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The Hindu Editorial Analysis | PDF Download

Date: 29 May 2019

  • Now that the general election is over, the time has come to pay serious attention to the economy.
  • The national income numbers continue to be controversial. No serious policy decision can be taken with ambiguous numbers. Nevertheless, even with the new official numbers it is clear that growth is slowing down. As in the revised new base estimates, the growth rate in 2016-17 was 8.2%; in 2018-19 it was 7%. Accelerating economic growth must be on top of the agenda of the new government. It is only a fast growing economy that will generate the surpluses which are necessary to address many of our socio-economic problems and to provide social safety nets.

  • Decline in investment rate
  • For faster growth, what is critically needed is a higher investment rate. In current prices, the ratio of Gross Fixed Capital Formation to Gross Domestic Product has stayed low at 28.5% between 2015-16 and 2017-18. In 2018-19 it is estimated at 28.9%. In 2007-08, it was as high as 35.8%. In constant prices, the ratio, has, however, shown a smaller decline from the peak. It is true that for a time growth can come out of better utilization of existing capacity. But for sustained growth, the ratio has to go up, and that too substantially.
  • There are several studies which indicate a fall in corporate investment. Every year the Reserve Bank of India (RBI) publishes a forecast of corporate investment. It uses the data made available by banks and other financial institutions on the phasing of capital expenditures of projects sanctioned by them. An article in the March 2019 issue of the RBI Bulletin says that in 2017-18, the capital expenditures of the corporate sector were estimated at ₹1,487 billion. There has been a steady decline from ₹2,050 billion in 2014-15. The industry-wise distribution of projects sanctioned by banks and other institutions in 2017-18 shows that the power sector accounted for 38.2% of the total expenditure. Pure manufacturing had only a small share. All these point to the urgent need to accelerate investment.
  • Reviving investment
  • First, much of public investment happens outside the Budget. In 2019-20, capital expenditures of the Central government to GDP are expected to be 1.6%. This ratio has not shown much change. The bulk of public investment comes from public sector enterprises, including the Railways. What is needed is for the government to interact with all public sector units and prepare a programme of public investment for 2019-20. Public sector units can take a longer-term view than the private sector. A strong public investment programme can be a catalyst of private investment. In a situation such as the present one, it can crowd in private investment.
  • Second, there have to be sector- or industry-wise discussions between the government and industrialists to understand the bottlenecks that each industry faces in making investment and take actions to remove them.
  • Banks are under stress and the ratio of non-performing assets (NPAs) has risen. We need to resolve this issue as early as possible so that banks can get back to lending at a significant pace. In the absence of term lending financial institutions, banks provide both working capital and longterm loans. That is why resolving the issue of NPAs is critically important for larger flow of longterm funds.
  • The government must infuse adequate capital into banks at one go. There are mechanisms such as resolution councils or committees which can help to resolve the NPA problem without the bank management coming under scrutiny of investigative agencies. Over the medium term we should consider reviving the setting up of separate long-term financial institutions, partly funded by government.
  • Jobs and growth
  • There has been great concern about the inability of the economy to generate adequate employment. Employment numbers have always been somewhat worrisome because of the presence of heavy underemployment in the country. Perhaps there has been some shift of employment from the unorganised to the organised segment. But this does not alter the overall situation. The answer to the problem of jobs is only growth. It is faster growth and faster investment which will generate employment. Of course the pattern of growth also counts. Some sectors such as construction are more labour intensive. Sectors such as IT and the financial system, which provided attractive employment to young educated entrants to the labour market in the past, have their own problems. But an improvement in the financial system may trigger some new jobs. Ultimately, it is overall growth which is key to more employment.
  • It is generally argued that growth will happen only if there is an adequate increase in demand. While this is true in relation to some sectors, there are many sectors including infrastructure where new investment will spur growth. In this context, the main concern is the slowdown in rural demand, which can affect the off-take of consumer goods. Agrarian distress, which is the cause of slowdown in demand, needs to be tackled on a priority. Where distress is due to a fall in prices, the best course of action is to resort to limited procurement so that the excess over normal is procured by the government. As far as increase in agricultural output in the short run is concerned, the monsoon is a big question mark. Nothing can be done about it except changing the cropping pattern depending on rainfall. But making available inputs such as seeds and fertilizers at an affordable cost must be the major task particularly of State governments. Over the medium term, more attention must be paid to increasing agricultural productivity through consolidation of land holdings and spreading better techniques of cultivation. Improving marketing arrangements has been a neglected area.
  • Coming to the medium term, reforms have been moving in the right direction. The introduction of the Goods and Services Tax is a major step. But glitches still remain in its implementation. The government should get tax authorities, industrialists, traders and, particularly, exporters to sort out the issues together. The Insolvency and Bankruptcy Code was another significant step taken in the last few years. Even here there are some bottlenecks and the government must address them. Land reforms which enable entrepreneurs to buy land speedily have been suggested. Some steps in this regard have been taken in the past. Compulsory acquisition of land is the antithesis of competition and should be resorted to only in limited cases where public interest is involved. Labour reforms should wait until the economy has picked up steam and moved to a higher growth path. Only in these circumstances will there be less resistance. A lot more can be said on reforms. But the focus of this article is largely on what needs to be done to get the economy to a higher growth path soon. From this angle, while there is a case for some easing of liquidity, monetary policy should keep a watch on prices as there is no easy way to forecast the behaviour of crude oil prices or the monsoon.
  • Minimum income support
  • In the wake of electioneering, there was a lot of talk on social safety nets, more so on providing a minimum income to the poor. Any caring society should do this. But it also depends on the ability of the government to sustain it.
  • The government should move in the direction of removing some of the subsidies and schemes which are similar in nature to minimum income, consolidate them, add to them what is fiscally feasible and provide the funds directly to the poor. The bigger problem is to define the ‘poor’ and, more particularly, identify them. But a move in this direction must be part of the agenda.
  • To conclude, besides economic factors, non-economic factors are also critically important to revive what are often described as ‘animal spirits’. Investment today is based on expectations of future earnings. Thus it is an act of faith in the future. For this to happen, there must be social and political tranquillity.

