Concerned about slowdown in the economy, Prime Minister Narendra Modi will interact with finance minister Arun Jaitley and other top officials on Tuesday to take stock of the situation and discuss remedial measures to bolster growth.
Modi will threadbare analyse the economic situation with Jaitley and secretaries of the finance ministry and explore options to stimulate the economy, official sources said.
The meeting comes days after government data showed GDP growth in the first quarter of the current fiscal slumping to a three-year low of 5.7%, from 7.9% in April- June of 2016 and 6.1% of January-March.
GDP growth has declined steadily for six straight quarters and the Economic Survey-II predicts that the economy may not be able to achieve the targeted growth rate of 7.5% owing to deflationary pressures.
Exports are facing strong headwinds and the industrial growth is the lowest in five years.
The current account deficit (CAD) in the April-June quarter has risen to 2.4% of GDP, or USD 14.3 billion, mainly on account of increased trade gap.
CAD, the difference between inflow and outflow of foreign exchange, was 0.1% (USD 0.4 billion) in the June quarter of last fiscal.
The figure compares with 0.6% (USD 3.4 billion) for January-March 2017.
The teething troubles with the rollout of the Goods and Services Tax (GST), after-effects of demonetisation and the fiscal space available is likely to figure during the meeting.
Till date, direct and indirect tax collections as well as projections for the year may be presented to the prime minister.
Disinvestment proceeds may also be put before Modi to give a fuller picture of government finances.
Inflationary pressures, along with reasons for the lacklustre manufacturing growth of 1.2% in July, may also come up for discussion, they said, adding that the meeting may also take stock of spread of monsoon and its impact on agricultural economy.
Both wholesale and retail inflation rose in August.
With demonetisation said to have dealt a blow to blackmoney, steps being taken to prevent its generation may also be discussed at the meeting.
Sources said the interaction may focus broadly on what ails the economy and the fiscal space available with the government.Steps to boost economic growth, create jobs and reviving private investment may be part of the discussion, they said.
The government is concerned at the stuttering growth despite a benign macroeconomic environment with easy money flowing in, global growth reviving, government revenues looking solid, deep foreign exchange reserves, reasonable oil prices and a decent monsoon keeping food prices in check.
Increasing government spending, particularly on infrastructure, combined with quickly fixing the problems with GST may feature in tomorrow’s deliberations.
Chief economic adviser Arvind Subramanian had last week briefed the Prime Minister on macro-economic situation.
Manish Sisodia said, "We started a pilot CCTV project in 10 schools — it has taken off in five schools, and we are working on the others. Right now, as an emergency measure, we need to extend the CCTV network for better monitoring."
The Indian Express talks to Delhi Education Minister Manish Sisodia on the need for more CCTV cameras, verification of staff and how parents should play an active part in the functioning of schools.
How is the CCTV project coming along?
We started a pilot CCTV project in 10 schools — it has taken off in five schools, and we are working on the others. Right now, as an emergency measure, we need to extend the CCTV network for better monitoring. I am working on a decentralised model in government schools — schools will install them and principals will find ways to maintain them. But this is just part of the solution. The biggest thing missing from society is the shrinking dialogue between parent and child. Apart from studies and food, parents don’t talk to their children about other things. There is an unpredictable atmosphere; we need to change that and take the child into confidence. We cannot have a relationship like the one between bosses and employees.
The conductor arrested in connection with the Ryan murder had lost his job as a driver at another school. How would you evaluate the security verification process in schools?
For government schools, we have hired big agencies to provide staff and conduct police verification. Unfortunately, this isn’t happening; even the government hasn’t been pushing enough. There was a centralised model in place. Now, we are placing the onus on the principals for the staff they hire. Similarly, private school principals should file a report on the DoE portal on the number of functional cameras, the staff they have hired and if they have been verified. This must be filed from next month. We will put this on automation mode so that we have real-time data.
Will this data be available on the DoE portal for parents to see?
I have asked the committee that has been set up if this can be implemented. I want CCTV footage to be stored for at least 15 days. If any parent says their child has complained of something, then there should be a standard operating procedure (SOP), where the parent can come and see the footage.
Are some schools skirting the verification process?
There have been lapses. I accept that the government did not take this very seriously. After this incident, we are ensuring that every guard and staffer is checked. We outsource the hiring process, but we need to make sure that the agency does police verification. We will have to enforce this. We need to learn from these tragedies and fix them.
What are the other issues that must be addressed?
For one, we need to have more parents in private school management committees. Right now, there is just a single parent in the committee. In government schools, each SMC has 10 parents. We are also looking at how safety audits can be done in schools and what SOPs must be in place. Keeping this in mind, the committee will form a consolidated security protocol.
Some remarkable similarities exist between the current economic situation and the one that prevailed in the years when the first NDA government under Vajpayee was in power. What stand out more today, however, are the seeming paradoxes in market and investor behaviours, and in trends of slowing growth and the strengthening rupee. How are they to be explained?
There has, of late, been a lot of commentary on the similarities in the economic situations during the first National Democratic Alliance (NDA) government under Atal Bihari Vajpayee and the current one headed by Narendra Modi.
On some aspects, the resemblance is, no doubt, striking. GDP growth was relatively low during the six years of NDA-1 (1998-99 to 2003-04), averaging about 6%, compared to 7.8% during the subsequent 10 years under the Congress-led United Progressive Alliance (UPA). Growth during the first three years of the Modi regime, too, averaged below 7.3% and has, moreover, posted a decline in every consecutive quarter from January-March 2016 to April-June 2017.
Agriculture didn’t do too well during NDA-1; it is in crisis mode under the present regime as well — the main reason being low crop prices, driven, in turn, by global commodity markets that were more favourable to producers during the UPA years.
