Economic Highlights

New Delhi, 11 December 2023

Glitter Is Not Gold

FM’s DATA, REALITY VARIES

By Shivaji Sarkar 

Union Finance Minister Nirmala Sitharaman has projected a promising economy that could take the country to a path of glory with huge capital expenditure and rising deficits that is showcased politically to charm the voters. She was partially correct during a short duration discussion on the state of the economy in the Rajya Sabha. But despite efforts, deficits remain high, exports drop, rupee slides and government measures such as high cess on petrol, rechristened additional excise duties, and tolls have not added to the ease of the people. 

Occasional growth, such as in the second quarter of the year at 7.6 percent being termed as India being the fastest-growing major economy may cheer up countrymen, but it is not a solution to the overall economic situation. Despite increase in estimated GDP to Rs 41.74 lakh crore in 2023-24, against Rs 38.78 lakh crore last fiscal or 6.2 percent, the Reserve Bank of India’sgrowth estimates remain unchanged at 6.5 percent in September quarter. 

India’s growth is not constant but seasonal, often to cater to the festive mood. Most world economies are taking corrective steps before that. It seems as per the RBI, an economy is on fire facing persistent threat of food inflation and severe constriction on farm level prices, both considered extremes. It calls for easing of policies and firming of the dollar that makes imports expensive. 

The minister compared achievements with developed countries and their growth. The Indian economy despite its large size has yet to match the growth parameters of France, Germany, UK, the US or China, though many of them are in slowdown. Their economies are larger. Even a small growth is substantial than what India could achieve.  

Much of the inflation is because of government policies such as maintaining high petrol prices despite a longer period of soft international prices. Despite Israel-Gaza or Russia-Ukraine wars, the crude oil prices have slumped to $70 a barrel and may fall further as western economies, particularly the US sees a glut of oil owing to the slowdown. Instead of a demand of 2 million barrels, it remains at 594,000 barrels. The slowing global economy is impacting Indian exports. 

While the benefits of low oil prices are not being passed on to the consumers in India, it has led to an inflationary economy. The Indian GST is high. Organisations such as the National Highway Authority of India (NHAI), have taken advantage to jack up road toll rates atrociously. Toll collections have increased to Rs 48028 crore in 2022-23 from Rs 33907 crore last year and Rs 17942 crore in 2017-18. This is hurting the economy, including farmers’ input and transportation costs, according to the Statista site. 

Since July 2022, the government has reduced petrol cess on exports of Reliance and Nyara but none for the poor domestic consumers. It remains at Rs 32.90 per litre of diesel and petrol. Petro road cess collection was Rs 4.55 lakh crore in 2020-21 as per a reply in the Rajya Sabha by Minister of State Rameshwar Teli. By 2023, it can be assumed to have risen further. There is now a diversion of funds from the cess for other purposes. 

Allocations for education and health have been cut and insurance premia allowed to rise by 30 percent.Farmers finding prices unremunerative have been destroying many vegetable crops, including cauliflower, onion and tomato during the season, though prices of many commodities spiralled in the retail market. 

The Opposition charged the government with being cut off from the ground realities during the discussion following a notice from TMC’s Derek O’Brien. Former Finance Minister P Chidambaram said it was “jobless growth”. Ram Gopal Yadav of Samajwadi Party alleged the ruling members were only indulging in propaganda and publicity. Of 194 nations, India is at 133 in the growth index even though it is the fifth largest economy. AITC’s Jawhar Sircar said in 2022 India’s youth unemployment rate was 23.22 per cent, which was even higher than 11.3 per cent of Pakistan, 12.9 per cent in Bangladesh and 14.4 percent of Bhutan. 

Sitharaman says that investments in infrastructure and productive capacity have a larger multiplier effect on growth and employment. The 2023-24 Union Budget steeply increased the capital expenditure outlay by 37.4 percent to Rs 10 lakh crore. It is being spent to demolish government buildings, railways stations, National Museum, National Archives and others. 

