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Friday, June 23, 2017

Deliberations on Investment Proposals Held Under Chairmanship of CM Chouhan


Investors from Bengaluru and Mumbai met the Chief Minister Shivraj Singh Chouhan at his residence today. Representatives of Karvi Electronics- Bengaluru and Rusan Pharma – Mumbai gave their proposals. Chief Secretary B.P. Singh, Principal Secretary Commercial Taxes Manoj Shrivastava, Principal Secretary Commerce and Industry Mohammad Suleman and Additional Managing Director of TRIFAC V. Kiran Gopal and other officers were present on the occasion.

CM Chouhan welcomed the investment proposals and directed the officials for their active cooperation to realise the proposals. Investors appreciated the policies and investment friendly atmosphere of the state. The proposal to establish pharmaceutical unit at special economic zone –Pithampur with an investment of Rs. 600 crore was given by the Rusan Pharmaceuticals-Mumbai. Similarly, Karvi Electronics informed about their proposal.

From 11% to 2.2%, five things explain vanishing India inflation


Mumbai: Four years ago Indian inflation was running at more than 11%. Now it’s melted to a record low 2.2%, below Mexico, Turkey and the UK, as the central bank’s battle against price pressures gains traction.

The slide has prompted the Reserve Bank of India, led by Urjit Patel, to slash its inflation forecasts and led one member of its six-person monetary policy committee to break ranks at its 6 June announcement, stoking market speculation the bank could next cut rates, perhaps as early as August.

So what’s changed? Economists say cyclical or temporary issues like a stronger currency and weaker domestic demand, combined with structural factors such as better food management by Prime Minister Narendra Modi’s government are in play.

There are risks the cyclical factors could easily unwind, but for now, economists increasingly see structural factors winning out. Inflation is expected to hug the lower band of the RBI’s 2% to 3.5% forecast for the first half of the financial year ending in March and remain below the 3.5% to 4.5% target for the second half.

Becoming anchored

To be sure, India is benefiting from subdued inflation globally, especially in oil, the country’s biggest import. Along with a 5.4% rise in the rupee this year, the cost of imports have been held in check. Crucially, inflation expectations are becoming anchored.

“Inflation expectations, both backward and forward, have declined,” said Pranjul Bhandari, chief India economist at HSBC Holdings. “Inflation each quarter is coming out to be lower than the previous quarter.” One-year forward inflation forecasts have fallen steadily since 2014 with underlying inflation — stripping out food, fuel, petrol and diesel — in the 4 percent ballpark which the RBI targets in the medium term, she said.

Food prices

Radhika Rao, a Singapore-based economist at DBS Group, expects inflation to be below 2% for June, July and possibly August and only come within the 4% target by the March 2018 quarter. That will be nearly 100 basis points lower than the 5% estimate the RBI made in April.

Food prices have been a big reason for the decline. Vegetable prices declined nearly 20% last month from a year ago with potato prices, a key staple, contracting for the sixth straight month, the country’s wholesale price index last week showed. After averaging 11% between 2007 and 2013, food inflation has averaged 4.5% since the start of 2016.

Adroit management

The government’s cash ban in November led to “fire sales” by farmers as Rs500 and Rs1,000 notes were rendered useless overnight for purchases. More importantly, structural changes like better food management by the government and a muted rise in support prices for farmers have kept a lid on prices, economists say.
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While falling food prices are good news for India’s rising middle-class, they haven’t gone down well with farmers, some of whom have taken to the streets to protest.

“We believe the backdrop continues to be that of adroit food management by the current government in terms of use of buffer stocks and the crackdown of hoarding, aided by softening in global food prices,” said Prasanna Ananthasubramanian, Mumbai-based chief economist at ICICI Securities Primary Dealership Ltd.

Monsoons, which are critical to the water supply, are forecast to be normal for a second year running and are likely to exert downward pressure on food prices.

