Debt Monetization

Farm Services Bill, 2020

AtmaNirbhar Bharat Package

Global Innovation Index 2020

Ideas for Economy : Raghuram Rajan

and more........
presents
 Preface

The MiX is a fortnightly magazine which has been prepared with a view
to provide the aspirants the updates about the Indian economy and
world around. We, the TEAM MENT-U, have put in our best in gathering
the data and putting it in an interesting and easy to comprehend
manner. All the articles are totally exam oriented and will give you 360
degree view of the current scenario on a variety of issues.
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Atma Nirbhar Bharat Scheme for Migrants
- A holistic perspective

T he Government of India announced various economic initiatives under the

AtmaNirbhar Bharat Package (ANBP) in mid-May 2020 for migrant workers
across the world in the midst of the outbreak of the country's novel coronavirus
(COVID-19) crisis. Accordingly, the Department of Food & Public Distribution
allocated a total quantity of about 8 Lakh MT of food grains to all States/UTs,
which was communicated to all States/UTs under the AtmaNirbhar Bharat Scheme
(ANBS) on 15 May 2020 to help mitigate migrant/stranded migrants' food security
requirements across the country. This scheme was explicitly given to cover all such persons who, during the extraordinary
situation of COVID-19, were either protected under the National Food Security Act (NFSA) or under any other State
PDS scheme or who were unable to access PDS food grains for any reason.

The number of inter-state migrants was not reported anywhere but a very liberal estimate of approximately 8 Crore
migrants / stranded migrants across the country was made as a matter of abundant precaution and taking into account the
comprehensive media coverage. For all eventualities, the goal was to provide sufficiently so that the allocation did not fall
short of the requirement. It must be stressed that either the Central Government or the State Governments had no data
available on the real or estimated number of such individuals across the world. In fact, the size of the problem, as illustrated
in the media, was such that the government needed a compassionate and generous response so that no one was left out.

Accordingly, a quantity of food grains was freely allocated by the Department of Food & Public Distribution to cover the
maximum number of migrants in the country. In order to ensure standardised food grain availability, additional food
grains were assigned to each province, representing 10% of the country's almost 81Crore NFSA population. Thus, for a
period of two months, the Food Department allocated approximately 4 LMT of food grain per month and a total of 8
LMT, i.e. May and the year 2020 June. This was sufficient to cover about 8 crore migrants/stranded migrants, if at all that
was the number in reality. In addition, States/UTs were given complete freedom to identify and allocate this additional
ration to everyone who did not have a ration card or was unable to access food grains due to a crisis, and were asked to
establish adequate mechanisms for identifying people and subsequently. In addition, this Food & Public Distribution
Department regularly interacted with States / UTs and also proactively explained to all States / UTs that the distribution of
free food grains under the AtmaNirbhar Bharat Scheme(ANBS) can also be done to all such individuals, who do not have
the details of the NFSA / State ration card, in addition to migrants / stranded migrants.

The Food & Civil Supplies Departments in all States / UTs made robust efforts during the implementation of the
AtmaNirbhar Bharat Scheme (ANBS) to recognise the maximum number of migrants / stranded migrants in their States /
UTs, such as people in transit, quarantine centres, labour camps, construction sites, etc., and also received assistance from
their counterparts in the Labour Departments, district administrations, civil administrations, etc. Thus, on the basis of the
identification / surveys, the States / UTs combined showed an estimated figure of approximately 2.8 Crore migrants /
stranded migrants who could theoretically benefit from the distribution of free food grains under the ANB Scheme and
mobilised all war-footing resources to distribute free food grains to all such people, not only through the Fair Price Shops
(FPSs), but also through the Fair Price Shops (FPSs).

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 In the middle of May 2020, the AtmaNirbhar Bharat Scheme (ANBS) was declared, and after the identification by States and
UTs of such migrants / stranded migrants, a total of around 6.38 LMT food grains were lifted by States / UTs based on their
own initial estimates, which were also liberal and motivated by their abundant sense of precaution so that no migrant /
stranded migrant was left out. Thus, the lifted food grain quantity of 6.38 LMT could not be completely used / distributed. As
a result, only about 2.3 LMT food grains were distributed by States / UTshad by the end of June,2020. However, according to
requests received from several States / UTs, the distribution duration of the food grains already withdrawn was extended by a
further two months , i.e. until 31 August 2020, in order to provide ample incentive for States / UTs to cover the full number
of migrants / stranded migrants.

