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A decision to extend the Prime Minister GaribKalyan Anna Yojana (PMGKAY) — the government’s free foodgrain scheme to alleviate Covid distress — is likely to be a “political call”.
With the sixth phase of the scheme coming to an end this month and the merits of yet another extension being actively discussed at the highest level.
In terms of fiscal math, the constraints are on the table: an extra outflow of around Rs 2 lakh crore for the estimated food, fertilizer and cooking gas subsidies that have shot up in the aftermath of the Russia-Ukraine war.
Even as revenue collections on both the direct and indirect tax front have picked up, offering a welcome buffer of sorts, the Finance Ministry has explicitly laid out its concerns.
There are still things to come. There has been extra outflow, about Rs 1 lakh crore in fertilizers, Rs 80,000 crore in already decided foodgrain (subsidy until September).
There will be some outflow on the petroleum side also, prices have gone up and spending has gone up for cooking gas through subsidies, it will be significant.
If the free foodgrain scheme gets extended, the cost for the second half would be little less than Rs 85,000 crore. Close to that, but a bit lower.
In May, the Department of Expenditure under the Ministry of Finance had, in an internal note, advised against the extension of the PMGKAY scheme both on “grounds of food security and on fiscal grounds” arguing that it’s “far beyond the need at a non-pandemic time”.
Huge increase in fertiliser subsidy burden (both urea & non-urea), re-introduction of subsidy on cooking gas, reduction of excise duty on petrol, diesel and Customs duty on various products have created a serious fiscal situation, the note had said.
The call on extending the foodgrain subsidy comes when the issue of freebies has touched off a heated political debate between states and the Centre.
Given that it was linked to Covid, now that the active case count is below 60,000 and vaccinations have crossed 200 crore, some experts are arguing for a phaseout given the fiscal burden.
The government is also staring at a surge in its fertilizer subsidy bill, which is expected to be between Rs 2.15-2.5 lakh crore, depending on volume of utilisation.
In May, Finance Minister Nirmala Sitharaman had said that in addition to the fertiliser subsidy of Rs 1.05 lakh crore in the budget, an additional amount of Rs 1.10 lakh crore is being provided.
The fertiliser subsidy bill was estimated at Rs 1.05 lakh crore in the 2022-23 Budget. It stood at Rs 1,62,132 crore in 2021-22.
Express Network
Ukraine conflict a concernfor G20, says Jaishankar(Page no. 8)
(GS Paper 2, International Relation)
With India scheduled to take up the G20 Presidency in December 2022 until November2023, Union Minister of External Affairs S Jaishankar on Saturday said that he is “cautious” about G20 especially in light of the “polarisation” owing to the repercussions of the Ukraine conflict. He also said the world has noted India’s “independent stance” in the Ukraine conflict.
Jaishankar was speaking at Indian Institute of Management in Ahmedabad on the evolution of “Brand India” in terms of Indian foreign policy over the last decade.
There are genuine challenges right now given the polarization. And I think in particular, how the repercussions of the Ukraine conflict are playing out in different forums.
This has become a very big concern…But if I were to do a little bit of forecasting, there’s no doubt today, energy security is a huge concern for people or when the price of oil has effectively double.
Jaishankar added that the anxiety of the developing countries is stronger as they do not have the resources to deal with this challenge.
The G 20 is a very heavily economic platform. It’s an economic developmental platform, which then gets into politics from time to time…These concerns about the stresses (with) three years of Covid, and then the Ukraine issue, and then in many cases climate change coming on top of it. These concerns will be foremost in the minds of people,” elaborated Jaishankar.
Additionally, Jaishankar pointed out that India’s “independent stance” on the Ukraine conflict has resulted in “brand improvement” owing to the “stronger confidence and more independent voice with which we have spoken out on global issues and made our decisions on that.”
The world is going through a very complicated conflict in Ukraine and the world is very polarized as a consequence. Now, in a very polarized world, obviously, all countries come under pressure from this side or that side.
The fact that we have taken an independent stance, the fact that we have made decisions which we believe are the right decisions, from the perspective of the welfare of our people, that is something, the world has noted.
We are also articulating the sentiments and the feelings of a lot of other countries who may not be that confident today in expressing the same.
Addressing India’s position with regard to China advancing along Indian borders, Jaishankar said, “Everybody wants to get along with the countries, especially if they happen to be neighbors. It’s sensible.
But you want to get along on reasonable terms on terms of mutual respect and interest. So, the issue is not whether we should have good relations or not.We want good relations, but good relations cannot be at the cost of our national interest.
Economy
India pips UK to be 5thlargesteconomy: The broader picture (Page no. 11)
(GS Paper 3, Economy)
India has become the world’s fifth-largest economy after it overtook the United Kingdom in end-March 2022, according to the latest calculations by Bloomberg.
While this was anticipated for a while, Bloomberg reached this conclusion by using the IMF database and historic exchange rates.
On an adjusted basis and using the dollar exchange rate on the last day of the relevant quarter, the size of the Indian economy in ‘nominal’ cash terms in the quarter through March was $854.7 billion. On the same basis, UK was $816 billion.
According to Bloomberg’s forecast, thanks to India’s fast-growing economy, there is likely to be a huge gap between India and the UK within the next few years (see Bloomberg Graph below).
The news comes close on the heels of Prime Minister Narendra Modi urging countrymen to resolve to become a “developed” country by 2047 — the centenary of India’s Independence.
As such, moving past one of the biggest economies in the world, especially one that ruled over the Indian sub-continent for two centuries, is a major milestone.
