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The economy will likely grow 6.0-6.8 per cent in 2023-24 with a baseline real GDP growth rate of 6.5 per cent on the back of a rebound in private consumption, higher capital expenditure, strengthening of corporate balance sheets and near-universal vaccination coverage enabling spending on contact-based services, the Economic Survey for 2022-23 tabled in Parliament.
A key Budget pointer from the Economic Survey 2022-23 authored by Chief Economic Advisor V Anantha Nageswaran clearly is the likelihood that the government may meet its fiscal deficit target for the current year (at 6.4 per cent of GDP) and further keep a modest target of under 6 per cent for 2023-24.
The Survey has placed sufficient emphasis on fiscal consolidation, which it notes is critical for low interest rates in the long term.
The other takeaway from the Survey is the government’s inclination to continue with higher capital expenditure that will crowd in private investment and is important to driving growth.
While India is seen as the fastest growing economy in the world, the baseline 6.5 per cent growth estimate is higher than the 6.1 per cent forecast for FY24 by the International Monetary Fund (IMF) in its World Economic Outlook update released.
Some analysts said the Survey’s 6.5 per cent growth projection for the next financial year seems over-optimistic and hence carried the risk of fiscal slippage by the government.
For the current financial year i.e., 2022-23, the Survey has projected a growth rate of 7 per cent, which is slightly higher than the 6.8 per cent estimated by the Reserve Bank of India in its December 2022 monetary policy.
PM CARES Fund, not of govt, RTI does not apply: center to HC (Page no. 3)
(GS Paper 2, Polity and Governance)
The Centre has informed the Delhi High Court that PM CARES Fund is set up as a public charitable trust and is not created under the Constitution or any law made by the Parliament or the state, in a plea seeking to declare the fund a ‘state’ under Article 12 of the Constitution to ensure transparency in its functioning.
When the matter was called before a division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad on Tuesday, senior advocate Shyam Divan, appearing for the PIL litigant, submitted that representations have been made to the general public by high public and constitutional functionaries asking for contribution to PMCARES.
When you have high constitutional authorities setting up the trust which has ex officio members, it is nothing but an element or aspect of State.
Merely by declaring it is not ‘State’ would not exclude or exempt you from the constitutional fetters. If you are not (state) then you can’t have government symbols or a government website so that the public thinks that you are ‘state’. Either you are ‘state’ or you are not.
Divan further argued that PMCARES “projects itself as the government of India” indicating that it operates on the domain name of the government of India and has the photograph of the Prime Minister as well as the Ashoka Pillar.
Divan also drew the court’s attention to public announcements made by the government functionaries, arguing that such persons making the statements are “people of responsibility
We are not saying trust is malafide. We have said that it can be misused,” Divan argued, clarifying that he was not questioning the purpose of the trust.
He said that the Fund cannot be contracted out of the Constitution of India merely by introducing a “self declaration” stating that it is not a State.
The Centre thereafter sought an accommodation as the solicitor general, who is representing the Centre, was unavailable.
Govt & Politics
Opp slams president address in joint house session, calls it poll speech (Page no. 7)
(GS Paper 2, Polity and Governance)
Cutting across party lines, the Opposition slammed President Droupadi Murmu’s first address to the joint sitting of Parliament. Pointing out it made no mention of the many challenges that India is facing and stressing that it was cleared by the Union Cabinet, they labelled her address an “election speech”.
While Congress president and Leader of the Opposition in Rajya Sabha Mallikarjun Kharge, who could not attend Parliament after being stuck in Srinagar due to bad weather, said the President has merely said what the Government wanted her to say, his party colleague Manish Tewari said it was a “laundry list” of the alleged achievements of the government.
The complete absence of any reference to the border situation with China, complete absence of any mention of unemployment, inflation and on the other challenges that India confronts, shows that it was not a serious exercise in order to inform the Parliament about the issues which the country faces.
Article 87 of the Constitution of India states the purpose of the President’s address explicitly. It is to inform Parliament of the causes of its summons.
It therefore can not be a platform to articulate the alleged achievements of the government. Moreover, does the remit of Article 74 that the President is bound by the aid and advise of the Council of Ministers be extrapolated to circumscribe the freedom of speech and expression of the President in terms of Article 87 where he or she is obligated to read out a Cabinet approved speech and not speak freely to Parliament,” he added.
Kharge said that if the achievements of the Government listed by the President are true, then the people should not feel the pinch of inflation and unemployment.