Both NDA-1 and NDA-2 have presided over a build-up of bad loans by banks — touching 15% of their gross advances in 1998-99, more or less the levels of today — although these were largely inherited from the reckless investment booms during the preceding years (1994-96 and 2004-11).
But on the other hand, the record of the NDA governments has been vastly superior when it has come to fiscal prudence and inflation control. The annual increase in the wholesale price index averaged 4.8% during NDA-1 as against 6.5% under the UPA, and it has been a mere 0.4% so far in the Modi regime. Reduced government borrowings and keeping prices under leash — the FRBM (Fiscal Responsibility and Budget Management Act) was a legacy of NDA-1, just as the Modi government has adopted a monetary policy framework agreement explicitly committing to a 4 per cent consumer inflation target — have enabled an environment of low interest rates, seen during both these regimes.
The similarities, however, probably end here. The tenure of the present government, if anything, has been marked by paradoxes that did not exist during NDA-1.
The first paradox relates to the markets. In the Vajpayee period, the Sensex rose by around 18%, from an average of 3,813 in 1997-98 to 4,492 in 2003-04. But between May 16, 2014 (when Modi’s party registered a landslide victory in the Lok Sabha elections) and September 15, 2017, it has registered a jump from 23,906 to 32,273 points. This 35% surge in barely 40 months has come despite sputtering growth and investment: the average growth in gross fixed capital formation, at 4.1% during 2014-15 to 2016-17, has lagged even the overall GVA (gross value added) growth of 7.3%, with the gap between the two widening in the April-June 2017 quarter (1.6% versus 5.6%). Single-digit growth in bank credit — it has actually shrunk by 0.9 during April-August — has further added to the discrepancy between the real economy and stock market performance, which was not all that apparent under NDA-1.
To what extent has the bullishness in markets been powered by foreign inflows?
Well, between May 16, 2014 and September 15, 2017, foreign portfolio investors (FPI) have pumped $ 65.35 billion into Indian equity and debt markets. Significantly, though, out of this total $ 65.35 billion, just over a third ($ 22.69 billion) has entailed investment in equity; the balance $ 42.66 billion has been in debt. The Sensex’s and Nifty’s sensational run has been fuelled mostly by Indian investors, especially mutual funds. While net resources mobilised by mutual funds stood at Rs 54,579 crore in 2013-14, in the following three years, they surged to Rs 102,880 crore, Rs 131,758 crore and Rs 343,418 crore, respectively.
That leads on to the second paradox: while low interest rates have led domestic investors to move away from debt — they have lost interest even in real estate and gold — and to aggressively put money into stock markets, the FPIs have been attracted more towards Indian bonds rather than equities. Proof of this is in the latter already exhausting 86.4% of their upward investment limit of Rs 275,100 crore in government bonds, with this utilisation ratio at 99.2% of the total of Rs 244,323 crore for corporate debt. The FPI appetite for Indian debt is also evidenced in resource mobilisation in the private placement market, which hit an all-time high of Rs 667,290 crore in 2016-17, up from Rs 412,600 crore, Rs 446,484 crore and Rs 399,179 crore during the preceding three fiscals. Simply put, lack of finance is not a constraint at least for large corporates. If they aren’t investing today, the reasons clearly lie elsewhere. Credit crunch arising from the poor health of banks, and aggravated by demonetisation, has basically impacted micro, small and medium enterprises.
The third paradox has been the strengthening of the rupee — a notable feature during NDA-1 and also under NDA-2 (in the UPA period, the rupee’s real effective exchange rate, against a basket of 36 currencies and adjusted for inflation differentials, fell 8.4% between 2010-11 and 2013-14). But under NDA-1, there was a clear explanation for the rupee’s rise, linked to the current account deficit (CAD) in the country’s external balance of payments. CAD levels were very low in the Vajpayee era. In the last three years (2001-02, 2002-03 and 2003-04), India actually ran a surplus, with its receipts from export of goods and services, remittances, etc. exceeding imports and other current account payments.
In the Modi regime, by contrast, the CAD has shown a rising trend, more so since early 2016, also coinciding with a growth slowdown. That has, nevertheless, not stopped either the rupee from strengthening or even the country’s foreign exchange reserves from soaring from $ 314.93 billion to $ 400.73 billion between May 16, 2014 and September 8, 2017. Much of this has, of course, been courtesy capital flows. FPIs, particularly, have been enthused to invest in Indian debt because of a combination of high yields (relative to global levels) and a stable rupee.
But how long this party will continue, in the absence of a real growth and investment revival on the ground, is the billion-dollar question. During NDA-1, a recovery did happen towards the end, which turned out to be politically too late. The Modi government seems still in a honeymoon phase, but if investment, jobs and incomes don’t revive fast enough, the story could well turn out differently in April-May 2019
BJP national president Amit Shah on Monday appeared at a sessions court in Ahmedabad as Maya Kodnani’s witness in the Naroda Gam riot case. Ahead of Shah’s appearance, security has been beefed up outside the court.
The BJP president was issued summons after Maya Kodnani’s counsel informed the court that Shah was inaccessible. The case dates back to 2002 where 11 Muslims were killed in Naroda Gam, a day after the Sabarmati Express was torched at the Godhra railway station.
Former Gujarat minister Maya Kodnani is among the 82 accused in the case. She has already been sentenced to life imprisonment in the Naroda Patiya massacre case in which 97 Muslims were killed.
Shah is among the list of 14 defence witnesses summoned by the court. Twelve persons have already given their testimony while the thirteenth was not examined as a witness. Kodnani wants to prove her alibi that on the day of the Naroda Gam killings, she was not at the spot.
Delhi is the capital of India and thus one of the most important cities of the nation. Many of the happenings and decisions that shape the course of the country are taken here and that is why the complete nation is always interested in knowing the Delhi news.