Highlights of Economic Survey 2016-17

Union finance Minister Arun Jaitley tabled the Economic Survey 2016-17 in Parliament budget session. The survey prepared by chief economic adviser in the finance ministry Arvind Subramanian. The survey projects the economy to grow in the range of 6.75% to 7.25% in fiscal year 2017-18 in the post-demonetisation year. It says that the adverse impact of demonetisation on GDP growth will be transitional. 

Major highlights from the Economic Survey 2016-17 

Growth Forecast: 

Gross domestic product (GDP) growth in 2016-17 pegged at 6.5%, down from 7.6% in last fiscal 2015-16. Economic growth to rebound to 6.75 to 7.5% in 2017-18. Farm sector to grow at 4.1% in 2016-17, up from 1.2% in 2015-16. Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17 from 7.4% in 2015-16. Service sector is estimated to grow at 8.9% in 2016-17 GST, other structural reforms should take the growth rate trend to 8-10%. 

Taxation: 

Prescribes cut in individual Income Tax rates, real estate stamp duties. IT net could be widened gradually by encompassing all high income earners. Time table for cutting corporate tax should be accelerated. Tax administration could be improved to reduce discretion and improve accountability. Goods and Services Tax (GST): Fiscal gains from GST will take time to realise. 

Fiscal Deficit: 

Implementation of muted tax receipts, wage hike to put pressure on fiscal deficit in 2017-18. For fiscal health of the economy fiscal prudence for both centre and states is needed. Fiscal windfall from low oil prices to disappear in 2017-18. 

Inflation: 

The average consumer price index (CPI) inflation rate declined to 4.9% in 2015-16 from 5.9% in 2014-15. CPI-based core inflation remained sticky around 5% in the 2016-17. Oil prices, seen rising by one-sixth in 2017-18 over the previous fiscal 2016-17 prices which could dampen India’s economic growth. 

Monetary Policy: 

monetary easing headroom may be capped due to sharp rise in prices in 2017-18. Market interest rates seen lower in 2017-18 due to demonetisation. 

Government Debt to GDP ratio: 

It was 68.5% in 2016, down from 69.1% in 2015. Banking: Suggests setting up public sector asset rehabilitation agency (PSARA) to take charge of large bad loans in banks. With government backing, PSAR can overcome coordination and political issues on bad loans. 

Demonetisation: 

The adverse impact of demonetisation on GDP growth will be transitional. It will affect growth rate by 0.25-0.5%, but to have long-term benefits It may affect supplies of certain agricultural products like sugar, milk, potatoes and onions. Remonetisation will ensure that the cash squeeze is eliminated by April 2017. 

Universal Basic Income (UBI): 

Advocates the concept of UBI as an alternative to the various social welfare schemes in an effort to reduce poverty. It will be alternative to plethora of state subsidies for poverty alleviation. UBI would cost between 4 and 5% of GDP

Dr Vijay Bhatkar appointed new vice-chancellor of Nalanda University

President Pranab Mukherjee has appointed Dr Vijay Bhatkar, architect of India’s first supercomputer the Param series, as the chancellor of Nalanda University. He will have term of three years from the date of his appointment as provided under Section 11(3) of the Nalanda University Act. He shall succeed George Yeo, former Foreign Minister of Singapore, who resigned after the Board of the University was reconstituted. 

About Dr Vijay Bhatkar 

Dr. Bhatkar is one of the acclaimed scientists and IT leaders of India. He is best known as the architect of India’s first supercomputer Param series. He is also known as the founder executive director of C-DAC, India’s national initiative in supercomputing. He is also credited with the creation of several national institutions. He also was member of the scientific advisory committee to the cabinet of Union Government and as also of the governing council of the Council for Scientific and Industrial Research (CSIR). Bhatkar studied at the Indian Institute of Technology (Delhi) and the Maharaja Sayaji Rao University. He has been honoured with Padma Shri, Maharashtra Bhushan, Padma Bhushan (2015) awards for his contribution to field of science and technology. 

About Nalanda University 

Nalanda University revived version of ancient Nalanda University located at Rajgir in Nalanda District in Bihar. It is a non-state, non-profit, secular and self-governing international institution. Its idea was mooted by former President APJ Andul Kalam in 2006. It was established through Nalanda University Act, 2010. It is mandated to be engaged in the pursuit of intellectual, philosophical, historical and spiritual studies 

Note: The ancient Nalanda University was established in 427 AD during the reign of Gupta king Sakraditya. It was one of India’s earliest university. At its peak, it had attracted scholars and students from near and far with some travelling all the way from Tibet, China, Korea, and Central Asia

Indian Navy’s Theatre Level Exercise TROPEX 17

The Indian Navy’s Annual Theatre Readiness Operational Exercise (TROPEX) 2017 is being conducted off the Western Seaboard. The month long exercise will see participation of ships and aircraft of both the Western and Eastern Naval Command and also assets from the Indian Air Force, Indian Army and the Indian Coast Guard.

Key Facts

TROPEX 17 exercise is aimed at testing combat readiness of the combined fleets of the Indian Navy, and the assets of the Indian Army, Indian Air Force and Indian Coast Guard. It seeks to strengthen inter-operability and joint operations in a complex environment. It assumes special significance in the backdrop of the current security scenario. TROPEX 17 exercise will be conducted in various phases, both in harbour and at sea encompassing the various facets of war-fighting and combat operations. It will see participation of major surface combatants and air assets of the Indian Navy including the aircraft carrier Vikramaditya, nuclear submarine Chakra, Landing Platform Dock (LPD) Jalashwa. It will also see participation of recently commissioned destroyer Chennai, the P-8I long range maritime reconnaissance and anti-submarine warfare aircraft. The assets of Indian Navy will operate alongside SU-30 MKI, Jaguars, AWACS, IL-78 Flight Refuelling Aircraft of the Indian Air Force and Infantry units of the Indian Army. The last edition of TROPEX exercise was conducted in January 2015 and since its launch it has grown in scale and complexity over the years.