According to reports available up to 17 August 2020, a total of approximately 2.49 LMT (39 percent) food grains were
distributed by the States / UTs under the defined migrants / stranded migrants scheme out of a total of 6.38 LMT lifted food
grains. With the distribution going on until 31 August 2020, it is predicted that some more migrants may benefit from free
food grains under ANBS by then. The low usage clearly confirms that the total number of migrant workers was probably
much smaller and they were still protected under either the NFSA or the State Ration Card system if they had returned to
their home states.

It is also important to note that, in addition to the distribution of free food grains under the ANBS, some States, such as Uttar
Pradesh , Bihar, Tripura, Manipur, J&K, also provided new ration cards to recipients not previously covered after March 2020,
adding almost 45 Lakh, 15 Lakh, 25,000, 10,000 and 35,000 persons respectively to regularly receive subsidised food grain
quota under the NFSA / PP This implies that during this time about 60.70 lakh additional citizens were covered who were not
covered earlier as they were outside the state and fresh cards were created on return. And this figure could easily be applied to
the 2.51 crore migrants who obtained ANBP coverage, taking on a monthly basis the number of actual beneficiaries to 3.81
crore. In addition, several States / UTs have obtained subsidised food grains from the Open Market Sales Scheme (OMSS) and
have given the same to various civil societies, NGOs, district administrations to supply many more migrants who needed food
assistance during the time of the greatest crisis with either food kits / cooked meals/ etc. In the initial phase, states have used
SDRF services to cater to migrant / stranded migrant food requirements.

NFSA covers nearly 81 Crore individuals and the own scheme of some States / UTs including tide over foodgrains covering
additional 20 Crore individuals. Thus, the provision for additional 8 Crore persons was intentionally on the liberal side after
covering more than 100 Crore persons under PDS through NFSA and State/UTs' own scheme, and the moderate usage
clearly shows that the actual number of inter-state migrants was much less than expected earlier. This also demonstrates that
provision was more than sufficient and did not fall short of requirement Therefore, the interpretation that 8 crore migrants
actually existed and should have been served is not a fair interpretation of the truth. It should also be a matter of more
satisfaction that this number turned out to be much lower at 2.33 Crore in May and another 2.37 Crore in June, dropping by
the end of May 2020 in the range of assessments made by the State / UTs, representing an approximate figure of 2.80 Crore.
In addition, after March 2020, 60.70 lakh additional persons were covered who receive daily ration under NFSA / PMGKAY
after returning to states and hence the amount of 8 Crore persons should not be construed as the real target and
underperformance of ANBP. The fact that, even after the extension of the distribution time of the quantity of food grains
already withdrawn by the States / UT to July and August 2020, only more than 21 lakh beneficiaries could be covered by all
States in July and by approximately 6 lakh beneficiaries in August, indicates that all migrants / stranded migrants were covered
and that the ANB scheme served the purpose for which it was covered by the brand.

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Ideas for Economy : Raghuram Rajan

Raghuram Rajan, had some strong ideas for bringing the economy back on its feet.

I
t's worth reiterating some important points. The government needs to step up spending, both on relief and on new
investments, particularly on infrastructure. There's time to invest now, not later. Do not be threatened by concerns about
the fiscal deficit; resolve such concerns with a realistic programme, under the oversight of the Fiscal Council,
to lower the debt-to - GDP ratio over the medium term. Fill the coffers of the state government,
since they are big spenders. Prepare systemic frameworks for debt burden resolution that will
emerge once the moratorium is over. Recognize that reforms are often a type of stimulus.

Rajan also offers some imaginative moves. One is a variation of the income-tax credit received
in some nations. Refund companies a percentage of the overall tax they have paid in the past, with
the percentage declining with the scale of the company. The tax-compliant would benefit, and it
would struggle to get a look-in from evaders and fraudsters. Another is to allow Walmart, Amazon and
Jio-Reliance to invest in the tiny companies from which they come. The government will have to clean up its
policy mess to make this idea work: Reliance, unlike the two international retailers, has no limits on its operations; Amazon has
the right to sell food, but Flipkart-Walmart does not. Walmart exports quite a bit from India, and Amazon is now using its
website to showcase Indian goods to the world. They can both be motivated to export even more from the small and medium
sectors of India. Clever, creative use of government funds is urged by Rajan. Ridding irrationality from public sector
procurement will help divert current outlays to Indian businesses. Kirloskar sells valves to the whole world, but they will not
be purchased by India's oil industry because the company has no previous experience of supplying valves to the Indian oil
industry! Designed cold-chain infrastructure procurement required for the Covid vaccine will breathe life into a whole
industry segment.

