Corridor, Bangalore-Mumbai

Industrial Corridor, Bangalore-Chennai Industrial Corri‐

dor, Chennai-Vizag Industrial Corridor would converge

in itself the creation of 100 smart cities across India.

The Digital India programme would also become a part

of the Industrial Corridor and Smart City program. But

at the base of all these programmes is the Skill India pro‐

gramme. There is an urgent need for skilling, re-skilling

and up‐skilling the labour force so that the demograph‐

ic advantage that India is right now enjoying is fruitfully

utilised for creation of Industrial Corridors, Smart Cities,

Housing for All, Swachh Bharat Mission, road connectiv‐

ity etc. Only a collaborative and convergent approach

can make the Make in India init iative successful. Hence

while the Make in India init iative would boost the manu‐

facturing activity and thereby create jobs, the skill India

would make available job ready skilled workforce to

the industry for enhancing their productivity and facili‐

tate faster manufacturing sector and overall economic

growth. The other �agship programmes would also

promote demand for various products of the manufac‐

turing sectors. This calls for close integration between

the Make in India and Skill India init iative. Some of the

policy init iatives in this direction could be:

n Formalising the informal sector‐ the recent initia‐

SECTOR IN FOCUS

t ives in e-registration, exemption from �ling returns

on 16 labour laws, simplifying apprenticeship train‐

ing should encourage the large number of unregis‐

tered small establishments to enrol into the formal

system which in turn would facilitate these units in

availing the micro credit facilities, technical know‐

how and facilitate their expansion.

n Promotion of cluster development of MSME units

to enable them overcome the disadvantages asso‐

ciated with economies of scale and avail of the ben‐

e�ts of skill training, quality upgradation, market

promotion etc which in turn would facilitate the

growth of the sector and create more employment.

The development of virtual cluster is a step in the

right direction. It would bring all the stakeholders

viz. MSME, Financial Institut ions, Government, Aca‐

demic institutions etc. together

n The mapping of the skill requirements at the secto‐

ral, district level and trade level is must for assess‐

ing the skilled manpower requirements and avoid

skill mismatch. In addition to mapping the job re‐

quirements for the domestic market there is need

to map the job requirement in the global markets

so as to provide quali�ed manpower to the ageing

economies and enhance employment opportuni‐

t ies for the youth. The setting up of the LMIS or La‐

bour Market Information System should therefore

be speeded up so as to determine the skill develop‐

ment targets in tune with market demand.

n The entrepreneurship development is also very

integral for the success of the Make in India Cam‐

paign. One entrepreneur would have a force mul‐

t iplier to generate the jobs. ATAL INNOVATION

FUND and SELF EMPLOYMENT and TALENT UTILI‐

SATION FUND would promote entrepreneurship.

There is Rs 10,000 start-up fund also for promoting

start-ups and entrepreneurs. The large number of

foreign companies are committing to invest in India

Such as Apple, FOXCON, QUALCOMM, Google, Fa‐

cebook and many automobile majors have already

invested. These will while bring in investment but

would also generate ample employment opportuni‐

ties.

n There is also need to Identify and integrate labour

intensive industries with potential for employment

creation and integrate with the Make in India init ia‐

tive. An exercise done in this regard for the manu‐

facturing, non‐manufacturing and services sector is

detailed below:

For instance in the manufacturing sector that ac‐

counted for 13 per cent share in total employment

in 2011‐12, out of the total of 131 economic activities

listed in NIC 2008 around 85 economic activit ies ac‐

counted for 8.5 per cent employment in 2011‐12. Of

which a list of 30 economic activit ies in NIC 2008

under manufacturing with signi�cant CAGR growth

in employment arranged in decreasing order of

their share in employment in 2011‐12 is shown in

Annexure‐1. Activities related to food processing,

manufacture of furniture, jewellery & related arti‐

cles etc are labour intensive sectors. Activities re‐

lated to manufacture of fabricated metal products

and manufacture of machinery and equipment has

shown signi�cant increase in employment in 2011-

12. These activit ies can act as feeder to construction

and allied act ivit ies. These sectors have workforce

with low education and skill levels. Thus, these sec‐

tors can be given focus for promotion of employ‐

ment.

Similarly in the non‐manufacturing sector which is

predominated by construction accounted for 12 per

cent share in employment in 2011-12. Out of 141 eco‐

nomic activit ies under NIC 2008 analysed for this

sector only 22 activit ies accounted for 11.6 per cent

of the total employment in 2011-12. This employ‐

ment was mainly in construction related activities

and the employment was mostly of unorganized

informal type involving unskilled labour. This sector

has been very well targeted under the Make in In‐

dia initiative.

