📰 With stealth ship, India in elite group
Defence Minister Nirmala Sitharaman says nation is marching towards indigenisation
•The country is rapidly marching towards indigenisation and the commissioning of the third Kamorta class Anti-Submarine Warfare (ASW) stealth corvette is a classic example of that, said Defence Minister Nirmala Sitharaman.
•She was in Visakhapatnam on Monday at the Eastern Naval Command to commission INS Kiltan , the third of the four Project-28 Kamorta class ASW.
•Addressing the naval officers and the media from the deck of the newly commissioned ship, she said, “This ship is unique, as about 81% is built indigenously and is the first built by India that has a superstructure made up of carbon fibre composite material. This makes it a stealth corvette and makes India one among the few nations that have this technology or this class of ships.”
Builder’s Navy
•The keel was laid in 2010 under the Project-28 scheme and was built by Garden Reach Ship Builders and Engineers (GRSE), Kolkata.
•Ms. Sitharaman said the Indian Navy was moving from the status of a ‘buyer’s navy to builder’s navy.’
•“This is part of Prime Minister Narendra Modi’s ‘Make in India’ initiative and we need to become more self-reliant. We have already gained the expertise in building hulls and we now need to focus on propulsion and weapon technology,” she said. She pointed out that India had a long coastline with a vast EEZ (Exclusive Economic Zone) and there was a need to have a capable and potent navy.
•The Indian Navy, she said, had been playing an important role in defending the borders as well as in peace and humanitarian missions.
•Chairman and Managing Director of GRSE V.K. Saxena said the partnership between GRSE and the Indian Navy began in 1961 and so far it had built over 100 ships for the Navy and the Indian Coast Guard. “In the next few years, we will be delivering about 10 ships to the Navy with state-of-the-art technology,” he said.
Tough steel
•INS Kiltan has been constructed using high grade steel (DMR 249A) produced by the state-owned Steel Authority of India Limited (SAIL). It has a displacement of 3500 tonnes, spans 109 meters in length and 14 meters at the beam and is propelled by four diesel engines to achieve speeds in excess of 25 knots with an endurance of 3450 nautical miles.
•The carbon composite material gives it an extra stealth edge and also lowers the top weight and maintenance cost.
•The installed propulsion and auxiliary systems provides very low radiated underwater noise feature, required for anti-submarine warfare.
•The enhanced stealth features include ‘X’ form of Hull, full beam superstructure, inclined ship sides and use of Infra Red Signature Suppression (IRSS).
📰 Observations confirm neutron star merger
Indian scientists play a significant role in source modelling
•The announcement of the neutron star merger, detected on August 17 by the LIGO-VIRGO collaboration of gravitational wave detectors, has been reinforced by the observation of short gamma ray (light waves) bursts almost simultaneously by other space and earth-based observatories.
•“This discovery is so fundamental that it is definitely a strong candidate for another Nobel prize,” K.G. Arun, who was part of the team that studied the astrophysical implications of the joint detection, said in a press release from the Indian Institute of Technology- Madras.
•Dr. Arun is one of nearly 40 members of the LIGO-VIRGO scientific collaboration who have contributed to the source modelling, developing the algorithms that search for binary mergers amid noisy data from many detectors, testing Einstein’s theory and separating signals from experimental and environmental artefacts. The second part of the discovery — the observation of Gamma ray bursts by several telescopes — includes the observations by the Giant Metrewave Radio Telescope (GMRT), the Himalayan Chandra Telescope (HCT) and AstroSat.
•The sensitive CZTI instrument on AstroSat helped narrow down the location of the gamma-ray flashes. The HCT obtained optical images at locations of neutrinos detected by other telescopes at the same time as the burst, and showed that they were unrelated to the gravitational-wave trigger. The GMRT played a key role in understanding jet physics and refining models of radio emission from the remnant formed by the merging neutron stars.
