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AS the economy picks up the thread post Covid-19, at least two big infrastructure ministries — Railways, and Road transport and Highways — have recorded a fast pace of spending in the first five months of the current financial year.
In fact, these two ministries account for nearly half (Rs 3.24 lakh crore) of the entire capital expenditure (Rs 7.50 lakh crore) budgeted for 2022-23.
What is, however, of importance in their first five months’ spending pattern is that the bulk of it was capex — meaning expenditure that results is new asset creation or improving the quality of existing ones.
Of Rs 85,279 crore utilised by the Railways in April-August this year, 79 per cent or Rs 67,244.99 crore was capital spending. For Road Transport and Highways, 95 per cent of Rs 1.15 lakh crore total spending in the first five months was capital expenditure.
Just five ministries in the Union government account for 72 per cent of the total capex of Rs 7.50 lakh crore in 2022-23. These are: Road Transport and Highways (Rs 1.87 lakh crore), Defence (Rs 1.60 lakh crore), Railways (Rs 1.37 lakh crore), Telecommunications (Rs 54,150 crore), and Housing and Urban Affairs (Rs 27,341.01 crore).
This suggests the government has pressed the pedal on public expenditure to give an impetus to growth since the private sector continues to be averse to invest.
While the CAG data shows high capex ministries are taking the lead in spending, several ministries with smaller outlays are lagging. Ten departments have utilised less than 10% of their allocated funds. This will force them to spend in the last few months hurting the quality of expenditure.
According to latest data available with the Controller General of Accounts (CGA), the Union Ministry of Railways led by AshwiniVaishnaw has already utilisied 61 per cent of its annual budgetary allocation in the first five months; of the total allocation of Rs 1,40,367.13 crore allocated for the full year, it has spent Rs 85,279 crore during April-August 2022. This is substantially higher than last year’s; it had utilised only 29 per cent of the total allocation in the first five months in 2021-22.
The pace of spending by the Railways is also much higher than the government overall expenditure in the first five months this year. The government has utilised a little over one-third – Rs 13.90 lakh crore in April-August – of the total budgeted expenditure of Rs 39.44 lakh crore for the full year.
Editorial Page
Risk to growth (Page no. 8)
(GS Paper 3, International Institutions /Economy)
While cutting down India’s GDP growth to 6.5 per cent for 2022-23, the World Bank noted that this was largely due to a deteriorating global scenario. But, even at 6.5 per cent, India will still be a global growth out-performer this year.
An examination of the GDP growth data for India and advanced countries over the past two decades leads to two conclusions. One, India’s growth cycles are in sync with those of the advanced economies.
What this implies is that India cannot avoid the short-term pain of deceleration in the developed countries. Increasing global interconnectivity only accentuates this effect.
And two, the long-term trend rate of GDP growth of advanced economies and India is divergent. For India, it has moved up over time, while for advanced economies it is the other way.
So, when assessing India’s growth prospects for this year and next year, it’s important to keep the first conclusion in mind — though, in addition, domestic inflation dynamics and financial conditions will also influence growth outcomes. On the other hand, the long-term trend rate of growth will be influenced by many factors including efficiency-enhancing reforms.
A complex interplay of geopolitical events, worryingly high inflation and sharp rate hikes has turned the global environment gloomier — more so for calendar 2023 than 2022.
As economies moved past the pandemic in early 2022, geopolitical risks emerged and have only escalated since then. S&P Global has recently marked down global growth to 3.1 per cent and 2.4 per cent for 2022 and 2023 respectively. The key contributors to this are the US and Eurozone which are expected to grow at an anaemic 0.2-0.3 per cent in 2023, while China is seen growing 2.7 per cent.
A slowing world will hurt India via falling exports. Worse, it may not commensurately bring down prices of crude oil and commodities.
Typically, global slowdowns soften crude and commodity prices, which eases the burden on India’s imports. However, this time around, the ongoing geopolitical stress is likely to limit the decline in their prices. OPEC’s recent move to cut oil output is an example of how geopolitics is shaping oil prices.
From the beginning of this fiscal, geopolitical developments have had an outsized impact on India’s inflation, particularly the wholesale price inflation, which continues to be in double digits and spills over to consumer prices.
The Russia-Ukraine dust-up has lifted crude oil and commodity prices and has created volatility for several agricultural commodities.
Exporter nations have then imposed trade restrictions. While commodity prices have come off from their highs, volatility and uncertainty about their price trajectory continue.
