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Center’s Thrust To Education

$50 billion
What is it? The targeted size of bilateral trade between India and Indonesia by 2025. It was $18.13 billion in 2017.

Why is it important? In Prime Minister Narendra Modi’s official visit to Indonesia, the two countries have signed 15 agreements in sectors including defence, science, health, railways and technology. They also pledged to step up defence and maritime cooperation and have planned to develop a strategic Indonesian naval port in the Indian Ocean. India is in a bind as Indonesia is seeking its support to become a non-permanent member of the UN Security Council though the former has consistently supported Maldives for this so far. The voting is scheduled for next week.

Tell me more: India also announced a 30-day free visa for Indonesian citizens to visit India.

Rs 550 crore

What is it? The amount the National Company Law Appellate Tribunal (NCLAT) has ordered Reliance Communications (RCom) to pay Ericsson by the end of September.

Why is it important? This is a part of NCLAT’s Wednesday order after the debt-laden firm reached a settlement with the Swedish telecom gearmaker. The order has halted RCom’s 270-day insolvency process and also, allowed RCom’s lenders to complete the sale of the telcom firm’s wireless assets including airwaves and mobile masts to Reliance Jio Infocomm in a deal that is reportedly worth $3.8 billion.

Tell me more:Ericsson, which had signed a seven-year agreement in 2014 to manage and operate RCom’s nationwide telecom network, had filed an insolvency petition against the latter to claim around Rs 1,600 crore in dues.

15-20%

What is it? The percentage of total funding the central government is looking to provide to states for key school schemes in the form of incentives and on the basis of performance.

Why is it important? This step is aimed at helping states improve their school education system and will depend on the measures taken by them including teaching-learning outcome and rationalisation in teacher deployment. Surveys by NGO Pratham and that by a state government point to low reading/understanding skills and the inability to solve math problems at the basic level by many children in both government and private schools.

Tell me more: The overall student-teacher ratio is 1:27 compared to the required 1:30 under the Right to Education Act. The Indian government will spend Rs 34,000 crore under the Samagra Shiksha Abhiyan, which clubs key schemes.

7.3%

What is it? The projected growth rate of the Indian economy in 2018, according to Moody’s FInancial Services, a ratings firm.

Why is it important? The current growth projection is lower than Moody’s earlier projection of 7.5% growth in 2018. Higher crude oil prices and tighter financial conditions are cited as reasons for downgrade in the growth rate. Between 1 April and 28 May this year, crude oil prices (Indian basket) have increased by $12.15 a barrel, or 19%.

Tell me more: For every $10/ barrel increase in crude oil price, India’s GDP growth is reduced by 0.15%, according to an earlier estimate by the Reserve Bank of India.

25 basis points 

What is it? The increase in retail fixed deposit rates for tenure between 1 and 2 years by India’s largest commercial bank, the State Bank of India (SBI).

Why is it important?The increase shows fading of demonetisation benefits, which brought in record deposits into the banking system from November 2016. Now with credit growing at a faster rate than increase in deposits, the state-run SBI has felt the need to increase the retail deposit rates for select tenures.

Tell me more: Increase in retail deposit rate is likely to increase the benchmark Marginal Cost of Funds based Lending Rate (MCLR), which the SBI will release on Friday. SBI had increased MCLR in March by 10-20 basis points (one basis point is one-hundredth of a percentage point).

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3 years of Modi govt: Are NDA’s big programmes delivering?

When it comes to big-ticket programmes, the National Democratic Alliance (NDA) government led by Narendra Modi has launched a raft of new schemes, championed old ones or silently embraced those it was once critical of. Here’s how four such big programmes have fared vis-à-vis their stated objectives and targets in the three years of Modi government.

HOUSING: Pradhan Mantri Awas Yojana (Urban), or PMAY

Target

With the aim of ‘housing for all’, the centre plans to facilitate the building of 20 million ‘affordable’ houses in Indian cities by providing financial assistance to urban local bodies, implementing agencies and households. The scheme is scheduled to run from 2015 to 2022.

 

Progress

Much of the scheme’s first two years have gone in spadework. Thus, against the 2022 target of building 20 million new houses, 9.3% has been approved. In terms of completion, the figure is 5.3% of the houses approved and 0.5% of the overall target.

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Funding

The central government spend mirrors the scheme’s slow physical progress. So far, the centre has released about 31% of the amount it has committed for the cleared projects.

 

 

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Highlight

The scheme’s progress varies across states. Other than Gujarat and Karnataka, all states with the maximum PMAY houses approved have little to show in terms of completion.

 

 

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Challenges

Private involvement: Private builders have been reluctant to take up PMAY projects, citing low margins in the affordable housing segment, which are further compounded by the opaque and high-cost approvals process endemic to Indian real estate.

Affordability: The need for housing in cities is the greatest at the lowest income strata. Even as the government struggles to service this segment at a low price point, it has relaxed the income cap for households to avail a discount on home loan rates. This can boost PMAY numbers, but it won’t help meet the ‘housing for all’ objective.

Source: pmaymis.gov.in, indiabudget.nic.in

 

FINANCIAL INCLUSION: Pradhan Mantri Jan Dhan Yojana (PMJDY)

 

Target

Aims to provide “universal access to banking facilities, with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility”. The scheme was launched in August 2014, with no end date specified.

 

Progress

Measured on number of accounts, progress has been brisk in this top-down scheme—entailing a government push to banks—going from 0 to 280 million new accounts in under three years. But usage levels are still low: the average account balance is only Rs 2,278.