•P. Ajith of ICTS-TIFR, Bengaluru, one of the leading scientists in the LIGO-VIRGO collaboration, on the importance of the discovery, said: “Neutron-star mergers are incredibly rich and complex phenomena. Virtually every area of physics and astrophysics can learn something from this unique laboratory set up by nature!”
📰 Need to implement progressive laws: CIC
‘They will strengthen governance’
•Chief Information Commissioner of India Rajiv Mathur on Monday called for immediate implementation of the Whistleblowers’ Protection Act, the Lokpal Act and the Lokayukta Act, which would strengthen governance systems further.
•“Although progressive legislation such as the Whistleblowers’ Protection Act, the Lokpal Act and the Lokayukta Act have been enacted, the rules for these Acts have not been framed. As a result, neither the Union government nor States are executing these Acts,” Mr. Mathur said, addressing the valedictory session of the Fifth National Convention on Right To Information here.
•The CIC paid tributes to RTI (Right to Information) activists who lost their lives in their crusade against attempts to suppress information.
•“Bureaucracy cannot deny information in the pretext of the Official Secrets Act. They are accountable to the general public,” he observed.
•Mr. Mathur said, “The Information Commission is trying to clear pendency on a war-footing. By February 2018, there will be no one-year-old case.”
•Mr. Mathur announced that the Commission would analyse second appeals being filed by RTI applicants. “Based on the findings, we would identify the Ministry that is frequently denying information.
•“Subsequently, the same Ministry would be asked to disclose information suo moto,” he said.
📰 ‘Free movement’ along Myanmar border
Home Ministry holds talks with four northeastern States
•The Centre is putting in measures to facilitate free movement of Indian and Myanmarese citizens within 16 km along the Myanmar border.
•On Monday, the Home Ministry held consultations with four States — Mizoram, Nagaland, Manipur and Arunachal Pradesh — on the Free Movement Regime (FMR).
•In June, the Ministry had constituted a committee to examine various methods to curb the misuse of free movement along the Myanmar border, a friendly country, with which it shares unfenced borders and unhindered movement of people across the border.
•The committee headed by Rina Mitra, Special Secretary-Internal Security, visited the border areas in September.
•The move comes in the wake of large-scale displacement of Rohingya people from Rakhine State in Myanmar.
Parallel discussion
•A senior Home Ministry official also said a “parallel discussion” involving the Ministry of External Affairs and their counterparts in Myanmar was on to allow Indian nationals going and staying in Myanmar under the bilateral agreement for up to 72 hours.
•While India allows Myanmarese nationals to stay for 72 hours without visa, Myanmar allows stay only up to 24 hours, an official said.
📰 NITI’s Kumar bats for fiscal stimulus
But additional expenditure should be used only for raising productivity and capex, he says
•NITI Aayog Vice Chairman Rajiv Kumar has pitched for fiscal stimulus to boost growth, with a rider that additional expenditure should be used only for increasing productivity and capital expenditure.
•Faced with slowing economic growth, the industry has been clamouring for a stimulus package from the government. “I do see a case for stimulus,” Mr. Kumar told PTI in an interview. He added, however, that additional expenditure should be used judiciously. Mr. Kumar’s comments come a day after Finance Minister Arun Jaitley saying that he had not promised any fiscal stimulus, but would respond to the emerging situation.
•Mr. Jaitley’s remarks followed increased speculation over a possible fiscal stimulus that can go above Rs 40,000 crore after six successive quarters of dip in the economic growth, which slid to 3—year low of 5.7 per cent in the April—June quarter.
•The finance ministry has pegged the fiscal deficit target for 2017-18 at 3.2% of the GDP and at 3% for the following year. Any fiscal stimulus to boost sagging growth would push up fiscal deficit.
‘More roads, airports’
•Various experts have argued against fiscal stimulus as it would jeopardise the fiscal consolidation programme.
•On apprehensions about the stimulus, Mr. Kumar said: “It depends on how you increase government spending. If you... throw money away and give doles then, yes, of course it will give [the] wrong signal. But if you are doing that by increasing productivity and capital investment by making, for example, more roads, more airports, more railways, nobody can argue that this will give a bad signal.”
