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Current Affairs: 1 December 2018



NATION

Pakistan FM scored self-goal with ‘googly’ remark, says New Delhi
  • Pakistan’s Foreign Minister Shah Mehmood Qureshi scored a “self-goal” by claiming that Prime Minister Imran Khan had tricked India over the Kartarpur corridor, government sources said in New Delhi.
  • Mr. Qureshi’s statement at a function claiming that Mr. Khan had “bowled a googly” became the latest in a series of contradictory messages that marked the otherwise cordial photo-opportunity afforded by the start of work on the Kartarpur Sahib corridor this week.
  • The Ministry of External Affairs didn’t comment officially on Mr. Qureshi’s latest remarks.
  • Mr. Qureshi had also said it was Pakistan’s failing economy that was the motivator for the “consensus for peace with India” in the country. “Let me point out why there’s support for the entire [engagement process]: because we have come on a mandate to fix the economy. We have inherited a difficult economic situation where the fiscal deficit is close to 6.6%, the trade deficit was historic and growth rate is abysmal. So the challenge….is the economy,” he had said.
Hostage crisis: India is working with Ethiopia
  • India is trying to resolve a crisis that began after seven Indian employees of IL&FS were taken hostage by local workers in Ethiopia over unpaid wages. 
  • Sources said that both sides are trying to resolve the situation on a priority basis which began on November 24. 
Paris Agreement can’t be renegotiated: India
  • India will resist attempts by countries to renegotiate the Paris Agreement, said one of India’s key negotiators at climate talks set to begin next week in Katowice, Poland.
  • “India won’t create obstacles…however, we want that the Conference of Parties-24 (discussions) be balanced, inclusive and consistent with the Paris Agreement,” said C.K. Mishra, Secretary, Union Minister for Environment, Forests and Climate Change. “Some countries are trying to reopen the Paris Agreement.”
  • While he didn’t name them, meetings in the run-up to the COP have seen several, particularly Australia, and the U.S. prominently, raise concerns about clauses in the deal.
  • The landmark deal agreed to in 2015 exhorts countries to take steps to avoid temperatures from rising beyond 2C of pre-industrial levels, and even 1.5 C as far as possible, by the end of the century.
  • Currently global emissions are poised to warm the world by 3C by the end of the century.
  • The United States opted out of the deal last year but continues to be part of discussions as a complete withdrawal — as per terms of the UN convention — takes up to four years.
  • A 17-member delegation, consisting of officials from several Ministries as well as Union Environment Minister Harsh Vardhan, will be representing India over two weeks in what is likely to be arduous negotiations on how to agree to implement the Paris Agreement.
  • A key point, said Mr. Mishra, would be transparency and accountability. Developing and developed countries have disputes on whether there should be a common set of standards that all countries must adhere to when reporting what steps each has taken to contain carbon emissions.
  • India and China, which have committed to ensuring that their emission intensities will not cross a threshold, also argue that all countries cannot be held to the same data-monitoring-and-reporting standards.
Modi meets Trump, Putin ahead of G20 summit
  • Prime Minister Narendra Modi interacted with U.S. President Donald Trump, Russian President Vladimir Putin and British Prime Minister Theresa May ahead of the G-20 summit .
  • Earlier, Mr. Modi held separate bilateral meetings with Chinese President Xi Jinping, Saudi Crown Prince Mohammed bin Salman and UN Secretary General Antonio Guterres. Mr. Modi and Mr. Xi discussed joint efforts to further enhance mutual trust and friendship. Asserting that the Wuhan meet was a milestone in India-China ties, Mr. Modi told Mr. Xi that he was looking forward to host him for an informal summit next year.
  • Mr. Modi assured Mr. Guterres, that India will play its “due and responsible” role at the crucial climate change negotiations in Poland next week.
  • During Mr. Modi’s meeting with Crown Prince Salman, the two leaders decided to set up a mechanism to scale up the oil-rich kingdom’s investments in energy, infrastructure and defence sectors in India.
  • Crown Prince Salman said Saudi Arabia will be finalising an initial investment in the National Infrastructure Fund.
ECONOMY