This is one of the most fundamental differences between the two countries. As of 2022, India has a population of 1.41 billion while the UK’s population is 68.5 million.
In other words, India’s population is 20 times that of the UK’s. And as Chart 2 alongside shows, this gap is unlikely to be bridged in a hurry.
Since there is such a stark difference between the population of the two countries, GDP per capita provides a more realistic comparison of income levels because it divides a country’s GDP by the population of that country. Unsurprisingly, as Chart 3 shows, the income of an average Indian is far lower.
Low per capita incomes often point to high levels of poverty. Chart 4 shows India’s and the UK’s share of extreme poverty. It is noteworthy that at the start of the 19th century, the UK’s share in extreme poverty was considerably higher than India’s.
However, as things stand today, the relative positions have reversed even though India has made giant strides in curbing poverty.
14mn in informal music industry, butpaid below unskilled workers: ICRIER(Page no. 11)
(GS Paper 3, Economy)
The ‘informal music industry’ — which includes people like DJs, brass bands, independent artists, sound engineers, and small-scale manufacturers, among others — is at least 74 times bigger than the ‘formal’ music industry, which comprises recording studios and digital streaming, a new report has estimated.
Yet, the average salaries of those who form the informal music industry is lower than the typical average salary of an unskilled worker.
According to a report by the Indian Council for Research on International Economic Relations (Icrier) titled ‘The Untold Potential of India’s Informal Music Industry’, the market size of the informal music industry in the country is between Rs 1 trillion and Rs 5 trillion. In comparison, the formal part of the industry is worth Rs 18.7 billion, or Rs 0.0187 trillion.
The popularly available estimates for the music industry, primarily focused on the formal sector, are miniscule in comparison and reflect just the tip of the industry iceberg.
The report estimated that the informal music industry employs almost 14 million people, which, it said, is more than those employed by the Indian Railways or even the Indian government.
Sectorally, even though the industry employs more people than the telecom sector does, the report said that government policies focus on the telecom sector for their growth dividends, but “the music industry has remained on the periphery in the overall economic agenda for the country”.
Despite its large size, the estimated average monthly income of different sub-groups within the informal music industry is lower than the median salary of an unskilled worker under the Minimum Wage Act, 1948, the report has found.
The estimates for the informal music industry indicate a need for policy intervention with respect to improving livelihood opportunities for the sector, providing social security to vulnerable groups and nurturing its overall growth perspective,” said the report, which was commissioned by the Indian Music Industry (IMI) — an industry body which represents the interests of the recorded music industry in India.
Its estimates are based on the triangulation of data from a multi-city field survey of 1,574 individuals, including members of 255 brass bands, 207 DJs, 201 sound engineers, 234 independent music teachers, and 677 independent artists.
While globally, some governments have approached music as an industry central to its cultural reflection and an opportunity for growth, “in India, music has seen commercial success primarily in the shadows of the film industry”, Icrier said in its report. It cited the example of South Korea, where the government has managed to create soft power through music.
Exports nearly flat at $33 billion, trade deficit widens(Page no. 11)
(GS Paper 3, Economy)
Merchandise exports dropped marginally in August from a year before, but trade deficit still eased a tad from its July peak, as imports rose at a slower pace.
Nevertheless, at $28.7 billion, trade deficit was the second-highest on record and close to the monthly peak of $30 billion in July. This will continue to pressure the current account deficit (CAD), which is likely to have hit a nine-year high in the June quarter amid capital outflows.
As per preliminary data released Saturday by the Commerce Ministry, exports hit $33 billion in August, down 1.1 per cent from a year before, as recession in key western markets hurt order flows. Imports jumped 36.8 per cent in August to $61.7 billion, against 43.6 per cent in the previous month.
Briefing reporters, Commerce Secretary BVR Subrahmanyam exuded confidence that exports would pick up going ahead. The optimism stems from the fact that India’s recent trade deals with the UAE and Australia will start bearing fruit soon, and that there could be a partial diversification of western orders away from Covid-hit China.
World
Russia, West step up energy war as UN experts inspect N-site (Page no. 12)
(GS Paper 2, International Relation)
Steppingup an energywar between Russia and the West,Moscow has announced it willkeep its main gas pipeline toGermany shutandG7countriessaidthey plannedapricecaponRussianoil exports.
Already struggling to tamesoaringgasprices,EuropeangovernmentshadexpectedtheNordStream 1 pipeline to resume
flows afterashort maintenancethis week but Russia abruptlycancelled therestart,citinganoilleak in a turbine. Gas shortagesalso prompted Sweden onSaturdaytounveilafinancialsupportpackage forenergyfirms.
Russia’s defence ministry,meanwhile, accused Ukrainianforces of mountinga failed attempt to capture theZaporizhzhia nuclear powerplant that has been a centre ofinternational concern in recentweeks.
The ministry said aUkrainian naval force of morethan 250 troops attempted toland on the coast of a lake nearthe plant, which is Europe's largestnuclear energy station.
The head of the UN nuclearwatchdog said Saturday that theZaporizhzhia nuclear plant wasdisconnected to its last externalpowerlinebutwasstillabletorunelectricity through a reserve lineamidsustainedshellinginthearea.
TurkeyofferedonSaturdaytofacilitate the Zaporizhzhia situation.Elsewhereonthefrontlines,Ukraine started an offensive thisweek to recapture territory insouthernUkraine,mainlyfurtherdown the Dnipro in neighbouringKhersonprovince.