📰 Exports cross $400 billion annual target as goods shipments jump
PM lauds farmers, weavers and MSMEs for the achievement
•India’s annual goods exports crossed the $400-billion mark for the first time ever, the government announced on Wednesday, buoyed by an increase in shipments of merchandise, including engineering products, apparel and garments, gems and jewellery and petroleum products.
•Marking the “first time ever” development, Prime Minister Narendra Modi congratulated the manufacturers, farmers and weavers for achieving this target.
•Commerce and Industry Minister Piyush Goyal asserted that neither the COVID-19 pandemic nor the global uncertainties following the Ukraine crisis had affected India’s ability to reach its export goals.
Milestone, says Modi
•“India set an ambitious target of $400 billion of goods exports and achieves this target for the first time ever. This is a key milestone in our Aatmanirbhar Bharat journey,” Mr. Modi said in a message.
•Exports had reached $331.02 billion in the pre-pandemic fiscal year of 2018-19. Shipments have so far increased by $25.19 billion during the month of March and by March 31, the total figure is expected to be $410 billion.
•Commenting on the development, Mr. Goyal said the boost in the exports was likely to bolster India’s position in the ongoing negotiations for Free Trade Agreements (FTAs) with several trade partners.
•Noting that the agriculture sector too had recorded its highest-ever export during 2021-22 with the help of export of “rice, marine products, wheat, spices and sugar”, Mr. Goyal termed the development a “Made in India blockbuster” and a “collective show of strength”.
•“A country which is self-confident, which provides for its needs where people respect domestically made products — and we are able to work with the rest of the world from a position of strength and are able to take on challenges of all sorts and compete on the strength of our farmers who toil day and night to produce truly exotic and wonderful fruits and vegetables and our fishermen who go out into the sea... it’s truly a time for all of us to reflect on our strengths and our future,” said Mr. Goyal, who dedicated the achievement to everyone in “Team India”.
Collaborative effort
•The Minister attributed the success to the coordination between the government, the industry and various Ministries, including the diplomatic arm. He said Indian embassies and envoys had explored new opportunities across the world to help achieve the target.
•“We broke every silo within the government... our missions abroad, and collectively everybody worked for a common purpose,” said Mr. Goyal who thanked banks, insurance companies and India’s diplomats.
•“Crossing $400 billion is a remarkable achievement particularly as we will be adding over $110 billion in one year to reach here, despite huge logistics challenges, including container shortage, sky rocketing freight and liquidity constraints,” said A. Sakthivel, president of the Federation of Indian Export Organisations (FIEO).
How will the next generation of lunar exploration operate and what are its objectives?
•The story so far: On March 17, the National Aeronautics and Space Administration (NASA) rolled out its Artemis I moon mission to the launchpad for testing at the Kennedy Space Centre in Florida, United States. The Space Launch System (SLS) rocket and Orion capsule of the mission were hurled out to the launchpad by NASA’s Crawler-Transporter 2 vehicle.
What is the Artemis mission?
•NASA’s Artemis mission is touted as the next generation of lunar exploration, and is named after the twin sister of Apollo from Greek mythology. Artemis is also the goddess of the moon.
•Artemis I is the first of NASA’s deep space exploration systems. It is an uncrewed space mission where the spacecraft will launch on SLS — the most powerful rocket in the world — and travel 2,80,000 miles from the earth for over four to six weeks during the course of the mission. The Orion spacecraft is going to remain in space without docking to a space station, longer than any ship for astronauts has ever done before.
•The SLS rocket has been designed for space missions beyond the low-earth orbit and can carry crew or cargo to the moon and beyond. With the Artemis programme, NASA aims to land humans on the moon by 2024, and it also plans to land the first woman and first person of colour on the moon.
•With this mission, NASA aims to contribute to scientific discovery and economic benefits and inspire a new generation of explorers.