MCQ

  • Choose The Correct Ones :
  1. Governor’s Discretionary Powers Are Larger Than The President
  2. Governor Enjoys Same Power Of Pardoning As President
  3. The Law Governing Grant Of Pardon FOR GOVERNOR Is Contained In Articles 72

(A)Only 1

(B)2 & 3

(C)1,2 & 3

(D)None

Governor

  • All the executive actions of the state are taken in his name.
  • He makes rules specifying the manner in which the orders and other instruments made and executed in his name shall be authenticated.
  • Further, Governor also can make rules for more convenient transaction of the business of the state government.
  • The discretionary powers of Governor in state are much more extensive in comparison to the President in centre in India.
  • For example, Article 163 of the constitution says that there shall be a Council of Ministers in the states with the Chief Minister at the head to aid and advise the Governor in exercise his functions, except those which are required to be done by the Governor on his/ her discretion.
  • The constitution further mentions that if any question arises whether a matter falls within the Governor’s discretion or not, decision of the Governor shall be final, and the validity of anything done by the Governor shall not be called in question on the ground that he ought or ought not to have acted in his discretion. Moreover, what advice was tendered by the Governor to the Ministry cannot be inquired into a court
  • Some discretionary powers are as follows:
  • Governor can dissolve the legislative assembly if the chief minister advices him to do following a vote of no confidence. Now, it is up to the Governor what he/ she would like to do.
  • Governor, on his/ her discretion can recommend the president about the failure of the constitutional machinery in the state.
  • On his/ her discretion, the Governor can reserve a bill passed by the state legislature for president’s assent.
  • If there is NO political party with a clear cut majority in the assembly, Governor on his/ her discretion can appoint anybody as chief minister.
  • Governor determines the amount payable by the Government of Assam, Meghalaya, Tripura and Mizoram to an autonomous Tribal District Council as royalty accruing from licenses for mineral exploration.
  • Governor can seek information from the chief minister with regard to the administrative and legislative matters of the state.
  • Governor has discretion to refuse to sign to an ordinary bill passed by the state legislature.
  • Thus, though the Governor is made the constitutional head of a state like president of India, yet there is a thin line as the Constitution empowers the Governor to act without the advice of the Chief Minister and his council and can use discretion on certain matters.