 

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Funding

The programme is driven by a government nudge to banks and the unbanked: increasingly, welfare benefits will move through Aadhaar-linked direct benefit transfers to bank accounts. It doesn’t entail the government paying banks, and barely affects the exchequer directly.

 

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Highlight

While releasing its year-end review for 2016, the department of financial services (DFS) reported that 99.9% of the 212 million households it surveyed had a bank account. But did it under-count households? Census 2011 counted 246 million. At an annual growth of 2.5%, as between 2001 and 2011, India would have 278 million households in 2016. If all households the DFS did not survey did not have a bank account, 66 million households (24%) still don’t have a bank account.

 

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Challenges

Usage needs to pick up, especially given that the system is being primed for delivery of welfare benefits through Aadhaar-based direct benefit transfers. Although the numbers are continuously improving, 24% of Jan Dhan accounts have no money and 34% are yet to be linked to Aadhaar.

Source: www.pmjdy.gov.in, indiabudget.nic.in, Census (2001-2011) data, year-end review of department of financial services (2016 data)

 

RURAL ELECTRIFICATION: Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

Targets

Aims to achieve electrification of 18,452 villages by May 2018, and electrification of 45 million rural households by December 2018.

 

 

Progress

About 73% of the 18,452 villages that did not even have power infrastructure now have it, and the government should reach its target on this count. But this doesn’t necessarily mean every household in the village has access to electricity. At present, in only 6% of these 18,452 villages do 100% households have access. Increasing this metric is the scheme’s next big target.

 

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Funding

This is one of the big programmes the centre has been pushing, and its spends and allocations have stayed consistent.

 

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Highlight

Even in the villages that have power infrastructure, there are many households that don’t have access to electricity—across India, 45 million of the 179 million rural households, or 25%. Linking them to the grid is the next big step for the programme. At present, DDUGJY is addressing 0.7 million.

 

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Challenges

Power for all: Even as villages are getting new power infrastructure, there are issues of last-mile connectivity and supply, making the ‘power for all’ goal a challenge.

M1 to M12: When it comes to electrifying a village, there are 12 stages outlined by the ministry—from M1 (awarding a village), M2 (receipt of poles) to M12 (handing over a village). Work is at various stages, which is something the headline numbers don’t always convey.

Source: garv.gov.in, indiabudget.nic.in

 

RURAL EMPLOYMENT: Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)

Target

Launched by the Congress-led United Progressive Alliance government in 2006, the scheme aims to provide 100 days of assured employment to a rural household in a year.

 

Progress

When the current government entered office, Prime Minister Modi portrayed MGNREGS as a symbol of the Congress’ ineffectual legacy. But, following a drought which led to a fall in farm output and incomes, the BJP-led government has increased employment and spends to the scheme.

 

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Funding

Average daily wages have increased from Rs132 in 2013-14 to Rs161 in 2016-17. As a result, after a small dip in 2014-15, total funding by the centre has since increased sizeably.

 

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Highlight

Non-BJP states have registered an increase in MGNREGS spending in the past two years, while BJP-ruled states registered a spike in 2016-17.

 

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Challenges

Lengthy delays in paying workers have marked MGNREGS. Recently, the centre said it had cleared 89% of wages within 15 days of the work being done. In the past four years, this figure ranged between 27% and 50%. Can the government maintain this year’s high numbers?

Source: mnregaweb4.nic.in, news reports

Graphics by Sarvesh Kumar Sharma/Mint

 

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Understanding budget series: So what really does fiscal deficit mean? Part 1

(This is the first of the five-part series that will explain the numbers in the Budget)

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Budget is akin to ‘Rob Peter to pay Paul’. Government collects money from one set of people (tax payers) and gives out the money to another set of people (expenditure on various government schemes). Government has long stopped printing its own money to spend. If they resume, prices would spiral as more money notes will chase few things to buy. So, governments collect taxes from individuals and companies, and then spends the money on different things like defence expenditure, paying salaries/ pensions to employees, interest payments on past borrowings etc.,

When sum of taxes and non-taxes (like dividends from government-run companies) is not enough to meet the sum of all expenditure, the difference or deficit is called as ‘fiscal deficit‘. This year (that is twelve months ending March 2017), the deficit is estimated at 3.5% of GDP or Rs 533,904 crore.

To contextualize this number, lets compare the fiscal deficit with total expenditure of Rs 1,978,060 crore. This means government borrowed more than one rupee for every four rupees it spent.

Next question is how did the government bridge the deficit? Where else, the government borrowed from public, though not directly.

Having fiscal deficit is not necessarily a bad thing, if spent wisely on building infrastructure to enable faster movement of goods and people, or in helping more people into schools and colleges. But that’s not what is happening. A large part of borrowing is primarily to meet today’s expenditure like paying salaries for government employees or interest payments. So how much of borrowing or fiscal deficit is used to meet today’s expenses is captured by ‘revenue deficit‘.

Revenue deficit for current financial year is estimated at 2.3% or Rs 354,015 crore. In other words, two-thirds of borrowings is to meet today’s expenses. If the trend continues, country will slowly and surely get caught in debt spiral.

So what is the ideal situation?
1. Revenue deficit has to be reduced to zero. This is like earning Rs 10,000, but spending Rs 12,000 on monthly basis.
2. Whatever is borrowed to meet the fiscal deficit should create assets that should generate future streams of benefits.

What we are doing now is to burden the next generation to finance our fiscal profligacy.

(Part 2 will look at how much we pay our government employees). 

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