GAAR will be effective from April 1, 2017

The Union Finance Ministry has announced that the General Anti Avoidance Rule (GAAR) will be effective from the 1 April, 2017. In this regard Income Tax (IT) department has issued a slew of clarifications on implementation of GAAR, seeking to address concerns of foreign investors over implementation of the anti-evasion measure. GAAR seeks to prevent companies from routing transactions through other countries to avoid taxes. The rules are framed mainly to minimize and check avoidance of tax. India will be the 17th nation in the world to have laws that aim to close tax loopholes. At present, GAAR is in force in nations like Australia, Singapore, China and the UK. 

Issued clarifications 

GAAR seeks to give the IT department powers to scrutinize transactions structured in such a way as to deliberately avoid paying tax in India. It will not be invoked in cases where investments are routed through tax treaties that have a sufficient limitation of benefit (LOB) clause to address tax avoidance. It should be noted that LOB clause in tax treaties generally requires investors to meet certain spending and employment criteria to avail the benefits of the treaty. All transactions or arrangements approved by courts and quasi-judicial authorities like the authority for advance ruling and that specifically address the issue of tax avoidance will not be subject to the GAAR test. GAAR will not be applicable on compulsorily convertible instruments, bonus issuances or split/consolidation of holdings in respect of investments made prior to 1 April 2017 in the hands of the same investor. In order to prevent misuse of GAAR provisions by the IT department, adequate safeguards also have been put in place based on which GAAR will be invoked. The proposal to apply GAAR first will be vetted by an officer at the level of the principal commissioner or commissioner of income tax and at the second stage by an approving panel headed by a high court judge. GAAR will not apply on foreign portfolio investor if its jurisdiction is based on non-tax commercial considerations and the main purpose is not to obtain tax benefits.

India inks deal with UAE for strategic oil reserves storgae

India has signed a deal with United Arab Emirates (UAE), fifth biggest oil supplier as part of its quest for energy security and strategic reserve system. The deal allows UAE’s Abu Dhabi National Oil Co. (ADNOC) to fill half (about 6 million barrels of oil) of an underground crude oil storage facility at Mangaluru, Karnataka. India has already filled the other half of the Mangaluru storage in Karnataka state with six million barrels of Iranian oil. It also has filled a Vizag storage site in southern Andhra Pradesh with 7.55 million barrels of Iraqi oil and has invited bids from suppliers to fill an 18.3 million-barrel facility at Padur in Karnataka. 

Background 

As one of the fastest growing economies and world’s third-biggest oil consumer, India is building emergency storage in underground caverns to hold 36.87 million barrels of crude, or about 10 days of its average daily oil demand. This move aims to hedge against energy security risks as it imports most of its oil needs. In 2014, India already had started talks to lease part of its strategic storage to ADNOC. Under those discussions, India was to have first rights to the stored crude in case of an emergency, while ADNOC will be able to move cargoes to meet any shift in demand. 

Significance 

Strategic petroleum reserves have become indispensable to safeguard the economy and to help maintain national security in the event of an energy crisis. These crude oil reserves (or stockpiles) can be held by the government of a particular country, as well as by private industry.

Japan successfully launches first military communications satellite

Japan has successfully launched its first military communications satellite Kirameki-2 (kee-RAH-meh-kee 2) satellite. It was launched on board of H-2A rocket that lifted off from the Tanegashima Space Center in southern Japan. The satellite separated from the rocket and entered a designated orbit. 

Key Facts 

The Kirameki-2 satellite has been designed to upgrade Japan’s existing communication network in the face of China’s increasingly assertive maritime activity and North Korea’s missile threat. It is the first of three satellites that will replace three civilian satellites currently used by Japan’s military. The new satellites will allow military units to communicate on a high-speed and high-capacity network. These satellites aimed at stepping up Japan’s emergency response capability in case of natural disaster, China’s maritime activity from southern Japanese waters to South China Sea, as well as missile threats from North Korea. They will be also used by Japanese troops operating overseas as part of international peacekeeping operations, including those off the Somali coast and in South Sudan.

India ranks 79 in Corruption Perception Index

India has been ranked 79th out of 176 countries in the recently released Corruption Perception Index (CPI) for the year 2016 by the Berlin-based corruption watchdog Transparency International (TI). The index has been complied by using World Bank data, the World Economic Forum (WEF) and other institutions It ranks countries on the score in the scale ranging from 0 (highly corrupt) to 100 (very clean). 

Key Facts

Top 10 Countries:

New Zealand and Denmark in joint first place (with a score of 90), followed by Finland (3rd), Sweden (4th), Switzerland (5th), Norway (6th), Singapore (7th), Netherlands (8th), Canada (9th) and Germany (10th).

Counties bottom of the index:

Somalia was ranked the most corrupt country. Other countries with lower rankings were Syria, South Sudan, North Korea, Afghanistan, and Iraq. In this edition of list, India, China and Brazil with a score of 40 each figured in the 10 key economies in the mid-range. Over two-thirds of the 176 countries in this year’s index fall below the midpoint of the scale of 0 to very clean of index. The global average score is 43, indicating endemic corruption in a country’s public sector. In this edition of list, India has marginally improved its ranking index for 2016 by two points from 38 score in 2015. India’s condition showed growth with inequality. India’s ongoing poor performance with a score of 40 reiterates the state’s inability to effectively deal with petty corruption and large-scale corruption scandals. Regionally, South Asia had performed poorly. Bangladesh at 27th and Nepal at 29th positions were slotted in the highly corrupt section.