Growth slows to 7.1% on oil, rupee
  • Second-quarter GDP growth slowed to 7.1%, from 8.2% in the preceding three-month period, official estimates show. Gross Value Added (GVA) growth eased to 6.9% in July-September, from 8%.
  • The GDP expansion in the corresponding quarter of the last fiscal year was 6.3%, while GVA growth was 6.1%.
  • Economists said while the slowdown was anticipated, given that oil prices had been high and the rupee had weakened against the dollar during the quarter, the actual numbers had surprised on the downside.
  • “The general expectation was it would come in anywhere between 7.2% and 7.9%,” said D.K. Srivastava, Chief Policy Advisor at EY India. “It has come down lower than that primarily because of the impact of net exports being in the negative. The growth rate in investment is about 12% but this contribution has been negated by the negative effect of exports.”
  • The data also show that GDP growth in the first half (April-September) was 7.6%, faster than 6% in the year-earlier period. First-half GVA growth was estimated at 7.4%, up from 5.8%.
  • “GDP growth for second quarter 2018-19 at 7.1% seems disappointing,” Economic Affairs Secretary Subhash Chandra Garg tweeted. “Manufacturing growth at 7.4% and agriculture growth at 3.8% is steady. Construction at 6.8% and mining at -2.4% reflect monsoon months deceleration. Half year [GVA] growth at 7.4% is still quite robust and healthy. First half GDP growth is at 7.6% and is quite robust and healthy. Still, the highest growth rate in the world.”
  • Analysts expect easing oil prices and the rupee’s recent rebound to boost third-quarter GDP growth.
Fiscal deficit exceeds full-year target in just seven months
  • India’s fiscal deficit in the first seven months of the financial year, at ₹6.49 lakh crore, exceeded the budgeted target for the entire year, coming in at 103.9% of that target, according to official data.
  • The fiscal deficit was 96.1% of the budgeted amount in the same period of the previous year.
  • Net tax receipts were ₹6.61 lakh crore in the April-October 2018 period, which is only 44.7% of the budgeted estimates for the year, with just five months to go. Total receipts, at ₹8.08 lakh crore, were only 44.4% of the budgeted amount for the year. Total expenditure, on the other hand, stood at ₹14.5 lakh crore, which is 59.6% of the budget estimate for the year.
  • “While expenditure continues to grow, total receipts in October 2018 shrank from October 2017,” Devendra Kumar Pant, chief economist, India Ratings and Research, said.
  • India Ratings expects the fiscal deficit for the year to be 3.5% of GDP, higher than the government’s target of 3.3%. 
  • Meanwhile, the growth rate of eight infrastructure sectors slowed to 4.8% in October due to contraction in the production of crude oil, natural gas and fertilizers, according to official data released.
  • Rating agency ICRA said the modest uptick in core sector growth in October compared to September portends a pickup in IIP growth to 6.5-7.5% in that month.
What’s with the back series GDP data?
  • The government released the GDP growth estimates for previous years based on the new method of calculation and base year it had adopted in 2015. The new data and the manner in which it was released led to criticism from various quarters.
  • What happened?: In 2015, the government adopted a new method for the calculation of the gross domestic product of the country, and also adopted the Gross Value Added measure to better estimate economic activity. Further, the change involved a bringing forward of the base year used for calculations to 2011-12 from the previous 2004-05. However, this had led to the problem of not being able to compare recent data with the years preceding 2011-12.
  • What does the new data say?: The new data release shows that GDP growth during the UPA years averaged 6.7% during both UPA-I and UPA-II, compared with the 8.1% and 7.46%, respectively, estimated using the older method. In comparison, the current government has witnessed an average GDP growth rate of 7.35% during the first four years of its term, based on the new method.
  • The new data shows that, contrary to the earlier perception, the Indian economy never graduated to a ‘high growth’ phase of more than 9% in the last decade or so.
  • What were the changes made?: The first and most basic change made in the data calculations was changing the base year. While using 2011-12 as the base year is simpler for calculations for subsequent years, it was a tougher exercise calculating backwards using the new base.
  • According to the Ministry of Statistics and Programme Implementation, the method for preparing the back series is largely the same as what is used to calculate the data using the new base, which is how all national accounts calculations will be made going forward.
  • While doing the exercise, the government adopted the recommendations of the United Nations System of National Accounts, which included measuring the GVA, Net Value Added (NVA), and the use of new data sources wherever available. One of these data sources is the Ministry of Corporate Affairs MCA-21 database, which became available since 2011-12.
  • One problem encountered was in finding matching data for the older series as what the MCA-21 database provided. The key difference between the two was that the old method measured volumes — actual physical output in the manufacturing sector, crop production, and employment for the services sector. The MCA-21 database allows for a more granular approach, looking at the balance sheet data of each company and aggregating the performance of the sector from that, after adjusting for inflation.
  • For most sectors, simply changing the price vectors from a 2004-05 to a 2011-12 base was enough, but others required a splicing of new and old data in the relevant proportions to arrive at the closest approximation.
  • The new method is also statistically more robust as it tries to relate the estimates to more indicators such as consumption, employment, and the performance of enterprises, and also incorporates factors that are more responsive to current changes.
  • What are the problems with the new data?
  • As even the government concedes, there are a number of ways to calculate the back series data. To arrive at the ‘best’ one, it held numerous consultations with leading economists and statisticians.
  • However, the number of options available and the manner in which the data was released also led to criticism and doubt over the method that was finally chosen. Former Chief Statistician of India Pronab Sen pointed out that the fact that the data was released by Niti Aayog led to questions over the credibility of the method chosen. While it was being handled exclusively by the Central Statistics Office, the assumption was that the statistically strongest method would be chosen. Adding Niti Aayog to the equation puts this in doubt, Mr. Sen said, since it brought political considerations into the fray.
  • Are these numbers different from previous estimates?
  • The new back series data diverges quite sharply significantly from the estimates made in a draft report released by the National Statistical Commission earlier this year, which showed that growth during the UPA years crossed 9% on at least four occasions, and even hit 10.78% in 2010-11. This report pegged the average GDP growth during UPA-I at about 8.4% and UPA-II at 7.7%. The government, however, was quick to clarify that this was just a draft report that used only one of the many methods on offer to estimate the back series, and that it was not the final number.