This apart, reckless constructions of roads and other supposed infrastructure have had a heavy toll in the Himalayan states facing severe devastation. Various construction lobbies are preventing the government from reviewing vast delicate areas in Uttarakhand, Himachal Pradesh and northeastern parts of the country, including the newly built railways and sinking of Halflong rail stations. Himachal has demanded over Rs 5000 crore to mitigate the damages. 

While periodic renovation of buildings is necessary, rebuilding for the sake of it without a discussion with the people or other stakeholders necessarily does not mean that it would achieve the stated objective. The supposed rail upgradation to Vande Bharat and ignoring the usual trains again made the Railways go back to basics and restore the number of general coaches and improve upkeep of ordinary sleeper bogeys. The Railways are also realising that dynamic fare disrupts the lives of average travellers and creates a myth about higher earnings. 

The Budget notes that revenue expenditure is estimated to grow by 1.2 percent at Rs. 35.02 lakh crore in 2023-24 over Rs. 34.59 lakh crore. Major components of revenue expenditure include interest payments, defence revenue expenditure, and transfers to States in the form of Finance Commission grants, centrally sponsored schemes, etc. Grants to Central autonomous bodies are a substantial part of the Central sector schemes. 

Sitharaman says India’s national debt has increased from $1595 billion in 2018 to $3288 billion in 2023 and projected to rise to $4816 billion by 2028. Outstanding government debt and other liabilities are rising to Rs 169.46 lakh crore in March 2024 from Rs 152.69 lakh crore in March 2023. Though this is considered manageable, its servicing costs are high. The government needs to review various projects for their utility. Interest payments are estimated to be Rs 10.80 lakh crore, 30.8 percent of the total revenue expenditure. The fiscal policy statement highlighted the total expenditure as Rs. 45.03 lakh crore in 2023-24; increase of 7.5 percent over 2022-23. The states are to get about Rs 10.21 lakh crore. 

Despite India growing at a better pace than Pakistan and Sri Lanka, neighbouring Bangladesh and Vietnam have overtaken it!---INFA 

(Copyright, India News & Feature Alliance)

Round The States

New Delhi, 9 December 2023

Cong Results & INDIA Bloc

WB, BIHAR EYE OPPORTUNITY

By Insaf 

The losses in four States, especially in Hindi heartland of Rajasthan, Chhattisgarh and Madhya Pradesh for the Congress should not only make it but the INDIA bloc partners to think and think seriously and aloud. For there’s no time for bickering or blame game as heard soon after the results were out. Some parties had their knives pointed at Congress, though not openly. Importantly, two Chief Ministers, West Bengal’s Mamata Banerjee and Bihar’s Nitish Kumar seem to have seen an opportunity. The two appear to have gone into top gear and consider themselves now steering the Opposition ship. Working on seat-sharing agreements must be the top of the agenda for the bloc is what Mamata has insisted upon for the next meeting to be held later this month. Recently, Congress President Kharge’s invite for the 4^th bloc meeting this week had few takers. Seat-sharing formula must be top priority and it must be a 1:1 fight with the BJP, it has insisted. Besides, candidates must be given sufficient time for campaigning and gauging the situation on the ground for battle 2024 ahead, only months away. 

The TMC’s opinion was shared at a meeting of Opposition leaders this week to work out strategy for the ongoing Parliament winter session. Upset about the halt of meetings due to Congress being preoccupied and partners fighting against each other in these polls, sending a wrong message, the party has also sought ‘establishing a collective narrative and finalising the manifesto to mount a credible challenge against BJP’. Likewise, the JD(U) is seeking to gain importance with Congress debacle. The party is suggesting that Nitish Kumar be made the ‘convenor’ of the INDIA bloc as his image makes him ‘the best fit.’ And more so as he would match up to Modi! The Congress is upset and out alright but certainly not down. It argues that though it was defeated in these three states its vote share has been intact. Well, the bloc must weigh the option ahead: should it cry over spilt milk or rather should it be safe than sorry! 

