1. IBC boosted ‘ease of doing business’ rank, says Justice Kaul

Supreme Court judge Justice Sanjay Kishan Kaul on Saturday credited India’s rise in the ‘Ease of Doing Business’ index to the introduction of the Insolvency and Bankruptcy Code (IBC), calling it a dynamic law that adapts to the “realities of the Indian society”.

“India’s rank has gone from 142 in 2014 to finally 63 in 2022 — due credit for which should be given to the IBC. In my opinion, IBC has also had a big role to play in India’s new ‘startup’ culture, by creating a conducive environment for budding entrepreneurs,” Justice Kaul said in his address at the inaugural conference of the Insolvency Law Academy.

Balance of power

Justice Kaul said the IBC had shifted the balance of power from the promoters of a company to the creditors. The judge referred to changes proposed by the government in the IBC to benefit homebuyers and prevent them from being caught up in prolonged litigation with real estate developers. One of the proposals is that when an insolvency application is filed against a real estate developer having multiple projects, proceedings may be initiated only against a specific project that has defaulted. Hence, even if the company is legally under insolvency, the economic solution would be limited to the affected project.

“We must appreciate that these battles are not only about the colossal amounts of money involved in these matters, but about the dreams and hard-earned savings of these homebuyers,” Justice Kaul said.

The judge also highlighted the role of mediation, as a “confidential and voluntary process” in the insolvency process.

2. Centre clears appointment of five SC judges

Notification comes a day after Supreme Court made strong observations, but government sources say PMO approved the names on February 2; once the new judges are sworn in next week, the strength of the top court will go up from 27 to 32, and only two vacancies will remain

President Droupadi Murmu signed the warrants of appointment of five new judges to the Supreme Court on Saturday.

Union Law Minister Kiren Rijiju took to Twitter to announce the appointments of Chief Justices Pankaj Mithal, Sanjay Karol and P.V. Sanjay Kumar of the Rajasthan, Patna and Manipur High Courts, respectively; Justice Ahsanuddin Amanullah of the Patna court, and Justice Manoj Misra of the Allahabad court.

The new judges will be inducted after a swearing-in ceremony at 10.30 a.m. in the Supreme Court on Monday.

“I extend best wishes to all of them,” the Law Minister said in a tweet.

These names were recommended by the Supreme Court Collegium on December 13.

The appointments have come a day after a word of caution from a Supreme Court Bench led by Justice S.K. Kaul that things would get “uncomfortable” if the government continues to delay judicial appointments and transfers. “If you keep them pending… you will make us take some very, very difficult decisions,” Justice Kaul had warned.

On Friday, Attorney-General R. Venkataramani told the court that the five names were already cleared by the Centre and would be sent to the President for issuance of warrant of appointments the same evening.

Sources told The Hindu that the Prime Minister’s Office had approved the recommendations of the collegium on February 2 and the appointments were already in their “final stages”. The Centre had taken a considered decision, which had nothing to do with the Bench’s observation, the official said.

Once the new judges are sworn in next week, the strength of the Supreme Court will go up from 27 to 32 and only two vacancies will remain. The top court has a sanctioned strength of 34 judges.

After August 26, 2021, when nine Supreme Court judges were appointed together, this is the second time when so many judges have been appointed in one single batch.

The apex court has an opportunity to function with its full strength if the government clears two other names proposed by the Supreme Court Collegium on January 31. These two names are Justice Rajesh Bindal of the Allahabad High Court and Chief Justice Aravind Kumar of the Gujarat High Court.

3. India joins UAE, France for trilateral on clean energy, counter-pandemic steps

The trilateral initiative will serve as a forum to promote the design and execution of cooperation projects in the fields of energy, with a focus on solar and nuclear energy

NEW DELHI

India, France and the United Arab Emirates on Saturday declared their common intent to formalise a “trilateral cooperation initiative” to collaborate on nuclear energy and explore opportunities in the Indian Ocean region.

The Foreign Ministers of the three countries held a telephonic conversation in this regard and agreed to work together in the field of solar and nuclear energy, climate change and biodiversity.

“Productive conversation with colleagues, French FM @MinColonna and UAE FM @ABZayed today evening. Took forward discussions of New York on building practical projects that will benefit the region,” External Affairs Minister S. Jaishankar said in a tweet after the telephonic conversation.