The services sector accounted for 27 per cent share

in employment in 2011-12. Out of the 204 economic

activit ies mentioned under NIC 2008,108 activit ies

accounted for 20 per cent of the total employment

in 2011-12. The sectors that have recorded signi�‐

cant growth in employment out of these 108 are

shown in Annexure-II. The sectors that can be con‐

sidered for employment generation include retail

trade, repair of motor vehicles, restaurants and

food services, health services, renting and leasing,

activities of travel agencies, data processing, call

centres, private security activities etc.

To conclude to facilitate the creation of quality jobs

with decent wages skilling of the workforce is an ur‐

gent need and all e�orts should be made to speed up

skill development. The init iatives like RPL and Skill Card

will go a long way to achieve the objectives of skill India

of providing skilled manpower for the manufacturing

and non‐manufacturing sectors.

(Views expressed are personal)

SECTOR IN FOCUS

SECTOR IN FOCUS

SECTOR IN FOCUS

FOCUS OF THE MONTH

Financial Inclusion

The concept of �nancial inclusion has special sig‐

ni�cance for a fast emerging economy such as

India, as it encompasses a large segment of the

productive sectors of the economy under the formal

�nancial network to unleash their creative capacities.

Over a period of t ime, several �nancial and economic

policy measures are being taken by banks in India to

improve access to a�ordable �nancial services through

�nancial education, awareness generation, business

communication networking and leveraging technol‐

ogy. According to the Committee on Financial Inclusion

(Chairman: C. Rangarajan), 2008, “ Financial Inclusion

may be de�ned as the process of ensuring access to �‐

nancial services and timely and adequate credit where

needed by vulnerable groups such as weaker sections

and low income groups at an a�ordable cost” .

The essence of �nancial inclusion is in trying to ensure

that a range of appropriate �nancial services are availa‐

ble to every individual and enabling them to understand

and access those services. Apart from the regular form

of �nancial inclusion intermediation, it may include a

basic no‐frills banking account for making and receiv‐

ing payments, a saving product suited to the pattern of

cash �ows and a poor household, money transfer facili‐

ties, small loans and overdrafts for productive personal

and other purposes, insurance etc. While �nancial inci‐

sion, in the narrow sense, may be achieved to some ex‐

tent by o�ering any of these services, the objective of

comprehensive �nancial inclusion would be to provide a

holistic set of services compassing all of the above. Cen‐

sus 2011 estimated that out of 24.67 crore households

in the country, only 4.48 crore (58.7 per cent) house‐

holds had access to banking services. This has resulted

in non-access to a well-functioning �nancial system in

the country. Despite various measures for �nancial in‐

clusion, poverty and exclusion continue to dominate

socio‐economic and political discourse in India even

after 68years of independence. Though economy has

shown impressive growth during the post‐liberalisation

era (1991 onwards), impact so yet to percolate to all sec‐

tions of the society and therefore India is still home to

1/3rd of world’s poor. Given the importance of �nancial

inclusion in the current milieu, this month’s Focus of the

Month presents the insights on this pertinent topic by

industry experts.

FOCUS OF THE MONTH

CII Analysis

The Changing Face of Financial Inclusion in India – The

Era of Di f ferent iated Banks

India has a proud history of policy enablement for

bringing the poor and vulnerable into the mainstream

�nancial system. The Nationalization of Banks in late

1960s led to the rapid expansion of banking coverage

across the country. However, it is in late 2000s that In‐

dia launched a formal drive to bring the �nancially ex‐

cluded sections of our society to mainstream �nance,

by enlarging access and usage of �nancial services and

products as appropriate to their needs. Dr. C. Rangara‐

jan chaired ‘Committee on Financial Inclusion’, which

submitted its recommendations to Government in early

2008, argued that enhanced access to �nance for the

poor and vulnerable groups is a prerequisite for pov‐

erty reduction and social cohesion. Various commit‐

tees since then have suggested a series of measures for

comprehensive �nancial inclusion with rural India as the

focal point of development.

Access to formal banking is a necessary condition for

any economy to grow. It will increase saving rates,

which will enable capital investment in sectors such as

roads, ports, and railways. India needs to invest over

US$320 billion in infrastructure. As capital is scarce, a

perfect capital market will ensure a higher return for

each additional dollar of saving invested for building In‐

dia’s infrastructure.