•Mr. Kumar further noted that the only issue, then, was whether stimulus could be productively absorbed. “Stimulus money should be used on increasing investment, increasing demand and improving physical and rural infrastructure.”
•The newly constituted Economic Advisory Council to the Prime Minister wants the government to stick to its fiscal consolidation road map and has suggested that stimulus to the industry should not be at the cost of fiscal prudence. The RBI had cautioned the Centre against a stimulus package to revive sagging growth, arguing that breaching the fiscal deficit target will fire up inflation and hurt long-term macroeconomic stability.
•As at August end, the government has already run up 96.1% of its fiscal deficit targets for the year 2017—18 as it has advanced spending on core infra sectors like roads, ports and railways.
•Brokerage firm Nomura has warned that the present macro problems are due to higher spending, not a lack of that. It has also argued that they are not due to low revenue receipts either, hence a pump priming may be counterproductive this time around.
📰 Boosting horticulture through remote sensing
Novel project to be ready by March 2018, says Minister
•Union Agriculture Minister Radha Mohan Singh on Monday announced March 2018 as the deadline to complete the ambitious project of developing the horticulture sector using remote sensing technology and geo-informatics.
•India is the second-largest producer of fruits and vegetables in the world and the biggest producer of fruits such as banana, mango, papaya and lemon among others. But the country still has some distance to cover in terms of exports as post-harvest wastage of produce in India is high.
•In 2015, the Modi government started project CHAMAN — acronym for Coordinated Horticulture Assessment and Management using geo-informatics — to prepare a comprehensive horticultural plan. Using remote sensing technology to study soil conditions, land use, weather and cropping patter, the Centre has chosen 185 districts across the country where seven selected crops are being promoted.
•Once complete, the findings of the project would be shared with all states to give to boost to cultivation of horticultural crops.
States put into groups
•Different states have been divided into different groups to grow banana, mango, citrus fruits, potato, tomato, onion and chilli.
•Sharing the progress of the project CHAMAN at a press briefing, Mr Singh said the Centre would convene a meeting of the northeastern states by January next year as the report on horticulture development for this region was ready.
•“This sector provides nutrient rich crops to the people and better remunerative prices to the farmers and increases their incomes,” Mr. Singh said.
•Under CHAMAN, Tamil Nadu, Andhra Pradesh, Karnataka, Gujarat and Maharashtra have been identified as the major banana-growing states. Mango cultivation is being promoted in Andhra, Bihar, Uttar Pradesh, Karnataka and Telangana, while onion is the focus for Maharashtra, Gujarat, Karnataka and Madhya Pradesh.
📰 Out of UNESCO
The U.S.’s exit should not be seen as a point of no return
•The U.S.’s decision to quit UNESCO is an attempt to reassert geopolitical influence in West Asia. But the withdrawal is, at best, a face-saver for President Donald Trump who has been unable to back his pre-election rhetoric on the Palestinian peace process with substance. In January, for instance, the Trump administration prepared orders to halt U.S. funding to global institutions that advocate membership for the Palestine Authority. In February, Washington blocked the appointment, at the eleventh hour, of a former Palestinian premier to serve in a senior UN position. These one-time decisions are doing nothing for the peace process. Moreover, Mr. Trump has been forced to defer the controversial relocation of the U.S. embassy to Jerusalem and push for a pause in Israeli settlements, even as he prevaricates on the two-state solution.
