'Free data flow will aid economy' (GS-3) (Page-13) Batting for free flow of data across borders, Google CEO Sundar Pichai has written to IT Minister Ravi Shankar Prasad saying such a step will encourage global fhrms to contribute to India's digital economy as well as benefit Indian start-ups mulling global expansion. * This comes at a time when the Centre is readying a data protection framework. In July, a panel had suggested steps for safeguarding personal data. It also suggests that every data fiduciary in India shall ensure the storage of at least one copy of personal data on a server or data centre located in India.
Indian economy: Deja vu? But things seem better than in 2013 (GS-3) (Page-14) Macros management How 2018's numbers look, versus 5 years ago 68.8 Rupeevs $ Crude oil(S/bbl)a Petrol AUG.-SEP. 2018 Dlesel 108,16 71.08 70.33 78.52 AUG.-SEP. 2013 51.4 70.21 Aug.-Sep. '18 CAD(% of GDP)+ Fiscal deficit (% of GDP) # GDP growth(%) ^ Aug.-Sep. '13 4.8 4.9 4.4 2.4 3.5 8.1 Closing value on Aug. 28, 2013 and Sep. 7, 2018 respectively l Average for Aug. 2013 &2018 respectively l +Pertains to 2012-13&01, 2019, respectively ! # Pertains to 2012-13 & 2017-2018 respectively l A Pertains to Q1, 2013-14& Q1, 2018-19 respectively Petrol and diesel prices are as of the last day of August
Those with a long memory must be consumed by a sense of deja vu over developments in the past few weeks. In many ways, the present turbulent times are reminiscent of what happened in 2013. The rupee was in a tailspin. Oil prices were booming at over $110 a barrel, exerting upward pressure on domestic retail prices of petroleum products. The current account deficit was in dangerous territory at 4.8% and the country was headed for general elections in a just a few months. It is almost a repeat now even if some of the macro numbers are not as dramatically These are without doubt challenging times but the picture is not as dismal as it was in * First and most important, growth is on the ascendant. The economy seems to havee negative as they were then. 2013. And that's because of three major factors. shrugged off the twin shocks from the note ban and introduction of the GST. Admittedly, the 8.1% GDP growth in the first quarter of this fiscal was amplified by the lower base in the same period last year when manufacturers slowed down ahead of the introduction of GST. But there is no mistaking the strong underlying growth impulse supported by a return
Fiscal management Second, attribute it to deft fiscal management by the Centre or to the dividends from the soft oil price regime of the last four years , the fiscal deficit is at a very respectable level of 3.3-3.5%. In comparison, the deficit in fiscal 2013 was 4.9% and in 2014 was 4.5%. Finally, the political leadership does seem conscious of its fiscal responsibility; at least, it has been so until now. Despite calls from several quarters to loosen purse strings and cast aside the fiscal deficit marker, the Centre has refused to do so. At most, it has allowed itself the luxury of postponing the date of meeting that magic level of 3% to 2021. * The temptation to step on the expenditure pedal will undoubtedly be high in an election year but we have not seen any indications of that until now. The Centre's reaction to the twin shocks of the rupee fall and rise in oil prices are instructive. Even as the media has been going to town over new highs in petrol prices ever day and demanding a cut in excise duty, the Centre has remained unmoved and allowed the higher prices to pass through. With almost a quarter of the Centre's total revenue coming from fuel taxes, any cut will have an impact on the fiscal deficit.
Similarly, the reaction of the RBI and the Centre to the rupee's fall has been prudent. The rupee has been allowed to find its natural level and the central bank has stepped in only to smooth volatility; no reactionary measures such as forex deposits swap or restrictions on capital outflows as in 2013. Finance Minister Arun Jaitley may be anxious but he has exhibited none of it in public as he held on to the refrain that the rupee is not alone in its predicament and that global factors are more responsible for the weakness than domestic ones. So, do all these mean that there's nothing to worry about? Certainly not. The biggest risks are external and how they will play out domestically. The combined impact of elevated oil prices and a weak rupee can cause serious damage to the economy. The pass-through of higher fuel prices is sure to push up retail inflation; the impact may be seen as early as in the August print expected tomorrow. This could prompt the RBI to front load its second rate hike for this fiscal as early as in October.
Private consumption spending, which rose to 8.6% in the first quarter of this fiscal giving a boost to overall growth might well suffer a reverse as consumers pull back from the twin shocks of rising fuel prices and higher interest rates. This will have adverse consequences for GDP growth especially given that private investment is still to fully recover. * Second, the RBI may have let the rupee fall until now but indications are a further fall will be defended, which means a drain on forex reserves. The Centre may also be forced to step in and cut taxes on fuels with obvious implications for the fisc. Finally, there is no saying what one Donald Trump would do next. The tariff war that he has set off has thrown challenges for India as well In sum, these are piquant times indeed for the economy
Graduate in Economics. Gold medal in Dissertation, Prepared various documents on Demonetisation and GST, Share-trading and many more