Appointments done by Governor

  • Appointment of some of the following important functionaries of the State Government is made by the Governor including.

Chief Minister and Other Ministers

  •  The Chief Ministers is appointed by Governor and other ministers in state are appointed by him on advice of Chief Minister. The CM as well as other ministers hold their office during pleasure of the Governor. However, they cannot be removed arbitrarily until Council of Ministers has confidence of the state assembly. Further, in Bihar, Madhya Pradesh and Odisha, the governor also appoints a Tribal Welfare Minister.

Chairmen and members of SPSC

  • Governor also appoints the chairman and other members of State Public Service Commissions.However, removal of chairmen and members of SPSCs can be done only by President.

Advocate General

  • Advocate general is the part of state executive and highest law officer of the state. He is appointed by governor and his retainer is determined by Governor. Advocate general has no fixed tenure and holds the office during the pleasure of the Governor.

State Election Commissioner

  • Governor appoints the state election commissioner and determines the conditions of service and tenure of the later. However, Election Commissioners in states can be removed only in like manner and on like grounds of a state high court judge.

Vice-chancellors

  • Governor is the Chancellor of universities in the state and he appoints vice-chancellors in various universities.

District Judges

  • Appointments of persons to be, and the posting and promotion of, district judges in any State is done by Governor of the State in consultation with the High Court exercising jurisdiction in relation to such State. {Article 233}

Role in President’s Rule

  • Governor has extensive executive powers in terms of imposition of emergency in state under article 356. Under this article, Governor can send a report to President and recommend constitutional emergency on the ground that government of the State cannot be carried on in accordance with the provisions constitution.
  • The law governing grant of pardon is contained in Articles 72 and 161 of the Constitution.
  • Absolute –
  • Absolute pardon may blot out the guilt itself. It does not amount to an acquittal unless the Court otherwise directs. The accused is released permanently without requiring any condition to be fulfilled.
  • Jurisprudence of Granting pardon:-
  • The philosophy underlying the pardon power is that that “every civilized country recognizes and has, therefore provided for the pardoning power to be exercised as an act of grace and humanity in proper cases, without such a power of clemency to be exercised by some department or functionary of government, a country would be most imperfect and deficient in its political morality and in that attribute of deity whose judgments are always tampered with mercy."
  • The pardoning power is founded on consideration of public good and is to be exercised on the ground of public welfare, which is the legitimate object of all punishments, will be as well promoted by a suspension as by an execution of the sentences.

Article 72 :

  • (1) The President shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence—
  • (a) in all cases where the punishment or sentence is by a Court Martial;
  • (b) in all cases where the punishment or sentence is for an offence against any law relating to a matter to which the executive power of the Union extends;
  • (c) in all cases where the sentence is a sentence of death.
  • Thus, Article 72 empowers the President to grant pardons etc. and to suspend, remit or commute sentences in certain cases.

Article 161 :

