Exam View: The picture of Indian Economy

Context: The financial year began well with the government already making it clear that the budget would be prudent and that there would be no largesse even in a pre-election year. The broad numbers look statistically realistic but the triad of employment, consumption and private investment has to bear fruit.

Decoding the editorial: The picture of Indian economy

• India is the fastest-growing economy at 6-6.5 percent.
• But from a medium-term perspective, there is not too much optimism about being on track for the 8 percent-plus growth rate. The new normal appears to be 6-7 percent.
• The export picture
  • While services have definitely gone against the trend of the global slowdown in 2022, exports of merchandise are not too satisfactory.
  • For example, if refinery products are excluded from the exports basket, there has been a fall in FY23.
  • Indian exports are inexorably linked with global growth and a slowdown does not augur well for them. In 2022, higher crude prices got reflected in both imports and exports.

• The investment picture
  • The official position is that investment is picking up in the private sector, which should ideally get reflected on the funding side.
  • Data on all funding sources show that there is a slowdown.
  • Bank credit is buoyant more on the retail end than manufacturing.
  • Debt issuances are dominated by the financial sector with manufacturing lagging.
  • External Commercial Borrowings (ECBs) have slowed down mainly due to the higher cost of loans. Hence, while several companies have pointed to investing more, these seem, so far, to be more intention than action.
• The consumption picture
  • While there are reports of rural demand being good in FY23, the same is not reflected in the production of consumer goods.
  • The 16 percent growth in nominal consumption in FY23 would amount to just 7 percent in real terms, as inflation has pushed up costs. And this was also brought about by pent-up demand for both goods and services post the full removal of the lockdown in 2022.
  • Also, this was the time when households save less as was reflected in slow growth in deposits.
• The employment picture
  • As per CMIE data, the average unemployment rate is around 7.5 percent, which can now be considered the “natural” rate of unemployment in India.
  • The labour participation rate has been coming down from 46.2 percent in FY17 to 39.5 per cent in FY23.
  • It indicates a growing population in the working age group that is not interested in working. If one combines this with the series of layoffs in several IT or fintech companies, the picture gets darker.
  • The start-ups have not been job creators to the degree that was expected, given the push by the government over the years.

• The banking picture
  • The cleaning up operations as well as the slowdown in the economy, which lowered demand for credit, has helped the banks, especially those in the public sector, to emerge stronger.
  • NPA levels have come down and banks are well-capitalised.
  • Also, profitability has improved as control over the quality of assets has meant lower provisioning for NPAs.
  • The implication is that as and when the economy gets into the take-off mode, banks will be well equipped to provide the funds, which would not have been the case 4-5 years ago.

Source:

https://indianexpress.com/article/opinion/columns/madan-sabnavis-writes-economic-weather-warning-8600413/

In News: India is heating up slower than the world average.

About

The annual mean temperature of the world is known to have increased by 1.1 degree Celsius from the average of the 1850-1900 period. Temperature rise over land is much higher than over oceans.  According to the latest IPCC report Overland, the annual mean temperatures have risen by as much as 1.59 degree Celsius since preindustrial times.

The temperature of the Oceans, in contrast, has warmed by about 0.88 degree Celsius. Because Oceans have a higher capacity to cool themselves down through the process of evaporation. The warmer water evaporates, leaving the rest of the ocean relatively cooler.

The warming trends over the Indian region are very different. Ministry of Earth Sciences report in 2020 shows that annual mean temperatures had risen by 0.7 degree Celsius from 1900, which is significantly lower than the 1.59 degree Celsius rise for land temperatures across the world. It shows that the problem of climate change in India was not as acute as in other parts of the world.

Why is warming over India lower?

Because the increase in temperatures is known to be more prominent in the higher altitudes, near the polar regions, than near the equator. This is attributable to a complex set of atmospheric phenomena, including heat transfers from the tropics to the poles through prevailing systems of air circulation. India happens to be in the tropical region, quite close to the equator.

According to the IPCC report the Arctic region has warmed at least twice as much as the world average. Its current annual mean temperatures are about 2 degrees Celsius higher than pre-industrial times.

Impact of aerosols

• Aerosols have the potential to affect the local temperature in multiple ways. Aerosols scatter sunlight back, so that lesser heat is absorbed by the land.
• Aerosols also affect cloud formation which has an impact on how much sunlight is reflected or absorbed.
• Aerosol concentration in the Indian region is quite high, due to natural as well as man-made reasons.
• Emissions from vehicles, industries, construction, and other activities add a lot of aerosols to the Indian region. A reduction in warming could be an unintended but positive side effect.

