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30 December 2014
Achievements and Initiatives of Ministry of Commerce & Industry during 2014
Civil Aviation Ministry Discusses Draft Civil Aviation Policy with States
Minister of Civil Aviation, Shri P. Ashok Gajapathi Raju inaugurated the Meeting of Chief Ministers and State Civil Aviation Ministers in New Delhi today to discuss the Draft Civil Aviation Policy and other issues related to civil aviation sector. Speaking on the occasion, the Minister said the civil aviation sector in India has been growing steadily registering a growth of 13.8% during the last 10 years. He said, though the rate of growth came down during the last two years due to the overall economic slowdown, it is recovering fast, with the year 2013-14 showing a growth of 6%. Shri Raju expressed concern that despite high growth rates ,most of the airlines in the country are reported to have incurred losses and some airlines are struggling to stay afloat. He said, though there is a need for helicopter operations in India, helicopter population in the country has not improved in recent years. The number of small aircraft and seaplanes is stagnant. The Minister said that the aviation industry as such is seriously affected by high operational costs including cost of aviation turbine fuel, service tax and other charges, shortages of maintenance facilities, high foreign exchange rate, competition from foreign airlines etc. There is a high customs duty on import of private aircrafts and helicopters. Shri Raju stated that aviation is now acknowledged as a growth engine, which has a force multiplier effect. He said that as per global estimates, for every $100 of input, there is $325 worth of output generated while for every 100 jobs created by aviation industry, there are 610 jobs created in other industries. Highlighting close linkages between tourism and civil aviation sectors, the Minister said more than 90% of the international tourists arrive by air. He said that according to a study conducted in 2009, the aviation sector has contributed 0.5% directly and 1.5% with catalytic effects to the Indian GDP and this, when coupled with the tourism sector’s contribution of 5%, works out to be a significant 6.5% of the GDP. He said acknowledging the role of civil aviation in the overall growth of economy, Government has proposed a Draft Civil Aviation Policy. Civial Aviation Minister said that India’s impressive growth in international and domestic trade over past few years has augured well for the air-cargo industry. However, he said, the current share of air-cargo compared to other modes of cargo-transportation is fairly low in India. The Minister added that the growth in the passenger and cargo traffic requires significant investments in terms of construction of new airports, expansion and modernization of existing airports, improvement in connecting infrastructure and better airspace management. Shri Raju underlined that the real challenge is to manage phenomenal growth of air traffic with safety. He said, the increase in air traffic has not only increased demand of aircraft but also posed a challenge to meet the airport and air navigation infrastructure to ensure safe, orderly and efficient operations. Earlier speaking on the occasion, Minister of State for Civil Aviation, Tourism (Independent Charge) and Culture (Independent Charge) Dr. Mahesh Sharma said that the three Ministries, i.e. Civil Aviation, Tourism and Culture have to work together to realize the great potential that India has in the civil aviation sector. He emphasized on improving air connectivity to remote areas. Highlighting the role civil aviation plays in an economy like India, the Minister stated a multi-model approach is the need of the hour for the development of the sector. |
Pradhan Mantri Krishi Sinchai Yojana
PM urges fast-tracking of pro-farmer initiatives, chairs high-level meeting on Pradhan Mantri Krishi Sinchai Yojana |
In yet another initiative aimed at benefiting farmers, the Prime Minister has asked concerned Departments and Ministries of the Union Government to fast-track the Pradhan Mantri Krishi Sinchai Yojana. Today`s meeting follows yesterday`s decision by the Union Cabinet, in which amendments to the Land Acquisition Act, 2013, were cleared. The amendments include the pro-farmer step of bringing 13 most frequently used Acts for Land Acquisition for the Central Government Projects into the purview of the Land Acquisition Act, thus benefiting a large number of farmers whose land is acquired for such projects. Chairing a high-level meeting involving the Ministries of Agriculture, Water Resources, Rural Development, the Prime Minister called for a multi-pronged approach to the ultimate goal of providing irrigation for every farm through the Pradhan Mantri Krishi Sinchai Yojana. The Prime Minister noted that NREGA had been used over the past few years for creation and augmentation of irrigation assets. He said that NREGA should be integrated with the overall plan of Pradhan Mantri Krishi Sinchai Yojana. He also called for precise monitoring of outcomes in this regard. At the macro-level, the Prime Minister asked the Ministry of Water Resources to identify river-interlinking projects that could be immediately taken up. The Prime Minister called for comprehensive mapping and identification of water bodies across the country. He said satellite imagery and 3D photography could be used to guide villages to best possible sources of irrigation. The Prime Minister has asked concerned departments to look into the possibility of identifying progressive farmers, who could take the lead in implementing water conservation and innovative irrigation techniques. The Prime Minister has also called for integrating water recycling projects of key towns and cities, to irrigation in nearby rural areas. He emphasized the importance of generating consciousness among people towards water conservation. |
29 December 2014
Tipping points and Goldilocks conditions
Many, if not most, observers of the Indian economy see 2015 as a year of decisive and positive movement. Malcolm Gladwell's concept of the tipping point is used by some as a characterisation of the moment. A number of forces converge to create a significant and discontinuous change, in this case, for the better. The investment bank Nomura, for example, sees 2015 as a Goldilocks moment for India, a term used in astronomy to describe a situation in which conditions are "just right" for the emergence of life on a planet. In this view, conditions that are supportive of a steady and sustainable acceleration of growth are falling into place.
