23rd November The Hindu Self Analysis 

India’s reluctance to join RCEP understandable’

Context:

  • India’s decision to walk away from the RCEP trade deal.

Details:

  • “The Regional Comprehensive Economic Partnership (RCEP) agreement looks like an extension of China’s Belt and Road initiative”, former Australian Prime Minister has said, adding that he understood India’s reluctance to join the pact.
  • Just as the Trans-Pacific Partnership was the economic leg of the U.S. pivot to the Asia Pacific, RCEP is like the trade leg of the Belt and Road Initiative.
  • One of India’s primary concerns about joining the RCEP pact was that its already-huge trade deficit with China would widen significantly.
  • India opined that while it is important to promote freer trade, it is also important to ensure that it does not unduly benefit one country at the cost of another.

Indo-Australian relations:

  • Australia was keen to see India join existing bodies, such as the Asia-Pacific Economic Cooperation agreement. The existing entities would be better with India in them rather than without. If India was within APEC, it would be a stronger, more effective body.
  • The potential of an Indo-Australian partnership needs to be harnessed with more bilateral interactions. An India-Australia bilateral deal must be considered.
  • With India opting out of RCEP, pursuing bilateral deals with significant trading partners should be considered. The India-Australia trade deal got subsumed in the RCEP negotiations. The discussions on the bilateral trade deal should be expedited and enhanced.

 

 

GDP slump will hit $5 tn target, warns NITI Aayog

Context:

  • In the backdrop of slowing economic growth rate, NITI Aayog has warned the government that the road to a $5 trillion economy by 2025 is beset with many speed breakers.

Details:

  • Finance Minister Nirmala Sitharaman, in her Budget presentation, had said that the government would work to make India a $5 trillion economy by 2025.

Concerns:

  • The nominal GDP growth — a measure of growth without accounting for inflation — has to be at least 12.4% on an average, if the set target has to be reached, according to a presentation made by NITI Aayog CEO Amitabh Kant. However, the growth rate was 8% in the first quarter (April to June) of the current financial year (2019-20).
  • Experts estimate that growth will dip in Q2 (July to September) compared to Q1 in both real and nominal terms. While GDP growth in real terms in Q1 stood at 5%, State Bank of India recently estimated that this could dip to 4.2% in Q2, with a corresponding dip in nominal growth as well. Real GDP growth accounts for inflation.
  • Domestic investment and consumption are the only dependable drivers for sustainable re-acceleration (of the economy). However, a deceleration in investment is visible, primarily in the household sector, almost entirely due to real estate.
  • Gross fixed capital formation in the sub-sector of ‘dwellings, other buildings and structures’ fell from 12.8% of GDP in 2011-12 to 6.9% in 2017-18.
  • The slowdown in the domestic market is also because of the limited availability of capital with the banks which are tied down due to high non-performing assets in heavy industry and infrastructure.
  • In the power sector, there is a high cross-subsidisation in favour of residential tariff leading to very high industrial tariffs. The electric power transmission and distribution (T&D) losses in India stand at 19%, higher than that of Bangladesh and Vietnam. This undue burden on industries is affecting their profitability.

Way forward:

There is a need for “structural changes” in the economy and in this direction India needs to focus on the export of high-value technology and manufacturing goods.

 

GST Council, finance panel should work in tandem

Context:

  • Chairman of the Fifteenth Finance Commission N.K. Singh has called for symmetry in the working of the GST Council and the Finance Commission.

Details:

  • The finance commission recommends distribution of revenues between Union and States, and thereafter among the States, further to the third tier.
  • While the Finance Commission looks at projections of expenditure and revenue, the issue of GST rates exemptions, changes, and implementation of the indirect taxes is within the domain of the GST Council.
  • This leads to unsettled questions on the ways to monitor, scrutinise and optimise revenue outcomes. In such a scenario the coordination mechanism between the Finance Commission and the GST council is an inescapable necessity.
  • For the first five years of GST, a 14% guaranteed compensation was provided to the States, and this would end in 2022. Many States are seeking an extension of this mechanism even after 2022.
  • The future roadmap on this has a bearing on the recommendations which the Commission is expected to make on the likely revenues of States, sustainable growth rates, and the Revenue Deficit of Grants under Article 275.

Way forward:

There is scope for coordination between the two constitutional bodies given the overlapping nature of their mandates. Such a coordination must be based on well-defined terms.

 

 

 

Policy to hasten piped gas infra on the cards

Context:

  • Constitution of a high-level panel to evaluate progress in the City Gas Distribution programme and to frame a national policy on City Gas Distribution.

Details:

  • A national policy on City Gas Distribution (CGD) to speed up the development of infrastructure for the supply of piped natural gas to households, as well as CNG for automobiles and industrial units, is on the cards.
  • The Petroleum and Natural Gas Regulatory Board (PNGRB) has formed a high-level committee comprising its senior officials and those of CGD entities. The committee will undertake a detailed review of all the issues to expedite the development of piped gas networks and draft such a policy.
  • The decision assumes significance considering challenges, especially delay in getting approvals at the State level, that industry sources say CGD entities in certain geographical areas (GAs) are facing.
  • Though the issues cited by the entities mostly come under the purview of the State governments, it was felt that a national CGD policy would serve as a guide for the States to formulate their own policy.
  • The regulator has been inviting inputs for the draft policy.

Significant progress:

  • The CGD industry has witnessed significant progress in the last two years in terms of authorisation of GAs.
  • The number of such GAs has increased from 78 at the end of 2017 to 229 at present, covering 71% of the country’s population as against 20%, two years ago.
  • Most firms that were awarded authorisation had taken steps towards the development of infrastructure. The various authorities at the Central and State governments as well as local authorities have generally been helpful and have been working along with CGD entities in resolving the issues.

Way forward:

  • The draft policy should consider important aspects, including the appointment of a nodal agency/officer by State governments to co-ordinate for granting single-window clearances in a time-bound manner. This would expedite the whole process and increase the ease of doing business for the CGD entities.
  • The important aspects the policy should consider is standardisation of road restoration/permission charges across the country to ensure synergy in the process and the procedure for timely availability of permissions from NHAI and Railways. This would cut the delay time in seeking permissions for the work.

 

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