Lok Sabha MP Shashi Tharoor told newsagency ANI that the President’s address was an election speech that was trying to praise the government for everything it has done and skipping over the bits it hasn’t done so well.
Express Network
Doval meets Sullivan, says need to convert ideas into actions (Page no. 9)
(GS Paper 2, International Relations)
National Security Adviser Ajit Doval met his US counterpart Jake Sullivan in Washington DC and highlighted the need to “convert intentions and ideas into actions and specific deliverables through focused steps in a time-bound manner.
Doval is in the US to participate in the first high-level dialogue on technology partnership, called Initiative on Critical and Emerging Technologies (iCET).
Announced during US President Joe Biden and Prime Minister Narendra Modi’s bilateral talks in Tokyo in May last year, the iCET is spearheaded by the National Security Councils of both countries.
It focuses on strengthening US-India partnership on technologies that will drive global growth, bolster both countries’ economic competitiveness and protect shared national security interests.
Ahead of the meeting, the two NSAs participated in a roundtable organised by US-India Business Council (USIBC) of the US Chambers of Commerce.
iCET is about much more than technology cooperation; it’s a platform to accelerate our strategic convergence and policy alignment.
During the roundtable, attended among others by Secretary of Commerce Gina Raimondo, Sullivan highlighted the work ahead for both governments.
He said the US and Indian governments want to establish a “list of firsts”, “firsts in removing barriers — on both sides — to enable greater ambition by all of you”.
Editorial
Post pandemic, pre-election (Page no. 12)
(GS Paper 3, Economy)
The assumptions and assessments of India’s annual Economic Survey and Budget last year went awry within weeks of tabling them. Russia invaded Ukraine. Inflation ran riot. A year later, the war continues. The inflation genie is yet to be bottled.
To be sure, as the Economic Survey 2022-23 notes, the Indian economy looks more upbeat than many others, given the circumstances.
A broad-based recovery is underway and has lifted all major sectors above the pre-pandemic levels this year. But that is about to be tested by slowing global growth amid tighter financial conditions.
The full effects of aggressive rate hikes by global central banks through 2022 will play out this year. A cache of troubles — high global debt burden, rising debt servicing costs, tight external financing conditions, geopolitical risks, and extreme weather events — threaten to pile on.
At home, the global slowdown will hit exports and export-linked segments. The full-blown impact of rate hikes by the RBI will kick in. And India will continue to reckon with volatility in crude and commodity prices, much like everywhere else.
The Survey also highlights the risks from an elevated current account deficit amid challenging external financing conditions.
Even as it acknowledges these risks, the Survey expects India’s real gross domestic product (GDP) growth for fiscal 2024 to slow to about 6.5 per cent — slightly more optimistic than projections by multilateral agencies and CRISIL’s forecast of 6 per cent.
It expects the high and broad-based domestic inflation seen this fiscal to ease next fiscal. CRISIL’s forecasts echo this, at 5 per cent for CPI inflation, and even lower for WPI.
Not all the views and suggestions of Economic Surveys have been reflected in past Budgets. Yet, the document serves as a useful policy mirror to the past year’s actions and sets the stage for what lies ahead in the near and medium term.
In the uneasy environment of tight financial conditions and cautious optimism on inflation, this year’s Survey suggests calibrated fiscal consolidation. We agree with this stance.
The fiscal deficit for the coming fiscal should move towards the glide path that targets 4.5 per cent of the GDP by fiscal 2026, as committed to earlier.
This is important because the benefit of high nominal GDP for the fiscal deficit is likely to fade in the coming months. Slowing growth and high borrowing costs will worsen the debt dynamics.
India has one of the highest debt-to-GDP ratios in its peer group. Fiscal consolidation will also complement monetary policy. A lower fiscal deficit-to-GDP ratio will help reduce pressure on domestic interest rates, the Survey opines.
Ideas Page
The Un-love triangle (Page no. 13)
(GS Paper 2, International Relations)
The triangular dynamic between the US, Russia and China has long been the principal factor shaping independent India’s geopolitics.
The unveiling of a new Sino-Russian alliance a year ago this week, the Russian aggression towards Ukraine, and the deepening confrontation between the West and Russia and China are compelling India to recalibrate its international relations.
