RaghukulCS DAILY NEWS ANALYSIS (UPSC) |30 Jan 2021| RaghukulCS

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RaghukulCS
January 30, 2021

Highlights of Economic survey 2020-21

Context: Finance Minister kept the Economic Survey 2020-21 in the Parliament on the first day of the Budget session. The survey, authored by Chief Economic Adviser, has analysed many topics from economic growth, fiscal stance, state of banking and more.

Topic in the syllabus: Prelims – Economy.

Highlights of Economic survey 2020-21:

The Economic Survey has pushed for a continued expansionary fiscal stance by the government to ensure pre-Covid levels growth.
- It will increase revenue collections and help India get back on a sustainable fiscal path.
Based on IMF estimates, the real growth rate for FY21 is taken as -7.7 per cent (MoSPI) and the real growth rate for FY22 is assumed as 11.5 per cent.
India’s real GDP is estimated to record a growth of 11.0 per cent in 2021-22 and nominal GDP by 15.4 per cent.
the Indian economy can go past its pre-Covid level in two years through a rebound in economic activity and the government’s reforms.
- A further boost is also possible if economic activities normalise very soon due to the vaccine rollout.
While the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been a V-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all important economic indicators. Therefore the survey projected a V-shaped recovery.
- Despite the hard-hitting economic shock due to the global pandemic, India is going through a V-shaped recovery with a stable macroeconomic situation supported by a stable currency, comfortable current account, increasing forex reserves, and encouraging signs in the manufacturing sector output.
The survey said that as long as GDP keeps growing, the country won’t have to worry about debt.
- The survey argues that over the last 2.5 decades, higher GDP growth makes the ratio of debt-to-GDP to decline in the case of India.
As soon as the Covid-19 relief measures are liftedthere will bea need for a revised asset quality review of Indian banks, the survey suggested.
- The chief economic adviser pushed for a clean-up of bank books for not repeating the mistakes of the past.
The survey has said that more focus on core inflation is necessary to drive policy-making.
According to the survey, India’s sovereign credit ratings does not reflect its fundamentals.
India’s administrative process is suffering from overregulation, with lack of compliance or regulatory standards, the survey noted.
Economic growth has a greater impact on poverty alleviation than inequality. Therefore, India must continue to focus on economic growth to lift the poor out of poverty, the survey said.
The survey recommended setting up a sectoral regulator, and a rating agency like a body, to assess the quality of healthcare providers in the country. This, the survey said, will help tackle information asymmetries.
Economic Survey pushes for counter-cyclical fiscal policy to be an important point of emphasis, where the government steps in when the private sector performs badly and steps back when the private sector performs well.
The Economic Survey pushed for higher research and development spending by the private sector to increase India’s innovations.

Bare necessities index

Context: To assess equity, Economic Survey introduces a bare necessities index

Topic in the syllabus: Prelims – Economy.

What is “The bare necessities index”?

Using a newly constructed “Bare Necessities Index” (BNI)the Economic Survey for 2020-21 has shown, Inequalities in access to bare necessities like drinking water, sanitation, hygiene and housing conditions continue to exist between urban and rural India despite “widespread” improvements.
The BNI based on the idea of Thalinomics in the Economic Survey for 2019-20, through which it had tried to examine the access to food in the country.
There are 26 indicators on five dimensions —
- water, sanitation, housing, micro-environment, and other facilities — it has been created for all states for 2012 and 2018 using NSO data.
- The index classifies areas on 3 levels of access — high, medium, low — to bare necessities.
The Economic Survey has focussed on reducing variations in the access to bare necessities across states, between rural and urban areas, and between income groups. There must be effective convergence in scheme implementation at the Centre-state and local levels because the civic amenities in urban areas are also provided by local self-government, the Survey said.
- Therefore, a BNI based on large annual household survey data can be constructed with suitable indicators and methodology at the district level for targeted districts to assess the progress on access to bare necessities.

New guidelines to banks on FCRA rules

Context: Govt. tightens oversight on funds received by NGOs

Topic in the syllabus: Prelims – Economy.

What is FCRA?

The Foreign Contribution (Regulation) Act, 2010 is an act of the Parliament of India.
It is a consolidating act whose work is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies
It prohibits acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest.
FCRA regulates foreign donations & funds and it ensures that such contributions do not adversely affect the internal security of the country.

What does the new charter say?

The Union Home Ministry’s charter for banks says that “donations received in Indian rupees” by non-governmental organisations (NGOs)and associations from “any foreign source even if that source is located in India at the time of such donation ”should be treated as “foreign contribution”.
The charter for the banks said the foreign contribution has to be received only through banking channels and it has to be accounted for in the prescribed manner.
Any violation by the NGO or by the bank may be treated under penal provisions of the FCRA, 2010.
Donations that are given in Indian rupees by any foreigner/foreign source including foreigners of Indian origin like OCI or PIO cardholders” should also be treated as foreign contribution.
All NGOs who are taking foreign donations have to open a designated FCRA account at the SBI branch by March 31.
The NGOs can keep their existing FCRA account in any other bank but it will have to be compulsorily linked to the SBI branch in New Delhi.

Important news in short

India assured Israel of the safety of its missions and diplomats after a low intensity device exploded near the country’s Embassy in Delhi. A police officer said the explosive was planted in a used soft drink can and wrapped in polythene; he ruled out any terror angle as of now.
China said it “appreciates” External Affairs Minister S. Jaishankar emphasising the importance of India-China relations, butreite rated its calls for the boundary dispute to “not be linked with the overall bilateral relations”.
Experts from the World Health Organization visited a Wuhan hospital as the fieldwork began in a closely watched corona virus origins probe that will be taken in a food market presumed to be “ground zero” of the pandemic.
The Taliban rejected Washington’s accusations that it had not lived up to its promises in Afghanistan, in turn claiming the U.S. was‘ bombarding civilians’.