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Telangana Challenge

Telangana has the Congress finally in and BRS out. With the “people’s mandate” going the former’s way, on Thursday last it installed its state party chief, A Revanth Reddy, as its first Chief Minister, with Mallu Bhatti Vikramarka as Deputy. Ousted CM and BRS chief, KCR was not only stopped him from hitting a hat trick but his plans too of becoming a national leader by changing the party name from TRS. While he becomes history, the going is tough for Revanth Reddy as the burden of fulfilling the party’s ‘six guarantees’, is far too heavy with the state said to be reeling under a debt of Rs 5 lakh crore. The guarantees, having got the go-ahead include, free travel for women in state run buses (under Rs 6000 crore losses) which will cost Rs 2,500 crore annually; Rs 2 lakh farm loan waiver will cost at least Rs 35,000 lakh crore for next five years for 42 lakh farmers; Rs 15,000 to farmers and Rs 12,000 to farm workers under Rythu Bharosa guarantee scheme per acre annually will cost Rs 1 lakh crore! Will Prime Minister Modi’s X post “…I assure all possible support to further progress of the state and citizens welfare” give some hope? The answer needs no guessing. 

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Rajasthan Drama

Nagging suspense lingers in the three Hindi heartland States over who will be their BJP chief ministers. Amidst this wait and watch, intriguing attempts are being made for the hot seat in Rajasthan particularly, with senior BJP leader and two-time Chief Minister Vasundhara Raje camping in Delhi. While she claimed she came ‘to visit my daughter-in-law,’ over 60 of the newly elected MLAs have met her at her residence in past 48 hours. Guess, a show of strength is the message, but efforts in Jaipur may turn out controversial. Such as father of an MLA Lalit Meena has claimed his son along with four others had been ‘confined in a resort’ by Raje's son MP Dushyant Singh on Thursday last, after h had brought them to meet Raje. However, he managed to get all five to leave the resort after party organisational secretary and others were informed. Raje is among the frontrunners for the CM post, with names of Diya Kumari, Mahat Balak Nath, and Rajyavarardhan Singh Rathore doing the rounds. Raje would be well versed with the saying there can be many a slip between the cup and the lip.

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Mizo Clean Slate

It’s not just a clean sweep victory but wiping out the Mizo National Front (MNF) and the Congress which ruled the border state of Mizoram for four decades. The Zoram People’s Movement (ZPM) with chief Lalduhoma, former police officer, who served as in-charge of former prime minister Indira Gandhi’s security, took over the reins of power on Friday last, winning 27 of the 40-seat Assembly. The ZPM’s USP: young voters (62%), promising a corruption-free alternative and a “new system” of “administrative reforms, land reforms, economic reforms”. Incumbent Chief Minister Zoramthanga submitted his resignation to not just the Governor but also the party as its president after a 33-year-long stint on Tuesday last, taking moral responsibility for the debacle. The MNF, in existence for over 60 years, which won only 10 seats now, refused to accept his resignation. The Congress, which had ruled the State for 25 years, managed to win only one seat and the BJP just two. Importantly, 9 of the 11 MNF ministers who contested the polls lost. Jubilation in the ZPM camp alright, but will it able to deliver is a million dollar question. 

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Southern Cyclone

Cyclone Michuang has played havoc with Tamil Nadu’s capital, Chennai and suburbs in adjoining districts. Other than death and destruction, sadly it opened the floodgates for the Opposition to hit out at ruling DMK, accusing it of poor relief work. The AIADMK particularly questioned Stalin government’s claim of implementing a Rs 4,000 crore storm water drain project in the city as ‘of 35,000 key interior roads under the city corporation, 20,000 were still inundated.’ It demanded a white paper be released, but the denial mode came into play. “Relief work was expedited; efforts to pump out stagnant water were on; drinking water, milk, milk powder, bedsheets and food were dispatched to affected areas,’ claimed the government. Importantly, it sought interim relief of Rs 5,060 crore from Centre, detailing the damage caused ‘in northern districts of Chennai, Tiruvallur, Kancheepuram and Chengalpet viz roads, bridges, public buildings and livelihood of lakhs of people affected. A detailed report will follow and additional funds would be sought, said Stalin’s letter to Prime Minister Modi on Tuesday last. It further sought a central team be sent to assess the damage. Will New Delhi oblige?---INFA 

(Copyright, India News & Feature Alliance)

Round The World

New Delhi, 8 December 2023

India’s Foreign Policy

FROM NON TO MULTI-ALINGMENT!