•NASA will establish an Artemis Base Camp on the surface and a gateway in the lunar orbit to aid exploration by robots and astronauts. The gateway is a critical component of NASA’s sustainable lunar operations and will serve as a multi-purpose outpost orbiting the moon.
•Other space agencies are also involved in the Artemis programme. The Canadian Space Agency has committed to providing advanced robotics for the gateway, and the European Space Agency will provide the International Habitat and the ESPRIT module, which will deliver additional communications capabilities among other things. The Japan Aerospace Exploration Agency plans to contribute habitation components and logistics resupply.
What is the mission trajectory?
•SLS and Orion under Artemis I will be launched from the Kennedy Space Centre in Florida, U.S. in the summer of 2022. The spacecraft will deploy the interim cryogenic propulsion stage (ICPS), a liquid oxygen/liquid hydrogen-based propulsion system that will give Orion the thrust needed to leave the earth’s orbit and travel towards the moon.
•On its way to the moon, Orion will be propelled by a service module provided by the European Space Agency (ESA). The spacecraft will communicate with the control centre back on Earth through the deep-space network. It will fly around 100 km above the surface of the moon and use its gravitational pull to propel Orion into an opposite deep orbit around 70,000 km from the moon, where it will stay for approximately six days. The aim of the exercise is to collect data and to allow mission controllers to assess the performance of the spacecraft.
•To re-enter the earth’s atmosphere, Orion will do a close flyby within less than 100 km of the moon’s surface and use both the service module and the moon’s gravity to accelerate back towards the earth. The mission will end with the spacecraft’s ability to return safely to the earth.
What are the future missions in the Artemis programme?
•The second flight under the programme will have crew on board and will test Orion’s critical systems with humans onboard. Eventually, the learnings from the Artemis programme will be utilised to send the first astronauts to Mars. NASA plans on using the lunar orbit to gain the necessary experience to extend human exploration of space farther into the solar system.
📰 The controversy over the proposed Mekedatu water project
Why is the drinking water project a source of confrontation? Why are both parties unable to come to a settlement?
•The story so far: The stage appears set for a summer of discontent yet again, as Karnataka and Tamil Nadu are heading for a political confrontation over the Mekedatu drinking water project across river Cauvery, proposed by the former. Within days of Tamil Nadu Assembly’s resolution against the project, Karnataka’s legislative assembly is set to counter it with a resolution seeking the project’s early implementation and clearances from the Centre.
•As Karnataka heads into an election year in 2023, the Mekedatu issue has been resonating within Karnataka and in Tamil Nadu as well. With Cauvery being an emotive issue that binds people in the Cauvery basin districts in Old Mysore region, Mekedatu is likely to impact election results.
•In Karnataka, the latest development on Cauvery has brought together the political class across parties, which were divided over the issue just a month ago by accusing each other of delaying the project. The BJP government was on tenterhooks after Congress took out a 170-km padayatra from Mekedatu to Bengaluru seeking the project's early implementation. They also accused the Centre of delaying the project for political gains in Tamil Nadu. The padayatra was dubbed by the ruling dispensation as a political tool to consolidate the dominant Vokkaliga votes in the Old Mysore region who lean towards the regional party Janata Dal (Secular).
•However, closing ranks, leaders of BJP, Congress and JD (S) have objected to the Tamil Nadu Assembly’s resolution as they see it as an "interference" in a project that has been proposed within the jurisdictional limits of Karnataka. With the Chief Minister Basavaraj Bommai taking the lead by announcing piloting of a resolution, parties feel that it was "unfair" on the part of Tamil Nadu, which has implemented drinking water projects across Cauvery in its territorial jurisdiction, to oppose a drinking water project proposed by Karnataka.
•As far as Tamil Nadu is concerned, it has executed drinking water supply projects from what is available to it, without seeking to make any additional claim.
What is the project?
