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DAILY NEWS ANALYSIS from THE HINDU 26th September 2017 By Jatin Verma Educator Unacademy
News Articles To be Discussed. I. PM launches 'Saubhagya' plan for household electrification. 2. Mullaperiyar Row gets re-ignited. 3. Illegal sale of Oxytocin continues 4. Economic panel- PMEAC- to be revived 5. India counters Pakistani narrative. 6. Jim Mattis likely to push for Indian troops in Afghanistan 7. Putin to send special representative 8. Merkel faces tough coalition talks after election victory. 9. N. Korea,Venezuela in new travel ban. 10. Database soon of savings schemes linked with Aadhaar. I l . Intervention, rethinking needed to stir demand'.
Business Page 13:'Intervention, rethinking needed to stir demand'. Economic growth in India has weathered the global tail winds over the last few years and the economy is well equipped to move to a higher growth trajectory in the near future However, subdued growth in the last few months, coupled with the slowdown in exports perhaps calls for some intervention and rethinking to push investments and demand in the economy. One of the critical contributions made by the government to economic growth comes from its capital spending on areas such as roads, railways, irrigation projects, affordable housing and building other productive assets These tend to have a multiplier effect on economic growth as higher spending on projects creates jobs which further creates greater demand for goods and services in the economy. In many cases, we find that the finances are not a problem. Implementation bottlenecks need to be addressed. For example, the National Infrastructure Investment Fund (NIIF) has sufficient funds to take over sound assets that are stranded due to paucity of funds. Special infra bonds: The other option that the government could explore is to issue special bonds for large infrastructure spends in railways and other projects in roads and highways, bridges to name a few.
The recent PPP option announced for low cost housing is innovative as it targets issues in risk allocation. Similar models can be offered to other infrastructure sectors where private investments can come in. clauses on renegotiation and grievance redressal need to be included in such policies as absence of these have stranded several projects in the past. In the current year, capital expenditure of not only the central government but also the state governments should be stepped up. Even if this leads to some breach in the fiscal consolidation target, this may be relaxed for a year, as suggested by the FRBM Act for exceptional circumstances Trimming bank holdings: One area of concern that needs immediate attention is to do with bank recapitalisation. This has become even more imminent given the stress caused by the NPAs. The government can look at raising this capital without putting pressure on the balance sheet by trimming its large holdings in these banks. This will enable the banks to restore their financial health and provide an opportunity to the retail capital market. nt has also been concerned about a slowdown in job creation.
While growth revival through public spending will itself create jobs especially in the construction sector, it is also necessary to focus on the labour-intensive sectors. e It is time to recast labour laws and allow fixed term employment contracts ensuring more flexibility The government's recent initiative on setting minimum wages is a move in the opposite direction and should be reconsidered. To quickly restore confidence among businesses, the government needs to resolve issues related to GST especially for the small and medium sector. [i]A clear and simple framework needs to be defined and instituted for claiming input tax credit. [ii]Problems faced by exporters such as withdrawal of duty drawback benefit need to be addressed immediately. [ii]ln the near to medium term, reducing the number of rates under GST and expanding its coverage to include electricity, oil and gas, alcohol and real estate at the earliest should be a priority.
The country has been fortunate to have two successive years of normal monsoon and good agricultural production . There is need to catalyse FDI in organized food retail which can create a supply chain transformation and strengthen the linkages between farmers and markets. RBI's supporting role The RBl also needs to play a role in providing support to the economy. For one, it needs to place some priority on growth while deciding on monetary policy. Having switched to an inflation-targeting regime, the monetary policy committee seems to be ignoring the weak growth trends while setting interest rates. The policy repo rate of 6% does seem excessively high for an economy that is facing recessionary pressure Phe RBl could outline a plan of cutting nterest rates over a period of time. Further, the exporters should have access to easily available credit. . This can be done by expanding interest rate subvention from the current rate to 4% and allowing commercial banks to lend more to SME exporters or tweaking working capital norms.
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