Policy Pulse #11 | An Economic Policy for Amritkaal?
Policy Pulse #11 | An Economic Policy for Amritkaal?
In Focus: A push for Aatmanirbharta
From the days of import substitution to ‘Aatmanirbhar Bharat’, the Indian economy has been through multiple transitions. Today, as many countries continue to explore ways to integrate themselves better in a much more globalised world, India has taken a lead in acquiring a flurry of market opportunities that would stand beneficial to its indigenous manufacturing base.
Since its economic liberalisation 1991, many have to come consider India as the perfect market for commercial opportunities. Its huge consumer base and the rising purchasing power of the people contributed to the success of many international business, including Hyundai, Posco, Samsung and Marks and Spencer. However, as imports continued to rise, experts were quick to map the rising deficit in India’s balance of payments. By the end of 2012, India’s balance of payments deficit stood at 91.47 billion, raising significant concerns over India’s resilience to any unforeseen economic shocks. In addition, many business would choose to import finished goods which were manufactured in the neighbouring countries of China and Bangladesh, draining away any manufacturing prowess that Indian could build.
This explains why, post-2014, India saw renewed efforts towards creating an indigenous manufacturing base. Policies such as ‘Make in India’, ‘Digital India’, ‘Skill India’ and ‘Start up India’ became an integral part of the government’s approach towards restructuring Indian economy. However, it was not until the horrors of the COVID-19 pandemic that the government felt the need to bring about a paradigm shift in the Indian economy. ‘Aatmanirbhar Bharat’ was introduced as an overarching principle to create resilient supply chains that would hold the fort in the gravest of circumstances. Production linked incentive schemes were brought in for manufacturing enterprises, start-up incubation was initiated for India’s entrepreneurial minds and a transformative approach was developed towards last mile infrastructure.
To help its business expand overseas, renewed effort was seen towards India’s existing lines of economic diplomacy. Within the last two years, India has been able to conclude Free Trade Agreement negotiations with the UAE and Australia. Further negotiations have been underway with UK, EU, Canada, Oman and the South African Customs Union for potential Free Trade Agreements. For instance, UAE, in recent years, has developed itself as a commercial hub for countries in the Middle East and North Africa. With India able to secure exclusive trade lines, Indian business can now attempt to expand their commercial footholds in the developing markets of Qatar, Bahrain, Lebanon, Morocco and Egypt. Similarly, the rising Indian diaspora in the regions of Europe and North America will became a significant boost for Indian exports if successful negotiations lead to Free Trade Agreements in the region.
India’s economic ambition by 2047, it appears, is to transform itself from a ‘large market’ to successful ‘market driver.’ Not only will this allow it to achieve a more of comfortable balance of payments, but also steadily integrate itself into the global economy through ways that would make its economic position resilient to unforeseen circumstances.
Top Stories of the Week
Hints on the contours of the Digital India Act
As the primary law governing India’s digital ecosystem, the Information Technology Act, 2000 (IT Act), grows increasingly antiquated for its rapidly evolving subject matter, many are eager for its long touted replacement, the “Digital India Act” (DI Act). According to an Economic Times report, the MeitY is rushing to roll out the DI Act, intending for it to replace the IT Act in the winter session of the Parliament. The DI Act shall be a comprehensive legislation for the digital world, covering the breadth of digital technologies, devices and services. Some of its expected contours are below:
The Act shall draw from digital regulations attempted across the world, including in Singapore, Australia and Europe.
It shall introduce provisions for the regulation of content on social media platforms. In particular, it shall attempt to safeguard the safety of women and children, prevent incitement of violence and regulate misinformation.
The Act shall regulate content on OTT platforms according to “current societal norms”.
The DI Act shall also contain provisions regarding emerging technologies such as the metaverse and blockchains.
Russia pulls out of India’s mega submarine deal
In another blow to Indian Navy’s plans for domestic manufacture of six advanced submarines under a strategic partnership model, Russia became the latest foreign original equipment manufacturer (OEM) to exit the already beleaguered Rs. 43,000 crore Project-75(I) tender.
The last date for submission of responses was extended by six months to December 2022, in hopes that it would provide enough time to OEMs to prepare their bids for the project. However, with Russia’s exit, only two of the original five shortlisted OEMs remain in the fray - Spain’s Navantia and South Korea’s Daewoo Shipbuilding and Marine Engineering. Germany and France had exited the race previously, and Sweden had pulled out even before the tender was officially issued.