Lower Lattitude location of India in the tropics

• A major part of India’s relatively lesser warming can be attributed to its location in the lower latitudes. Higher-latitude countries experience greater warming than lower-latitude countries.
• A majority of the global landmass is concentrated in the northern latitudes. Land areas are more prone to faster, and greater, heating.
• Because of both these reasons — that lands heat up more, and most of the land is located in northern latitudes — the average warming over global land areas has become more pronounced.

https://indianexpress.com/article/explained/explained-climate/climate-change-why-india-is-heating-up-slower-than-the-world-average-8602414/

In News: Oil marketing firms received 45% of contracted 514 crore litres of ethanol for the current supply season ending in October, despite lower sugar output. This would help them increase the blending to 11.65% against 10% a year ago and achieve the target of 12% for ethanol blending with petrol.

About Ethanol blending:

• An ethanol blend is a blended motor fuel containing ethyl alcohol that is at least 99% pure and is derived from agricultural products, and blended exclusively with gasoline. Apart from sugarcane-based raw materials, ethanol production from surplus rice with Food Corporation of India and Maize is also allowed.
• The National Policy on Biofuels which had set a target of 2030 to meet 20% ethanol blending was amended to move ahead the target to 2025-26.
• Oil marketing companies (OMCs) have contracted to buy 374 crore litres from sugar-based distilleries and 140 crore litres from grain-based plants.
• Government has been implementing the Ethanol Blended Petrol Programme wherein OMCs sell petrol blended with ethanol. Recently, PM launched a pilot project for E20 fuel, 2 years ahead of target.
• Ethanol fuels are less polluting, cost effective, lower import bills and help in achieving energy security. It also brings in farmers in the energy supply chain and engages them in the energy economy.

Source:

https://www.thehindubusinessline.com/economy/agri-business/sugar-mills-on-course-to-meet-12-ethanol-blending-target/article66830916.ece

In News: As per the new analysis by UNICEF, multiple crises including conflict, climate shocks, and the ongoing fallout from COVID-19 are threatening to reverse hard-earned gains made reducing child marriage in the last decade.

About Child Marriages:

• Child Marriage is a marriage or an informal union entered into by an individual before reaching a certain age as specified by law. In India, the minimum legal age for marriage of a girl is 18 years and for boys is 21 years.
• Globally, an estimated 640 million girls and women alive today were married in childhood.
• Despite decline in share of women being married in childhood from 21% to 19%, global reductions at a 20 times faster rate is needed to meet Sustainable Development Goal of ending child marriage by 2030.
• Sub-Saharan Africa currently shoulders the second largest global share of child brides i.e. 20%.
• Latin America and the Caribbean is also falling behind and are on course to have the second-highest regional level of child marriage by 2030.
• Although India has recorded significant progress in recent decades, it still accounts for one-third of the global total.

Consequences of child marriage:

• Deprivation of basic rights such as Right to Education, Right to Rest and Leisure, Right to Protection from Mental or Physical Abuse including Rape and Sexual Exploitation.
• Risk of child and maternal health complications due to increased risk of early pregnancy.
• Disempowerment of Women since they remain dependent and underpowered due to lack of education.
• Mental health issues since they get isolated from friends and family members.

Source:

https://www.unicef.org/press-releases/global-polycrisis-creating-uphill-battle-end-child-marriage-unicef

In News: The RBI increased its gold reserves by nearly 5% to touch 794.64 metric tonnes in fiscal 2023, as part of the diversification process, since gold is considered a more safe, secure, and liquid asset, to safeguard its returns amid global uncertainty and a rising inflation scenario.

About India’s forex reserves:

• 4 major components of India’s forex reserves are:
  • Foreign Currency Assets
  • Gold
  • Special Drawing Rights (SDR)
  • Reserve positions at IMF

• In its recent report, RBI said that 437.22 tonnes of gold is held overseas with the Bank of England and the Bank of International Settlements (BIS), while 301.10 tonnes of gold is held domestically.
• As on March 31, 2023, the country’s total forex reserves stood at $578.449 billion, and gold reserves were pegged at $45.2 billion i.e. around 7.81%.
• As per the World Gold Council report, India is the 2^nd largest gold jewellery consumer in the world with rural India is the largest consumer of gold jewellery occupying 55-58% of the market share.

Reasons for investment in Gold: Along with RBI, other central banks such as the Monetary Authority of Singapore, People’s Bank of China and Central Bank of the Republic of Turkey have also been purchasing gold. This is because:

• To diversify portfolios and hedge against erratic exchange rate of currencies during global uncertainty.
• To hedge against the weakening of the dollar and growing geopolitical uncertainty which could lead to negative interest rates as witnessed in the past.
• Gold is a safe asset to have as it has liquidity, has an international price which is transparent, and as it can be traded anytime.