“During this call, the three sides agreed that the trilateral initiative will serve as a forum to promote the design and execution of cooperation projects in the fields of energy, with a focus on solar and nuclear energy, as well as in the fight against climate change and the protection of biodiversity, particularly in the Indian Ocean region,” a joint statement by the three nations said.

Earlier meeting

The trilateral was first discussed when the three Ministers — Dr. Jaishankar, France’s Catherine Colonna and the UAE’s Abdullah bin Zayed Al Nahyan — had met on the sidelines of the UN General Assembly in New York in September 2022.

It was further agreed that “a range of trilateral events will be held in the backdrop of the Indian Presidency of the G-20 here and COP28 to be held in UAE in November-December 2023,” said the joint statement.

The countries have also agreed to cooperate in defence preparation and in countering infectious diseases, it added.

Towards ‘One Health’

“In this regard, cooperation in multilateral organizations such as World Health Organization (WHO), Gavi-the Vaccine Alliance, the Global Fund, and Unitaid will be encouraged. Further, the three countries will attempt to identify tangible cooperation on implementing the “One Health” approach, and support the development of local capacities in biomedical innovation and production within developing countries,” the joint statement declared.

4. CDSCO bars T.N.-based firm from making eye lubricant

The eye drops are distributed in the U.S. by Aru Pharma/ EzriCare and Delsam Pharma.

Move comes after report from the U.S. Centers for Disease Control and Prevention linking the ophthalmic preparation to 55 adverse events; suspension order to apply till completion of probe

The Central Drugs Standard Control Organisation (CDSCO) has instructed Tamil Nadu-based Global Pharma Healthcare to stop manufacturing all the products under the category of ophthalmic preparation till the completion of an investigation. The move came soon after the U.S. Centers for Disease Control and Prevention (CDC) linked the company’s eye drops to 55 adverse events in the U.S.

On Friday, a joint team — comprising senior drug inspectors and officials from the Centre and from Tamil Nadu — visited the company’s manufacturing premises. They collected samples from four batches of “control samples” for analysis and that of the raw material, carboxymethylcellulose sodium, which was used for manufacturing the eye lubricant.

The investigation was launched on the basis of a warning by the CDC that the eye drops supplied by the company to distributors Aru Pharma/EzriCare and Delsam Pharma in the U.S. had been linked to adverse events, including eye infections, permanent loss of vision, and a death with a bloodstream infection.

During the exercise, the joint inspection team found that the firm had exported two consignments of 24 batches of the eye lubricant to the U.S. The consignments were manufactured in 2021 and 2022. No stocks of the batches concerned were found. The manufacturer had, however, maintained the control samples for the said batches. It said the “media fill validation” (a testing process) was carried out biannually, whose records were verified.

The firm said the root cause analysis in respect to the complaint was under process. On verification of the records, the inspection team observed that the stability studies for the representative batch of the said drugs were done yearly once. The inspectors gathered the relevant manufacturing records for scrutiny.

The CDC had alerted the U.S. Food and Drug Administration (FDA) to the cases of adverse events recorded in 12 States in the country. A warning issued by the FDA on Friday told consumers and doctors to not buy, and stop using, the product.

The company, which has recalled the eye drops from the market, has been placed on the FDA’s import alert list for allegedly providing an inadequate response to a records request.

5. Easing an albatross off the neck of great Indian bustard

Not a solution: Installing bird diverters on power lines, a stop-gap measure, cannot entirely guarantee an end to bird hits.

A Supreme Court-appointed committee has recommended that to protect the endangered great Indian bustard, close to 800 km of proposed power lines in the Thar and Kutch deserts of Rajasthan and Gujarat should be re-routed or made to go underground. This makes up about 10% of the length of the lines.

Despite a Supreme Court order directing that low-voltage power lines go underground, no significant steps appear to have been taken by power companies and State governments to comply with them, according to the report, which The Hindu has accessed.

The 7,200 km of overhead lines are meant to transfer solar power into the grid, but existing lines have been harming the birds, which have been dying in collision with the lines or from electrocution. Only some 150 of these birds are still left, most of them in Jaisalmer of Rajasthan.

The contention

The death of these birds, and the danger to them from power lines and renewable energy projects, triggered a petition in the Supreme Court in 2019, by environmentalists who demanded that all overhead lines be taken underground.