Financial inclusion provides the poor an opportunity to

build their savings, make investments, avail credit, and

insure themselves against income shocks and emergen‐

cies. Reaching all corners of the country and meeting

low-ticket demand of �nancial services have been the

major deterrent while emulating the normal business

models of banks. However, leveraging technology to

achieve scale has ushered in a shift in approach. Banks

now look at �nancial inclusion on a whole-volume basis

and not on a per‐ticket basis.

Importantly, access to banking will increase the produc‐

t ivity of the Indian Micro, Small and Medium Enterprises

(MSMEs) sector, and aid the much touted Make in India

campaign for India. Only 5 per cent of the MSMEs avail

loan from institutional sources, underscoring the need

for �nancial inclusion for the MSME sector, and to drive

India’s inclusive growth agenda.

A quiet �nancial revolution has begun in India since,

August 28th, 2014. The Honorable Prime Minister,

launched National Financial Inclusion Mission, namely

Jan Dhan Yojana (PMJDY), importantly, under PMJDY,

�nancial inclusion target is set at the household-level,

not villages. The PMJDY envisages universal access to

banking facilities with at least one basic banking ac‐

count for every household, �nancial literacy, access to

credit, insurance and pension facility.

To supplement the Governments e�ort the framework

announced by the Reserve Bank of India for di�erenti‐

ated banks (payments banks and small banks), is a step

in the right direct ion. The Reserve Bank of India, has

granted permission to set up payment banks to 11 In‐

dian companies. This is with the objective of bringing

new areas under �nancial inclusion which otherwise are

neglected by traditional commercial banks. Payment

banks can accept deposit up to Rs. 1 million, and will of‐

fer other banking services such as an issuance of ATM/

debit cards, and money transfer.

Among the big names which have been granted license

are India Post, Reliance Industries, Airtel, Vodafone,

Tech Mahindra, Paytm, IDFC, National Securit ies De‐

positary Limited (NSDL), Fino PayTec, Cholamandalam

group, and Aditya Birla Nuvo. Although India Post, with

0.15 million post o�ces, has already got a network in

place, others are tying up with commercial banks (for

instance, Reliance with State Bank of India, Airtel with

Kotak Bank, etc.) to leverage their presence.

The usher of payment banking system is an important

step for �nancial inclusion in India.

Payment bank will be a big boon for thousands of mi‐

grant workers. In India, a negligible percent of people

FOCUS OF THE MONTH

used an account to receive money from their family

member living in other regions. Migrant workers land

up paying higher commissions when they transfer

money through informal route such as Hawala. The cost

of the loan through an informal channel is also high in

India. Firms/people with access to �nance/capital are

guaranteed with more income than the ones without

access to banks and capital.

As these payment banks are backed by big corporates

(some of them have already pioneered use of technol‐

ogy in the �nancial sector such as Tech Mahindra and

NSDL), it will usher in a technological revolution in In‐

dia. Technology helps to augment �nancial inclusion

by making accessibility to bank and �nancial transac‐

t ions easier. In a digital world �nancial transaction hap‐

pens through a click of the mouse, and over the mobile

phone.

In India, changes have already happened in three spe‐

ci�c areas. First is the introduction of Real Time Gross

Sett lement (RTGS) system, enabling banks to transfer

funds across all deposit accounts in real t ime. The new‐

er version of RTGS has many advanced capabilit ies such

as national electronic fund transfer (NEFT), and elec‐

tronic fund transfer (EFT) across national boundaries.

Second is the introduction of online automatic clearing

mechanism such as BillDesk, underlying any retail trans‐

fers between the point of sale for credit/debit cards and

bank automatic teller machines. And, third is the intro‐

duction of electronic clearing service (ECS) for cheques,

an electronic mode of fund transfer from one bank ac‐

count to another.

Payment banks will make mobile network operators

(MNOs) and internet banking more popular. According

to the report published by the Internet & Mobile Asso‐

ciation of India (IAMAI), The number of internet users

in India has reached 354 million by the end of June 2015.

The internet users in India have grown 17 per cent in the

init ial 6 months of this year, adding 52 million new us‐

ers. The latest �gure indicates that India has more in‐

ternet users than the population of the US and become

the second largest country by the number of internet

users after China.

For a populous country like India future strategy for

�nancial inclusion will call for technology to reach the

bottom of the pyramid, something that these payment

banks can facilitate. Bringing poor people under the

garb of digital banking platform will help �nancial trans‐

fer meant for social security payment easier.