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 concept corner

Debt Monetization

A
concept which refers to the central bank's purchasing of government bonds to fund the government's spending
needs. If the central bank raises fresh funds for the purchase of these bonds on the stock market, the monetization
of debt contributes to an increase in the overall supply of liquidity. This, in fact, will lead to higher economic
rates that the central bank is able to offset by selling the bonds it holds on the free market. Such purchases of bonds tend
to drain surplus capital out of the economy, therefore helping to stabilise rising prices.

History Of Phrase

T he term "monetizing the debt" evolved to a large degree from the background of the Federal Reserve shortly
after the First World War. The Federal Reserve had a clear obligation to the U.S. at the time. Treasury to
stabilise the burden of war debt funding from the Treasury. Individuals started liquidating their Liberty Bond
assets after the war. The Federal Reserve bought large quantities of government securities thanks to its deal with the
Treasury.'

These acquisitions raised the financial system's assets and, subsequently, the capital stock; it was said that the Federal
Reserve had monetized the debt. The Federal Reserve and the Treasury signed an agreement in March 1951, in which
the Federal Reserve declared its independence. The Federal Reserve has since been allowed to follow its economic
priorities independently of the Treasury's debt servicing needs.

With the net federal debt (NFDI, gross debt minus government department and trust holdings, at approximately $1.3
trillion and record large deficits, in both nominal and actual terms, there is fear that the increasingly increasing debt
would place upward pressure on interest rates, forcing the Federal Reserve to raise the supply of money more quickly
than it would otherwise, or even could,

Today, as in the immediate post-World War II context , the term "monetizing the debt" means liquidity growth
caused by efforts to moderate the impact on interest rates of increasingly increasing government debt. By definition,
open market operations in the currency and bond markets buying and selling government securities reflect debt
monetization, i.e. substitution of government debt undergoing debt monetization. Therefore, competitive market
acquisitions and debt monetization are also perceived to be synonymous.

This perception is supported by the fact that open maiket operations are commonly considered the key instrument by
which the Federal Reserve controls the supply of money, so that shifts in Federal Reserve policy are likely to
immediately be mirrored in its government debt portfolio. For these factors, analysts often look at the growth of the
government debt portfolio of the Federal Reserve, the ratio of IFHDI debt holdings of the Federal Reserve to IFHDI
debt holdings, NFD, or similar measures, such as debt monetization indicators.

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 concept corner
However, these steps give very little consideration to the policy priorities and the essence of the money stock system.'
From our description, it is clear that debt monetization should not be evaluated independently from the policy aims of the
Federal Reserve. Assume, for instance, that in order to ensure price level stabilisation, the Federal Reserve is targeting
money inflation. In addition, assume that actual sales grows at a higher pace than inflation, so that money growth must be
good.The connexion between the increase in the assets of the Federal Reserve and the increase in government debt will
offer the false impression in debt monetization if this capital growth is accomplished by free market purchasing of
government debt as the debt is concurrently rising. Indeed, debt monetization happens in this case only if the Federal
Reserve modifies its primary price stabilisation target because it worries that debt inflation will increase interest rates.

In addition, to argue that the Federal Reserve has monetized the debt, one would have to contend both that there is a
favourable link between current or expected interest rates and debt growth and that, in reaction to actual or perceived
upward pressure on interest rates, the Federal Reserve has altered its primary money stock growth target.

In this case, proof of debt monetization will be presented by the connexion between the difference in the real and
expected growth rates of money and the growth of NFD. Thus, it may be inaccurate to use the growth of Ff10 or the
ratio of FF10 to NFD alone as measures of debt monetization. If the Federal Reserve meets the intended goal of capital
growth, the debt is not monetized, even if money growth is accomplished purely by buying government debt on the free
market.

Alternatively, assume that the intermediate policy aim of the Federal Reserve is to peg interest rates at a desired amount.
Then the Federal Reserve monetizes the debt only when, ceteris paribus, debt changes cause interest rate changes in the
same direction. That is, if debt levels bring upward pressure on interest rates, the debt will be monetized by the Federal
Reserve under an interest rate goal.

India's Current Situation

W hen the fiscal deficit significantly exceeds projections, the government can consider monetising its borrowings,
as told by Officials.

A Rs 20 lakh crore package has been unveiled by the government to boost the economy that has been locked down for
almost two months now, offering assistance to, among others, small enterprises, non-banking finance companies
(NBFCs), migrant labour and farmers. A variety of changes have since been carried out as part of the programme.

