Syllabus for Indian Economic Environment (IEE) Unit 2:

This 12 page PDF contains reliable notes (for 2024 session) on the sub-sections indicated above,
compiled by the students and their mentor from sources such as the Economic Survey 23-24 and
Press Information Bureau reports.

Grateful to the students for their dedication in understanding and synthesizing the content.

[The long notes are mainly framed keeping in mind 10 mark question and short note on MSME and
MUDRA for 5 or 2 marks. The notes are not exclusive. Kindly remember all discussions held in
classes including those held on various government schemes or initiatives.]
ROLE OF AGRICULTURE IN THE INDIAN ECONOMY
By Vrinda Mantry (S5) and Umang Agarwal (S6) of morning section.
(Source: Economic Survey of India)
Agriculture plays a pivotal role in the Indian economy, contributing significantly to employment
(42–45%), GDP (18%), and ensuring food security for the entire nation. During the challenging
times of COVID-19, the agriculture sector emerged as a silver lining, registering a positive growth
rate.
1. Contribution to GDP : - Although agriculture's contribution to India's GDP has been declining,
it remains significant, accounting for approximately 18% of GDP. However, its allied sectors,
such as livestock, have demonstrated a robust compounded annual growth rate (CAGR) of 7.38%
at constant prices over the past six years. Agriculture itself maintains an annual growth of 4.18%
at constant prices despite its reduced share in GDP.
The sector contributes significantly through the food processing industry and is a leading
producer of milk. Food grain production reached an all-time high of 329.7 million tons in
2022-2023, and approximately 40% of the food grain stock is distributed free of cost to two-
thirds of the population.

2. Contribution to employment : – (i) Major Employment Source: The employment share in

agriculture is around 42%–45%. Reports suggest that more than half of the population in India
is engaged in agriculture. According to the latest report, India's workforce is approximately 56.5
crore, out of which 45% is employed in agriculture. It is noteworthy that females also find
opportunities in this sector. Although there is an issue of disguised unemployment in this sector,
given its importance, measures are being undertaken to address it and enhance productivity.
3. Food security and supply : - (i)Ensuring Food Security: Indian agriculture ensures food
security for the nation. India is one of the top producers of staple foods such as rice, wheat, and
pulses. (ii) Self-Sufficiency: India has largely achieved self-sufficiency in food grain production.
The total food grain production in 2023 is estimated to exceed 330 million tonnes, making India
one of the largest producers globally. (iii) Exports: India is also a major exporter of agricultural
products, including rice, spices, and sugar. In 2023, agricultural exports surpassed $50 billion,
reflecting their significance in foreign exchange earnings. In the financial year 2024, exports
from agriculture held an share 11% in merchandise exports.
4. Support to other sectors from both demand and supply side :- (i) Raw Materials for
Industries: Agriculture provides essential raw materials for industries such as textiles (cotton,
jute), sugar, and food processing. These sectors rely on a steady supply of agricultural products.
(ii) Rural Demand: Agriculture sustains rural demand, which supports industries such as FMCG
consumer goods and fertilizers. When agricultural output and income increase, they contribute
to higher consumption of industrialized goods. It also caters to the food demand of employees
working in other sectors.
5. Poverty alleviation and inclusive growth: (i) Reducing Rural Poverty: Since the majority of
our rural population depends on agriculture, improving the agricultural sector is crucial for
poverty alleviation. Government initiatives like the PM-Kisan Samman Nidhi scheme, which
provides direct income support, aim to uplift the farmers. (ii) Doubling Farmers' Income: The
government has also set a goal to double farmers' income by 2024 through various policy
interventions aimed at increasing productivity, diversification, and better price realization,
ensuring a proper MSP, and reducing production costs in the agriculture sector and its
dependence.
6. Agricultural Reforms and Challenges :- (i) Technological Integration: The Indian government
has been pushing for technological integration in agriculture such as precision farming, irrigation
technologies, and drone-based monitoring. There are policies for allied sectors like horticulture
development. Additionally, the e-NAM portal serves as a digital platform for farmers to ensure
they get proper prices.(ii) The MSP: The Minimum Support Price (MSP) system continues to be
a crucial tool to protect farmers from price volatility. In 2023, the government increased the MSP
for several crops, reflecting its commitment to supporting farmers. (iii) Challenges: Indian
agriculture faces challenges like land fragmentation, overdependence on monsoon, low
productivity compared to global standards, and issues related to climate change and soil
degradation.
7. Government Initiatives :- (i) PM KISAN Scheme - Provides Rs. 6000 annually to small and
marginal farmers. (ii) Pradhan Mantri Fasal Bima Yojana (PMFBY) - Aimed at providing
affordable crop insurance to farmers. (iii) National Agriculture Market (e- NAM) - Promotes
online trading in agricultural commodities, enabling better price discovery for farmers. (iv)
Atmanirbhar Bharat (Self-Reliant India) - Focuses on increasing agricultural productivity and
improving infrastructure.
8. Role in Sustainable Development :- Agriculture remains central to India's goals of achieving
sustainable development with an emphasis on improving agricultural practices, enhancing water-
use efficiency, and promoting organic farming for long-term sustainability.