Source:

https://indianexpress.com/article/explained/explained-economics/rbis-hoard-of-gold-now-almost-800-tonnes-whats-behind-the-gold-rush-by-central-banks-8599547/

In News: The National Highways Authority of India (NHAI) is implementing changes to regenerate investor interest in the Build-Operate-Transfer (toll) model for highway construction.

About Built Operate Transfer (BOT) Model:

• The Build-Operate-Transfer (BOT) model is a form of public-private partnership (PPP) used in infrastructure projects, particularly highway construction.
• In this model, the private entity (concessionaire) is responsible for financing, constructing, and operating the infrastructure project.
• While the land acquisition is the responsibility of NHAI and the concessionaire is allowed to collect tolls from users to recover their investment and make a profit.
• After a specified period, typically ranging from 20 to 30 years, the ownership and operation of the project are transferred to the government or relevant public authority.
• This model aims to attract private investors by providing them with the opportunity to build and operate infrastructure projects and generate revenue through toll collection.
• Only projects that are financially viable or can receive viability gap funding are offered for bidding under the BOT-Toll model.
• The National Highways Authority of India (NHAI) commits to providing 90% of the construction zone (land) required for executing BOT-Toll projects.
• The BOT model was extensively used between 2007 and 2014 but faced challenges, leading to a slowdown in highway construction.
• NHAI has however targeted to construct 60% of highways through HAM, 30% through EPC, and 10% through BOT-Toll in its recent vision roadmap.
• In this regard, the Ministry of Road Transport and Highways has set ambitious targets for road project awards, aiming to award 12,000 km of road projects in the upcoming fiscal year.

https://www.financialexpress.com/business/roadways-building-highways-build-operate-transfer-toll-model-to-be-tweaked-further-to-regenerate-interest-of-investors-3077984/

In News: Govt. Panel Proposes Ban on Diesel 4-Wheeler Vehicles by 2027

About Panel on Diesel Vehicles:

• The Ministry of Petroleum and Natural Gas in India has formed a panel that recommends a ban on diesel-powered four-wheeler vehicles to reduce carbon emissions.
• The panel suggests banning the use of diesel-powered four-wheelers by 2027 in cities with over a million people and polluted towns.

Major Recommendations:

• The panel has recommended transitioning to electric and gas-fuelled vehicles to cut emissions and promote cleaner transportation.
• It has been proposed that no diesel buses be added for city transport from 2024 onwards and by 2030, all city buses should be electric for public transportation.
• Extending of incentives provided under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) scheme beyond March 31 to boost electric vehicle usage in the country.
• Higher usage of railways and gas-powered trucks for cargo movement and has proposed that the railway network to be fully electric within two to three years.
• The panel has also suggests considering the construction of underground gas storage equivalent to two months' demand.
• Depleted oil and gas fields, salt caverns, and aquifers can be utilized for gas storage, potentially involving foreign gas-producing companies.
• With India aiming to increase the share of gas in its energy mix from 2% to 15% by 2030, gas can serve as a transition fuel for 10-15 years till Long-distance buses can transition to electricity in the long term.

https://www.thehindu.com/news/govt-panel-proposes-ban-on-diesel-4-wheeler-vehicles-by-2027/article66826148.ece

In News: Common Uniform for High-Rank Officers in Army from August 1

About Common Uniform:

• The Indian Army has recently decided to implement a common uniform for brigadiers and above-rank officers from August 1.
• The decision aims to promote a common identity and approach in service matters among senior leadership.
• The uniform standardization includes the headgear, shoulder rank badges, gorget patches, belt, and shoes of senior officers.
• Colonels and below-rank officers will not be affected by the change and will continue to wear their existing uniforms.
• The adoption of a common uniform reinforces the Indian Army's commitment to fairness and equity besides strengthening the sense of unity and reflecting the true ethos of the Indian Army.
• Different types of uniforms and accouterments in the Indian Army have specific associations with respective arms, regiments, and services.
• At present, the uniform rule in the Indian army varies based on the soldier's rank, regiment, or specific roles within the Army.

https://www.thehindu.com/news/national/common-uniform-for-brigadiers-and-above-rank-officers-in-army-from-august-1/article66829953.ece

Why in news? Recently, India has extended a $1 billion credit line for Sri Lanka by one year.