Idea Page
In defence of freebies (Page no. 9)
(GS Paper 2, Polity and Governance)
The pathology of the Indian public debate is how much it is biased towards the privileged. Given the levels of poverty and inequality in the country, one would hope for debates on how to improve the lives of those less fortunate in life.
One could debate how to expand social security systems, how to invest in education and health, and how to generate more revenue.
Instead, public debate focuses on so-called “freebies”. Instead of talking about how to expand social security, the debate focuses on the little support that is given.
After the Supreme Court referred a petition challenging the announcement of “freebies” to a three-judge bench, now the Election Commission has proposed a change in the Model Code of Conduct requiring an explanation for how promises would be financed.
The Supreme Court is ostensibly aware of the need for social welfare programmes. Such programmes further the Directive Principles of State Policy under Part IV of the Constitution.
Article 36 of the Constitution encourages the state to secure a just social order. Article 39 says that the state shall make efforts to reduce the concentration of wealth and promote the common good.
But even without the Directive Principles, social welfare for the poor is a basic demand of justice, humanity, and compassion.
In the hearings before the Supreme Court, the Court was searching for a distinction between social welfare on the one side and “irrational freebies” on the other side. Whichever way we look at the issue no principled distinction can be made.
Let us start with the distinction, espoused by some progressives, that investment in public goods is social welfare and that the distribution of private consumption goods is a freebie.
This approach classifies intangible entitlements for everyone, like public health care and education, as social welfare.
But on this understanding, the Public Distribution System (PDS) would fall on the freebie side. People receive a consumption good (food) rather than an intangible entitlement. No one should seriously doubt the ability of the state to tackle endemic hunger through the PDS.
Another way to distinguish is to distinguish basic needs from luxury consumption goods. Yet where does one draw the line? Both the petition in the Supreme Court and Advocate General Tushar Mehta spoke out against free water and free electricity.
But access to clean water and electricity are clearly basic needs. Even more contentious examples like free scooters or phones can be interpreted as basic since, after all, they serve needs of mobility and communication.
Express Network
Tourism body seeks e-visa resumption for Canada, UK nationals (Page no. 10)
(GS Paper 3, Economy)
Stakeholders from the tourism industry have written a letter to Prime Minister Narendra Modi expressing serious concern over the non-resumption of electronic tourist visas (e-TV) to citizens of the United Kingdom and Canada by the Centre,
The Indian Association of Tour Operators (IATO), a national body of the tourism industry with 1,600 members covering all segments of tour operators, said they have made numerous representations to the Ministries of Tourism, Home Affairs and External Affairs, requesting them for the restoration of e-tourist visa for UK, Canada and other source markets as maximum foreign tourists travel to India from these countries.
Having failed to evoke any response from these ministries, we have written to the PM, hoping for a quick resolution,” said IATO President Rajiv Mehra, adding that the letter was sent on October 6.
The e-tourist visa facility – which was open to nationals of 166 countries, including the UK and Canada – was discontinued in the wake of the pandemic in March 2020. It was partially resumed late last year after a gap of 18 months, under air bubble arrangements and Covid-19 protocols.
In March 2022, the government restored the e-TV facility for 156 countries, according to a Ministry of Home Affairs (MHA) order. Mehra says the March order was not extended to countries like the UK, Canada, Saudi Arabia, Kuwait, Bahrain and Oman, adding that they have been cited “security reasons” for the same during their meetings with officials from MHA and MEA over the last one year.
Explained Page
SenaSplit : How does EC decide who gets party symbol ? (Page no. 11)
(GS Paper 2, Polity and Governance)
In an interim order, the Election Commission of India (ECI) froze the well known ‘bow and arrow’ election symbol of the Shiv Sena until the competing claims for recognition by the two rival factions is decided.
In the operative part of its order, the ECI said that (a) “neither of the two groups led by Sh. EknathraoSambhajiShinde (Petitioner) and other led by Sh. Uddhav Thackeray (Respondent) [shall] be permitted to use the name of the party ‘Shivsena’ simplicitor”; (b) “neither…group shall…be permitted to use the symbol ‘Bow & Arrow’, reserved for ‘Shivsena’”; and (c) “both…groups shall be known by such names as they may choose”.
This had been done “in order to place both the rival groups on even keel and to protect their rights and interests, and going by the past precedence,…to cover the purpose of the current Bye-elections and to continue till the final determination of the dispute in the matter.
“For the purposes of the current bye-elections”, the order said, the two groups “shall…be allotted such different symbols as they may choose from the list of free symbols…”.
The by-election to the Andheri East Assembly seat will be held on November 3. The Shinde faction had moved the ECI in an attempt to deny the Uddhav Thackeray faction the use of the ‘bow and arrow’ symbol in the bypoll.