Conclusion :- Although the share of agriculture is less in the Indian economy compared to other
sectors, it provides food security to the entire nation and employment to a major sector of the
population. Further, exports help us earn foreign exchange. The agriculture sector, though falling
under the primary sector, is linked to the secondary and tertiary sectors from both the demand and
supply sides. Further, the government's initiatives to ensure food security for farmers, maintain price
levels by adopting technology, and make reforms to boost this sector clearly indicate that agriculture
plays a crucial role in the Indian economy. There may be challenges, but reforms could help
overcome them.
__________________________________________________________________

Compiled from Economic Survey of India 2023-24 by Forum Shah.

(Credits to students of semester 3 for their continuous dedication.)

Role of Indian Industry in the Economy

The industrial sector plays a pivotal role in the economic development of India,
contributing significantly to the nation's GDP, employment generation,
infrastructure development, and exports. The Government of India, through
various policies and initiatives, has emphasized the importance of
industrialization as a means to drive growth and development.

1. Contribution to GDP and Economic Growth

The share of industry sector in overall GVA at current prices was 27.6 per cent in
FY24. Economic growth of 8.2 per cent in FY24 was supported by an industrial
growth of 9.5 per cent. Industry encompasses sectors such as manufacturing,
mining, construction, and electricity, and plays a major role in driving the
economic growth of the country. Among the four sub-sectors of industry,
manufacturing and construction achieved close to double-digit growth, while
mining & quarrying and electricity & water supply also recorded strong positive
growth in FY24. Manufacturing activities account for about 50 per cent of the
inter-industry consumption and, at the same time, supply almost 50 per cent of
inputs used in all productive activities (agriculture, industry and services)
2. Employment Generation

Indian industry is a significant source of employment, directly and indirectly. Out

of India’s estimated workforce of 56.5 crore in 2022-23 (as per WPR from PLFS
and MoHFW's population projections), 11.4 per cent is engaged in manufacturing
and 13.0 per cent is in construction. In terms of total persons engaged,
employment has been rising in bigger factories (employing more than 100
workers) than in smaller ones, suggesting a scaling up of manufacturing units.
This is a positive development in terms of quality of employment, as wages per
worker tend to rise with the employment size of factories. Given the affinity of
India’s population to work with technology, as seen with the digital public
infrastructure, proactive interventions by the Government and industry can
position India as a key player in the AI age.
3. Exports

The industrial sector plays a crucial role in enhancing India's export performance.
Industries such as textiles, pharmaceuticals, engineering goods, and chemicals
contribute significantly to the country's exports. India's industrial exports have
shown remarkable growth, supporting the nation's foreign exchange earnings and
contributing to a favorable trade balance. Some of the key highlights are:
India's pharmaceutical market, valued at USD 50 billion, is the world's third-
largest by volume, with a diverse range of products. Known as the "Pharmacy of
the World," it accounts for 20% of global generic drug exports, with eight of the
top 20 global generic companies based in India.
The Indian footwear and leather industry is an important foreign exchange earner.
India is the second-largest global producer of footwear after China, accounting
for 13 per cent of global footwear production and 2.2 per cent of global exports.
India is the ninth-largest global footwear exporter
India's toy exports grew significantly in 2023, with a CAGR of 15.9% from FY13
to FY24, turning the country from a net importer to a net exporter. India has
transitioned from an arms importer and found a place in the list of the top 25 arms
exporter nations.
The defence industry, including the private sector and Defence Public Sector
Undertakings (DPSUs), has made tremendous efforts to achieve the highest-ever
defence exports. About 100 domestic companies are exporting a wide range of
defence products and equipment such as aircraft like Dornier-228, artillery guns,
Brahmos Missiles, PINAKA rockets and launchers, radars, simulators, and
armoured vehicles.
India also became the world's sixth-largest smartphone exporter in 2022, from the
23rdlargest smartphone exporter in 2014.
4. Infrastructure Development