The U.S., UN and Palestine
•The UNESCO, which designates world heritage spots, accorded recognition in 2011 to Palestine as its 195th member. Ever since, controversies over the historical status of the region’s religious symbols, that have divided the Palestinian Authority and Israel, have come into sharp focus. Washington, long opposed to the admission of Palestine to world bodies until the question of its UN membership was resolved, promptly slashed funding, amounting to about a quarter of UNESCO’s annual budget. The 2012 elevation to a non-member observer status at the UN came as a shot in the arm for Palestinians demanding separate statehood. In the meanwhile, Arab nations vested in decision-making positions at the UNESCO have sought to fast-track the designation of holy sites as endangered heritage sites, alleging Israeli attacks on their authenticity and integrity. Noteworthy is the agency’s July declaration of the bitterly contested shrine in Hebron city as an endangered Palestinian heritage site. While most of Hebron is under Palestine administration, the core of the shrine is surrounded by Israeli military guards. A resolution last year condemned Israel for hampering access for the Palestinians to Jerusalem’s holy places. Under a 2015 proposal, Arab members on the body’s executive aimed to classify the Western Wall, one of the holiest spots of Judaism, as part of the Al-Aqsa Mosque compound in Jerusalem’s Old City. A potential escalation was averted only because the Director-General prevailed against any attempt to reopen the status of this UNESCO heritage location. Israel has denounced these moves and deplored the distortions of the Hebrew context to these sites.
•While Israel has also followed the U.S. lead, it would nevertheless be hasty to view Washington’s exit from the UNESCO as a point of no return. The Reagan administration walked out of the body, objecting to its perceived Soviet slant, only for the U.S. to return during the presidency of George W. Bush, at the peak of U.S. world dominance. The election of Audrey Azoulay, former French Minister of Culture, as the UNESCO’s new head comes at a critical juncture for the institution as it fights to regain its credibility. As globalisation accentuates the need among communities to amplify historical and cultural identities, the challenge could only intensify further.
📰 Avoid the adventurous path
Any aggressive attempt to widen the fiscal deficit will land India’s economy in problems
•The sharp deceleration in the growth of the economy as revealed by the first quarter estimate of GDP released a month ago has been widely commented upon. The policy prescriptions needed to reverse the trend depend on our understanding of the factors responsible for the slowdown. Among other things, one factor that stands out is the steady and sharp decline in the investment rate. The Gross Fixed Capital Formation (GFCF) rate has touched the level of 27.5% in the first quarter of 2017-18. A year ago, it was 29.2%, and a decade ago, it was 10 percentage points higher. In recent years, public investment has shown a small rise. The decline in the investment rate has been largely due to a decline in the private investment rate, both corporate and household.
Fiscal and revenue deficits
•Given this situation, policy initiatives must be directed towards raising private investment. However, some have argued for a strong fiscal stimulus through an increase in public investment by relaxing the fiscal deficit. It is also suggested that what is relevant is revenue deficit and that there is no rationale for having a fiscal deficit target. There are two problems with this argument. First, the focus on fiscal deficit is mainly to ensure that the private sector has sufficient borrowing space. This is clearly set out in the Report of the Twelfth Finance Commission (TFC) chaired by the first author and which was reiterated by the recent Report of the Fiscal Responsibility and Budget Management (FRBM) Review Committee chaired by N.K. Singh, former Revenue and Expenditure Secretary and former Member of Parliament. The argument in the TFC was that when the transferable saving of the household sector relative to GDP is 10% and an acceptable level of current account deficit 1.5%, containing the aggregate deficit of the Centre and States at 6% and providing 1.5% to the public sector enterprises would leave 4% borrowing space to the private sector.
•Similarly, the target of debt-GDP ratio at 60% in 2023 from the present level of 70% (with the Centre and States required to contain their ratios at 40% and 20%, respectively) is supposed to be achieved by limiting the fiscal deficit at 3% of GDP in the first three years and 2.5% in the next two by both the Centre and States.
•Second, over 60% of the estimated fiscal deficit at the Centre in 2017-18 (1.9% out of 3.2%) is revenue deficit. At the State level, when the impact of loan waivers, additional interest payments on account of Ujwal DISCOM Assurance Yojana (UDAY) and possible impact of pay revision is considered, the revenue deficit may increase by 1% of GDP. Thus, the problem of proliferation in revenue deficit continues. The golden rule which the U.K. wanted to follow set no limit on fiscal deficit. But borrowing was limited to only financing capital expenditures. The implication is revenue deficit will be nil. We are far from this.