By Prof. (Dr.) D.K. Giri

(Secretary General, Assn for Democratic Socialism) 

The erudite and articulate foreign affairs minister S Jaishankar has of late been stressing the multi-polarity in world politics that requires a multi-alignment approach. Probably he means that configuration of world powers has drastically changed causing a few global powers emerging on the scene. So non-alignment between two blocks in a bipolar world as it was, should give way to engaging with various power centres. This certainly merits a deeper evaluation. Interestingly, the foreign policy for the first in recent years, such as the success of G-20 in New Delhi, became a campaign point in the recent State elections.   

Foreign policy of any country is essentially a manifestation of its national imperatives. They are defined by international political observers, commentators, academics and diplomats as determinants, objectives, principles and national interests. India’s foreign policy, likewise, has been shaped by and has evolved as reflection of such priorities, and more important, in response to the prevalent world order. 

The evolution of India’s foreign policy since 1947 till date could be divided into several phases in various ways. Let us take two formats for segmenting India’s foreign policy. One is to divide it into six phases. The first phase (1947-62) could be described as optimistic Non-Alignment. India got independence in 1947, two years after the end of Second World War when international politics got divided into two camps – one led by the US and the other by the former Soviet Union. India was wary of the Western powers which were colonisers and wanted to stay away from them. 

Strategically also, India did not wish to belong to any camp. The independent stance stemmed from its long and gruelling freedom struggle. Thus, India founded the Non-Alignment Movement (NAM) in 1961, which, in a way, was the zenith of solidarity in the Third World which was getting decolonised. However, the 1962 war with China changed that position as India had to seek military help from US and Britain. 

The unexpected war with China and its consequence led to the second phase of Realism and Reorganising (1962-71). New Delhi had to look beyond Non-Alignment in the interest of national security, concluding a now largely forgotten defence agreement with the US in 1964. Later, India faced pressures from the US and UK on Kashmir. At the same time, Pakistan was becoming an ally of the United States. New Delhi then perforce had to tilt towards the Soviet Union which led to the third phase. 

The third phase (1971-91) consisted of India’s assertion as a regional power based on self-reliance. India showed remarkable strategic autonomy and use of hard power in liberating East Pakistan (Bangladesh) in 1971 war against Pakistan. The emergence of US-China-Pakistan axis posed multiple challenges for India. Recognising the security risks, New Delhi signed a Peace and Friendship Treaty with Soviet Union. Geo-political and domestic upheavals in 1990s necessitated a strategic shift in India’s foreign policy. The Gulf War (1991-91), the collapse of the Soviet Union (1991) and the economic stagnation at home causing a balance of payment crisis led India to rethink its foreign policy. 

The fourth phase, safeguarding the strategic autonomy (1991-98) came into play. The strategic autonomy manifested conspicuously in exercising its nuclear option (Pokhran-II) in 1998. The emergence of the US as a sole super power also prompted India to change its course. India reached out to engage with the US, Israel and Asean countries. 

In the fifth phase (1998-2013), India acquired the attributes of a balancing power and began to be seen as the counterweight to China, a new economic power. This recognition could be reflected in India-US Nuclear Agreement in 2008. At the same time, India maintained its traditional ties with Russia and made ‘common cause’ with China in BRICS and SCO. 

The sixth phase turned India to multi-alignment (2013-till now). This current strategy emanates from India’s self-realisation of its capabilities and geo-political significance in the existing world politics influenced largely by rise and threat of China. To name a few of India’s power-indicators; it is one of the major world economies (fifth largest), a big technology power (software), global player in certain major issues like climate change (Paris Agreement), anti-terrorism (peace-broker) and a regional power – SAGAR, Act East, BIMSTEC, QUAD, and so on. 

The second format phasing India’s foreign policy consists of three strategies. Nehruvian idealism (1947-62); during this period, India regarded ethics and rule-based order as the guiding principles enshrined in the international institutions. That is why perhaps India took the Kashmir dispute to the United Nations, signed the Panchsheel Agreement with China (remember Hindi-Chini Bhai Bhai mood sweeping across the country), built NAM which was marked by anti-imperialism, anti-colonialism and anti-racism. 

