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My Notes- 12JAN2016 12-01-2016

Improving investment climate

IMF projections for global economic growth for 2016 stand at 3.6 with advanced economies growing at 2.2 and developing economies projected to grow at 4.5%. Among the BRICS bloc India appears to be rightly placed with strong macroeconomic fundamentals.

Globally, the factors that can influence the global demand include – fall in commodity prices, US Fed interest rates, Chinas economic situation. Its recent devaluation of currency can hev spiraling impact on global economy.

In India, economic growth though projected at 7-7.5% it has its own challenges.

Agriculture is stagnant, rural demand may not increase in the coming year. Falling exports, lack of private investment is particularly worrisome. It shall be noted that bulk of public investment comes from the public sector enterprises. So, improving the investment climate and confidence of the investors by fast pacing the reforms is the need of the hour.

On fiscal front, Seventh pay commisison can increase the burden on fiscal consolidation path, but the impact will be less than 1%. It will boost the demand in the economy. The major challenge is how to achieve growth by not off tracking from the fiscal consolidation path.

Afghanistan Pakistan talks

Analysis - more hype than hope

  1. The talks are guided and guaranteed by Pakistan, which has an interests of its own in Afghanistan. The previous attempts by Karzai Government to start negotiations with Taliban are thwarted by Pakistan itself.
  2. The objectives of The Taliban and Afghan Government are at contradicting each other- Taliban wants the exit of foreign forces, power sharing, constitutional changes establishing the supremacy of the Sharia, and the reestablishment of the Islamic Emirate of Afghanistan, reversing the gains of the Afghan people over the past 14 years. Its immediate objectives are seeking the release of Taliban prisoners, ending targeted sanctions.
  3. Not all factions of the Taliban are committed to peace.
  4. Violence and talks both cannot exist together simultaneously.

 

Organisational struggles

  1. Inter-tribal conflict - The southern stronghold of Taliban is no more under its control and the major reason is ethnically divided Taliban.
  2. Leadership crisis- After the death of Mullah Omar and killing of his son, many factions in Taliban are not willing to accept the leadership of Mullah Akhtar Mansour.

 

India’s stand

 

  1. The official stand of the India is that it is “supportive of the peace process” provided “it brings genuine peace and internationally accepted red lines”.
  2. In 2010, former President Hamid Karzai had listed these “red lines” as an acceptance of the Afghan Constitution; peace or a ceasefire as a pre-condition for talks; and following an “Afghan owned, Afghan-led” process. These all are violated in the present talks.

 

China – USA

China has expanded its second artillery force – Institution that controls a china’s nuclear forces to a full pledged service as PLA rocket force. It makes china only the country to have first independent service with land, sea, air nuclear forces in the world.

China also has established the worlds near complete ballistic missile strike system with both nuclear and conventional missiles. It can challenge the superiority of USA on Land and sea.

Clean Air

Recent initiatives that can have significant impact on quality of air in the urban areas include Governments early shift to the EURO VI norms. Various committees such as Saumitra Choudhury committee on auto fuel vision and policy 2025, IIT, Delhi recommended for revision of fuel standard and influencing the passenger behaviour to decrease the emissions.

We still need to address the issues of public transport, population of vehicles on the roads, poor civic governance to take the quality of air to the next level.

Odd – Even formula – Trying and testing the car formula

National Air quality index shows that Odd even formula for use of domestic cars in Delhi had a little impact on the pollution levels. It is because 80% of the pollution in the city comes from Trucks and two wheelers and cars only form 20% of Particulate matter less than 2.5 M concentration.

Other actions such as vacuum cleaning of roads, temporary controls on industry and construction can help. However, implementation of scheme showed the community organization abilities of the Government.

Make in India - Defence procurement

Government made changes to the defence procurement procedures to boost Make in India. These include

1)      DPP 2016 will have a new category indigenously designed, developed and manufactured category. Mandatory 40% domestic content for a domestic design or a mandatory local content of 60% if design is not Indian.

2)      Department of defence production will fund private R&D

3)      Offset policy is amended and the bar is raised from 300cr to 2000cr  ( 30% of  contracts value shall be manufactured in India)

4)      In the bidding process, additional weightage is given to the performance rather than relying only on lowest bidder.

 

Question of the day

 

Do you think recent changes to the defence procurement can encourage the Make in India? Critically analyze based on our past experiences.

 

 

 

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