•Originally mooted in 1948, Mekedatu (which translates as Goat’s crossing) is a drinking water cum power generation project across river Cauvery. Karnataka gave the project shape after the final award of the Cauvery Water Disputes Tribunal was notified in February 2013 allocating the riparian states their shares. After a pre-feasibility study report was submitted in 2018, the State submitted a detailed project report to the Central Water Commission in 2019. The ₹9,000 crore balancing reservoir at Mekedatu on the Karnataka-Tamil Nadu border envisages impounding of 67.15 tmc (thousand million cubic) ft. of water. The project, which will involve submergence of nearly 5,100 hectares of forest in Cauvery wildlife sanctuary hosting rich flora and fauna, will help the state in utilising the additional 4.75 tmc ft. of water allocated by Supreme Court in 2018 for consumptive use for drinking purpose for Bengaluru and neighbouring areas. Karnataka’s share in the award has been decided at 284.75 tmc ft. In July 2019, the Expert Appraisal Committee on River Valley and Hydroelectric Projects constituted by the Union Ministry of Environment, Forest and Climate Change (MoEFCC) has said the proposal could be reconsidered only after Tamil Nadu and Karnataka reach an “amicable solution.”
How will it benefit Karnataka?
•The water from Mekedatu is to be pumped to quench the thirst of the burgeoning population of Bengaluru which is estimated to be around 1.3 crore. Currently, more than 30% of Bengaluru is dependent on borewell water. Ramanagara and Bengaluru rural districts will also benefit. Along with the 5th stage of the Cauvery Water Supply Scheme, which will be completed shortly, the water from Mekedatu is projected to meet the water requirement of the State capital for the next 30 years. Besides, there are also plans to generate 400 MW of power. The revenue earned from power generation is expected to compensate the Government its investment on the project within a few years. Karnataka argues that the reservoir will also help to ensure monthly flow stipulated in the award for Tamil Nadu rather than harm the neighbouring State's interest in any way.
What is the current status?
•The project is now before the Cauvery Water Management Authority. The Authority is exploring the possibility of having an exclusive discussion on the project, when the matter is sub judice. Apart from writing to the Centre to withdraw the permission given to prepare the detailed project report (DPR), Tamil Nadu has also filed a petition before the Supreme Court, explaining its objections against the project. The Centre and Karnataka have also filed counter affidavits.
What is Karnataka’s stand?
•Karnataka says that there is no case for Tamil Nadu after its share of 177.75 tmc ft. of water is ensured at the inter-State border gauging centre at Biligundlu. Also, the project falls inside the jurisdictional limit of Karnataka and Tamil Nadu’s permission is not needed. The State also argues that since there is no stay in any court for the project, Karnataka can go ahead. On utilising the surplus water, Karnataka says that any allocation in this sphere should be done after hydrology studies to ascertain the quantum of excess water available in the basin.
Why is Tamil Nadu opposed to it?
•Tamil Nadu feels that Karnataka, through the project, will impound and divert flows from “uncontrolled catchments” to it, a component which was taken into account by the Tribunal in the 2007 order while arriving at the water allocation plan for the State. As per an estimate, around 80 tmc ft of water flows annually to Tamil Nadu, thanks to the catchments including the area between Kabini dam in Karnataka and Billigundulu gauging site on the inter-State border, and the area between Krishnaraja Sagar dam in Karnataka and the gauging site. As the upper riparian State has adequate infrastructure even now to address the water needs of Bengaluru, there is no need for the Mekedatu project, according to Tamil Nadu. Mekedatu also does not find mention in the Tribunal’s final order or the Supreme Court judgement. Besides, given the unpleasant experiences that it has had with Karnataka in securing its share of the Cauvery water, as per the monthly schedule of water release, Tamil Nadu is wary of assurances from the other side.
Is Karnataka ready for negotiation?
