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Painting an exuberant picture of the Indian economy’s prospects thanks to “New Age” reforms undertaken since 2014, the Economic Survey tabled by Finance Minister Nirmala Sitharaman in Parliament asserted that not only were the pandemic-induced blues over, but the outlook for the years ahead was also rosier than in the pre-COVID years.
Though global uncertainties are rife and the world economy is slowing, the Survey exuded confidence that India’s GDP would grow 6.5% in 2023-24, after an estimated 7% this year, “supported by solid domestic demand and a pickup in capital investment”.
The Indian economy in 2022-23 has nearly ‘recouped’ what was lost, ‘renewed’ what had paused, and ‘re-energised’ what had slowed during the pandemic and since the conflict in Europe.
The final growth outcome for 2023-24 could be in the range of 6% to 6.8%, depending on the trajectory of global economic and political developments.
Some of you may think the range is asymmetric in nature, but that is deliberate because there is still uncertainty. We have many known unknowns and unknown unknowns.
While the Survey expects inflation — a bugbear for the economy throughout this year — to be “well-behaved” in 2023-24, the CEA acknowledged there were upside risks to commodity prices from external factors such as China rapidly restarting economic activity.
The central bank’s estimate of 6.8% retail inflation for 2022-23 is outside its target range, but “at the same time, it is not high enough to deter private consumption and also not so low as to weaken the inducement to invest.
We expect [that] if the global economy slows down as the IMF and many people project, then commodity prices should retreat on the back of the monetary tightening.
As of now, the United States economy looks set to avoid a full-fledged formal recession. And therefore, this January, already we have seen crude oil prices and industrial metal prices are higher than they were at the end of December.
States
Privilege motion moved against Rajasthan MLA for plea in HC (Page no. 4)
(GS Paper 2, Polity and Governance)
A breach of privilege motion moved against senior BJP MLA and Deputy Leader of the Opposition Rajendra Rathore led to an uproar in the Rajasthan Assembly, with Speaker C.P. Joshi announcing that a decision on the motion will be taken shortly.
The matter pertained to resignation by 81 ruling Congress MLAs after a failed CLP meeting here on September 25, 2022.
Mr. Rathore had filed a public interest litigation in the Rajasthan High Court seeking direction to the Assembly Speaker to decide on the resignations.
The Assembly Secretary has since informed the court that all the 81 MLAs had appeared before the Speaker to withdraw their papers and their resignations were ‘not voluntary’.
Sanyam Lodha, Independent MLA from Sirohi, said that Mr. Rathore had approached the High Court through PIL despite the matter being under consideration of the Speaker.
Mr. Lodha, who is also one of the advisers to Chief Minister Ashok Gehlot, said there was a clear demarcation of power among the Constitutional institutions and none of them could encroach upon the jurisdiction of the other.
While requesting the Speaker to hold an inquiry into the matter, Mr. Lodha said the Deputy Leader of the Opposition had insulted the electorate and sought to weaken the Assembly by going to the court.
The MLAs, considered loyal to Mr. Gehlot, had submitted the resignations en masse after boycotting a CLP meeting on September 25, 2022, in which the Congress high command was to be authorised to select a new CM.
The resignation letters were lying with the Speaker for over three months, before the MLAs appeared before him and withdrew the papers ahead of the budget session.
The Speaker said that the powers of the legislature, executive and judiciary were clearly defined in the Constitution.
PM CARES Fund administered like PM’s National Relief Fund, HC told (Page no. 4)
(GS Paper 2, Polity and Governance)
The Prime Minister’s Office (PMO) told the Delhi High Court that the PM CARES Fund is administered on the pattern of Prime Minister’s National Relief Fund (PMNRF) as both are chaired by the Prime Minister.
As the national emblem and domain name ‘gov.in’ are being used for the PMNRF, it is also being used for PM CARES Fund,” an affidavit filed by an under secretary at the PMO.
The PMO stated that PM CARES Fund is not a government fund as donations to it do not go to the Consolidated Fund of India. The affidavit was filed in response to a petition by Samyak Gangwal, a lawyer, seeking to declare the PM CARES Fund a ‘State’ under the Constitution. Mr. Gangwal has also filed a separate petition to declare PM CARES as a ‘public authority’ under the RTI Act.
The PM CARES Fund has been set up as a Public Charitable Trust,” the PMO said as it stressed that no third-party information can be parted with irrespective of its status.
Editorial
The Economic Survey that wasn’t (Page no. 6)
(GS Paper 3, Economy)
It is generally acknowledged that the Budget of 1991 which was presented by the then Finance Minister, Dr. Manmohan Singh, is one of Indian economic history’s landmark events.
The Budget is still widely lauded by neo-classical economic commentators because it marked a structural shift in India’s economy away from the hands of the government to the hands of private enterprise, and embraced free trade. That was the prevailing wisdom then, dubbed as the ‘Washington Consensus’.
Three decades later, many developed economies, including America, Britain and Germany, are now reversing course to economic nationalism and increasing the role of government in their economy through industrial policy, ostensibly as a response to China’s economic might and a weaponisation of trade.