Private and public power companies, supported by the Union Ministry of New and Renewable Energy (MNRE), contended that shifting all overhead lines underground would be expensive and impractical, and would significantly increase the cost of solar power, undermining India’s commitment to green growth.

In April 2021, the court directed that all low-voltage power lines in areas demarcated as “priority and potential habitats of the great Indian bustard” in the Thar and Kutch deserts be pushed underground. “Priority zones” are areas where the birds are known to live and “potential regions” are those where conservation programmes, such as breeding the birds in captivity, are ongoing.

Bird diverters

High-voltage lines in these zones were also expected to follow suit. However, if power companies found undergrounding technically infeasible, they could approach a Supreme Court-appointed three-member committee for permission to go ahead with overhead lines with modifications.

These modifications include installing “bird diverters”, which are flaps installed on power lines that work like reflectors and are visible to the flying birds from about 50 metres away, giving them a chance to swerve from the path of a power line. Bird diverters are, however, considered to be a stop-gap measure, as they cannot entirely guarantee an end to bird hits.

The SC-appointed committee perused applications for about 3,260 km of prospective power lines in the area of Rajasthan where the endangered birds live, and made decisions on the fate of 2,356 km. The committee ratified plans to build 98% of the length as overhead lines with modifications, and denied ratification of 2% of the line in areas which passed through “priority zones” and where recent bird mortalities have been reported.

The committee also received applications for about 4,132 km of power lines in the endangered bird’s habitats in Gujarat and made decisions on 4,094 km of it. Roughly 82% of the line’s length has been ratified for overhead laying with bird flight diverters, while 18% was not ratified. There are more applications from power companies which are still being scrutinised.

‘Expedite work’

“Given the high mortality risk and recent evidence of two [Great Indian Bustard] mortalities in the Prioritized Area of Rajasthan, and frequent movements of both species of bustards in the Prioritized Area of Gujarat,.. request the Hon’ble SC for necessary directions to concerned agencies for expediting the underground laying of transmission lines inside the Priority Areas of Rajasthan and Gujarat,” said the report submitted on January 16.

The companies which have sent applications for exemptions include both public and private sector power companies.

Only a small proportion of the proposed power lines lay in the priority zone, MNRE Secretary Bhupinder Bhalla told The Hindu. “Bird diverters add only a small cost, but undergrounding is much more expensive. The companies, however, have to comply with the Supreme Court order and while many applications are still pending, I think they should begin installing [bird diverters] very soon,” he said.

6. U.S., China exchange barbs over ‘high altitude surveillance balloon’

New hurdle: Antony Blinken, right, said he spoke to Wang Yi to convey he was “postponing” his travel in light of the incident.

The presence of the balloon in U.S. airspace is a clear violation of our sovereignty and international law, and it’s an irresponsible act, Secretary Blinken tells Wang Yi; Beijing says it would ‘not accept any groundless conjecture or hype’

A day after the U.S. cancelled the much-anticipated visit of its top diplomat to China over a Chinese “spy balloon”, the two sides exchanged sharp remarks over the incident, the latest flashpoint in already tense relations.

U.S. Secretary of State Antony Blinken, due to arrive in Beijing on Monday, described the presence of what he called a “high altitude surveillance balloon” in American skies as an “unacceptable action” and said he had spoken with top Chinese diplomat and Politburo member Wang Yi to convey he was “postponing” his travel in light of the incident.

Mr. Wang, in Friday’s phone call, said Beijing, which previously described the balloon as intended for meteorological use and expressed “regret” that it had deviated from its planned course, will “not accept any groundless conjecture or hype”.

“In the face of unexpected situations, what both sides should do is to maintain steadiness, communicate in time, avoid misjudgement and manage differences,” said Mr. Wang, who is also Director of the Office of the Central Commission for Foreign Affairs, according to a Foreign Ministry statement.

Mr. Blinken said he had, in the phone call, “made clear that the presence of this surveillance balloon in U.S. airspace is a clear violation of U.S. sovereignty and international law, that it’s an irresponsible act, and that the PRC’s decision to take this action on the eve of my planned visit is detrimental to the substantive discussions that we were prepared to have.”