The technological and domestic manufacturing requirements of the tender coupled with the aggressive delivery schedule have rendered OEMs either non-compliant or incapable of delivering on the project in time. To add to their misery, OEMs also face stringent fines for delays in construction, something which they don’t have control over.
Comprehensive Action Against Drug Abuse (CADA) Act
The Punjab Government is considering introducing new a legislation, the ‘Comprehensive Action Against Drug Abuse Act’ (CADA Act), to combat rampant drug use and trafficking in the state. The CADA Act, a comprehensive legislation targeting alcohol, tobacco and drug abuse, stresses on the early detection of addictive tendencies and consequent timely cure of those engaged in drug abuse. The CADA Act is expected to work alongside general rules made under the Narcotic Drugs and Psychotropic Substances Act.
The proposed legislation buttresses the state’s ongoing Comprehensive Action Against Drug Abuse Strategy, which was implemented in 2019, giving a statutory foundation to the state’s programs on the treatment and prevention of drug addiction. The 2019 strategy pioneered innovative ideas such as the ‘Outpatient Opioid Addiction Treatment Clinics’, where the addicted would not have to be admitted, but could simply drop into clinics to take necessary medicine, and the ‘Drug Abuse Prevention Officers’ program, where any adult could volunteer to work towards controlling drug abuse.
Under the CADA Act, minor crimes shall be punished with community service, thereby assisting the larger community as a whole. The government intends to constitute a panel for monitoring the implementation of such community service.
This Week in Policy
Macroeconomics and Taxation
India’s wholesale price inflation (WPI) for the month of July 2022 eased to 13.93%, from 15.18% in the previous month. However, this marks the 16th consecutive month that WPI has been in double digits.
The Government intends to review the exemption-free taxation regime in order to make it more attractive to individual tax payers.
Labour
Prime Minister Modi has directed the Union Labour Ministry to ensure that superannuating employees in the private sector are given retirement benefits on the day of their superannuation.
Bihar CM Nitish Kumar promises to prepare a plan to provide 10 lakh jobs in the government sector.
Agriculture and FMCG
The Union Cabinet has approved to restore Interest Subvention on short-term agriculture loans to 1.5% per annum for all financial institutions for the financial year 2022-23 to 2024-25.
The Union Ministry of Agriculture and Farmers Welfare has released the fourth advance estimate of the production of major agricultural crops for the year 2021-22.
Healthcare
Union Health Secretary inaugurates the National Medical library’s Electronic Resources in Medicine (NML-ERMED), wherein access to 228 e-journals is provided round the clock to 71 states and government institutions.
Rajasthan Health Department launched a ‘TB mukt Rajasthan’ campaign to focus on gram panchayats to achieve a target of eliminating tuberculosis by 2025.
Arunachal Pradesh state government and World Economic Forum have launched the ‘Medicine from the Sky’ pilot project to explore the possibility of using drones for medical logistics in remote areas of the state.
Foreign affairs
EAM Dr. S. Jaishankar is currently visiting Thailand for the 9th India-Thailand Joint Commission Meeting, celebrating 75 years of diplomatic relations. The meeting will witness India and Thailand signing two Memoranda of Understanding, in the fields of health and information broadcasting.
This Independence Day, India gifted a Dornier Maritime Reconnaissance Aircraft to Sri Lanka, in order to boost their maritime security. This gesture is also in line with India’s vision of Security and Growth for All in the Region (SAGAR).
Technology, Media and Telecommunications
The office of the Principal Scientific Advisor launches the ‘Manthan’ platform, which intends to promote collaboration at scale between industry and the scientific R&D ecosystem.
Foreign vendors have been restricted from participating in the 4G / 5G upgrade being undertaken by BSNL and MTNL as part of their INR 1.64 lakh crore revival project.
The Department of Telecommunications initiates the process to auction an additional 5,500 GHz of 5G spectrum, worth over INR 35,000 crore.
International trade and commerce
India’s trade with Russia via Iran, through the International North-South Transport Corridor (INSTC) has been witnessed a boom. About 3000 tonnes of goods have been transported across the INSTC between May and July.
With global coal prices surging, India has started importing discounted petroleum coke from Venezuela, to replace coal. Between April and June, 160,000 tonnes of petroleum coke was imported by Indian companies.