•No. A recent suggestion by the Union Water Resources Minister Gajendra Singh Shekhawat for a negotiated settlement raised a storm in Karnataka’s political circles and the State Water Resources Minister Govind Karjol met him to reiterate the State’s stand. Karnataka has said that there is no scope for negotiation in any interstate river water sharing issue where the tribunal award has been concluded and Karnataka’s right on water has been established after the award has been gazetted.
📰 Russia’s war must stop
The EU stands for the rule of law against the rule of the gun
•In the 21st century, on the European continent, bombs are again killing children, women and destroying civilian infrastructure. Russian President Vladimir Putin has decided to unleash an unprovoked, illegal aggression against a neighbouring, sovereign country and its population. In violation of Russia’s international commitments, in violation of international law and the United Nations Charter.
An unjustified war
•The United Nations General Assembly (UNGA) adopted on March 2 the resolution on 'Aggression against Ukraine', by an overwhelming majority of 141 in favour to five against, with 35 abstentions. The UNGA issued a resounding condemnation of President Putin’s illegal and unprovoked attacks on a free and sovereign state. The UNGA has been speaking loud and clear in defence of the values and principles enshrined in the UN Charter. Russia must stop and withdraw all military forces from the entire territory of Ukraine – immediately, completely and unconditionally. The International Court of Justice on March 16 also ordered Russia to suspend its military operation in Ukraine. President Putin must heed this clear decision from the international community. This unjustified war must stop.
•Across Ukraine, we see the violence and destruction caused by the Russian military, including wide-scale indiscriminate attacks on civilian targets. An Indian student lost his life in Kharkiv on March 1 due to indiscriminate Russian shelling. A children’s hospital and its maternity ward were bombed in Mariupol on March 9. In the past few days, a theatre and then an art school sheltering civilians and children were bombed by Russian forces, again in Mariupol.
•Hundreds of civilians have died and more than three million people, mostly women and children, have fled the violence – with many more to come. The European Union (EU), its Member States and ordinary citizens are offering shelter and support to all those fleeing the violence unleashed by Russia, regardless of whether they speak Russian or Ukrainian, of their nationality, ethnicity or skin colour.
•The EU together with its friends and partners worked hard for months to avert this war and pursue the path of diplomacy. There was no threat emanating from Ukraine. President Putin chose to unleash an invasion, a fully-fledged war, violating the most basic principles of international law and all agreements, covenants and treaties underpinning Europe’s security such as the Helsinki Final Act or the Paris Charter – to which Russia is a party. This multilateral framework is the foundation of European security, including Russia’s security. There can be no justification for President Putin’s attack against a sovereign country.
•The Kremlin underestimated the resistance of the people of Ukraine against such unprovoked and unjustified aggression. Ukraine has resisted despite the overwhelming number of Russian forces and the outrageous escalating tactics that the Kremlin has chosen, including attacks on residential areas and nuclear power plants.
The EU is united
•President Putin may have counted on the EU to be divided. Instead, he has led Russia into growing isolation. The EU has shown unity and taken concrete steps with real bite. From the start of the war, we have worked to support Ukraine and condemn President Putin’s actions. We reject a world where “might makes right”.
•We have adopted tough and unprecedented sanctions, targeting the sectors that are key in financing and supporting this war - the financial, energy and transport sectors - and we have placed restrictions on dual use goods. The list of Russian individuals sanctioned now include President Putin and Minister Sergey Lavrov as well as top oligarchs, political and military figures who have responsibility for the aggression.
•In addition, we have cut off the most significant Russian banks from the SWIFT system and frozen all transactions with the Russian Central Bank. All EU member states have closed their airspace to Russian aircraft. EU heads of state and government met in Versailles on March 10-11 and adopted further important measures, such as reducing drastically the EU energy dependency, phasing out Russian gas, oil and coal and bolstering our defence capabilities. These sanctions will come at a cost for our economy, but investments today will make us more independent tomorrow.
•We are taking these measures to isolate further Russia and drain the resources to fund this war. Russia and its leaders cannot grossly violate international law and, at the same time, expect to benefit from the privileges of being part of the international economic order. The international community shall stand united to stop President Putin’s war machine.
