Public Financial Management System (PFMS)

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What is PFMS?
  • PFMS is an electronic fund tracking mechanism
  • It compiles, collates and makes available in real-time, information regarding all government schemes.
  • Besides, it will significantly provide government real-time information on resource availability and utilisation across schemes.
  • In addition it allow government expenditure to adopt a Just-in- Time (JIT) approach, with payments made only when they are needed.
How will it benefit government?
  • It aims at promoting transparency and bringing about tangible improvements in overall Central Government Financial Management as well as implementation of various Central Government Schemes across the country.
  • The PFMS aims to help in complete tracking and monitoring flow of funds to implementing agencies and ensuring timely transfer of funds.
  • It will help government to ascertain actual status of utilization of funds by multiple implementing agencies of central and the state governments.
  • It will also cut need for paper work and in long way help in monitoring and tracking of any unnecessary parking of funds by implementing agencies, thus minimising cases of delay and pending payments to large extent.
  • It will help to plug leakages in system and help to manage and maintain data that government can use to develop more scientific approach.
  • The Public Financial Management System (PFMS) after implemented on full scale will help Union Government to save a significant amount on interest costs.
  • It will allow the government to monitor and access more than Rs.1 lakh crore of idle funds lying with it under various heads.
  • Once government access these funds through PFMS, it does not need to borrow that amount.
  • It will be integrated with IT network of the GST.
Why in news?
Government has made use of PFMS mandatory for Central Schemes.
NOTE: Mention PFMS while analysing various schemes.


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What is Gratuity?
  • Gratuity is the monetary benefit provided by the employer to his/her employee for the services rendered by him during the period of employment.
  • A minimum of five years of service with an organisation is mandatory for availing the benefit of gratuity.
  • The Payment of Gratuity Act 1972 makes it mandatory for the employers to pay their employees gratuity at the time of quitting, provided certain conditions were met.
  • An organisation comes under the purview of the Payment of Gratuity Act 1972 if it has 10 or more employees on any single day in the preceding 12 months.
  • The Payment of Gratuity Act follows the rule of ‘Once Covered, Always Covered’ which implies that that once an organisation comes under the Act, it will always remain covered even if the number of employees falls below 10.
  • The Ministry of Finance has now enhanced the income tax exemption for gratuity under Section 10 (10) (iii) of the Income Tax Act, 1961 to Rs 20 lakhs.

White Label ATMs

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  • Automated Teller Machines (ATMs) set up, owned and operated by non-bank entities are called White Label ATMs.
  • These White Label ATMs provide banking services to the customers of banks on the basis of the cards (debit/credit/prepaid) issued by banks.
  • The non-bank entities which set up, own and operate ATMs are called White Label ATM Operators.
  • Their role is confined to enabling the transactions of all banks customers by establishing technical connectivity with the existing authorized, shared ATM Network Operators or Card Payment Network Operators.
  • These White Label ATM operators are entitled to receive a fee from the banks for the use of ATM resources by the bank’s customers and they are not permitted to charge bank customer directly for the use of WLAs.

National Productivity week

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National Productivity week :

  • National Productivity Council (NPC) is celebrating National Productivity week.
  • This year, the theme is “Circular Economy for Productivity & Sustainability”.
  • This theme will help NPC to meet its zero waste goal.
  • The above theme is decided by looking into the different national objectives of sustainable growth and commitments with respect to different sectors.

What is Circular Economy?

  • Circular Economy is based on the model of Make, Use and Return.
  • It controls the finite stocks and reuses them by recycling and thus balances the resource flow.
  • The key advantages of Circular Economy are as follows:
    1. It will increase productivity.
    2. It will create more jobs.
    3. It will reduce carbon emission thus preserving valuable raw materials.
  • Circular Economy system increases the product life span through improved design and servicing and relocating wastes from the end of the supply chain to the beginning.

Other Initiatives taken by NPC to accomplish the goal of converting linear economy to circular economy are:

  1. New Solid waste management rules to fulfill the Swacch Bharat objectives.
  2. Trained energy professionals in various industrial sectors.
  3. To meet 50% of NDC target, 18640 certified energy auditors have been prepared.
  4. Through 10-15 annual workshops from the last 12 years, 8000 boiler supervisors have been trained who are experts on efficiency and safety issues.

National Gas Grid

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The Union Government has envisaged the development of the National Gas Grid. The government is implementing various projects of about 14,239 Km gas pipelines which would add to the existing 16,788 Km natural gas pipeline.

