Prelims Level
Mains Level
Prelims Syllabus : Economy Mains Syllabus : Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing.

In News:

  • The Prime Minister’s Economic Advisory Council (EAC-PM) said that the agriculture sector should be bolstered through increased credit flows and schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme.

Major Highlights of the EAC-PM Observation:

  • Among the issues discussed by the EAC-PM were agricultural problems, investment trends (including investments by States consequent to the 14th Finance Commission devolution), fiscal consolidation, interest rate management and credit and financial market issues.

Agriculture:

  • The challenges in the agricultural sector should be addressed by looking at credit flows and support to employment programmes such MNREGA,

Externality:

  • The Council felt that the exchange rate management of the rupee by the RBI has been sound despite the volatility in the price of crude oil
  • The good news is that oil intensity (use of fossil as a percentage of GDP) is showing a declining trend
  • The EAC-PM said that it felt that the challenge of insularity being seen in external trade should be reversed through supportive policy interventions because there is a positive turn in exports that is now visible.

Domestic:

  • The Council also added that it strongly felt that the government should not deviate from its fiscal consolidation 
  • India is not insulated from global developments. Nevertheless, India’s growth is expected to be in the 7-7.5% range in the next few years; one of the fastest in the world
  • However, it added that with reforms designed to address the structural problems, growth rates can “easily be enhanced by at least 1%”.
  • There are indications that financial savings have started going up and there is credit up tick through private banks to the services sector .The reforms in the financial sector should be strengthened further building upon what the Government is already doing
  • The EAC-PM strongly feels that there should be no deviation from the fiscal consolidation target and but there must be continued emphasis on social sector intervention
  • Among the challenges that need to be addressed are reforms in the agricultural sector, the MSME sector, skill development, credit issues, digital payments and the banking sector reforms. The government and the RBI should be complimented for sound macroeconomic management, and this trend should be continued with.

Background on EAC-PM:

  • Economic Advisory Council to the Prime Minister (PMEAC) is a non-constitutional, non-permanent and independent body constituted to give economic advice to the Government of India, specifically the Prime Minister.
  • The council serves to highlight key economic issues facing the country to the government of India from a neutral viewpoint. It advises the Prime Minister on economic issues like inflation, microfinance, and industrial output.
  • For administrative, logistic, planning and budgeting purposes, the NITI Aayog serves as the Nodal Agency for the PMEAC.

Terms of Reference of the EAC-PM:

  1. Analyze any issue, economic or otherwise, referred to it by the Prime Minister and advising him thereon.
  2. Addressing issues of macroeconomic importance and presenting views thereon to the Prime Minister. This could be either suo-motu or on reference from the Prime Minister or anyone else.
  3. Attending to any other task as may be desired by the Prime Minister from time to time.

Periodic Reports of the PMEAC: 

  • Annual Economic Outlook
  • Review of the Economy
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