•We will also continue to fight the Kremlin’s disinformation, including the fake narrative about NATO as a threat to Russia: there was no NATO threat whatsoever. There was no enlargement process going on for Ukraine. There were no NATO weapons in Ukraine, no provocation. The aggressor tries to pose as a victim but the facts speak for themselves: death and destruction upon defenceless civilians in Ukraine.
•Ukraine has been attacked and is defending itself. The EU has therefore decided to support Ukraine financially and supply it also with military equipment and platforms, for the first time in the history of the EU. Russia’s outrageous attack on Ukraine was a shock, sending waves across the continent and further afield, signalling that it prefers a world where the rules-based international order gives way to the law of force. The reaction from Europe has been consistent and determined. We stand with Ukraine.
•As the UN Secretary General said: “We need an immediate cessation of hostilities and serious negotiations based on the principles of the UN Charter and international law.” We have to ramp up pressure on the Kremlin to stop this war.
A watershed moment
•We do not know when or how this conflict will end. We want Russia to come back to reason so that peace can be re-established in Ukraine and the European continent. This is a watershed moment. Repercussions will have a global impact and the risk of further escalation cannot be ruled out. The EU will stand for the rule of law against the rule of the gun. The international community as a whole has to stand for a rules-based order and shall prevail against the dark vision of a world of naked aggression and brutality.
📰 Global uncertainties, India’s growth prospects
Normalisation of the economy has been disturbed and the growth objective would be served by apt fiscal policy moves
•On February 28, 2022, the National Statistical Office (NSO) released India’s GDP data for Q3 of 2021-22 along with Second Advance Estimates (SAE) for 2021-22. Post COVID-19, the normalisation of the Indian economy has now been disturbed by the ongoing geopolitical uncertainties.
Growth performance
•In the COVID-19 year of 2020-21, both real GDP and GVA contracted by minus 6.6% and minus 4.8%, respectively. The NSO’s SAE show that real GDP and GVA growth are estimated to recover to 8.9% and 8.3%, respectively, in 2021-22. Despite this improvement, the magnitude of real GDP at ₹147.7 lakh crore in 2021-22 is only marginally higher than the corresponding level of ₹145.2 lakh crore in 2019-20. The NSO’s GDP data highlights that in 2021-22, the nominal GDP growth at 19.4% is significantly higher than the real GDP growth due to an inordinately high implicit price deflator (IPD)-based inflation rate of 9.6%. Monetary policy authorities need to take note of this.
•The magnitudes of all demand components in 2021-22 have surpassed their corresponding levels in 2019-20. However, the growth of consumption and investment demand — as measured by private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF) in 2021-22 over 2019-20 is only 1.2% and 2.6%, respectively, suggesting sluggish revival in domestic demand. On the output side, the 2021-22 magnitude of the trade, transport et.al sector, which has many contact-intensive segments, has remained below its corresponding level in 2019-20 by ₹2.9 lakh crore. Growth in the construction sector in 2021-22 was at only 1.9% over 2019-20.
•On a quarterly basis, both GDP and GVA show normalising growth with waning base effects. Real GDP growth moderated from 20.3% in Q1 to 5.4% in Q3 of 2021-22. Similarly, real GVA growth also fell from 18.4% to 4.7% over this period. The implied Q4 GDP and GVA growth rates are estimated to be even lower at 4.8% and 4.1%, respectively. Thus, without a base effect, quarterly growth performance appears to be averaging at less than 5%. Assuming some base effects to continue in the first two quarters, the annual growth in 2022-23 may not be more than 7%. Even this may not be realised due to the ongoing geopolitical conflict.