When a prominent party splits, a tussle often ensues for its election symbol, which is frequently the embodiment of its very identity, and its fundamental connection with voters.
Indeed, Indian voters are commonly heard saying that they would vote “kamalkapool” or “panja” or “jhadu” while indicating their preference for the BJP, Congress, or AamAadmi Party, as the case may be.
The last time the ECI took a similar decision was in October 2021, when it froze the ‘Bungalow’ election symbol of the LokJanshakti Party (LJP).
Like in the case of the Shiv Sena, the intention on that occasion was to ensure that neither of the two factions of the LJP — led by Chirag Paswan, son of the late Ram Vilas Paswan, and Pashupati Kumar Paras, the senior Paswan’s brother — could use it in the Assembly byelections for the KusheshwarAsthan and Tarapur seats in Bihar, which were scheduled for October 30 that year.
Before that, tussles over the election symbol had been witnessed in 2017 after the Samajwadi Party (Cycle) and the AIADMK (Two leaves) split.
Question about numbers (Page no. 11)
(GS Paper 3, Economy)
These are simple questions, but basic to understanding the market for agri-produce — not just in these inflationary times, but also from a policy and planning perspective.
Consider milk. According to the National Statistical Office’s (NSO) household consumer expenditure (HCE) survey for 2011-12, the monthly per capita consumption of milk was 4.33 litres in rural India and 5.42 litres in urban India.
Taking an average of 5 litres (5.15 kg; 1 litre of milk = 1.03 kg), this translates into an annual consumption of nearly 75 million tonnes (mt) for a population of 1,210.85 million as per the 2011 Census.
This figure includes only milk consumed by households — directly and as curd, butter, ghee, paneer, etc. at home. It excludes milk consumed by businesses — tea shops, hotels, and ice-cream, sweetmeat, chocolate and biscuit makers.
If this milk is assumed to be 25% over and above that consumed by households, it adds up to about 94 mt — or a daily per capita availability of 212 gm.
Going by Department of Animal Husbandry & Dairying (DAHD) statistics, India’s milk production in 2011-12 was 127.9 mt with a daily per capita availability of 289 gm. These were 210 mt and 427 gm respectively in 2020-21.
Unfortunately, there is no published HCE survey data after 2011-12. In all likelihood, the gap between the NSO’s consumption-based estimates and the DAHD’s production numbers would only have widened.
Between 2013-14 and 2020-21, India’s milk production grew at an average 6.2% a year. But this isn’t reflected in the marketing of liquid milk by dairy cooperatives, which grew by just over 3% annually in volume terms during this period.
In the private sector, growth in the average sales of 12 major dairy companies averaged 4.93% in nominal terms between 2014-15 and 2020-21.
After adjusting for an average wholesale price inflation of 3% for “dairy products” over this period, their real sales growth was slightly more than 1.9%.
Clearly, the 6.2% growth in milk production based on official DAHD statistics does not seem to square up with the sales growth of organised dairies, averaging only 2-3% per year.
Equally interesting is the per capita daily milk availability of 427 gm for 2020-21, which, by definition, is the average for India’s population — across regions, rich and poor, babies, the young, and the aged.
In Punjab, the average person supposedly consumes 1,219 gm or close to 1.2 litres per day; Rajasthan and Haryana are also more than 1 litre.
Rosetta Stone (Page no. 11)
(GS Paper 1, Art and Culture)
An object that helped create a new domain of history, is referenced in the name of an Apple translation software, and is the most-visited item at the British Museum is at the centre of demands by historians in Egypt.
According to a Reuters report, the UK is being asked to return the Rosetta Stone, a large stone slab that has fascinated the world since its discovery around two centuries ago.
The calls also reflect the growing acceptance towards the idea of Western countries returning historically and culturally important artefacts taken largely from the global South during the colonial era. Many such objects are housed in various museums or owned by private collectors in the West.
Monica Hanna, acting Dean of the College of Archaeology in the Egyptian city of Aswan, told Reuters, “I am sure all these objects eventually are going to be restituted because the ethical code of museums is changing, it’s just a matter of when.” She added, “The stone is a symbol of cultural violence, the stone is a symbol of cultural imperialism.”
The Rosetta Stone is a large stone slab with inscriptions on it and is believed to be a piece of a bigger rock. It has inscriptions in three scripts, all of which convey a decree or public message.
This is similar to how in Ancient India, King Ashoka ordered stambhas or edicts that had messages of Buddha’s teachings and news about victory in a war inscribed. These were then placed throughout the kingdom for the public to see.