The future will see the emergence of contact less pay‐

ment enabled through usage of near �eld communica‐

t ion (NFC) technology. NFC will enable smart phones

and other devices to establish radio communication

with each other by touching devices together or bring‐

ing them in close proximity. Going paperless by saving

time will not only reduce transaction costs but will also

play an important role for �nancial inclusion.

FOCUS OF THE MONTH

CRISIL Inclusix, India’s most comprehensive and

granular index that measures the progress of �‐

nancial inclusion, stood at 50.1 1 at the end of �s‐

cal 2013 ‐‐ the latest period for which data from the Re‐

serve Bank of India is available -- compared with 42.8 at

the end of �scal 2012. Two factors were clearly behind

this spurt in the index: continued progress in the bank‐

ing services, and addition of micro�nance institutions

(MFIs) into the index computation for the �rst t ime.

The highlights of India’s �nancial inclusion march in �s‐

cal 2013 are:

1. Banking services continues to gain ground, with

the number of savings accounts and bank branches

registering their fastest growth in 4 years

2. Deposit penetration remains the key driver of �nan‐

cial inclusion

3. MFIs have helped underpenetrated regions of east

and north‐east to play catch‐up with north.

4. Among states, West Bengal bene�ted the most be‐

cause of the presence of large MFIs, while Jammu &

Kashmir improved substantially as credit accounts

surged. Tamil Nadu moved into the top three for

the �rst t ime driven by an increase in deposits

5. In as many as nine districts, CRISIL Inclusix hit the

maximum score of 100

Overall, however, basic �nancial services remains un‐

derpenetrated. One‐third Indians did not have a bank

savings account at the end of �scal 2013, while only one

in seven had access to credit.

Going forward, we expect tailwinds to �nancial inclu‐

sion from policy steps taken such as the Pradhan Mantri

Jan Dhan Yojana (which has not been factored in the

third edit ion of Inclusix), and di�erentiated banking li‐

cences. Under Jan Dhan Yojana, more than 18 crore new

savings accounts have been opened, which will add to

the Inclusix score for 2015.

Continued progress in the banking services

The progress in the banking services is re�ected in a re‐

cord increase in number of savings accounts and bank

branches. This was partially o�set by a decline in small-

borrower accounts, mainly in the metros.

Savings accounts grow the fastest in 4 years

A good 11.7 crore new savings bank accounts were

opened during �scal 2013, almost 50 per cent more than

the 7.9 crore opened in �scal 2012. This took the total

accounts in the country to 82.0 crore from 70.3 crore

‐‐ an increase of 17 per cent for the year, which is the

fastest growth in four years. South, north and east ac‐

counted for nearly 80 per cent of the new bank savings

accounts opened.

Bank branches cross the 1 lakh mark

The number of bank branches in India crossed the 1 lakh

mark to close the �scal 2013 at 105,437 as 8,195 new

branches were opened (30 per cent of which was in the

south). This, again, is the fastest growth in four years.

Small-borrower accounts drop

Growth in credit accounts declined due to a reduction

in small‐borrower accounts to 10.2 crore at the end of

Financial Inclusion Cont inues to Gather Pace: CRISIL

1 It is important to note that the index values for the two years are not directly comparable, as data for MFIs is available only for the �scal 2013.

FOCUS OF THE MONTH

�scal 2013 from 10.9 crore at the end of �scal 2012. The

decline was primarily observed in �ve metro districts

- Delhi, Kolkata, Mumbai, Mumbai Suburban, and Ban‐

galore Urban. This could be attributed to book-cleaning

exercise undertaken by banks, and closure of dormant

credit‐card accounts.

Addition of MFIs makes CRISIL Inclusix more representative

CRISIL Inclusix has been enhanced with the incorpora‐

t ion of granular district-wise data for MFIs beginning

�scal 2013. The index is now a better representation

of ground level penetrat ion of �nancial inclusion in the

country.

MFIs play a crucial role in �nancial inclusion having a

strong presence in the unbanked and under‐banked re‐

gions, especially in semi urban and rural India. Adding

their contribution to the index catapulted the all‐India

CRISIL Inclusix score for �scal 2013 to 50.1.

