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Economic Survey 2016-17 for IAS Prelims: Towards Competitive Sub-Federalism Part 1

Mar 2, 2017 15:48 IST

    Economic Survey on Competitive Sub-Federalism Part 1

    Cities are complex, organic, humming entities that tend to defy the attempts of planners and architects to impose order. Empowering cities will be critical but the political economy challenges from state governments are considerable. Cities, like states, must compete with each other to unleash dynamism. To competitive federalism, India must add competitive sub-federalism.

    ECONOMIC SURVEY 2016-17 IMPORTANT QUESTIONS

    By all accounts, urbanisation will define the trajectory of Indian development. The exodus of rural Indians into the cities over the coming decades will pose tremendous challenges for government, particularly the municipalities who will be primarily responsible for providing the services that the new migrants and established residents will need.

    The Festering Twin Balance Sheet Problem Part 3

    Here, we provide exclusive questions on Competitive Sub-Federalism from the Economic Survey 2017 which can prove to be extremely helpful in IAS Prelims 2017 preparation.

    1. The Economic survey remarks that India’s urbanisation rate appears to have been similar to that in other emerging countries. Consider the following statements in this regard:

    1) It has been observed that countries have followed a pattern of urbanisation where the level of urbanisation has increased with the per capita GDP.
    2) Indian urbanisation is not special and the patterns of urban size seem to be adhering to Zipf's Law.
    3) Zipf's Law claims that the city with the largest population in any country is generally twice as large as the next-biggest; three times the size of the third biggest, and so on. In other words, the nth ranked city would be 1/nth the size of the largest city.

    Which of the above statements is true?

    a. 1 and 2
    b. 2 and 3
    c. 1 and 3
    d. 1, 2 and 3

    Answer: c

    Explanation:

    India’s urbanisation rate appears to have been similar to that in other countries if the latest urbanisation rate against per capita GDP for a group of emerging and developing countries being observed. India is not far away from the average positive relationship.

    GDP and Urbanisation curve for indiaSimilarly, the evolution of the urbanisation rate for India is also not unusual. If the urbanisation rate for three countries at different levels of per capita GDP is observed, it can be seen that countries have followed a pattern of urbanisation where the level of urbanisation has increased with the per capita GDP. Contrary to perception, India and China have had very similar trends of urbanisation.

    If the magnitude of Indian urbanisation is not special, the patterns of urban size seem to be, in the sense of not adhering to Zipf's Law. Zipf's Law has been shown to hold true for many countries but not so for India.

    Zipf's Law claims that the city with the largest population in any country is generally twice as large as the next-biggest; three times the size of the third biggest, and so on. In other words, the nth ranked city would be 1/nth the size of the largest city.

    Union Budget 2017 Questions for IAS Exam

    2. The Government has launched several new initiatives to rejuvenate urban areas. Consider the following statements regarding these initiatives:

    1) Smart Cities Mission (SCM) is a holistic city rejuvenation programme for 100 cities in India.
    2) AMRUT was launched to improve basic urban infrastructure in 500 cities/ towns which would be known as Mission cities/ towns.
    3) HRIDAY scheme was launched with a focus on holistic development of immunisation and vaccination in the major Indian cities.

    Which of the above statements is true?

    a. 3 and 2
    b. 2 and 1
    c. 1 and 3
    d. 1, 2 and 3

    Answer: b

    Explanation:

    With the higher devolution of taxes to the states and grants to the ULBs, the overall public funds available for urban rejuvenation have increased. The Government has launched several new initiatives to rejuvenate urban areas. Some of the key schemes are - Smart Cities Mission, AMRUT, Swachh Bharat Mission (SBM), HRIDAY, Digital India, Skill development, Housing for All, Metro transport etc.

    Smart Cities Mission (SCM) is a holistic city rejuvenation programme for 100 cities in India. The strategic components of area-based development in the SCM are city improvement (retrofitting), city renewal (redevelopment) and city extension (greenfield development) plus a pan-city initiative in which smart solutions are applied covering larger parts of the city.

    AMRUT was launched to improve basic urban infrastructure in 500 cities/ towns which would be known as Mission cities/ towns. The components which are to be covered under the Mission are water supply, sewerage, septage, storm water drains, urban transport, in particular, with the focus on facilities for non-motorised transport and development of green space and parks with special provision for children-friendly components in 500 cities & towns.

    The Government launched the National Heritage City Development and Augmentation Yojana (HRIDAY) scheme on 21st January 2015, with a focus on holistic development of heritage cities. The scheme aims to preserve and revitalise soul of the heritage city to reflect the city’s unique character by encouraging aesthetically appealing, accessible, informative and secured environment.