This is a profound shift in economic thought — and perhaps the greatest symbolic victory for China’s economic model — that has forced the ‘Washington Consensus’ champions to back-pedal.
The Russia-Ukraine conflict has had enormous geo-economic consequences by recreating a stark bi-polar world order of a China/Russia bloc vis-à-vis western bloc of nations.
The Economic Survey presented by the Chief Economic Adviser a day before the Union Budget has typically been the medium to raise issues for public discussion and ponder over such strategic economic matters.
At least, that has been the case over the past decade or so. Surveys of the previous years had put out various ideas and issues such as universal basic income, economic divergence among States, steps to improve property tax revenues using satellite technology, new ways to calculate inflation using the Indian thali, estimating internal migration of people and so on.
Many of these may not have even been fully fleshed out or well-researched policy ideas, but at least served as an intellectual public good by triggering a debate and forcing policy influencers to think about these issues.
Disappointingly, the Economic Survey of 2022-23 did not provoke any such deliberation or discussion. It is a rather dry compilation of data to substantiate the Narendra Modi government’s economic performance.
The Economic Survey has 66 tables and 246 charts with cherry-picked data points that seek to portray a stellar image of the government’s economic management and blame the previous regime for all ills, which is perhaps an occupational hazard and an inevitability in the current climate of politics and government.
But the Survey had some new and interesting data — on the housing market, digital infrastructure, etc. — and putting out such copious amounts of economic data in the public domain in itself is a yeoman service to be appreciated.
Solar energy is not the best option for India (Page no. 6)
(GS Paper 3, Energy)
The Energy conundrum” (December 15, 2022), expressing caution about the country’s bubbling enthusiasm in the climate change agenda by going the whole hog on solar energy is timely but spartan, and needs amplification.
Apart from the external pressure that is pushing India more and more into the so-called carbon limiting renewable energy path, the Prime Minister’s own enthusiasm and support and a simple understanding that solar energy is a free gift from the sun have made identifying what is good for the country difficult.
Shorn of misperceptions and ill-conceived pressures, we can conclude that solar energy is not the best option for India and that we are better off in just relying on large hydro and coal. Now, what are the misconceptions?
One argument put forth in favour of solar power is that the levelised cost of power is coming down and is close to that of coal.
The first is the wrong comparison of solar power with coal electricity at the load centre, instead of at the pithed, which costs about half that of the load centre.
According to the Central Electricity Authority, which was once the final arbiter in electricity matters, moving electricity through high voltage wires is cheaper than moving coal — and that is the reason for starting the National Thermal Power Corporation Limited (now NTPC Limited) during K.C. Pant’s time.
The second flaw is not comparing like with like. Solar electricity is intermittent and coal electricity is continuous. So, you have to add the cost of storage by battery.
Protagonists of solar power will want us to add the environmental cost of carbon to coal — for its greenhouse gas emissions — but now the carbon market has crashed and is in that state for years; one does not have any objection to add its market price.
The shadow price or true economic value of coal is even lower than its market price, since the cost of labour in mining carries a shadow price of zero (they being unskilled workers who would be unemployed otherwise).
Some enterprising researchers (E. Somanathan of the ISI et al.) have quantified the cost of carbon emission in terms of deaths due to particle (PM2.5) pollution.
Implicitly, they agree not to consider the greenhouse gases cost of coal, because it is a global issue, but want to include the particulate emission cost of carbon, which is a local issue.
Opinion
The quest for hope in Myanmar (Page no. 7)
(GS Paper 2, International Relations)
Myanmar today remains pessimistic about its future. Exactly two years ago, the military staged yet another coup, snatching power from the elected leaders.
It derailed the limited democracy of the previous decade, violating the 2008 constitution which the generals had given to the people.
The period since February 1, 2021 has been a long nightmare. There are three camps now in Myanmar: the military, which wields power in major towns; the opposition named the National Unity Government (NUG) and its partners, which call the shots in the countryside; and the ethnic groups on the geographic periphery, which are divided into those which are pro-military, pro-NUG, or neutral.
Peaceful protests of the early post-coup months gave way to violent resistance, with frequent clashes occurring in many parts from the west to the east and the heartland. Insecurity is widespread.
The deep divide is seen in the air force bombing the citizens and the people’s militias killing government soldiers and policemen. Aung San Suu Kyi, whose party scored a decisive victory in the 2020 elections, is now 77 and is serving a 33-year-long prison sentence in solitary confinement.
The military and the NUG have termed each other as “terrorists”, thus ruling out dialogue. Without dialogue and the will to compromise, there can be no reconciliation.
Meanwhile, the economy traverses a difficult terrain, marked by a sharp decline in GDP, and a massive rise in poverty, unemployment and inflation. The currency is in free fall. Myanmar thus finds itself mired in a total impasse today.
Many Burmese people tend to place their hopes on some miraculous assistance from the outside world. Unfortunately, the international community stands fractured while coping with the crisis in Myanmar.