Reducing regional disparit ies even as south stays way

ahead

The inclusion of MFIs augmented the Inclusix scores

of the traditionally excluded regions of east and north‐

east. Stronger presence of MFIs in the east helped

reduce the disparity in Inclusix scores between the

eastern and northern regions to 3.8 for �scal 2013, com‐

pared with 8.7 for �scal 2012. Similarly, the disparity be‐

tween north-east and north reduced to 4.3 compared

with 8.6 for �scal 2012. South, meanwhile, continued to

strengthen its leadership position. It ’s pertinent to note

here that the computation of Inclusix till �scal 2012-end

only considered the contribution of banks.

Bolstering credit and branch penetrat ion scores

MFIs augmented the credit and branch penetration

scores to 45.7 and 52.4, respectively, for �scal 2013,

bringing them closer to the deposit penetration (DP)

score of 60.3. The contribution of MFIs to DP is nil be‐

cause they are not permitted to accept deposits.

Miles to go before full �nancial inclusion

Despite the progress made, there is a lot of ground to

be covered if India is to see full �nancial inclusion.

Large population remains outside banking network

While the Inclusix score has improved to 50.1 out of 100,

it also re�ects that a large part of India’s population

does not have access to formal �nancial services. One in

three Indians still does not have a bank savings account.

And with just one in seven having access to credit, the

credit penetration (CP) score continues to be low.

Gap between south and the rest remains wide

South improved its Inclusix score compared with other

regions, and continues to lead in all the three dimen‐

sions of �nancial inclusion.

While CP has been a drag on the overall Inclusix score, it

is the frontrunner in south. Consequently, the region’s

CP score is nearly twice the all-India number.

Success stories

During �scal 2013, some states and regions emerged as

outperformers in terms of progress in �nancial inclu‐

sion:

West Bengal bene�ts from strong MFI presence

Strong presence of large MFIs, including Bandhan Fi‐

nancial Services (the largest in the country), helped

West Bengal post a CRISIL Inclusix score of 46.6 and en‐

ter the list of top 20 states on �nancial inclusion. MFIs

boosted the BP and CP scores of the state to 51.1 and

41.3, respectively, taking all the three-dimensions to the

‘above average’ category.

Jammu & Kashmir shows signi�cant progress

Jammu & Kashmir moved into the ‘above average’

category with an Inclusix score of 45.2. This can be at ‐

tributed to a 40.3 per cent increase in total bank credit

accounts. Despite this upsurge, its CP score at 28.9 re‐

mained a constraining factor. The state’s CRISIL Inclusix

score was driven by high DP and BP scores of 61.6 and

56.3, respectively.

Tamil Nadu moves to the top 3 for the �rst t ime

Tamil Nadu moved to the top 3 with a CRISIL Inclusix

score of 79.2. More than 1 crore new savings accounts

were opened in the state during �scal 2013, resulting in

an 11.3 increase in the DP score to 80.5. The presence of

large-sized MFIs and self-help group bank linkage pro‐

grammes ensured a very high CP score of 97. MFIs also

boosted BP score to 72.1.

North-east catching up with the rest

The CRISIL Inclusix score for north-east stood at 39.7

compared with 44 for the north. That di�erence of 4.3

is an improvement compared with a di�erence of 8.6

FOCUS OF THE MONTH

in �scal 2012. The forward march of north-east can be

attributed to the presence of large MFIs in Tripura and

Assam. Tripura moved into the top 10 for the �rst t ime

with a CRISIL Inclusix score of 63.8. Manipur, however,

continued to be the lowest‐ranked state with a score

of 21.6.

Tailwind from Policy Steps

Pradhan Mantri Jan-Dhan Yojana

In August 2014, the Government of India launched one

of its most ambitious and comprehensive �nancial inclu‐

sion plans called the Pradhan Mantri Jan-Dhan Yojana

to facilitate access to �nancial services to the excluded

sections of society.

Till date, around 18 crore new savings accounts have

been opened under the scheme. This has the potential

to add signi�cantly to the Inclusix score for 2015.

About CRISIL Inclusix

CRISIL Inclusix measures the extent of �nancial inclu‐

sion at a geographical level, starting from the district

level. The index can be further aggregated to compute

Di�erentiated Banking Licences

RBI recently granted in-principle licenses to 10 and 11

organisations to transform to ‘small �nance banks’ and

‘payments banks’ respectively are moves intended to

improve �nancial inclusion through di�erentiated bank‐

ing channels. They are based on the recommendations

of the committee on Comprehensive Financial Servic‐

es for Small Businesses and Low Income Households

chaired by Dr Nachiket Mor.

Small �nance banks will enhance accessibility of bank‐

ing services to the small and micro borrowers in semi‐

urban and rural areas. Payments banks can speed up

payment and remittance services to those still outside

the banking network.