As we look ahead to 2015 and beyond, it is useful to look back; in particular to two possibly similar moments in the Indian economy's timeline. Since 1991, we have seen two growth spurts - 1994-1997, when the average rate of growth was over seven per cent and 2003-08, when it came close to nine per cent. Both episodes offer valuable lessons about what mix of conditions supports rapid growth in India and how changes in the mix can cause growth to slow.
In the first episode, a favourable backdrop was provided by nine successive normal monsoons (1988-96), which generated rural demand and contributed to keeping inflation in check. The reforms of 1991 opened up massive investment opportunities as a result of de-licensing. Investment spending boomed, stimulating growth. And the significant depreciation in the rupee that the reform strategy engineered caused a boom in exports, to which information technology (IT) was just beginning to contribute during that period.
But the party was over almost as soon as it had begun. A bad monsoon in 1997 was a setback. The East Asian crisis saw the currencies of many competing exporters depreciate very sharply, impacting exports. And inflation surged, partly demand-driven but also as a result of investment imbalances exerting pressure on capacities in many sectors, including infrastructure. Growth fell back to around the five per cent mark for the next five years, raising serious questions about the economic benefits of the entire reform agenda.
Things changed in 2003. Here again, it is possible to identify a number of pre-conditions and concomitants that featured in that five-year phase. Low inflation, supported by soft global commodity prices, were clearly a factor. There was also the tailwind provided by buoyant global growth. These contributed to an investment surge, which appeared to be much more balanced than in the previous episode. An important contributor to this was the role of public investment.
Capital spending as a share of total government spending at the central level rose to a post-liberalisation high of 23 per cent during this period. The most visible manifestation of this was the National Highway Development Programme, initiated in 2001, which had a classic public expenditure multiplier effect on the economy. Further, committed public investment also helped to facilitate an increase in private investment. This, together with significant increases in productivity, which businesses struggling in a period of sluggish growth had achieved, brought about a dramatic increase in capital efficiency. A factor that played a decisive role was the rapid growth in telecom capacity and capability. For a while, it helped offset other infrastructural bottlenecks. Conference calls and e-mailing was possible even when stuck in endless traffic jams or airport congestion.
This fiscal pattern was facilitated by the larger commitment to fiscal consolidation reflected in the Fiscal Responsibility and Budget Management Act of 2003. India's experience during the 2003-08 episode demonstrates that high growth can be achieved even as the fiscal deficit is being rolled back, as long as a greater proportion of expenditure is being used to create assets. In my view, this didn't go far enough, but even at the levels attained, the benefits were visible. The final contributor to the Goldilocks phase was the balance of payments. IT and IT-enabled services exports grew rapidly, helping to narrow the current account deficit, even taking it to surplus in three of those years.
However, as in the previous episode, headwinds began to manifest during the growth spurt itself. Inflation became a problem, aggravated by surging commodity - particularly oil - and food prices. The financial crisis of 2008 created adverse global conditions, weakening some of the growth drivers that the economy had benefited from earlier. There was, of course, a short-lived recovery after the crisis, but this was based on the monetary and the fiscal response to the crisis, rather than the more robust force of private investment, which was decelerating. Significantly, the share of public expenditure allocated to capital formation has declined considerably from its peak. The current account deficit ballooned to an unprecedented 4.8 per cent of gross domestic product, a result of a number of factors, including the massive increase in coal imports for electricity generation.
Be that as it may, many things have changed in the economic environment in 2014, both globally and domestically. The robust United States recovery and significantly lower oil prices bring back into play tailwinds similar to 2003. The latter helps considerably in narrowing both fiscal and current account deficits. Inflation has moderated significantly, as a result of slow growth and less pressure from food and energy prices.
But it is still too early to invoke tipping points and Goldilocks conditions. Two factors that might spoil the party are the state of infrastructure and, related to this in part, the state of the banking system. The first calls for a return to an increased role for public spending on infrastructure, along the lines of the highway programme in its initial stages. Relying predominantly on private capital for infrastructure has proved to be infeasible. The second requires a substantial restructuring of bank balance sheets, with, possibly, a large capital infusion as part of the package. Both are going to be fiscally costly, and politically and administratively challenging.