  • Power of Governor to grant pardons, etc, and to suspend, remit or commute sentences in certain cases The Governor of a State shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends
  • The Article deals with the power of the Governor to grant pardons, etc, and to suspend, remit or commute sentences in certain cases. The Governor of a State shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends. Thus, this Article empowers the Governors of States to grant pardon, reprieves, respites or remissions of punishment or suspend, remit or commute the sentence of a person convicted of an offence against a law relating to a matter to which the executive powers of the State extends.
  • Pardon as a mode of mitigating the sentence of the accused has always been a controversial issue for a long time. Those who reject pardon as an effective measure of mitigating circumstances argue that the power to pardon is often misused by the executive. There is a possibility that the convict may procure his release from prison by exerting undue influence on the executive authority. To avoid these flaws, in most of the countries, there is a provision for judicial review of the pardon granted in the event of grounds for pardon being found unsatisfactory.
  • In a landmark judgment Epuru Sudhakar & Anr vs Govt. Of A.P. & Ors [12] , it was held by the Supreme Court that it is a well-set principle that a limited judicial review of exercise of clemency powers is available to the Supreme Court and High Courts. Granting of clemency by the President or Governor can be challenged on the following grounds:
  • The order has been passed without application of mind.
  • The order is mala fide.
  • The order has been passed on extraneous or wholly irrelevant considerations.
  • Relevant material has been kept out of consideration.
  • The order suffers from arbitrariness.
  • Now, it is a well settled principle that power under Articles 72 and 161 is subject to judicial review.
  • Difference between pardoning powers of President and Governor :
  • The scope of the pardoning power of the President under Article 72 is wider than the pardoning power of the Governor under Article 161. The power differs in the following two ways:
  • The power of the President to grant pardon extends in cases where the punishment or sentence is by a Court Martial but Article 161 does not provide any such power to the Governor.
  • The President can grant pardon in all cases where the sentence given is sentence of death but pardoning power of Governor does not extend to death sentence cases.

MCQ 1

  • Regarding the energy transition index :
  1. This project is part of the world economic forum’s shaping the future of energy system initiative
  2. India has been ranked at 78th, lower than its emerging market peers like brazil and china, among 114 countries on the world economic forum’s (WEF) energy transition index that was topped by norway
  3. India has the largest government-mandated renewable energy programme, with a target of 175GW renewable energy capacity by 2022
  • Choose the correct options :