CRISIL believes these init iatives by the government and

the regulator should lead to a signi�cant increase in the

level of �nancial inclusion in the country over the me‐

dium term.

the extent of �nancial inclusion at the state, regional

and national levels. CRISIL Inclusix can therefore be

used to measure the progress of �nancing inclusion at

a district level and taking necessary corrective actions.

FOCUS OF THE MONTH

Financial Inclusion is a Nat ional Priori ty: Key Takeaway

of Financial Inclusion Summit

On the occasion of the �rst anniversary of Pradhan

Mantri Jan-Dhan Yojana, the Confederation of Indian

Industry (CII) under guidance of the Department of

Financial Services, Ministry of Finance organized the

Financial Inclusion Summit with the theme ‘Industry –

Government Partnership for Pradhan Mantri Jan-Dhan

Yojana’ on 27 August 2015 in New Delhi.

Mr Jayant Sinha, Minister of State for Finance was the

Chief Guest and delivered Valedictory Address at the

Summit.

While setting the context of the summit, Dr Janmejaya

Sinha, Chairman, CII National Committee on Financial

Inclusion and Chairman- Asia Paci�c, Boston Consult ing

Group re�ected how in the last one year �nancial

inclusion has been given a national priority status

and is being looked upon as an opportunity rather an

obligation. While lauding the e�orts of the Government

Dr Sinha said “ Financial Inclusion has assumed a far

more important role with the much needed regulatory

push in the form of issuance of new licenses for payment

banks and push for �nancial literacy.”

Mr Hemant Contractor, Chairman, Pension Fund

Regulatory and Development Authority (PFRDA)

highlighted the importance of expanding the coverage

of pension in the country. He mentioned that the overall

coverage of pension in the country was just around 12 –

13 per cent and there was a need to integrate pensions

in the Jan Dhan Yojana to strengthen the social security

system of the country. Further, Mr Contractor outlined

the di�erences between the earlier Swavalamban

scheme and the Atal Pension Yojana, stating that

necessary improvements in the pension scheme

have been made in the form of providing guaranteed

pensions.

Speaking at the summit, Mr Jayant Sinha, Minister of

State for Finance laid out the vision and goal of the

current Government to achieve �nancial inclusion in

India. He said “ I think we have a historic opportunity

to work together using open platforms to genuinely

end poverty & deprivation in India” . He attributed this

vision to the strong and decisive leadership of the Prime

Minister Narendra Modi and the rapid development

of technology which has and will continue to help in

achieving this goal.

Speaking on one of the signature programmes of the

Mr. Jayant Sinha, Minister of State for Finance addressing the audience

FOCUS OF THE MONTH

Government, Mr Sinha stated that the Government

wants to take the bene�ts of �nancial inclusion to the

last mile. In other words, the e�ort would be towards

achieving ‘Antyodya’. Three broad themes outlined in

his speech were the vision behind �nancial inclusion,

the approach followed by the Government and ground

realit ies of achieving holistic �nancial inclusion in India.

Re-iterating Prime Minister’s vision of Minimum

Government and Maximum Governance, he noted

that the the e�ort would be to achieve universal social

security through JAM (Jan Dhan Yojana, Aadhar and

Mobile) trinity.

Addressing the gathering he also spoke on the various

principles like co‐operative federalism and pro‐market

approach adopted by the Government to make

�nancial inclusion possible. He added that simple

products, universal KYC system and cit izen centric

view is of high priority for the Government to make

the social security schemes more accessible and make

the system more transparent.

Enlisting the ground realities, he stated that providing

simple products with security, creating �nancial

awareness amongst the populace and strengthening of

the distribution network are necessary.

Under the theme, the Summit had three separate work

streams that came up with concrete recommendations

for the Government. Speakers from the industry

presented recommendations on Financial Inclusion to

the Minister. Mr Arun Tiwari, Chairman and Managing

Director, Union Bank of India, Mr Ajay Srinivasan, Co-

Chairman, CII National Committee on Financial Inclusion

and CEO-Financial Services, Aditya Birla Group and Ms

Shikha Sharma, Chairman, CII National Committee

on Banking and MD & CEO, Axis Bank Limited made

presentat ions on ‘The Next Phase of Jan Dhan Yojana’,

‘Partnership Models for achieving Universal Financial

Inclusion’ and ‘Role of Technology in Advancing

Financial Inclusion’ respectively.

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