The industrial sector is integral to infrastructure development in India. Industrial

growth stimulates the demand for transportation, energy, and communication
infrastructure, contributing to overall national development. Policies like the
National Infrastructure Pipeline (NIP) and Make in India encourage private
sector participation in infrastructure projects, facilitating industrial expansion
across sectors. GatiShakti Multi-Modal Cargo Terminal (GCT) is being
developed by private players on the railway and non-railway land, based on
demand from industry and the potential of cargo traffic.
5. Technological Advancements

Industrial growth has been a key driver for technological innovation in India. The
Make in India initiative, launched by the Government of India in 2014, aims to
transform India into a global manufacturing hub. This has spurred industries to
adopt new technologies, enhance product quality, and improve efficiency. The
development of industries like electronics, information technology, and
biotechnology has boosted India’s global competitiveness.

6. Regional Development and Balanced Growth

Indian industries contribute to the regional development of various states,

particularly in underdeveloped or economically backward regions. Government
policies aimed at promoting industrialization in the northeast, backward regions,
and rural areas ensure that industrial growth is balanced and inclusive. Programs
like PM Gati Shakti and UDAN (Ude Desh ka Aam Naagrik) focus on improving
connectivity and creating infrastructure that facilitates industrial growth in
underserved areas.

7. Boosting Domestic Investment

India's industrial policies have fostered an environment conducive to investment.

Government initiatives such as the Production-Linked Incentive (PLI) scheme
and Startup India have attracted both domestic and foreign investments into
various industries, including electronics, textiles, and pharmaceuticals. The ease
of doing business has also improved, as evidenced by India's progress in the
World Bank's Ease of Doing Business Index.

8. Contribution to Sustainable Development

Indian industries are increasingly focusing on sustainable practices. Policies

encouraging clean energy, green manufacturing, and environmentally-
friendly technologies are helping reduce the carbon footprint of industries. The
government’s National Action Plan on Climate Change (NAPCC) emphasizes
sustainable industrial practices, which help align economic growth with
environmental protection.
9. Government Initiatives to Support Industry

The Indian government has introduced several policy reforms to support and
promote the industrial sector. Amongst many initiatives, some include
Aatmanirbharta Pursuit, Pradhan Manri Bhartiya Janaushadhi Pariyojana and PM
MITRA. Seven PM MITRA Parks, with a ₹4,445 crore budget, will be set up
across seven states from FY22 to FY28, offering 1,000-acre industrial
infrastructure and "plug and play" facilities.
Problems: India faces significant hurdles in expanding its manufacturing sector.
To overcome these, the private sector must adopt a long-term perspective,
focusing on quality improvement through increased investment in research and
development (R&D). While R&D alone might not solve all the challenges, it is a
critical component for growth. Manufacturing remains a key driver for creating
low to semi-skilled jobs and fostering development at the grassroots level. For
this reason, India must prioritize the growth of its manufacturing sector to unlock
its full potential.
Further, technological challenges arise from limited modern mining equipment
availability from local manufacturers. Procedural hurdles in acquiring forestry
and environmental clearances, as well as land acquisition, need addressing for
timely project development. India also relies heavily on imports for antibiotic
APIs produced through fermentation, due to the lack of cost-effective domestic
production options. While domestic infrastructure and R&D have improved,
challenges persist.
Conclusion

In conclusion, the industrial sector is a cornerstone of India’s economy, fostering

growth, employment, and innovation. Through strategic government policies and
initiatives with growing focus on Industry 4.0, the sector is poised for continued
development, contributing significantly to India’s ambition to become a global
economic powerhouse.

Previously shared:

• Role of Agriculture in the Indian Economy: Compiled from Economic

Survey of India 2023-2024 by Vrinda (M5) along with mentor.
Thankful to Umang (S6) for refining and digitizing the content.
• Next after discussions on Public Sector, Private Sector and Small Scale
Sector, we move on to MSMEs (with notes) and MUDRA (with notes)
In accordance with the Micro, Small and Medium Enterprises Development Act,
2006, MSME are classified as below (revised in 1st July 2020):

1. A micro enterprise, where the investment in plant and machinery or

equipment does not exceed one crore rupees and turnover does not
exceed five crore rupees.

2. A small enterprise, where the investment in plant and machinery or

equipment does not exceed ten crore rupees and turnover does not
exceed fifty crore rupees.