Objectives of the National Gas Grid

The objectives of the National Gas Grid are:

  • To remove regional imbalance within the country with regard to access for natural gas and provide clean and green fuel throughout the country.
  • To connect gas sources to major demand centres and ensure availability of gas to consumers in various sectors.
  • Development of City Gas Distribution Networks in various cities for the supply of CNG and PNG.
  • The National Gas Grid together with providing gas connections to households will provide better infrastructure for automobiles using gas.
  • The National Gas Grid will also aid in renewing of the fertilizer sector and also give a boost to the Power and Automotive sector.

Authorisation Authority

  • Under the Petroleum and Natural Gas Regulatory Board Act, 2006 Petroleum and Natural Gas Regulatory Board (PNGRB) has been recognised as the authority to grant authorization to the entities for the development of City Gas Distribution (CGD) network in Geographical Areas.
  • Petroleum and Natural Gas Regulatory Board identifies the geographical areas for authorizing the development of the CGD network in synchronization with the development of natural gas pipeline connectivity/ natural gas availability.

Employment : Data on job creation

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The Prime Minister while addressing the Lok Sabha made the following claims about the creation:

  • New jobs were created in the unorganised sector, which accounts for 80-85 per cent employment.
  • PM cited an increase in the sale of commercial vehicles, infrastructure building and housing activities as evidence for the claim.
  • PM further said that 1.8 crore people had enrolled in the Employees’ Provident Fund (EPF) in the past 15 months, and 64 per cent of them, who were below the age of 28 were first-time employees.
  • PM also cited data showing an increase in the registration of employees under the National Pension Scheme (NPS) from 65 lakh in March 2014 to 1.2 crore till October 2018.

Why the critics claim this argument as flawed?

The critics refuse to buy these data on job creation based on the following grounds:

  • Considering the EPF enrolments as a reflector of job creation is not correct as it can be the formalisation of informal jobs.
  • Enrolment for the EPF does not necessarily mean that the person has got a job. It is most likely that the person has enrolled for the EPF for the first time though he/she had a job for a long time.
  • As per the law, an employer with 20 people or more is required to register with the EPFO. If a firm had 19 employees till yesterday and today 20th person joins in, then all 20 would be enrolled for the first time. Hence what is perceived as 20 jobs created is actually one.
  • PM also said that new 6.35 lakh new non-corporate taxpayers such as doctors must have provided jobs in the past four years. Experts call it “incomprehensible” in the absence of the source of the data.
  • As per data from CMIE India’s unemployment rate shot up to 7.4 per cent in December 2018 and the number of unemployed increased by a substantial 11 million – the highest in 15 months.
  • Further critics site the alleged data from the NSSO survey which is said to be withheld by the government. It is said that the report puts the unemployment rate at 6.1 per cent in 2017-18, post-demonetisation. It is the highest level of unemployment since 1972-73 – the period since when the jobs data is comparable.

Revenue Mobilisation : Interim Budget

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The interim budget has announced a slew of welfare measures for farm and rural economy, middle class, realty and housing and the unorganised sector. The burden on the exchequer due to the farm income support scheme PM-KISAN itself comes around Rs 75000 crores. This necessitates the government to explore the avenues to find the corpus to pay for these schemes.

Revenue Mobilisation

The government is exploring the following avenues to fund welfare schemes:

  • Large dividend transfers by the Reserve Bank of India and PSUs to balance the Budget deficit after funding the welfare schemes.
  • The government is expecting Rs 82,911 crore through dividend from banks, financial institutions and the RBI in 2019-20.
  • In 2018-19 the government estimates receipts of Rs 74,140 crore from banks, financial institutions and the RBI, much higher than the budget estimate of Rs 54,817 crore.
  • The government is estimating Rs 53,200 crore as PSU dividend in 2019-20.
  • The government is expecting to raise anywhere between Rs 12,000 crore and Rs 20,000 crore through the CPSE buyback route.

Challenges in Revenue Mobilisation

The revenue from the Goods and Service Tax (GST) for the most part of the year has lagged behind the Rs 1 lakh crore monthly target. The government’s efforts at disinvestments are also not yielding desired results. The government’s planned stake sales in state-run firms are still short of the target.

As a result, the government is heavily dependent on the dividends from state-run firms, financial institutions and the RBI to fund its additional expenditure. The government has pegged dividends at Rs 1.36 lakh crore in 2019-20 which is a 14 per cent rise from an already elevated dividend collection of Rs 1.19 lakh crore in 2018-19.