The Department of Defence, he added, was continuing to track and monitor “a high-altitude surveillance balloon that remains over the continental United States”. The U.S. government on Friday said it had also observed a second surveillance balloon in skies over Latin America.

Sensitive information

Reports in the U.S. said a decision to shoot down the balloon, which was floating over Montana this week and drifting towards the east coast of the U.S., was considered by President Joe Biden but ultimately shelved because of concerns over damage from debris.

“We’re confident this is a Chinese surveillance balloon,” Mr. Blinken said.“Once we detected the balloon, the U.S. Government acted immediately to protect against the collection of sensitive information. We communicated with the PRC Government directly through multiple channels about this issue. Members of my team consulted with our partners in other agencies and in Congress. We also engaged our close allies and partners to inform them of the presence of the surveillance balloon in our airspace. We concluded that conditions were not conducive for a constructive visit at this time.” “In the meantime,” he added, “the United States will continue to maintain open lines of communication with China, including to address this ongoing incident.”

Next week’s visit had been agreed to by both countries in November, following a first meeting between Presidents Biden and Xi Jinping as leaders of their two countries, on the sidelines of the G-20 summit in Bali. .

7. Magnetite in roadside dust reveals source of pollution

Marker: The amount of magnetite in a roadside dust sample is proportional to the traffic on a given road.

VASUDEVAN MUKUNTH

Geologists at Jadavpur University have found that they can get a preliminary sense of the pollution in an area by collecting roadside dust and testing it with magnetic fields. The technique reveals the presence of different magnetic elements, and by tracing them back to specific sources of pollution, the researchers could tell which sources were dominating in different places.

Their study is in the area of environmental magnetism — which is “magnetism as it depicts the impact of climate change, pollution and environmental footprints on magnetic minerals present in environmental samples such as soil, dust and sediments,” Rimjhim Maity, who has completed her PhD from the Department of Geological Sciences, Jadavpur University, and is the study’s corresponding author, told The Hindu in an email.

She and her colleagues collected roadside dust samples from 50 locations in Kolkata in 2016 using a brush and a scraper, dried them in the lab to remove all moisture, and tested them using a magnetic susceptibility meter. The extent to which a material becomes magnetised when a magnetic field is applied is its magnetic susceptibility. They also studied the shapes of the particles in each sample under an electron microscope.

Their results were published in the January 2023 edition of Current Science.

They found that the amount of magnetite was proportional to the traffic on a given road; it is produced when fossil fuels are combusted in vehicle engines. Using the microscope, they were able to classify the particles’ surfaces as “rough and meld-like”. According to their paper, “Meld-like structure of these particles is due to the high-temperature combustion of fossil fuels”. They also wrote that “angular iron-rich particles are considered to have been emitted by vehicles having abraded and corroded vehicle parts”.

Piecing together

In this way, the study pieces together a coarse yet indicative map of Kolkata’s near-ground pollution and its sources.

“Broadly speaking, the method in the paper looks useful for mapping dust-loading on the roads – a very useful number for calculating road-dust resuspension emissions,” Sarath Guttikunda, founder/director of UrbanEmissions.info and an independent air-pollution researcher, said in an email.

But Dr. Guttikunda was concerned that it was “a manual method,” not automated like air-quality monitors.

“Although our sampling procedure required manual intervention, in this process we can easily collect samples,” Dr. Maity responded. “We don’t have to follow any lengthy process to collect data; we can collect samples like road-dust using very cost-effective tools; and the instruments used … made the sample analysis very cost-effective, less time-consuming and more constructive than chemical analysis.”

Dr. Maity continued, “We are planning to do further studies to identify the usefulness of this cost-effective and less time-consuming method as a pollution proxy and apply it to detect the pollution in any environment globally,” and that it could be “very helpful for economically developing countries”.

She also said, “If each and every industry has its own environmental management team, it can easily study the level of pollution periodically and seasonally using this cost-effective method.”

8. Climate change will increase hydropower generation

There is greater likelihood of increased hydropower generation but the risk arises from very high inflow due to extreme rainfall, especially when the reservoirs are already full

Unlike coal-powered power plants, hydropower, which is the second highest power producing source at 13%, is a significant contributor to clean global electricity generation. Based on observations and climate projections, a two-member team from IIT Gandhinagar studied the hydroclimatic changes in the catchment areas and their implications for hydropower generation in 46 major dams located in north, central and south India.