The war with China changed dramatically India’s foreign policy. New Delhi shifted to strategic realism (1962-1991). In this phase, India gave shelter to Dalai Lama to the chagrin of China; India was critical of US action in Vietnam, India liberated Bangladesh in 1971, sent troops to Sri Lanka (IPKF) to quell the Tamil separatist movement, although on hindsight, it was a strategic mistake. 

In the third phase following the foreign currency crisis in 1991, India embraced the policy of economic pragmatism, which primarily meant focussing on India’s growth and development. Following such strategy, India did business with China despite the lingering border disputes, continued arms trade and other imports from Russia despite latter’s decline as a world power and falling out with US, carried on trade even with Pakistan although to a less volume than before. New Delhi negotiated both with Israel and adversarial Arab States. 

From the historical overview of India’s foreign policy, I would like to draw two broad distinct phases in terms of strategy, one non-alignment and the other, multi-alignment. It is to be noted that non-alignment was sought to be worked into “genuine Non-Alignment for a brief period, two-and-half years under Janata Party rule (1977-79)”. It is also worth noting that the Latin American countries seem to be emulating India’s non-aligned strategy re-christening it as “active Non-Alignment” which partly shaped their reactions to the war in Ukraine. 

This policy emerged in 2019 and is still being laid out as a framework of their foreign policy in response to the challenges posed by US-China competition. It means not accepting a priori position of any of great power in conflict. The term ‘active’ refers to a foreign policy in constant search of opportunities, a kind of nimble approach. 

In India’s journey from non-alignment to multi-alignment, is there any room for re-alignment? Recognising the popular aphorism, “people become wiser after the event”, non-alignment was a flawed policy from the word go. If Nehru wanted to stay away from Western powers, why did he stay in the Commonwealth which was created and headed by Britain? In a world, in which countries are inter-dependent as well as antagonistic, it was not feasible to be non-aligned. The non-viability of the strategy was exposed many times in India’s conduct of its foreign policy – 1956 (invasion of Hungary), 1962 (China war), 1968 (attack on Czechoslovakia), 1971 (post-Bangladesh war) and so on. 

Multi-alignment is stating the obvious. No country can function in isolation. Politics is global although strategies in actions are national. Multi-alignment as a strategy seems nebulous; it needs to be clearly defined. Going with everyone conceptually appears to be confusing two potential allies, actual friends and partners. What is therefore needed is re-alignment in India’s foreign policy in keeping with its long-term national interests. ---INFA 

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 6 December 2023

Regional Imbalance

WILL FINANCE PANEL BRIDGE GAP?

By Dhurjati Mukherjee 

The BJP’s victory in three states appears to suggest the promise of development via ‘double engine’ sarkar has takers. And the timing should make the task of the 16^th Finance Commission, recently recommended by the Union Cabinet to be set up, easier. It is to decide on sharing of taxes between the states and Centre. States are entitled to 41% share of the divisible pool, which comprises all taxes, excluding the cesses and surcharges. However, they have been demanding a larger share of the pie, arguing they are burdened by many schemes announced by the Centre. On its part, the Centre believes it’s funding several schemes, such as health and education is part of the States’ mandate. The difference of opinion may steadily disappear now.    

The existence of regional imbalance in India cannot be denied as there has not been balanced development. As in the case of literacy and educational attainment, where the states of southern India are far ahead than others, similarly in financial matters, states in the western part as well as Tamil Nadu and Karnataka in the south are stronger than their counterparts. The pace of growth in the two southern states and in Maharashtra and Gujarat has been phenomenal in recent years and experts believe their performance may be even better in the coming years. 

The per head income of states such as West Bengal, Bihar, Jharkhand and Odisha is far below the national average. In fact, the per head income of Bengal has been one of the lowest in the country in 2022-23 at Rs 141,373 whereas in Telangana, Karnataka and Haryana it’s more than double. These are indicative of regional imbalances in economic development. The Centre’s strategy of tackling this has not been successful enough and India suffers from a strategy of balanced economic development. 