3. A medium enterprise, where the investment in plant and machinery or

equipment does not exceed fifty crore rupees and turnover does not
exceed two hundred and fifty crore rupees.
The Economic Survey(ES) 23-24 mentions that MSMEs are the backbone of the
Indian economy, contributing approximately 30 per cent of the country’s GDP
and 45 per cent of manufacturing output. As per PIB report of Ministry of Micro,
Small & Medium Enterprises, beyond their economic contributions, MSMEs
have generated substantial employment opportunities, providing jobs to over
21.17 crore individuals. This extensive employment generation underscores the
sector's crucial role in driving economic development and enhancing social
stability by offering livelihoods to millions across the country (second only to
agriculture in employment generation in India).

Problems faced by MSMEs and recommendations (as highlighted in ES 23-

24):
• MSMEs’ Challenges: Extensive regulations licensing, inspection, and
compliance requirements, especially from sub-national governments,
hinder growth and job creation. There’s difficulty accessing affordable and
timely funding. Deregulation is key, with necessary policy changes
requiring institutional dialogue, particularly with state/local governments.
 • Credit Gap & Focus Areas: Bridging the credit gap is crucial, but focus
should also be on deregulation, enhancing physical & digital connectivity,
developing an export strategy for global market access and scaling up.
• Regulatory Bottlenecks: Threshold-based incentives unintentionally limit
enterprise size, suggesting these should have sunset clauses.
• Entrepreneurial Training: MSME entrepreneurs need training in critical
areas like HR, financial management, and technology to boost productivity
and growth.
INITIATIVES
The Government of India has rolled out a range of initiatives to empower
MSMEs, which are crucial to the nation's economic progress. These initiatives
focus on financial support, market access, and capacity building:
1. Udyam Registration Portal: Facilitates free, paperless, and self-
declaration-based registration for MSMEs, with over 4.91 crore enterprises
registered.
2. PM Vishwakarma Scheme: Launched to support artisans and
craftspeople, providing training, collateral-free credit, and integration into
global value chains.
3. Prime Minister’s Employment Generation Programme (PMEGP):
Offers subsidies and loans to establish micro-enterprises, creating
employment opportunities with a focus on special categories like women
and SC/ST.
4. Scheme of Fund for Regeneration of Traditional Industries (SFURTI):
Organizes traditional artisans into clusters for product diversification,
competitiveness, and better income prospects.
5. Public Procurement Policy for MSEs: Mandates that 25% of government
procurement comes from MSEs, with special provisions for SC/ST and
women-owned businesses.
6. CHAMPIONS Platform: An ICT-based system to resolve MSME
grievances and provide a single window solution for their needs.
7. Raising and Accelerating MSME Performance (RAMP): A five-year
program with Rs. 6,000 crore to boost MSME performance.
[Source:https://pib.gov.in/PressReleasePage.aspx?PRID=2034922
https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=152063&ModuleId=3&reg=3&la
ng=1 ]
| Notes initiated by students of morning section S5-S6 with their mentor: Role of
Agriculture, Industry, Services, MSME, MUDRA | Best wishes, Thank You |
Pradhan Mantri MUDRA Yojana (PMMY)
The Pradhan Mantri MUDRA Yojana (PMMY), launched on April 8, 2015, aims
to provide financial support to non-corporate, non-farm small and micro
enterprises by offering collateral-free loans up to Rs. 20 lakh. The scheme is
managed by MUDRA (Micro Units Development & Refinance Agency Ltd), a
financial institution set up by the Government of India to promote and refinance
micro-enterprises. It seeks to enhance financial inclusivity and support
marginalized, socio-economically disadvantaged communities. Under PMMY,
loans are initially available in three categories: Shishu (up to Rs. 50,000), Kishore
(Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs. 10 lakh) for
incomegenerating activities in sectors such as manufacturing, trading, services,
and for activities allied to agriculture. The loans are disbursed by Member
Lending Institutions (MLIs), including Scheduled Commercial Banks, Regional
Rural Banks, Small Finance Banks, NBFCs, and MFIs. The scheme has
significantly contributed to employment generation, with a survey by the Ministry
of Labour and Employment (MoLE) revealing the creation of 1.12 crore
additional jobs between 2015 and 2018. In the Union Budget 2024-25, the loan
limit was increased from Rs. 10 lakh to Rs. 20 lakh, with the introduction of a
new loan category, Tarun Plus, for loans above Rs. 10 lakh and up to Rs. 20 lakh,
furthering the goal of Funding the Unfunded and providing greater financial
assistance to small businesses.
Role of services in Indian Economy: The service sector is the cornerstone of
India’s economy, contributing significantly to GDP, employment generation and
exports.