History of fiscal laxity
•Indian economic history is replete with instances of adverse effects of fiscal expansion on inflation as well as the balance of payments. The huge fiscal expansion in the late 1980s, with the fiscal deficit at more than 10% of GDP leading to the macroeconomic and balance of payments crisis requiring the adoption of structural adjustment programme in 1991, has been very well documented. The recent episode of fiscal expansion after 2008-09 and 2009-10 is fresh in memory. After substantial improvement in the fiscal situation during the period 2004-05 to 2007-08, the implementation of the Pay Commission recommendation, expansion of rural employment guarantee for the whole country and the introduction of the loan waiver led to derailing the process of adjustment in 2008-09, and the fiscal deficit of the Centre increased from 2.5% in 2007-08 to 6.1% in 2008-09. It further ballooned to 6.6% in 2009-10 and the consolidated deficit was 9.4%. This was one of the important reasons for the inflation rate increasing to 10.2% in March 2010, and the average increase in wholesale price index in 2010-11 was 11.1%.
Declining financial savings
•The Annual Report of the Reserve Bank of India (RBI) gives the latest estimate of the financial saving of the household sector for 2016-17 at just about 8.1% of GDP. And if the foreign savings of 2% is added, the transferable savings is just a little over 10%. The aggregate fiscal deficit at the Central and State levels budgeted for 2017-18 is about 6% of GDP, but this is likely to go up after the impact of loan waivers and increase in house rent allowance at the Centre and possible revision of pay scales in the States are taken account of. The annual report also estimates the impact of loan waivers alone at 0.5% of GDP. Taking 6.5% of GDP as the aggregate fiscal deficit and leaving aside 2% for public enterprises, the private corporate sector is left with a borrowing space of just about 1.5% of GDP. At a time when the need is to stimulate private investment, to restrict the space available for it may be counterproductive. In such an environment, there is hardly any scope for reducing the interest rates by the RBI, and even if it did, financial institutions would be unwilling to lend at lower rates. The liquidity crunch may eventually result in monetising the deficits, if not directly but indirectly.
Shortfalls in Centre and States
•As it is, adhering to the fiscal deficit targets set out in the Budgets is going to be challenging. There will be a sharp reduction in the dividends from banking and financial institutions. The RBI has announced that against the expected Rs. 58,000 crore, the actual dividend will be Rs. 36,905 crore, and given the difficulties in the public sector banks, there will be shortfalls in the dividends from them as well. There will be a shortfall in disinvestment and tax revenue collection, if current trends persist.
•The problem of adhering to the fiscal deficit target is not confined to the Centre alone. At the State level, the combined fiscal deficit for 26 States is budgeted at 2.2% of GDP excluding the deficit arising from taking over the power distribution companies (discoms) loans. However, as mentioned earlier, the expenditure on account of loan waivers is estimated at about 0.5% of GDP. Furthermore, following pay revision at the Centre, some of the States may revise their pay scales which could add to the fiscal pressure. There could be a slippage of about 1% GDP in fiscal deficits.
Road map ahead
•The solution to the current slowdown in growth lies in reviving private investment, recapitalising banks to enable them to lend more, and speedy completion of stalled projects. Fiscal policy can at best play a role in creating the appropriate climate. Fiscal prudence is one of the elements in sustaining growth over an extended period. The fiscal deficit rules that we have evolved are consistent with the level of savings and the demands of the various sectors on those savings. Our adherence to the fiscal rules has been weak. They have been more honoured in breach than in observance. We are passing through a difficult situation. Even to maintain government expenditures at the budgeted levels, there will be a slippage in the fiscal deficit budgeted because of the likely fall in revenues. The slippage in fiscal deficit by a few decimal points may not matter but any aggressive attempt to widen the fiscal deficit will land us in problems. Our history is witness to it. We should avoid being adventurous.