Crude upsurge impact
•It is difficult to arrive at precise estimates of the impact of the increase in global crude prices, but some idea can be provided using the Reserve Bank of India (RBI)’s recent estimates (2021) of the growth and inflation effects of an increase of U.S.$10/bbl., ceteris paribus. The estimated impact is a reduction in real GDP growth by 27 basis points and an increase in CPI inflation by 40 basis points. This is based on using the baseline global crude price level of U.S.$75/bbl. For the full year of 2022-23, we may consider an average global crude price of U.S.$100/bbl. as a benchmark, although in the short run, it has already surged to U.S.$123.21/bbl. (average Brent crude price for the week ending March 7, 2022). An increase of U.S.$25/bbl. from the baseline price of U.S.$75/bbl. would lead to an estimated reduction in growth of 0.7% points and an increase in inflation of nearly 1% point. With reference to baseline growth for 2022-23 at 7% and CPI inflation at 5%, the revised levels of these may be put at 6.3% and 6%, respectively, due to the impact of crude price upsurge by an assumed margin of U.S.$25/bbl. through the year. The impact would be much larger if the margin of increase is enhanced. If the prices of other imported commodities also increase, the inflation impact will be higher.
Other challenges
•In regard to fiscal implications, reference may be made to the budgeted nominal GDP growth forecast for 2022-23 at 11.1%. Assuming a revised real growth component of 6.3% and an IPD-based inflation component of 6.5%, which may be slightly higher than the corresponding CPI inflation, we may have a revised nominal GDP growth close to 13.0%. Applying on this, a tax buoyancy of 1, the resultant Centre’s gross tax revenues (GTR) would be higher than the budgeted magnitude of ₹27.6 lakh crore by a margin of about ₹3.2 lakh crore. Alongside, there would also be increases in some components of expenditures linked to prices of petroleum products, including petroleum and fertilizer subsidies. The Government should attempt to keep the fiscal deficit at the budgeted level.
•Other economic challenges emanating from global uncertainties may include a worsening of the current account balance due to higher import bills with a depreciating rupee. A study by the RBI in 2019 had estimated an increase in the current account deficit (CAD) following a U.S.$10/bbl. increase in global crude price, to be nearly 0.4% points of GDP. Thus, for an increase of U.S.$25/bbl. in global crude prices, the CAD may increase by 1% point of GDP. The RBI Professional Forecasters Survey’s median estimate of CAD at 1.9% of GDP for 2022-23 may have to be revised upwards to 2.9%.
•There would also be some sectoral supply-side bottlenecks and cost escalation. Sectors that draw heavily on petroleum products, such as fertilizers, iron and steel foundries, transportation, construction and coal, would be adversely affected. Due to the discontinuation of transactions through SWIFT, there would be some disruption in trade to and from Russia and Ukraine. However, the respective shares of imports and exports from these countries relative to India’s overall imports and exports are limited. There would also be some adverse effects with regard to financial flows. Net foreign portfolio investment (FPI) outflows during October to December 2021 increased to U.S.$6.3 billion. Net foreign direct investment (FDI) inflows have also been falling during this period although they have remained positive.
•Policymakers may have to exercise a critical choice regarding who bears the burden of higher prices of petroleum products in India among consumers and industrial users, oil marketing companies and the Government. If the oil marketing companies are not allowed to raise prices of petroleum products, the bill for oil sector-linked subsidies would go up. If the central and State governments reduce excise duty and value-added tax (VAT) on petroleum products, their tax revenues would be adversely affected. If, on the other hand, the burden of higher prices is largely passed on to the consumers and industrial users, the already weak investment and private consumption would suffer further. If growth is to be revived, maximum attention should be paid to supporting consumption growth and reducing the cost of industrial inputs with a view to improving capacity utilisation. The Government may have to strike an appropriate balance among these options.
•As developed countries are being forced to raise their interest rates and inflationary pressures continue to mount in India and abroad, the RBI may find it advisable to raise the policy rate with a view to stemming inflationary pressures and outward flow of the U.S. dollar even as the growth objective would be served by fiscal policy initiatives.