About:

• It is a credit facility extended by a bank or any other financial institution to a government, business, or individual customer.
• The borrower can access funds from the Line of Credit (LOC) at any time as long as they do not exceed the maximum amount (or credit limit) set in the agreement and meet any other requirements such as making timely minimum payments.
• Credit line was part of about $4 billion in emergency assistance extended by India during the peak of Sri Lanka’s financial crisis early last year.
• Earlier India, Japan, and China — Sri Lanka’s top three bilateral creditors — played a crucial role in unlocking IMF assistance to it by providing financing assurances.

https://m.timesofindia.com/world/south-asia/india-extends-1-billion-credit-line-for-sri-lanka-by-a-year/articleshow/100097708.cms

Why in news? Recently, Union Home Minister laid the foundation stone of various development projects of the Land Port Authority of India.

About:

• Land Port Authority of India is founded in 2012.
• It is a statutory body (created through the Land Ports Authority of India Act, 2010), under the Ministry of Home Affairs, to develop and manage facilities for the cross-border movement of passengers and goods at designated points along international borders.
• It is responsible for creating, upgrading, maintaining, and managing border infrastructure in India.
• It manages several Integrated Check Posts (ICPs) all across the Borders of India.
• There are currently nine Land Ports operational in India at Attari, Agartala, Petrapole, Raxaul, Jogbani, Moreh, Sutarkandi, Srimantapur, and PTB at Dera Baba Nanak.

https://indianexpress.com/article/upsc-current-affairs/upsc-key-may-10-2023-know-about-nagara-style-of-architecture-land-ports-authority-of-india-and-cyclone-8602530/

Why in news? Recently, India Post signed an MoU with the Confederation of All India Traders (CAIT) and Tripta Technologies for the operationalization of a portal called ‘Bharat EMart’,

About

• Bharat e-mart portal will provide the facility of pick-up of consignments from the premises of traders and will ensure delivery at the doorsteps of consignees across the country.
• It is expected to provide much-needed logistics support to small traders in India, which will increase their businesses and employment opportunities.
• It is estimated to benefit eight crore traders associated with CAIT.

More Information:

• India Post in the recent past has entered into similar agreements with Government e-Marketplace (GeM), Regional Centers of Tribal Cooperative Marketing Development Federation of India Limited (TRIFED), to provide pick-up and delivery of parcels at the doorsteps of the consignees.
• India Post will onboard itself on the Open Network for Digital Commerce (ONDC) platform, being developed by the Ministry of Commerce as a logistics service provider.

https://www.thestatesman.com/india/india-post-signs-mou-becomes-logistics-partner-for-crores-of-traders-1503179954.html

Why in news? Glaciologists have found the grounding line of Petermann Glacier in northwest Greenland to shift substantially during tidal cycles, allowing warm seawater to intrude and melt ice at an accelerated rate.

About:

• Petermann Glacier is a large glacier located in North-West Greenland to the east of Nares Strait.
• It connects the Greenland ice sheet to the Arctic Ocean near 81°N.
• Petermann’s grounding line “migrates between 2 and 6 kilometers as tides come in and out.
  • Grounding line is the area where the ice sheet begins to extend out on top of the ocean.
  • This revelation is against the common belief of the scientists that the grounding line do not migrate with the tides.

https://edition.cnn.com/2023/05/08/us/greenland-petermann-glacier-melting-climate/index.html

Why in news? Recently, International Business Machines Corp (IBM.N) launched watsonx.

About:

• Watsonx is a new artificial intelligence and data platform to help companies integrate AI in their business.
• It provides self-service access to high-quality, trustworthy data, enabling users to collaborate on a single platform.
• It helps facilitate the entire data and AI lifecycle, from data preparation to model development, deployment and monitoring.
• It could “learn” and process human language.
• companies can use the watsonx platform to train and deploy AI models, automatically generate code using natural language and use various large language models built for different purposes such as chemical creation or climate change modeling.

https://www.reuters.com/technology/ibm-unveils-new-watsonx-ai-data-platform-2023-05-09/

Why in news? Recently, Human rights groups accused Myanmar’s military of using thermobaric bomb.

About:

• Thermobaric bomb is also known as aerosol bombs, fuel air explosives, or vaccum bombs.
• These are called vacuum bombs as they suck in oxygen from surrounding areas to generate high-voltage explosions.
• It is a fuel container with two distinct explosive charges inside of it.
• Thermobaric bom can be dropped as a bomb from an aeroplane or launched as a rocket.
• When it hits its target, first explosive charge opens the container and widely scatters fuel mixture as a cloud.
• A second charge then detonates the cloud, resulting in a huge fireball, a massive blast wave and a vacuum which sucks up all surrounding oxygen.
• There are no international laws specifically banning their use.
• A thermobaric weapon causes significantly greater devastation than a conventional bomb of comparable size.

https://www.aljazeera.com/news/2023/5/9/hrw-says-myanmar-used-fuel-air-explosive-on-army-rule-opponents