The effect of the package would be about 1 percent of GDP on government financing. The government has already
increased its borrowing target for the year, attributing it to the coronavirus epidemic that has crippled the economy, to Rs
12 lakh crore from 7.8 lakh crore declared in the budget. In FY21, FM Nirmala Sitharaman raised the state borrowing cap
from 3 percent to 5 percent of the gross state domestic product (GSDP) in FY21, a development that will provide them
with an extra Rs 4.28 lakh crore. This was part of the stimulation overall.

High bank borrowing from the government will increase interest rates and deprive the private sector credit. Monetisation
might mitigate this, however, aside from a general weakening throughout the macroeconomic equilibrium, there are
dangers of rising inflation and currency depreciation. Debt monetization allows the Reserve Bank of India ( RBI) to
directly buy government securities on the primary market to enable the central government, by printing more currency,
meet its spending. The practise of direct monetisation was discontinued by the RBI in 1997. Economists are divided on
the subject, although some have warned against the change, others claim it is possible to pursue minimal monetisation if
necessary.

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Global Innovation Index 2020
- key takeaways for India

O n September 2, 2020, the 13th study of the Global Innovation Index (GII) was introduced. The consistent performance
of India in the GII has been celebrated worldwide, as it has climbed 33 positions over the last five years , rising from
81st in 2015 to 48th in 2020. By doing so, for the first time , India broke into the league of the top 50 creative
economies. India 's success is particularly commendable because it has been recognised for the 10th consecutive year as the top
performer in the Central and South Asian region, and has also been featured among the Lower Middle-Income Community
as one of the Top 3 creative economies, even in the midst of the global Covid-19 crisis. In addition, South Africa ranks "fourth
in market capitalization and ninth in private sector domestic credit" and Kenya stands out for "holding the record for ten
consecutive years of being innovation achievers."

Israel Example

I
srael's meteoric rise as one of the world's leading superpowers may be attributed to its growing R&D spending and its
vibrant ecosystem of innovation. Israel has been able to take advantage of its indigenous innovation ability, facing
numerous obstacles such as a meagre population of 10 million, an exceedingly limited domestic market due to the trade
restrictions with neighbouring countries attributable to bilateral hostilities and the lack of natural resources like water.

In several fields, including defence, software growth, renewable energy sources, etc., Israel has led the world in innovative
technological initiatives, and has been recognised as a world leader in several key metrics, such as the number of innovators,
academics, R&D investment, and partnerships between industry and academia. Israel also topped the North Africa
and Western Asia (NAWA) regional innovation leaders with 13th place in the GII, with a pole position in
8 indicators, third in the highest ranking GII indicators, after Hong Kong and the USA.

Indian Opportunity

W
hen it comes to food, electricity , water and national security, India has its share of challenges. India and Israel both
have different religions and have a contentious relationship with their neighbouring countries. Given the parallels,
there are many lessons India might learn from Israel, the main one being the appetite for failure of Israel and its
ability to maximise resource-restricted efforts in technology growth. India needs to invest extensively in education and R&D,
as Israel does. India's national R&D investment actually accounts for a modest 0.7 percent of the gross domestic product. A
very limited amount of total R&D spending goes to universities, given that the majority of public R&D goes to the sectors of
space, electricity and security.

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 How did Israel deal with these challenges?

O penness to the rest of the world is one of the main reasons behind the growth of innovation in Israel. Israel's
businesses have been able to grow and develop business models that are appealing to investors outside their borders.
Israel is certainly a leader in developing a knowledge-based economy by greatly investing in research and development.
Civilian R&D expenditure surpassed 4% of its GDP in 2009, well ahead of annual spending in developed countries such as the
UK, Germany , France or the US. Israel also thought that many of the pressing problems would be solved by its intellectual
prowess: water shortages, agricultural production, national security. Israel started by investing in a strong system of education.
It spends 7% of its GDP on education at present. Over 45% of Israel's adults have completed their tertiary education. Its R&D
spending is the world's highest (4.9% of its GDP), with a third of it going to universities. Over 250 global companies have
developed their R&D labs in Israel, including Facebook, Google, Apple, HP and Microsoft. One of the largest concentrations
of Nobel laureates also occurs in Israel.

Furthermore, Israel has the largest number of hi-tech startups per capita than any other country in the world. Tel Aviv houses
the second largest startup eco-system after Silicon Valley. Hi-tech exports accounts for 45 percent of the country’s overall
exports. The startups have indeed solved the country 's pressing problems.