New base

Last month, India also moved to new base year to calculate wholesale prices, bringing it in line with the 2012 base year of the consumer price index. This will reduce volatility in wholesale prices and provide a clearer signal for the RBI, said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, the country’s largest bank.

Meanwhile, Bloomberg Intelligence economist Abhishek Gupta says that a raft of structural reforms, from the introduction of the goods and sales tax (GST) on 1 July, to easier foreign direct investment rules, should boost India’s growth potential over the longer term.

“At the same time, actual growth is lagging due to demonetization and high real interest rates,” Gupta wrote in a report earlier this month. “The upshot — a widening output gap that is pulling down inflation.”

Wage increases for India’s government employees and farm-loan waivers could start to pressure inflation higher again, economists say. “Even if inflation bottoms out later this year, its recovery is likely to be modest,” said DBS’s Rao. “Apart from inflation, lower financing costs will help investment growth.”

Ram Nath Kovind: A lawyer and BJP’s Dalit face from Uttar Pradesh


New Delhi: That the Bharatiya Janata Party’s (BJP) presidential nominee was going to be a surprise was a given. But no one imagined the extent to which it would surprise.

The announcement of Bihar governor Ram Nath Kovind as the party’s candidate had many scurrying for information on the man. The 71-year-old has served as a two-time Rajya Sabha MP in the past (from 1994 to 2006). He was appointed governor of Bihar in August 2015 and has also served as president of the BJP Dalit Morcha. A lawyer by profession, Kovind belongs to Kanpur. He was a central government advocate in Delhi high court for two years from 1977 to 1979 and central government standing counsel in the Supreme Court from 1980 to 1993.

Kovind’s appointment as Bihar governor was done without any consultation with the state government or the chief minister. The Telegraph quoted state assembly speaker Vijay Chaudhary as saying: “…the Centre did not inform the chief minister about the new appointment. Nitish (Kumar) heard of it from the media. The Centre is not following constitutional norms.”

This time around, Kovind’s name was discussed by Prime Minister Narendra Modi with Congress president Sonia Gandhi and former Prime Minister Manmohan Singh before the announcement by the party.

“Sonia Gandhi said she will hold talks on Kovind’s name and will let us know the decision after that,” BJP president Amit Shah said at a press conference where the nomination was announced.

Kovind has had a long political career but not one that brought him into the public eye.

In Patna the view about him remains middling at best with a political scientist saying his handling of the appointments of vice-chancellors to the state’s universities doesn’t inspire much confidence. “Several offices fell vacant on 31 January this year but appointments were not made till March. He has been a very non-intervening governor till now. He has not demonstrated or done anything which can openly be construed as a political stand,” said N.K. Choudhary of Patna University.

Kovind is reportedly close to home minister Rajnath Singh and campaigned for the BJP in the 2012 Uttar Pradesh assembly election.

There is no denying that Kovind’s nomination is a move made with one eye on the Dalit community. But for many it may not go beyond mere tokenism. According to Vivek Kumar of Jawaharlal Nehru University, BJP has neither effective nor functional representatives of Dalits in either the party or the government, unlike the Congress. “There is not one effective voice from top to bottom…and now you propose a name for the President’s office. It is a ceremonial office. We have seen nominal representation of Dalit causes for namesake through attempts like Bhim App etc. and now this is another step.”

What lies behind India’s falling infant mortality rate?


India’s inability to improve health outcomes significantly despite rapid growth has been one of the country’s major failings. But evidence from the latest round of the National Family Health Survey (NFHS) suggests that this may be changing. The infant mortality rate (IMR), an important summary measure of a country’s health, saw a marked improvement over the past decade, declining from 57 per 1,000 live births in 2005-06 to 41 per 1,000 live births in 2015-16.

The improvement over the past decade has been much faster than in the rest of the post-liberalization era. The IMR declined at a nearly constant pace of 2.5% per annum between 1992-93 and 2005-06. But the pace of decline accelerated over the past 10 years, with the IMR registering an annual decline of 3.24% per annum.