(A) Only 3

(B) 1 & 3

(C) 2 & 3

(D) All are correct

  • In 2018, Indian Prime Minister Narendra Modi gave the plenary speech becoming the first head of state from India to deliver the inaugural keynote for the annual meet at Davos. Modi highlighted climate change, terrorism and protectionism as the three major global challenges, and expressed confidence that they can be tackled with collective effort
  • The forum was founded in 1971 by Klaus Schwab, a German-born business professor at the University of Geneva. First named the "European Management Forum", it changed its name to the World Economic Forum in 1987
  • India has been ranked at 78th, lower than its emerging market peers like Brazil and China, among 114 countries on the World Economic Forum’s (WEF) energy transition index that was topped by Sweden.
  • The report titled Fostering Effective Energy Transition, ranks countries on how well they are able to balance energy security and access with environmental sustainability and affordability. According to the report India has taken “bold measures” to improve energy access, energy efficiency, and to improve the deployment of renewable sources of energy.
  • However, energy transition in the country will require “large investments, and an enabling environment and robust regulatory frameworks to support the transition”. “India is at the crossroads in its energy transition journey. Ranking 78th on the Energy Transition Index,” the report said.
  • Among its emerging market peers Brazil stood at the 38th place, Russia at 70th and China at 76th place. The overall list was topped by Sweden, followed by Norway at the 2nd position and Switzerland at the 3rd rank.
  • Interestingly, between 2013 and 2018, India improved its performance score by 5.6 percentage points, mainly with improved energy access, reduced subsidies and reduced import costs, the report noted. “Recent initiatives to improve electricity access have experienced some success and the outlook is positive; however, the road to continuous access to power and clean cooking fuel for all is long,” it added
  • India has the largest government-mandated renewable energy programme, with a target of 175GW renewable energy capacity by 2022, and it announced plans to shift completely to electric vehicles by 2030.
  • This project is part of the Global System Initiative on the Future of Energy and has two legs: A global energy index and a dialogue series. It builds from the current Global Energy Architecture Performance Index and an energygame-changer project. By combining a dialogue series with an improved index to benchmark energy system performance and transition readiness of countries, the project will provide a future oriented and facts based platform to enable a more effective global energy transition.
  • How this project will contribute The project, which is conducted in collaboration with McKinsey & Company, will provide a global facts-based tool to inform decision-making as well as targeted dialogue events to shed light on how best to prepare for and transition towards the energy future.
  • Over the last 4 years, the World Economic Forum has issued the “Global Energy Architecture Performance Index” which has been developed in collaboration between the competitiveness and energy teams in partnership with Accenture. The index – part of the Forum’s portfolio of indexes on Toplink – benchmarks historic and current performance of energy systems of 126 countries on 18 indicators covering the 3 core dimensions of energy access&security, sustainability and contribution to economic growth and development. The index has contributed to global benchmarking of energy systems and proven to be a good basis to inform energy reform dialogues. One workstream of this project will develop a new index that includes new data sources and notably the dimension of “Future Transition Readiness". The index will be published as a product and contribute to global benchmarking of the energy system transition and as such be a core facts based and forward looking tool for the Energy System initiative.
  • The forum is best known for its annual meeting at the end of January in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland. The meeting brings together some 2,500 top business leaders, international political leaders, economists, celebrities and journalists for up to four days to discuss the most pressing issues facing the world. Often this location alone is used to identify meetings, participation, and participants, with such phrases as "a Davos panel" and "Davos man" being used
  • The organization also convenes some six to eight regional meetings each year in locations across Africa, East Asia, and Latin America, and holds two further annual meetings in China, India and the United Arab Emirates. Beside meetings, the foundation produces a series of research reports and engages its members in sector-specific initiatives.
  • Also in 2017, WEF launched the Fourth Industrial Revolution (4IR) for the Earth Initiative, a collaboration among WEF, Stanford University and PwC, and funded through the Mava Foundation.In 2018, WEF announced that one project within this initiative was to be the Earth BioGenome Project, the aim of which is to sequence the genomes of every organism on Earth
  • On 19 January 2017 the Coalition for Epidemic Preparedness Innovations (CEPI), a global initiative to fight epidemics, was launched at the forum in Davos. The internationally funded initiative aims at securing vaccine supplies for global emergencies and pandemics, and to research new vaccines for tropical diseases, that are now more menacing. The project is funded by private and governmental donors, with an initial investment of US$460m from the governments of Germany, Japan and Norway, plus the Bill & Melinda Gates Foundation and the Wellcome Trust
  • The Water Initiative brings together diverse stakeholders such as Alcan Inc., the Swiss Agency for Development and Cooperation, USAID India, UNDP India, Confederation of Indian Industry (CII), Government of Rajasthan, and the NEPAD Business Foundation to develop public-private partnerships on water management in South Africa and India.
  • The Global Education Initiative (GEI) , launched during the annual meeting in 2003, brought together international IT companies and governments in Jordan, Egypt, and India that has resulted in new personal computer hardware being available in their classrooms and more local teachers trained in e-learning. This is having a significant effect on the lives of children. The GEI model, which is scalable and sustainable, now is being used as an educational blueprint in other countries including Rwanda.
  • The Global Health Initiative was launched by Kofi Annan at the annual meeting in 2002. The GHI's mission was to engage businesses in public-private partnerships to tackle HIV/AIDS, tuberculosis, malaria, and health systems.
  • In 2011, the World Economic Forum started a global network of people between the ages of 20 and 30 who have shown great potential for future leadership roles in society. The Community of Global Shapers, highlighting Global Shapers, is a network of selforganizing local hubs based in each major city around the world. They undertake events and activities intended by the Global Shapers to generate a positive impact within their local community.
  • Global Competitiveness Report
  • Global Information Technology Report
  • Global Gender Gap Report
  • Global Risks Report
  • Global Travel and Tourism Report
  • Financial Development Report
  • Global Enabling Trade Report