The team looked at the increase in rainfall in the catchment areas and the resultant inflow into all the 46 major reservoirs in the near (2021–2040), mid (2041–2060), and far (2081–2100) periods against the reference period (1995–2014) for two shared socioeconomic pathway scenarios — SSP1-2.6 and SSP5-8.5. While SSP1-2.6 is a low-emission scenario, SSP5-8.5 is characterised by high radiative forcing by the end of the 21st century.

Projected increase

“Under warmer climate, we expect hydropower production to increase across the country due to substantial increase in precipitation leading to increased inflow to the reservoirs,” says Dr. Vimal Mishra, professor at the Department of Civil Engineering at IIT Gandhinagar, who led the study. Based on selected hydroelectric dams, the projected increase in hydropower potential in India is 10-23%. The results are published in the journal iScience.

A warmer and wetter climate is projected to bring about 5%-33% increased rainfall. As a result, hydropower production is very likely to increase by 9%-36% for most dams and this will come from increased inflow (7-70%) into the dams. The dams in central India show significant increase compared to dams in north and south India. “But most of the increased inflow into the dams will come from extreme rainfall. And herein lies the risks to water storage in the dams,” Prof. Mishra says.

Due to global warming, there will be a simultaneous rise in extreme inflow and high reservoir storage conditions for most dams. “Our study highlights the high likelihood of increased hydropower generation but the risk comes from very high and sudden inflow due to extreme rainfall, especially when the reservoirs are already full. Any further increase in inflow when the dams have already reached their maximum storage capacity can pose challenges for reservoir operations,” he says. “Reservoirs can help prevent flooding, but when they are already full and if the inflow is high, then the dams can create a flood-like situation due to sudden water release. Chennai in 2015 and many places in Kerala in 2018 witnessed massive flooding due to heavy inflow into already full reservoirs.”

Compared with central and south India, north India is projected to experience higher warming in the future. As per the study, the highest warming (about 5 degree C) is projected for north India, while the warming is projected to be around 3-4 degree C for central and south India.

Similar to substantial warming, most reservoir catchments are likely to witness increased precipitation due to global warming. “Both north and central India are projected to receive a higher increase in precipitation than south India. The increased precipitation will alter the inflow to the dams more in north and central India than south India and also hydropower generation,” Prof. Mishra says.

The study found that inflow to a few dams in Ganga, Mahanadi, Brahmani, and west-coast river basins is projected to decline in the future. This reduction in inflow is due to increase in atmospheric water demands in response to the considerable warming compared to increase in precipitation.

Timeline of changes

The projected change in hydropower potential is the highest in the far period (-5% to 62.8%) and the lowest for the near period (-6.2% to 39%). “The potential hydropower generation is projected to rise by more than 50% in Tehri, Ramganga, Kadana, Omkareshwar, Maheshwar, and Sriramsagar dams in the far period,” he says. “In the case of south India, eight out of eleven dams are projected to experience a decline in hydropower potential. Dams in central India are projected to experience a more substantial increase in hydropower generation than north and central India.”

Substantial warming projected for north India may reduce snow and glacial storage, reducing snowmelt water contribution in the long run. But a substantial increase in rainfall is more likely to compensate for the reduction from snowmelt in north India.

“Our findings provide crucial insights into projected changes in hydroclimate and hydropower for the major dams in India,” says Prof. Mishra. “India may have to change reservoir rule curves on how much storage should be permitted at different times during the monsoon season.”

9. Why have mangroves got a Budget push?

How many varieties grow in India? What is the ecosystem required to grow and sustain mangrove forests?

Mangroves are under pressure due to increasing population in coastal areas and the rising demand for land

The story so far:

The Union Budget for 2023-24 announced an initiative for mangrove plantation along the coastline and on salt pan lands, under MISHTI (Mangrove Initiative for Shoreline Habitats & Tangible Incomes).

How do mangroves help?

Mangroves are salt-tolerant plant communities found in tropical and subtropical intertidal regions. They are important refuges of coastal biodiversity and also act as bio-shields against extreme climatic events. With the threat of climate change and frequent tropical storms looming large, planting more mangroves is a welcome development for India which has a coastline of about 7,500 km.

Where do mangroves grow in India?