Vision 2030 : Interim Budget

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The Union Government in the interim budget 2019 unveiled its vision for 2030, listing 10 dimensions to create an India where poverty, malnutrition, littering and illiteracy would be a matter of the past.

Vision 2030

The 10 dimensions of Vision 2030 listed in the interim budget 2019 are:

  1. Physical & Social Infrastructure : Building next-generation infrastructure in all sectors comprising roads, railways, seaports, airports and inland waterways together with social infrastructure is the first dimension to provide ease of living.
  2. Digital India : Building a “Digital India” that reaches every corner of the economy and every citizen.
  3. Clean & Green India : An India that drives electric vehicles, with renewables becoming a major source of energy, bringing down import dependence and increasing energy security for our people is the vision of Clean & Green India.
  4. Rural Industrialization : Expanding of rural industrialization using modern industrial technologies, based on the ‘Make in India’ approach, using grassroot MSMEs and startups across the country.
  5. Clean Rivers : Clean Rivers with safe drinking water to all Indians using micro-irrigation techniques is the fifth dimension.
  6. Oceans & Coastline : Exploitation of the Blue Economy, to ensure better standards and quality of life for a large number of people living in the coastal areas. Exploiting the potential of India’s long coastline for becoming the strength of the economy.
  7. Space : India becoming the launch-pad of satellites for the World and placing an Indian astronaut into space by 2022 (Project Gaganyaan) is the seventh dimension.
  8. Self-sufficiency in Food Production : Attaining self-sufficiency in food and improving agricultural productivity with an emphasis on organic food.
  9. Health : A healthy India, with a distress-free and comprehensive wellness system for all, is the ninth dimension.
  10. Minimum Government, Maximum Governance : Minimum Government, Maximum Governance with proactive, responsible, friendly bureaucracy and electronic governance is the tenth dimension.

Fiscal Deficit : Interim Budget

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The present government headed by Prime Minister Narendra Modi presented an uncompromising stance on fiscal deficit in the beginning. In its first budget, the government had stated that “we cannot go on spending today which would be financed by taxation at a future date”. The government emphasised on “inter-generational equity” and not leaving behind “a legacy of debt for our future generations” highlighting its commitment for adhering to the fiscal deficit norms.

Change in Stance

There was a deviation from this uncompromising stance on Fiscal Deficit during the second half of the government’s tenure:

  • The fiscal deficit for 2017-18 deepened from the targeted 3.2% to 3.5% of GDP.
  • The interim Budget has put the fiscal deficit target for 2018-19 at 3.4% of GDP, marginally higher than the budgeted 3.3%.
  • The targets under the Fiscal Responsibility Management Act also saw a revision over the years with the original 3% target set for 2016-17 now being pushed to 2020-21.

The Medium Term Fiscal Policy-cum-Fiscal Policy Strategy Statement has attributed the fiscal slippage in the last two years mainly on the lower-than-projected revenues from GST and the government having to provide support to farmers on account of low crop prices. The critics attribute these fiscal slippages to aftermath impacts of the twin shocks of demonetisation and GST.

The policy further states that the accrual of the full benefit of GST reforms and revenues is expected to take some more time and the stabilisation phase is expected to continue in 2019-20 too. Further, the full fiscal impact of the income support scheme for farmers will also be felt in 2019-20.

Agriculture : Interim Budget

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  • The budget announced a farm support scheme for farmers owning up to 2 hectares of lands.
  • These farmers will get Rs 6,000 per year in three equal instalments effective from December 1, 2018.
  • The Finance Minister has set aside Rs 75,000 crore for the scheme.
  • The farm support scheme is expected to benefit 12 crore small and marginal farmers.
  • The allocation for the Rashtriya Gokul Mission has been increased to Rs 750 crore for increasing the production and productivity of cows.
  • 2% interest subvention for farmers pursuing animal husbandry and fisheries through Kisaan credit cards.
  • A separate Department for fisheries would be created.
  • Farmers adversely affected by natural calamities would get 2% interest subvention and additional 3% interest subvention upon timely repayment.
  • Budget announced setting up of Rashtriya Kamdhenu Aayog to upscale sustainable genetic upgradation of cow resources and to enhance production and productivity of cows.
  • The Rashtriya Kamdhenu Aayog would also be responsible for effective implementation of laws and welfare schemes for cows.