To the West, it is a clear-cut case of a repressive and power-hungry army suppressing the people, depriving them of their democratic rights.
The western nations react through condemnation at the United Nations, targeted sanctions against the junta, and generous material assistance to the opposition.
On December 21, 2022, the UN Security Council adopted Resolution 2669, expressing deep concern about the situation and urging the release of all political prisoners.
It attracted no veto, only abstentions by China, Russia, and India. But even with such rare unity, the UN has failed to move the military, known for its stubbornness and inflexibility.
Explainer
The funding and demand for MGNREGA (Page no. 8)
(GS Paper 2, Welfare Schemes)
The Economic Survey 2022-23 presented on January 31, a day ahead of the Budget, showed that 6.49 crore households demanded work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
Of these, 6.48 crore households were offered employment by the government and 5.7 crore actually availed it. The survey credited the scheme on having a positive impact on income per household, agricultural productivity, and production-related expenditure. It added that this helped with “income diversification and infusing resilience into rural livelihoods”.
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was passed in 2005 and aimed at enhancing the livelihood security of households in rural areas.
Under it, the MGNREGS is a demand-driven scheme that guarantees 100 days of unskilled work per year for every rural household that wants it, covering all districts in the country except those with a 100% urban population.
There are currently 15.51 crore active workers enrolled under the scheme. The types of projects undertaken for employment generation under MGNREGA include those related to water conservation, land development, construction, agriculture and allied works.
Under the scheme, if work is not provided within 15 days from when it is demanded, the worker has to be given a daily unemployment allowance.
Additionally, the wages of unskilled workers also have to be paid within 15 days and in case of a delay, the Centre has to compensate them.
Beyond being a form of insurance or safety net for the country’s poorest rural households, the scheme proved to be beneficial not just for rural workers but migrant labourers as well especially during the COVID-19 pandemic which saw large-scale reverse migration.
During the first COVID-19 lockdown in 2020, when the scheme was ramped up, and given its highest-ever budget of ₹1.11 lakh crore, it provided a critical lifeline for a record 11 crore workers.
Studies gave empirical evidence that wages earned under MGNREGA helped compensate somewhere between 20% to 80% of the income loss incurred because of the lockdown.
News
Doval, Sullivan hold tech talks in U.S.; Jaishankar meets Nuland in Delhi (Page no. 12)
(GS Paper 2, International Relations)
National Security Adviser Ajit Doval met with his U.S. counterpart, Jake Sullivan, and other senior officials in Washington on Tuesday during the inaugural Initiative on Critical and Emerging Technologies (iCET) dialogue, which was announced last year.
The iCET, launched during the meeting between Prime Minister Narendra Modi and U.S. President Joseph Biden at the Quad meeting in Tokyo last May, is being run by the National Security Councils of the two countries.
The meetings in Washington coincided with the visit of U.S. Undersecretary of State Victoria Nuland to Delhi on Tuesday, where she met External Affairs Minister S. Jaishankar and Foreign Secretary Vinay Kwatra in interactions that will set the stage for visits by U.S. Secretary of State Antony Blinken in March followed by Mr. Biden in September, both for G-20 events.
Good talk on the Indian Subcontinent, the Indo-Pacific and the many convergences in our relationship,” Mr. Jaishankar tweeted.
After foreign office consultations with Mr. Kwatra, Ms. Nuland said the talks had focused on “deepening the U.S.-India strategic relationship in 2023”, adding that the U.S. looked forward to collaborating on global challenges, including at the G-20. Ms. Nuland flew to Delhi from Kathmandu where she met Nepal Prime Minister Prachanda and his Cabinet members.
In a statement issued after the meeting, the External Affairs Ministry said that both sides had focussed on regional developments in “South Asia, Indian Ocean Region and the Indo-Pacific”.
They “took stock of a number of initiatives and frameworks that reflect common strategic interests” including the Quad, I2U2, the Indo-Pacific Economic Framework and the Indo-Pacific Maritime Domain Awareness Initiative, and also discussed India’s G-20 Presidency this year.
Business
IMF retains India growth outlook at 6.8% and 6.1% for FY22, and FY23 (Page no. 14)
(GS Paper 3, Economy)
The International Monetary Fund (IMF) on January 31 said it is expecting some slowdown in the Indian economy next fiscal year and projected the growth at 6.1%, compared with 6.8% during the current fiscal ending March 31.
The IMF released the January update of its World Economic Outlook, as per which global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, and rise to 3.1% in 2024.
Our growth projections actually for India are unchanged from our October Outlook,” Pierre-Olivier Gourinchas, chief economist and director, Research Department of the IMF.
We have 6.8% growth for this current fiscal year, which runs until March, and then we’re expecting some slowdown to 6.1% in fiscal year 2023. And that is largely driven by external factors.
We had a positive view on India in our October forecast. That positive view is largely unchanged,” Mr. Gourinchas said in response to a question.
In a blog post he wrote that India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a 10th for the U.S. and euro area combined.