Table of Contents
IIP, CPI and green shoots
- A day after the government cited seven economic indicators to claim that the economy was recovering.
- Factory output contracted in December and retail inflation shot up to a 68-month high in January.
- The National Statistical Office (NSO) on Wednesday said that
- The index of industrial production (IIP) shrank 0.3% in December from a 1.8% expansion a month ago
- While retail inflation accelerated to 59% in January from 7.35% in the previous month.
- Rising foreign direct investments (FDIs)
- Foreign portfolio investments (FPIs)
- Rebound in industrial activity
- Rising Purchasing Managers’ Index
- Increasing forex reserves
- Robust collections of the goods and services tax
- Rising Sensex
- The contraction in factory output does not bode well for the economy as global headwinds, including the coronavirus epidemic, already pose significant challenges to companies, said Rumki Majumdar, an economist at Deloitte India.
- “The large outbreak of the coronavirus in China can adversely impact India as China is one of the largest trading partners,” she said.
- In 2002-03, when the SARS epidemic broke out, India’s total trade with China was a paltry $4.8 billion, which has since expanded more than 18 times to touch $87 billion in 2018-19.
- India’s economic growth is estimated by NSO to hit an 11-year low of 5% in 2019-20 on the back of sluggish consumption and investment demand.
- The International Monetary Fund has projected growth to recover to 8% in 2020-21.
- The IIP data came as a surprise as most economists expected that it would remain positive for the second straight month in December, after contracting for three consecutive months from August to October.
- Six infrastructure sectors, which constitute 40% of IIP, turned positive in December growing at 3% after a gap of four month.
- The contraction in IIP was led by manufacturing (- 2%) and electricity (-0.3%) sectors, while mining (5.4%) registered robust growth on the back of improved performance of Coal India Ltd.
- Among use-based items, both consumer durables (-6.7%) and consumer non-durables (-3.7%) registered sharp contraction, while capital goods (- 2%), which signifies investment demand in the economy, shrank for the 12th month in a row.
- Double-digit food inflation (13.6%) in January kept retail inflation above the central bank’s tolerance level for the second month in a row.
- The pick-up in core inflation to 4.1%, driven by various services, may also lead to a prolonged pause from the Reserve Bank of India (RBI).
- The central bank sharply raised projection for retail inflation to 5% for the fourth quarter of FY20 from 4.7-5.1% earlier and pegged it at 5-5.4% for the first half of FY21 compared with 3.8-4% earlier.
- The central bank has projected GDP growth for 2020-21 at 6%, in line with the projection in the Economic Survey, which pegged it in the range of 6-6.5%.
Bills to promote safer pesticides
- Union cabinet approved the Pesticide Management Bill, 2020
- The bill seeks to replace the existing Insecticide Act, 1968
- A bill seeking to promote safe and effective pesticides will be introduced in the current session of Parliament.
- Farmers would be empowered to get all information regarding the available pesticides, their strength, weaknesses, and risks from the dealers they choose to purchase the pesticide from.
- It comes against the backdrop of rising concern over the need to protect farmers from spurious and sub-standard pesticides , along with the need to assess their potential effects on the health of people and that of the environment.
- Any person who wants to import, manufacture, or export pesticides would have to register under the new bill and provide all details regarding any claims, expected performance, efficacy, safety, usage instructions, and infrastructure available to stock that pesticide.
- The information will also include details on the pesticide’s potential effects on the environment.
- “The bill also has a provision to provide compensation if there is any farm loss because of low quality or spurious pesticides. The penalty collected from the manufactures/dealers and funds put in by the government would be used to form a central fund,” said Javadekar.
- The bill also plans to regulate pesticides-related advertisements to check misleading claims by industries and manufacturers.
- India is among the leading producers of pesticides in Asia.
- In the domestic market, Maharashtra, Uttar Pradesh, Punjab, and Haryana are among the states with the highest recorded consumption.
Cabinet Dicisions
- The cabinet also gave its nod for the tabling of the Ports Authority Bill, 2020, in the current session of Parliament .
- The bill replaces the existing Major Port Trust Act, 1963, and aims to provide more operational autonomy and flexibility to all the major ports in India, allowing them to take decisions faster at the port level.
- This would be done by constituting a Board of Major Port Authority for each major port, which will be vested with powers of administration, control, and management of such ports.
- “The situation has changed over the last few decades. Many private ports have come up. We need a system for taking fast decisions and ensuring fast development of our ports and maintaining world-class standards,” said Mansukh Mandaviya, the minister of state for shipping.
- The cabinet also approved amendments to the existing double tax avoidance agreement with Sri Lanka to curb tax evasion by exploitation of gaps and mismatches in tax rules.
- It also approved the signing of an MoU with Iceland in sustainable fisheries development to allow the two countries to exchange expertise and research in the fisheries sector.
- The signing of an MoU with Portugal to develop a national maritime heritage complex at Lothal, Gujarat, to showcase India’s maritime heritage, was also approved.
Direct Tax Amnesty Scheme
- The Direct Tax Vivaad se Vishwas Bill, 2020 will now cover pending litigation in debt recovery tribunals (DRTs) as well, besides those in various courts and tribunals, the Union Cabinet stated, while approving the amendment to the bill on Wednesday.
- “It has been decided to cover disputes pending in DRTs also,” Union minister Prakash Javadekar said after the Cabinet meeting.
- “Disputes of search and seizure where the recovery is below ₹5 crore can be taken in this scheme,” he added.
- The amnesty scheme that was introduced in Lok Sabha earlier this month with the aim of reducing litigations related to direct taxes, at present, covers disputes pending at the level of commissioner (appeals), Income Tax Appellate Tribunals (ITAT), high courts, the Supreme Court and those in international arbitration.
- The minister hoped that people will take advantage of the scheme to settle the tax disputes before March 31, 2020 as 10% more will be charged for settlement of disputes after the end of the current fiscal
- The Cabinet also approved a scheme to recapitalise three public sector general insurance companies — National Insurance Company, Oriental Insurance Company and United General Insurance Company — to raise the solvency ratio and bring it in line with sector regulatory norms.
- The Cabinet’s approval to infuse ₹2,500 crore into National Insurance Company, Oriental Insurance Company and United General Insurance Company, may be a step towards the proposed merger of the three companies, which is at an advanced stage.
Trump’s Ahmedabad visit
- Prime Minister Narendra Modi, promising a memorable trip.
- The 5th visit of a serving US president to India in two decades.
- A testament to how far ties between the two nations have evolved since the two eyed each other suspiciously during the Cold War era, will have many takeaways, symbolic and concrete.
- “India and USA share a common commitment to democracy and pluralism. Our nations are cooperating extensively on a wide range of issues. Robust friendship between our nations augurs well not only for our citizens but also for the entire world,” PM Modi
- In Ahmedabad, Trump and Modi will attend theØ “Kem chho Trump” event at the new Sardar Vallabhbhai Patel Stadium, with more than 125,000 people expected to attend the programme, along the lines of the “Howdy Modi” event hosted for Modi in Houston in September.
- The Trump visit is important in the context of maintaining the high-level contact between the Indian and US leadership, said Arun K. Singh, former Indian ambassador to the US.
- Trump “has at least another year in office. It is important that he remains positively oriented towards India”, Singh said.
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