MCQ 2

  • Regarding schemes those are supporting export trade from india choose correct ones :
  1. MEIS
  2. Electronics Hardware Technology Parks Scheme
  3. Special Economic Zones (SEZs).
  4. Export Promotion Capital Goods Scheme (EPCGS)
  5. Duty Free Imports for Exporters Programme.
  6. Advance Authorization Scheme
  7. Market Access Initiative (MAI) Scheme
  8. FAME scheme

(A) 1 ,2,4,7 &8

(B) 1,2,3,4 & 5

(C) 1,2,3,4,5,6 &7

(D) all

  • Government of India has notified FAME India Scheme [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India] for implementation with effect from 1st April 2015, with the objective to support hybrid/electric vehicles market development and Manufacturing eco-system. The scheme has 4 focus areas i.e. Technology development, Demand Creation, Pilot Projects and Charging Infrastructure. The phase-I of the scheme is being implemented for a period of 2 years i.e. FY 2015-16 and FY 2016-17 commencing from 1st April 2015.
  • The FAME India Scheme is aimed at incentivising all vehicle segments i.e. 2 Wheeler, 3 Wheeler Auto, Passenger 4 Wheeler Vehicle, Light Commercial Vehicles and Buses. The scheme covers Hybrid & Electric technologies like Mild Hybrid, Strong Hybrid, Plug in Hybrid & Battery Electric Vehicles.
  • Foreign Trade Policy 2015-20 and other schemes provide promotional measures to boost India’s exports with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters a level playing field. Brief of these measures are as under:

1. Exports from India Scheme

  •  (i). Merchandise Exports from India Scheme (MEIS)
  • Under this scheme, exports of notified goods/ products to notified markets as listed in Appendix 3B of Handbook of Procedures, are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at specified rate (2-5%). Such duty credit scrips can be used for payment of custom duties for import of inputs or goods, payment of excise duty on domestic procurement, payment of service tax and payment of custom duties in case of EO default.
  • Exports of notified goods of FOB value upto Rs 25, 000 per consignment, through courier or foreign post office using e-commerce shall be entitled for MEIS benefit.
  • (ii). Service Exports from India Scheme (SEIS)
  • Service providers of notified services as per Appendix 3E are eligible for freely transferable duty credit scrip @ 5% of net foreign exchange earned.

2. DUTY EXEMPTION & REMISSION SCHEMES

  • 2.1Advance Authorization Scheme
  • 2.2 Advance Authorization for annual requirement
  • 2.3 Duty Free Import Authorization (DFIA) Scheme
  • 2.4 Duty Drawback of Customs/Central Excise Duties/Service Tax
  • 2.5 Rebate of Service tax through all industry rates

3. EPCG SCHEME

4. EOU/EHTP/STP & BTP SCHEMES

5. OTHER SCHEMES

  • Towns of Export Excellence (TEE)
  • Market Access Initiative (MAI) Scheme
  • Marketing Development Assistance (MDA) Scheme
  • Marketing Development Assistance (MDA) Scheme

MCQ 3

  • Regarding Index of Industrial Production (IIP).choose correct options
  1. . It is compiled and published monthly by Central Statistical Organization (CSO), Ministry of finance
  2. The CSO had revised the base year of the IIP from 2004-05 to 2011-12 in May 2017 to capture structural changes in the economy.
  3. Sector wise, the items included falls into 3 categories viz. Manufacturing (405 items), Mining (1 items) & Electricity (1 item)

(A) Only 1

(B) 1 & 3

(C) 2 & 3

(D) All are correct

  • The Index of Industrial Production (IIP) is an index for India which details out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing. The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period. It is compiled and published monthly by the Central Statistical Office (CSO) six weeks after the reference month ends.
  • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity , steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.
  • Use-based sectors, namely Basic Goods, Capital Goods and Intermediate Goods.
  • In India, Office of Economic Advisor (OEA), Department of Industrial Policy and Promotion, Ministry of Commerce and Industry calculates the WPI.
  • WPI reflects the change in average prices for bulk sale of commodities at the first stage of transaction while CPI reflects the average change in prices at retail level paid by the consumer.