The ‘State of World Mangroves 2022’ report by the Global Mangrove Alliance puts the total mangrove cover of the world at 1,47,000 sq km (14.7 million hectares). India has about 4,992 sq km (0.49 million hectares) of mangroves, according to the Indian State of Forest Report (IFSR) 2021. Mangroves in India are distributed across nine States and three Union Territories with West Bengal having the highest mangrove cover of 2,114 sq km. The IFSR report also points out that there has been an increase in the mangrove cover from 4,046 sq km in 1987 to 4,992 sq km in 2021. However, like most other countries, in India too the mangrove ecosystem faces constant pressure due to increasing population in coastal areas and the rising demand for land, timber, fodder, fuel-wood and other non-wood forest products like fisheries. The tree species that form a mangrove forest or ecosystem are broadly classified as true mangroves and mangroves associates. True mangroves are the ones which display morphological adaptations for a high saline mangrove ecosystem such as pneumatophores, vivipary or crypto vivipary germination and salt-secreting cells. Botanists put the number of true mangrove species in India at about 42 and mangrove associates at 68. A stable and resilient mangrove ecosystem requires a number of species to exist side by side. Experts believe that trial and testing with field experience and monitoring for years may be required to create a new mangrove ecosystem along the coastline.

What is the ecosystem of these forests?

Mangrove forests are formed when there is intertidal flow and where adequate sediments are available for the trees to set down roots. Experts say aquaculture or fisheries along the coast obstructing tidal flow is one of the biggest threats to the mangrove ecosystem. In the Sundarbans, the largest mangrove forest in the country, several instances of clearing mangroves for fisheries have come to light. Along the country’s coastline, land reclamation for agriculture, aquaculture and industrial activities have occurred in areas which are under the Coastal Regulation Zone. Restoration of the land and allowing intertidal flow is crucial for plantation and survival of mangrove forests.

Which agency will be responsible for it?

The Budget states that MISHTI will be implemented through convergence between the MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme), CAMPA (Compensatory Afforestation Fund Management and Planning Authority) Fund and other sources. Organisations that have been involved in mangrove plantation say that the initiative requires extensive work with local communities. The survival rate of mangrove seed plantation is 50% and of saplings is about 60% and it takes three years for a new plant to stabilise. A contract-based one-time plantation under MGNREGS and CAMPA may not work unless the local communities take ownership of the forests. Discharge of untreated domestic and industrial effluents into the rivers impede the natural inter-tidal flow along the coast and the mixing of freshwater and saline water which help in gradual formation of the mangrove forest.

Why is it crucial for fighting climate change?

The ‘State of World Mangroves 2022’ points out that mangroves are estimated to hold up to four times the amount of carbon as some other ecosystems. “The loss of even 1% of remaining mangroves could lead to the loss of 0.23 gigatons of CO2 equivalent, equating to over 520 million barrels of oil,” the report states. An initiative like MISHTI is in line with India’s Nationally Determined Contributions announced by the Ministry of Environment, Forest and Climate Change to create an additional carbon sink of 2.5-3 billion tonnes of carbon dioxide (CO2) equivalent, through additional more forest and tree cover by 2030. India joined the Mangrove Alliance for Climate, at the 27th session of the Conference of the Parties in Egypt.

10. Is Govt. on track on fiscal deficit targets?

Where does the Budget stand? Will paring food, fertilizer and petroleum subsidies help? Why are fiscal policy measures crucial to tackle inflation?

LEKHA CHAKRABORTY

The story so far:

In the Union Budget for 2023-24, Finance Minister Nirmala Sitharaman chose the path of relative fiscal prudence and projected a decline in fiscal deficit to 5.9% of gross domestic product (GDP) in FY24, compared with 6.4% in FY23. Ms. Sitharaman said the government planned to continue on the path of fiscal consolidation and reach a fiscal deficit below 4.5% by 2025-26. To finance the fiscal deficit in 2023-24, she said the net market borrowings from dated securities are estimated at ₹11.8 lakh crore, and that the balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at ₹15.4 lakh crore.

What is the direction on fiscal deficit given in the Budget?

In Union Budget 2023-24, the fiscal deficit to GDP is pegged at 5.9% in FY24. This ratio has declined from 6.4% in 2022-23 (revised estimate) and 6.7% in 2021-22 (actual).