The thing about tipping points and Goldilocks conditions is that they don't emerge overnight. Lots of things have to fall into place, many out of the government's control. The first episode came three years after liberalisation and lasted three years. The second came six years later and lasted five. Patience and persistence are key to achieving them and even they don't guarantee sustainability. Regardless, it is incumbent on the government to keep trying.
As we look ahead to 2015 and beyond, it is useful to look back; in particular to two possibly similar moments in the Indian economy's timeline. Since 1991, we have seen two growth spurts - 1994-1997, when the average rate of growth was over seven per cent and 2003-08, when it came close to nine per cent. Both episodes offer valuable lessons about what mix of conditions supports rapid growth in India and how changes in the mix can cause growth to slow.
In the first episode, a favourable backdrop was provided by nine successive normal monsoons (1988-96), which generated rural demand and contributed to keeping inflation in check. The reforms of 1991 opened up massive investment opportunities as a result of de-licensing. Investment spending boomed, stimulating growth. And the significant depreciation in the rupee that the reform strategy engineered caused a boom in exports, to which information technology (IT) was just beginning to contribute during that period.
But the party was over almost as soon as it had begun. A bad monsoon in 1997 was a setback. The East Asian crisis saw the currencies of many competing exporters depreciate very sharply, impacting exports. And inflation surged, partly demand-driven but also as a result of investment imbalances exerting pressure on capacities in many sectors, including infrastructure. Growth fell back to around the five per cent mark for the next five years, raising serious questions about the economic benefits of the entire reform agenda.
Things changed in 2003. Here again, it is possible to identify a number of pre-conditions and concomitants that featured in that five-year phase. Low inflation, supported by soft global commodity prices, were clearly a factor. There was also the tailwind provided by buoyant global growth. These contributed to an investment surge, which appeared to be much more balanced than in the previous episode. An important contributor to this was the role of public investment.
Capital spending as a share of total government spending at the central level rose to a post-liberalisation high of 23 per cent during this period. The most visible manifestation of this was the National Highway Development Programme, initiated in 2001, which had a classic public expenditure multiplier effect on the economy. Further, committed public investment also helped to facilitate an increase in private investment. This, together with significant increases in productivity, which businesses struggling in a period of sluggish growth had achieved, brought about a dramatic increase in capital efficiency. A factor that played a decisive role was the rapid growth in telecom capacity and capability. For a while, it helped offset other infrastructural bottlenecks. Conference calls and e-mailing was possible even when stuck in endless traffic jams or airport congestion.
This fiscal pattern was facilitated by the larger commitment to fiscal consolidation reflected in the Fiscal Responsibility and Budget Management Act of 2003. India's experience during the 2003-08 episode demonstrates that high growth can be achieved even as the fiscal deficit is being rolled back, as long as a greater proportion of expenditure is being used to create assets. In my view, this didn't go far enough, but even at the levels attained, the benefits were visible. The final contributor to the Goldilocks phase was the balance of payments. IT and IT-enabled services exports grew rapidly, helping to narrow the current account deficit, even taking it to surplus in three of those years.
However, as in the previous episode, headwinds began to manifest during the growth spurt itself. Inflation became a problem, aggravated by surging commodity - particularly oil - and food prices. The financial crisis of 2008 created adverse global conditions, weakening some of the growth drivers that the economy had benefited from earlier. There was, of course, a short-lived recovery after the crisis, but this was based on the monetary and the fiscal response to the crisis, rather than the more robust force of private investment, which was decelerating. Significantly, the share of public expenditure allocated to capital formation has declined considerably from its peak. The current account deficit ballooned to an unprecedented 4.8 per cent of gross domestic product, a result of a number of factors, including the massive increase in coal imports for electricity generation.
Be that as it may, many things have changed in the economic environment in 2014, both globally and domestically. The robust United States recovery and significantly lower oil prices bring back into play tailwinds similar to 2003. The latter helps considerably in narrowing both fiscal and current account deficits. Inflation has moderated significantly, as a result of slow growth and less pressure from food and energy prices.
But it is still too early to invoke tipping points and Goldilocks conditions. Two factors that might spoil the party are the state of infrastructure and, related to this in part, the state of the banking system. The first calls for a return to an increased role for public spending on infrastructure, along the lines of the highway programme in its initial stages. Relying predominantly on private capital for infrastructure has proved to be infeasible. The second requires a substantial restructuring of bank balance sheets, with, possibly, a large capital infusion as part of the package. Both are going to be fiscally costly, and politically and administratively challenging.
The thing about tipping points and Goldilocks conditions is that they don't emerge overnight. Lots of things have to fall into place, many out of the government's control. The first episode came three years after liberalisation and lasted three years. The second came six years later and lasted five. Patience and persistence are key to achieving them and even they don't guarantee sustainability. Regardless, it is incumbent on the government to keep trying.
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