    Two Analytical Narratives on States’ Development

    3. According to economic survey 2017, in India, urbanisation is rapidly on the rise. Consider the following statements regarding Urban Indians:

    1) Urban Indians now form about one-third of the Indian population.
    2) Urban Indians produce more than half of the country’s GDP.

    Which of the above statements is true?

    a. Only 1
    b. Only 2
    c. Both 1 and 2
    d. Neither 1 nor 2

    Answer: a

    Explanation:

    In India, urbanisation is rapidly on the rise. As recently as 1991, there were only 220 million Indians living in cities, equivalent to about one-quarter of the population. By 2011, there were no less than 380 million, living in around 8,000 cities/towns, at least 53 of which were home to over 1 million people.

    Urban Indians now form about one-third of the population – and they produce more than three-fifths of the country’s GDP. By all accounts, urbanisation will define the trajectory of Indian development.

    The exodus of rural Indians into the cities over the coming decades will pose tremendous challenges for government, particularly the municipalities who will be primarily responsible for providing the services that the new migrants and established residents will need.

    Economic Survey 2016-17 for IAS Prelims: Income, Health, and Fertility

    4. The Economic Survey 2017 comments that even the large cities are unusually small in India. Which of the following statements best describes the reason for this?

    a. Infrastructure in the large cities is overburdened.
    b. India is land-scarce and hence discourages migration.
    c. Mobility in India is limited by strong place-based preferences embedded in deep social networks in India.
    d. All of the above

    Answer: d

    Explanation:

    The Zipf’s Law (City/UA population and city/UA population ranks) plot for India is concave. This implies that many of the smaller cities are unusually small and a contrary to what one might think, so are the bigger ones. There are many reasons why the large cities are unusually small. One explanation might be that their infrastructure is overburdened.

    Another is that India is land-scarce relative to most countries, discouraging migration, particularly because distorted land markets render rents unaffordable. By 2050, it's land-to-population ratio will have declined fourfold relative to 1960, and India will be amongst the most land-scarce countries in the world.

    Further mobility in India is limited by strong place-based preferences embedded in deep social networks in India. In the coming years, these anomalies are likely to be rectified. And much of this urban growth is likely to take place in the bigger cities, possibly bringing the country in line with Zipf’s Law. This will create opportunities and risks.

    5. According to the Economic Survey 2017, the primary source of own revenue for urban local bodies is the:

    a. Wealth Tax
    b. Property Tax
    c. Income Tax
    d. Entertainment Tax

    Answer: b

    Explanation:

    The primary responsibility for the development of urban areas lies with the state governments and the municipal corporations, municipalities and nagar panchayats, commonly known as urban local bodies (ULBs). These levels of government face major and inextricably linked problems like poor governance capacities, large infrastructure deficits and inadequate finances.

    While property tax is the most important constituent of own revenues, there are problems of low coverage, low rates, low collection efficiency, and lack of indexation of property values, making it a non-buoyant source of revenue. The study on municipal finances conducted by the FFC indicated that per capita revenue from property taxes was $ 1677 at most, with a low of just $ 42.

    Current Issues and Events

    1.    The Economic survey remarks that India’s urbanisation rate appears to have been similar to that in other emerging countries. Consider the following statements in this regard:

    1)    It has been observed that countries have followed a pattern of urbanisation where the level of urbanisation has increased with the per capita GDP.

    2)    Indian urbanisation is not special and the patterns of urban size seem to be adhering to Zipf's Law.

    3)    Zipf's Law claims that the city with the largest population in any country is generally twice as large as the next-biggest; three times the size of the third biggest, and so on. In other words, the nth ranked city would be 1/nth the size of the largest city.

    Which of the above statements is true?

    a.    1 and 2

    b.    2 and 3

    c.    1 and 3

    d.    1, 2 and 3

    Answer: c

    Explanation:

    India’s urbanisation rate appears to have been similar to that in other countries if the latest urbanisation rate against per capita GDP for a group of emerging and developing countries being observed. India is not far away from the average positive relationship.

    Similarly, the evolution of the urbanisation rate for India is also not unusual. If the urbanisation rate for three countries at different levels of per capita GDP is observed, it can be seen that countries have followed a pattern of urbanisation where the level of urbanisation has increased with the per capita GDP. Contrary to perception, India and China have had very similar trends of urbanisation.

     

    If the magnitude of Indian urbanisation is not special, the patterns of urban size seem to be, in the sense of not adhering to Zipf's Law. Zipf's Law has been shown to hold true for many countries but not so for India.

    Zipf's Law claims that the city with the largest population in any country is generally twice as large as the next-biggest; three times the size of the third biggest, and so on. In other words, the nth ranked city would be 1/nth the size of the largest city.

    2.    The Government has launched several new initiatives to rejuvenate urban areas. Consider the following statements regarding these initiatives:

    1)    Smart Cities Mission (SCM) is a holistic city rejuvenation programme for 100 cities in India.