The faster decline in IMR over the past decade cannot be attributed merely to faster growth over the latter period. Over the past decade, the effectiveness of growth in lowering IMR increased, thanks to greater public investments in health, our research suggests.

Between 1992-93 and 1998-99, and between 1998-99 and 2005-06, every percentage point of economic growth led to about 0.38 percentage point of decline in IMR. Between 2005-06 and 2015-16, every percentage point of economic growth led to 0.43 percentage point decline in the IMR.

This is a significant improvement in terms of absolute numbers of lives saved. If the effectiveness of economic growth to translate into improvements in IMR had remained the same as over the 1990s, then the all-India IMR in 2015-16 would have been 42.55 instead of 41. That would have meant 1.55 more infant deaths for every 1,000 live births, and would have translated to a total of about 40,643 more infant deaths in 2015.

This improvement in IMR has coincided with an improvement in public health spending, and the rollout of a National Rural Health Mission (NRHM) focusing on the healthcare needs of under-served rural areas in 2005. Despite leakages, the mission helped set up rural health infrastructure in areas where it was non-existent earlier, and helped raise a cadre of community health workers (ASHA workers) who worked as the frontline staff of the mission in improving health outcomes, especially of women and newborns.

All of this was enabled by increased funding. Between 2004 and 2014, public health expenditure increased from 1% to 1.4% of the GDP, a 40% increase over a decade.

In recent research published in the Journal of Development Studies, my colleagues at the University of Massachusetts Amherst, Andrew Barenberg and Ceren Soylu, and I have examined data for 31 states and Union territories in India over the period 1983-84 to 2011-12 to estimate the causal impact of public health expenditure on the IMR. We control for possible confounding factors such as state level GDP, female literacy rate, urbanization, and use exogenous variation in the fiscal capacity of states—measured by the tax revenue and non-tax revenue of states—to find the effect of public health expenditure on the IMR. Our research suggests that an increase in public health expenditure by 1% of state-level GDP leads to a decline in the IMR by about 9 deaths per 1,000 live births, even after controlling for all other factors.

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These findings suggest that the decline in IMR over the past decade was caused, at least in part, by growing public expenditure on health.

The draft National Health Policy announced by the Union Cabinet earlier this year intends to take health spending to 2.5% of the GDP in a time-bound manner. Our research suggests that this should help India improve health outcomes more rapidly.

Punjab CM announces farm loan waiver, 8.75 lakh farmers to benefit


New Delhi: The Punjab government on Monday said it will waive off crop loans of up to Rs2 lakh taken by small and marginal farmers, a move it said will benefit more than a million farmers. The decision follows an election pledge made by the Congress party to farmers, and similar announcements made by the governments of Uttar Pradesh and Maharashtra.

“The initiative would provide double the relief announced by the states of Uttar Pradesh and Maharashtra,” chief minister Amarinder Singh told the state assembly.

According to an official statement from the chief minister’s office, the government will take overall outstanding institutional crop loans of households where a farmer has committed suicide.

The government also said it will raise the compensation to these families from Rs3 lakh to Rs5 lakh. For marginal farmers, the state government will provide a flat relief of Rs2 lakh irrespective of their loan amount, the official statement added.

For non-institutional loans, the government said it has set up a cabinet sub-committee to suggest ways to provide relief to farmers after reviewing the Punjab Settlement of Agriculture Indebtedness Act.

The decision to write off loans of small and marginal farmers holding up to five acres of land is based on an interim report of a committee headed by T. Haque, former head of the commission for agricultural costs and prices.

Amid rising demand for loan waivers in several states, the latest announcement in Punjab follows a Rs36,359 crore farm loan waiver programme announced by the Uttar Pradesh government in April, and Rs30,000 crore waiver announced by Maharashtra in June following massive protests by farmers. Farmers in states like Haryana and Madhya Pradesh are also demanding loan waivers and implementation of the recommendations of the M.S. Swaminathan commission for fixing crop support prices at 50% over the cost of production.

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