Prior to liberalisation, the Centre’s efforts yielded some results with the economic emergence of Karnataka, Andhra Pradesh (undivided), and Haryana and helped the hilly and smaller states to stand on their own. But presently, the government has hardly any means of restricting regional imbalances. If is left on the market forces and in all likelihoodimbalances in the standard of living of people in different states shall reach a crisis proportion. By 2047, some states will be as prosperous as some East European nations while most others will be comparable to some central African nations. 

According to the International Monetary Fund’s (IMF) estimate, the average GDP per head in India, based on purchasing power parity, was $9,073 in 2023 which came to around Rs 213,215. It is indeed distressing to note that an emerging country like India ranks 127^th and is in the league of small and virtually unnoticed nations like Laos (125), Cape Verde (126) and Bangladesh (128). 

Undeniably, in the coming years some parts of the country will be more equal than others due to the uneven nature of development. An aver­age person in Telangana, Kar­na­ta­ka or Goa will be having more or less a similar standard like those living in the west, comparable to say today’s Hungary or Croatia. Thus, the relative diffe­rences in the economic condi­tions of different states will be more differential than what it is today. 

The present determination to make India the third largest economy of the world after the US and China is obviously a positive development. India’s per capita GDP increased from $442 in 2000 to $2389 in 2022, which is considered quite impressive. But what has been of great concern is the widening inequality in incomes along with regional, spatial and gender disparities. Unless the laggard states can increase their incomes, even if the achievement becomes a reality, the development would not be balanced. 

India’s human development index, which is a composite of incomes, health and education, has been falling rapidly. The nation’s current rank is 132 among 191 countries, which indeed is quite shameful since India is aspiring to be among the top nations of the world. A recent UNDP report found that India’s economic inequalities in wealth and income to be among the highest in the world, which obviously goes against the concept of inclusive growth. Regionally, states comprising 45 percent of the population contain 62 percent of the poor. 

Thus, the importance of the 16^th Finance Commission comes into play. Obviously, the poorer states would be given a larger chunk of funds compared to the performing ones but this strategy, adopted by the earlier Finance Commission, hasn’t yielded expected results. The high growth states continue to make rapid strides in their incomes while only Odisha has shown some promise among the poor states. 

Economic justice demands that the Finance Commission allocate tax proceeds in such a way that the rich states subsidise the poor. Then there is the Backward Region Grant Fund (BRGF) which is implemented in 272 identified backward districts in all states to redress regional development imbalances. Besides, there’s the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), launched in September 2015 for the welfare of tribals and tribal areas and others affected by mining. But all these have not had any significant impact in boosting up the said incomes. 

India’s geographical diversity and different levels of development across regions mean that location specific targeted action would be required in less prosperous regions to ensure a minimum acceptable level of prosperity. The NITI Aayog has aThree-Year Action Agenda which underlined specific action for north Himalayan states, North-Eastern states, coastal regions and islands, desert and drought prone areas. There is obviously the need for implementing this action plan in a diligent and judicious manner. 

The belief that giving more funds to the poor states would result in a shift in the composition of India’s GDP away from agriculture has not become a reality as movement of labour from agriculture and from rural to urban areas has not taken shape. Thus, the inequality among states remains a big challenge, which needs to be seriously looked into and, it would be better, if the responsibility is given to the Finance Commission to suggest ways of improving the per capita income of the laggard states.     

Making agriculture more lucrative through value-addition and setting up agro-based industries may need to be considered. Though there may not be much scope for large-scale industrialisation and thrust on manufacturing in some states, they could concentrate on agro-based and cottage industries as also various types of ancillary products which may have a lucrative export market. Additionally, the electronics and IT sector could set up small hubs in various states as well small pharma manufacturing centres to meet regional demands. 

Economists and financial analysts are unanimous that merely providing funds will not help, unlessit’s supported by a plan, which the laggard states may be advised to follow. Accordingly, there’s anurgent need to frame some mechanism to boost incomes of the non-performing states and bridge the gap.---INFA 

(Copyright, India News & Feature Alliance)