The Reuters report mentioned that when the representatives of the British Museum were contacted regarding the Stone’s return, they said that of the 28 stelae or stones with inscriptions of the same decree discovered afterwards, 21 remain in Egypt.
“The British Museum greatly values positive collaborations with colleagues across Egypt,” said the statement from a spokesperson.
But as the museum’s own website states, the inscriptions themselves are as not important. “The Rosetta Stone is one of these copies, so not particularly important in its own right.
The important thing for us is that the decree is inscribed three times, in hieroglyphs (suitable for a priestly decree), Demotic (the cursive Egyptian script used for daily purposes, meaning ‘language of the people’), and Ancient Greek (the language of the administration – the rulers of Egypt at this point were Greco-Macedonian after Alexander the Great’s conquest”.
Economy
Online gaming sector:What are the proposed rules to regulate it (Page no. 13)
(GS Paper 2, Government Policies & Interventions)
An inter-ministerial task force, set up by the Ministry of Electronics and Information Technology (MeitY) to propose contours of a national-level legislation to regulate online gaming, has proposed the creation of a central regulatory body for the sector, clearly defining what games of skill and chance are, and bringing online gaming under the purview of the Prevention of Money Laundering Act, 2002, among other things.
The task force, set up by MeitY in May 2022, included the CEO of government think tank NitiAayog, and secretaries of ministries including IT, Home, Finance, Information and Broadcasting, and Consumer Affairs, among others.
The task force is understood to have prepared a final report of its recommendations and submitted it to the IT Ministry.
Online gaming so far has been a state subject, but state governments have said they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state.
Also, there is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country. State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
Stakeholders have highlighted a number of societal concerns that can arise from the proliferation of online games in the country.
There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country.
Along with that, there is currently no regulatory framework to govern various aspects of online gaming companies such as having a grievance redressal mechanism, implementing player protection measures, protection of data and intellectual property rights, and prohibiting misleading advertisements.
For online gaming businesses, the inconsistency has led to uncertainty. The thinking within the government is to have a nodal agency that will address all issues related to online gaming, including introducing a uniform law to determine what forms of online gaming are legally allowed.
The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025.
The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US.
It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.
Gross direct tax revenue jumps 24%; net mop-up over 52% of Budget target (Page no. 13)
(GS Paper 3, Economy)
Gross direct tax collections including corporate and personal income tax rose nearly 24 per cent so far in the current financial year to Rs 8.98 lakh crore, the tax department.
This includes a 32.3 per cent growth in personal income tax (including Securities Transaction Tax) mop up and 16.73 per cent increase in corporate tax revenues over the same period last year.
After adjusting for refunds, the net direct tax collections between April 1-October 8 stood at Rs 7.45 lakh crore, which is 52.46 per cent of the Budget estimates (BE) for the full year tax collection target, the department said.
The Budget had estimated direct tax collection at Rs 14.20 lakh crore this fiscal, higher than Rs 14.10 lakh crore collected last fiscal (2021-22). Tax on corporate and individual income makes up for direct taxes.
Direct Tax collections up to 8th October, 2022 show that gross collections are at Rs 8.98 lakh crore which is 23.8 per cent higher than the gross collections for the corresponding period of last year.
Refunds amounting to Rs 1.53 lakh crore have been issued between April 1- October 8, an increase of 81 per cent over the corresponding period last year.
After adjusting refunds, net direct tax collection stood at Rs 7.45 lakh crore, 16.3 per cent higher over the year-ago period. This includes a 16.25 per cent increase in PIT (including STT) and 16.29 per cent in corporate tax.
Tax collection is an indicator of economic activity in any country. But in India, the robust tax collection was despite a slowdown in industrial production and exports.
Some analysts believe that the economic growth has lost momentum but corporate profits are keeping the engine running.
Merchandise exports have lost on the momentum of last year’s surge and shrunk by 3.5 per cent in September.
Trade deficit has nearly doubled in the first six months. IIP growth was subdued at 2.4 per cent in July while ‘core sector’ hit a nine-month low of 3.3 per cent in August.
Collection from levy of tax on goods and services sold (GST) has flattened at around Rs 1.45-1.46 lakh crore per month. The Reserve Bank of India (RBI) last month cut its production of India’s GDP growth in the current fiscal to 7 per cent from 7.2 per cent previously estimated. Other rating agencies too have lowered the economic growth projection for India citing impact of the geopolitical tensions, tightening global financial conditions and slowing external demand.