1. Contribution to GDP : The services sector is the dominant driver of the

Indian economy contributing the most (around 55%) to India’s GDP. Its
estimated growth was 7.6% in FY 24, outpacing both the agriculture and
industrial sectors, as highlighted in the Economic Survey. Key sub-sectors such
as IT, financial services, tourism, and real estate significantly boost overall
growth. The sector demonstrated resilience amid global uncertainties, benefiting
from strong domestic demand and expanding digital services. Government
initiatives like Digital India and reforms in taxation and compliance further
facilitated growth. The consistent contribution of the services sector has
positioned it as a cornerstone for India’s march towards becoming a $5 trillion
economy.

2. Employment : The services sector continues to be a critical employment

generator in the Indian economy. According to PLFS, as mentioned in Economic
Survey 23-24, 28.9% of the workforce is employed in services sector. Female
labour force participation rate (FLFPR) has been rising for six years.
Investment in the care economy could create 11 million jobs, with
approximately 70% reserved for women, helping to further reduce gender
disparities in the workforce.
Employment in high-growth areas such as IT, retail, healthcare, and logistics is
expanding rapidly, supported by digital transformation and global outsourcing
demand.
Government initiatives like National Career Services portal, e-Shram portal,
Atmanirbhar Bharat Rojgar Yojana, MUDRA yojana, various skill development
programmes, simplification of labour laws aim to boost both job creation and
job creators, even as automation and AI influence workforce dynamics.

3. Foreign Exchange Earnings : India’s services exports emerged as a

significant contributor to foreign exchange reserves, accounting for 44% of
total exports in FY 2023-24.
IT and IT-enabled services (ITeS) remained the largest components, supported by
India’s global reputation as an outsourcing hub.
Services trade posted a robust surplus, helping offset the merchandise trade deficit
and stabilizing the current account.
Tourism, including medical tourism, also played a notable role, with international
travelers seeking high-quality, cost-effective healthcare and wellness services.
The economic survey highlighted the growing importance of emerging digital
services, which are transforming India’s position in global trade.
These earnings are vital for macroeconomic stability and achieving long-term
developmental goals.

4. Investment Attraction : The services sector remained the top recipient of

Foreign Direct Investment (FDI) in FY 2023-24, attracting 53% of total FDI
inflows, equivalent to $14.9 billion.
Sectors like IT, telecommunications, and financial services received the majority
of investments.
Reforms in insurance, banking, and retail enhanced investor confidence, making
India an attractive destination.
Government measures to improve ease of doing business, along with production-
linked incentives (PLI), boosted foreign investment in high-growth service areas.
These investments played a key role in upgrading technology, creating jobs, and
fostering innovation across the services sector.
5. Urbanization and Infrastructure Development :
Given the importance of tertiary sector, government has prioritised delivering
financial services to the last mile.
Flagship programmes such as Make in India, Smart City Mission, Atal Mission
for Rejuvenation and Urban Transformation, Housing for All, Infrastructure
Development and Industrial Corridors boost employment opportunities. The
sector contributes towards improving urban transport systems, with metro rail and
app-based ride-hailing services transforming urban mobility.
The integration of services and infrastructure has improved the quality of life and
economic opportunities across India.

7. Innovation and Technological Advancements : The services sector is at the

forefront of technological innovation, leveraging India’s vast digital talent pool:
The IT industry has led the way with advancements in artificial intelligence (AI),
cloud computing, and blocks chain technology.
Financial services embraced fintech innovations, enabling seamless digital
payments and financial inclusion, even in rural areas.
Government initiatives like Digital India have created a robust framework for
startups to innovate and thrive in sectors like edtech, medtech, and agritech.
With its focus on high-value, knowledge-driven services, the sector have
positioned India as a global leader in outsourcing and digital transformation.

8. Standard of Living : The services sector has played a direct role in improving
the standard of living for millions of Indians:
Digital services like telemedicine and online education have enhanced access to
essential services, even in remote areas.
The proliferation of modern banking and financial products has increased
financial inclusion and security for households.
Higher employment opportunities and rising wages in the services sector have
improved disposable incomes.
Improved urban infrastructure, supported by service-sector growth, has led to
better housing, transport, and public amenities.
These advancements demonstrate the sector’s critical role in not just driving
economic growth, but also ensuring inclusive development.

[Compiled from Economic Survey 23-24 and Press Information Bureau by

Vrinda Mantry (S5) and Umang Agarwal (S6) of morning section.]
12-page compilation ends here.
ALL THE BEST