In the revenue budget, the deficit was 4.1% of GDP in 2022-23 (revised estimate). In Union Budget 2023-24, revenue deficit is 2.9% of GDP. If interest payments are deducted from fiscal deficit, which is referred to as primary deficit, it stood at 3% of GDP in 2022-23 (RE).

The primary deficit, which reflects the current fiscal stance devoid of past interest payment liabilities, is pegged at 2.3% of GDP in Union Budget 2023-24.

Are allocations lower for some sectors?

The major allocations that have been pared down are food, fertilizer and petroleum subsidies. The food subsidy in 2022-23 (RE) was ₹2,87,194 crore. In 2023-24, it has been reduced to ₹1,97,350 crore. Similarly, the fertilizer subsidy in 2022-23 was ₹2,25,220 crore (RE); it has been reduced to ₹1,75,100 crore for FY24. The petroleum subsidy in 2022-23 was ₹9,171 crore (RE); it has declined to ₹2,257 crore in 2023-24 (Budget estimate/BE). However, the point to be noted is that compared with BE 2022-23, the decline is not that sharp. In BE 2022-23, food subsidy was ₹2,06,831 crore; fertilizer subsidy was ₹1,05,222 crore, which was less than what has been allocated in BE 2023-24. It is a laudable decision to extend food security to the poor for one more year amid rising inflation. However, rationalisation of subsidies is important so that the government can move towards reaching a fiscal deficit target of 4.5% by 2025-26.

What needs to be done for growth?

Inflation hurts the poor. The interest rate management by the RBI through inflation targeting alone cannot effectively control inflation, given the supply side shocks. Therefore, fiscal policy measures are crucial to tackle mounting inflation. Policy coordination between RBI and North Block is crucial for a sustained growth recovery process. The RBI has been increasing policy rates to tackle mounting inflation. But a high interest rate regime can hurt the economic growth process. So, the fiscal policy needs to remain “accommodative” with focus on gross capital formation in the economy with enhanced capital spending, especially infrastructure investment. In Budget 23-24, capital spending is expected to rise to 3.3% of GDP. The interest-free loan of ₹1.3 lakh crore for 50 years provided to States should help them spend and boost growth.

Ms. Sitharaman stressed that infrastructure investment has a larger multiplier effect on economic growth and employment.

Can the govt. stick to fiscal consolidation?

The Government has not deviated from the path of fiscal consolidation. In Union Budget 2023, the medium-term fiscal consolidation framework stated that there is a need to reduce fiscal deficit-GDP ratio to 4.5% by 2025-26 from the current 6.4%. There are revenue uncertainties in post-pandemic times and also geopolitical risks, mounting inflation, supply chain disruptions and energy price volatility. At the same time, the Government has kept the fiscal policy “accommodative”, and has undertaken capital spending to support economic growth recovery. The predominant mode of financing fiscal deficit in India is through internal market borrowings. It is also to be financed through securities against small savings, provident funds and an insignificant component of external debt. In Union Budget 2023, India’s external debt is pegged at ₹22,118 crore of the total fiscal deficit of ₹17,86,816 crore in 2023-24 (BE), which is approximately about 1%. In Union Budget 2023, it is also stated that the States will have to maintain a fiscal deficit of 3.5% of GSDP of which 0.5% will be tied to power sector reforms.

What are rating agencies saying?

According to Moody’s, leveraging buoyant revenue, the Government plans to substantially increase spending on infrastructure, while cutting personal income taxes, and providing capital support for the oil sector. The Budget plans are credit positive for renewable energy companies, cement and steel producers, oil marketing companies and automakers in particular, it said.

While continued gradual fiscal consolidation contributes to the stabilisation of the government’s debt burden and supports credit quality, authorities remain unlikely to achieve their ambitious target to narrow the deficit to 4.5% of GDP by FY26, Moody’s added. According to Fitch Ratings, the slow fiscal consolidation process in the wake of the pandemic could leave public finances exposed in the event of further major economic shocks.

What lies ahead?

The Finance Minister is focusing on economic growth recovery through capex. She contends that infrastructure investment will boost private investment. In the fiscal deficit-GDP ratio, if the denominator GDP expands, it will reduce the overall fiscal deficit-GDP ratio. Her focus is on economic growth recovery to strengthen GDP.