Last February, Vladimir Putin travelled to Beijing to unveil a partnership “without limits” and with no “forbidden areas”. To be sure, Russia and China had a strategic partnership for a long time before Putin’s February 2022 visit. What the Beijing declaration did was lay out a solid basis for jointly confronting the West.
Until the turn of the 2010s, both Moscow and Beijing sought a productive relationship with the US. Russia’s accumulating grievances against the West and China’s new ambition to replace the US as Asia’s dominant power have brought them much closer now.
A few days after issuing the declaration on February 4, Putin invaded Ukraine. We do not know the nature of the consultations, if any, on Ukraine when Putin and Xi Jinping met in Beijing.
It is not unreasonable to presume that the Sino-Russian alliance added to Moscow’s confidence in risking a confrontation with the West in Europe.
Putin had hoped that his multi-pronged military offensive would force a quick collapse of the regime in Kyiv and fold Ukraine’s sovereignty into Russia’s.
Imagine for a moment he had gotten away with this in Ukraine. Putin, who had long complained about the European security order, would have driven a stake through its heart.
Explained
Assessing the case for amending India-Pak Indus water treaty (Page no. 15)
(GS Paper 2, International Relations)
There are two ways to look at India’s recent notice to Pakistan on the Indus Waters Treaty, which governs the sharing of six rivers flowing through the two countries.
It can be viewed as India’s counter measure to Pakistan’s repeated objections to every irrigation or power project on the Indian side of the Indus basin. This would imply that if Pakistan drops its obstructionist approach, India might not insist on amending the Treaty.
Alternatively, this can be seen as the beginning of something more significant. India could be serious about making amendments to the Treaty and might have just set the ball rolling with the notice, served on January 25.
While it is too premature to hazard a guess on the eventual outcome of the move, the renegotiation of the Indus Waters Treaty is not as radical an idea as it appears. In fact, it is not a new idea at all.
Calls for amending or renegotiating the Indus Waters Treaty are being made for more than two decades now, on both sides.
Despite being awarded nearly 80 per cent of the water flow in these rivers, Pakistan has always maintained that it has been treated unfairly, arguing that it should have been allotted some share of the Ravi, Sutlej and Beas rivers as well.
The Treaty gave India full rights over the waters of these three ‘eastern’ rivers, while most of the flows in the three ‘western’ rivers, Jhelum, Chenab and Indus, were meant for Pakistan. The western rivers have far greater volumes flowing in them.
But this is not the only reason why Pakistani voices want the Treaty renegotiated. Experts on both sides agree that there have been significant changes since the Treaty came into being in 1960, and it needs to be updated.
The impacts of climate change and the advancement in water storage and management technologies are cited as some of the most compelling reasons to renegotiate.
Climate change concerns bother Pakistan more. One of the consequences of climate change has been a decrease in the overall flows in the Indus river system. The decline thus far is just about 5 per cent from 1960, but is expected to worsen rapidly.
On the other hand, Pakistan’s population has increased by six to seven times since Independence, and is still growing at a fast pace. That means increased demand for water, and thus increased dependence on these rivers.
Economic Survey takeaways (Page no. 15)
(GS Paper 3, Economy)
On the government tabled the Economic Survey 2022-23. The Survey laid out the outlook for India’s growth, inflation and unemployment in the coming years.
The Survey provides a detailed report of the national economy for the year along with forecasts. It touches upon everything from agriculture to unemployment to infrastructure.
It is prepared by the Economic Division of the Department of Economic Affairs (DEA). The comments or policy solutions contained in the Survey are not binding on the government.
The Survey said India’s growth estimate for FY23 is higher than for almost all major economies. Despite strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5 and 7.0 per cent, and that too without the advantage of a base effect, it is a reflection of India’s underlying economic resilience; of its ability to recoup, renew and re-energise the growth drivers of the economy.
The RBI has projected headline inflation at 6.8% in FY23, outside its comfort zone of 2% to 6%. High inflation is seen as one big factor holding back demand among consumers.
However, the Survey sounded optimistic about the inflation levels and trajectory, saying “it is not high enough to deter private consumption and also not so low as to weaken the inducement to invest.
The Survey said “employment levels have risen in the current financial year”, and that “job creation appears to have moved into a higher orbit with the initial surge in exports, a strong release of the “pent-up” demand, and a swift rollout of the capex.”
It pointed to the Periodic Labour Force Survey (PLFS), which showed that urban unemployment rate for people aged 15 years and above declined from 9.8% in the quarter ending September 2021 to 7.2% one year later.