As India continues to keep developing Free Trade Agreements with its partners, Bangladeshi PM, Sheikh Hasina has given her approval to the proposal sent by India for a Bangladesh-India Comprehensive Economic Partnership Agreement (CEPA).
Banking, Finance and Insurance
SEBI questions ‘senior-junior’ fund deals, wherein NBFCs transfer assets to alternative investment funds (AIFs) set up in partnership with PEs and asset managers.
RBI seeks public feedback on reinstating merchant discount rate (MDR) for UPI transactions.
Manufacturing
Union Minister Dr. Jitendra Singh, on behalf of the Department of Science and Technology, has signed an MoU with TGP Bio-plastics Private Limited, Maharashtra for the manufacturing and commercialization of compostable plastic - an alternative solution to Single Use plastic.
Retail and e-commerce
The Central Government is looking to establish new set of policies to bring about “algorithmic fairness” for ecommerce consumers. The proposed rules shall standardise search results of sellers to consumers.
Sustainability
MNRE may cancel allocations of solar parks due to failures in meeting timelines.
NTPC to carve out its renewable energy assets into a SPV and subsequently sell a stake to raise funds as part of government’s National Monetisation Pipeline (NMP).
Miscellaneous
The Civil Aviation Ministry has done away with fare caps on domestic airlines placed during the height of the COVID-19 pandemic.
Upcoming Events
Gati Shakti - Transforming India’s Infrastructure
August 23 | PHD House, New Delhi
The PHD Chamber of Commerce is organising a one day conference on 23rd August at the PHD House, New Delhi on the updated status of the seven engines under the Gati Shakti National Master Plan to explore synergies between industry and government to achieve the goal of a $5 trillion economy. The conference will have senior officials from the Ministry of Railways, DPIIT, and Ministry of Road, Transport and Highways as well as key stakeholders from Railway, Infrastructure, Logistics, and Cargo Handling industries present. More Information | Registration Link
EV State Summit 2022- Tamil Nadu
August 26 | The Vivanta, Chennai
EMobility+ is organising the Tamil Nadu iteration of the EV State Summit on 26th August at The Vivanta, Chennai to explore the developments in the electric mobility sector within the state. The event will be driven by regional policies which aim to support the uptake of electric vehicles in the state. More Information | Registration Link
Sustainable Energy Transition Dialogues in Rajasthan
August 24 | Virtual
WRI India is organising a webinar as part of its Sustainable Energy Transition Dialogues in Rajasthan series on the theme of Potential of Battery Energy Storage and Viability of Solarization of Agriculture sector on 24th August from 10 AM to 4 PM. In the webinar, preliminary findings of WRI’s research on energy storage potential for Rajasthan and its role in Rajasthan’s clean energy ambitions will be disclosed. More Information | Registration Link
A Few Good Reads
India’s G20 sherpa, Amitabh Kant highlights the successes of India's 'Aspirational Districts Program’.
Check out this post on Price Controls on Power Exchanges, where two electricity policy wonks under the pseudonyms of Jai and Veeru post their musings on the state of electricity markets in India.
Shrayana Bhattacharya writes of the small ways in which everyday Indian women push for equality.
Noahpinion, in the context of the United States, makes a case for pursuing high-skilled immigration.
Larry Summers talks about inflation, recession, UBI, the challenges of policy-making and more in this interview with Bari Weiss.
Tweets of the Week
Amidst celebrations of the Azadi Ka Amrit Mahotsav, one must not forget the abject horrors that accompanied our independence. PM Modi declares August 14 as Partition Horrors Remembrance Day:
Rishabh Bhatnagar recaps why the AIFF was banned by FIFA in this thread:
Tanay Sukumar summarises results of the YouGov-Mint-CPR survey of young Indians in this fascinating thread:
Key Notifications
11 new judges were appointed in Punjab and Haryana high courts on 15th August. This is in addition to 26 judges appointed on 12th August in various High Courts.
Draft Indian Ports Bill, 2022 was issued for stakeholder consultation. The Bill aims to replace The Indian Ports Act, 1908 which is over 110 years old. The draft bill can be found here, and suggestions can be emailed to sagar.mala@gov.in.
Cabinet approves Interest subvention of 1.5% per annum on Short Term Agricultural Loan upto Rupees Three Lakh.
Last date for applications under the Production Linked Incentive Scheme for Specialty Steel extended till September 15.