    2)    AMRUT was launched to improve basic urban infrastructure in 500 cities/ towns which would be known as Mission cities/ towns.

    3)    HRIDAY scheme was launched with a focus on holistic development of immunisation and vaccination in the major Indian cities.

    Which of the above statements is true?

    a.    3 and 2

    b.    2 and 1

    c.    1 and 3

    d.    1, 2 and 3

    Answer: b

    Explanation:

    With the higher devolution of taxes to the states and grants to the ULBs, the overall public funds available for urban rejuvenation have increased. The Government has launched several new initiatives to rejuvenate urban areas. Some of the key schemes are - Smart Cities Mission, AMRUT, Swachh Bharat Mission (SBM), HRIDAY, Digital India, Skill development, Housing for All, Metro transport etc.

    Smart Cities Mission (SCM) is a holistic city rejuvenation programme for 100 cities in India. The strategic components of area-based development in the SCM are city improvement (retrofitting), city renewal (redevelopment) and city extension (greenfield development) plus a pan-city initiative in which smart solutions are applied covering larger parts of the city.

    AMRUT was launched to improve basic urban infrastructure in 500 cities/ towns which would be known as Mission cities/ towns. The components which are to be covered under the Mission are water supply, sewerage, septage, storm water drains, urban transport, in particular, with the focus on facilities for non-motorised transport and development of green space and parks with special provision for children-friendly components in 500 cities & towns.

    The Government launched the National Heritage City Development and Augmentation Yojana (HRIDAY) scheme on 21st January 2015, with a focus on holistic development of heritage cities. The scheme aims to preserve and revitalise soul of the heritage city to reflect the city’s unique character by encouraging aesthetically appealing, accessible, informative and secured environment.

    3.    According to economic survey 2017, in India, urbanisation is rapidly on the rise. Consider the following statements regarding Urban Indians:

    1)    Urban Indians now form about one-third of the Indian population.

    2)    Urban Indians produce more than half of the country’s GDP.

    Which of the above statements is true?

    a.    Only 1

    b.    Only 2

    c.    Both 1 and 2

    d.    Neither 1 nor 2

    Answer: a

    Explanation:

    In India, urbanisation is rapidly on the rise. As recently as 1991, there were only 220 million Indians living in cities, equivalent to about one-quarter of the population. By 2011, there were no less than 380 million, living in around 8,000 cities/towns, at least 53 of which were home to over 1 million people.

    Urban Indians now form about one-third of the population – and they produce more than three-fifths of the country’s GDP. By all accounts, urbanisation will define the trajectory of Indian development.

    The exodus of rural Indians into the cities over the coming decades will pose tremendous challenges for government, particularly the municipalities who will be primarily responsible for providing the services that the new migrants and established residents will need.

    4.    The Economic Survey 2017 comments that even the large cities are unusually small in India. Which of the following statements best describes the reason for this?

    a.    Infrastructure in the large cities is overburdened.

    b.    India is land-scarce and hence discourages migration.

    c.    Mobility in India is limited by strong place-based preferences embedded in deep social networks in India.

    d.    All of the above

    Answer: d

    Explanation:

    The Zipf’s Law (City/UA population and city/UA population ranks) plot for India is concave. This implies that many of the smaller cities are unusually small and a contrary to what one might think, so are the bigger ones. There are many reasons why the large cities are unusually small. One explanation might be that their infrastructure is overburdened.

    Another is that India is land-scarce relative to most countries, discouraging migration, particularly because distorted land markets render rents unaffordable. By 2050, it's land-to-population ratio will have declined fourfold relative to 1960, and India will be amongst the most land-scarce countries in the world.

    Further mobility in India is limited by strong place-based preferences embedded in deep social networks in India. In the coming years, these anomalies are likely to be rectified. And much of this urban growth is likely to take place in the bigger cities, possibly bringing the country in line with Zipf’s Law. This will create opportunities and risks.

    5.    According to the Economic Survey 2017, the primary source of own revenue for urban local bodies is the:

    a.    Wealth Tax

    b.    Property Tax

    c.    Income Tax

    d.    Entertainment Tax

    Answer: b

    Explanation:

    The primary responsibility for the development of urban areas lies with the state governments and the municipal corporations, municipalities and nagar panchayats, commonly known as urban local bodies (ULBs). These levels of government face major and inextricably linked problems like poor governance capacities, large infrastructure deficits and inadequate finances.

    While property tax is the most important constituent of own revenues, there are problems of low coverage, low rates, low collection efficiency, and lack of indexation of property values, making it a non-buoyant source of revenue. The study on municipal finances conducted by the FFC indicated that per capita revenue from property taxes was $ 1677 at most, with a low of just $ 42.

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