Moreover, in a structured way, teamwork and problem-solving skills are instilled. Such qualities allow them to come out and
create successful businesses. One such organisation is Check Point, the largest cyber security firm in the world. Probably, as
much as 10 percent of the global cyber security market is dominated by Israel.

Key takeaways from GII 2020 for India

I ndia needs to ensure that its R&D expenditure figures are recent and represent a real snapshot of India's innovation.
A recent study conducted at the Institute for Industrial Development Studies (ISID) reveals that many businesses do
not disclose their R&D spending. Earlier GII studies, however, pointed out that there is a lack of data on foreign-funded
R&D in the case of India. In order for effective policies to be framed and leveraged, a proper understanding of India 's thriving
R&D services industry and its effect on national innovation capabilities needs to be established.

There are some other studies suggesting that India has the potential to become the world's leading destination for R&D
investment in offshore corporations. Nevertheless, India 's underlying potential could only be
utilized if data collection, curation and review were correctly carried out on a national scale.

Furthermore, it is important to explore the reasons for India not being able to increase R&D
expenditure as a percentage of GDP. India 's target of raising R&D expenditure above 2 %
of GDP with private sector support has not yet materialized. The expenditure of the private sector
on gross R&D expenditure is less than half, which is low compared to other GII countries which
perform reasonably well. There is an urgent need to establish institutional incentive structures that promote
private R&D investment in order to address this issue. In addition, to maximize the financing of R&D funding
in the short and medium term, the enhancement of the project assessment and peer review processes is essential.

India 's innovation should focus not only on providing people with goods and services at an affordable rate. Instead, it should
be geared towards global leadership. Eventually, overcoming India's problems would open up doors for Indian companies
internationally, as was the case with Israel. In order to do so, R&D decentralization initiatives across the states may play a key
role.

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Price Assurance & Farm Services Bill, 2020
to empower farmers
- Highlights of the Ordinance

Highlights of the Ordinance

T
he Farmers'Produce Exchange and Commerce (Promotion and Facilitation) Ordinance, 2020
requires farmers' produce to be sold intra-state and inter-state outside the physical premises of
APMC markets. The levying of any market tax, cess or levy outside APMC areas is prohibited
by state governments.

In an arrangement between a farmer and a buyer prior to the processing or rearing of any farm
produce, the Farmers Arrangement Ordinance provides a structure for contract farming. The Conciliation Board, Sub-
Divisional Magistrate and Appellate Authority provide for a three-level dispute resolution mechanism: The 2020 Critical
Commodities (Amendment) Ordinance enables the central government only under exceptional conditions (such as war and
famine) to control the supply of some food products. Only if there is a steep increase in prices will stock limits be imposed on
agricultural produce.

Key Issues and Analysis

T
he three ordinances are intended to increase the supply of farmers 'produce to buyers by allowing them to trade
freely without any licence or stock cap, so that an increase in competition between them results in higher farmers'
prices. Although the ordinances are aimed at liberalising trade and increasing the number of buyers, de-regulation
alone may not be sufficient to attract more buyers.

The Standing Committee on Agriculture (2018-19) noted that the provision of a marketing network that is open, easily
accessible and competitive is a prerequisite for ensuring that farmers obtain remunerative prices. Entry to government
procurement facilities and APMC markets is missing for most farmers. It noted that, where adequate infrastructure facilities are
established, small rural markets can emerge as a viable alternative to agricultural marketing.

The Standing Committee also recommended that the Gramin Agricultural Markets Scheme (which aims to develop
infrastructure and civil facilities in 22,000 Gramin Haats across the country) should be completely funded and scaled up to
ensure the existence of a Haat in each of the country's panchayats.

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Enlarging the balance-sheet of RBI
- a glance

Advantages of enlarging
the balance-sheet of RBI

A s the Bimal Jalan Committee had a view about how much of the assets should be
allocated to the budget, the RBI balance sheet was at the core of a controversy last
year. In 2019-20, this privilege was not available, and the lower surplus transfer,
of about Rs 57,000 crore, was not really a surprise. As non-tax revenues from the financial
sector, like RBI, were to be about Rs 89,000 crore, it would be a problem for the government,
and it is difficult to see the balance being made up by the PSUs. As was done in the West to
sustain the economy in those days, one school of thinking argues for extending the RBI balance sheet.

The RBI balance-sheet reveals an rise in total assets / liabilities in 2019-20 of around Rs 12.3 lakh crore. As growth in
the balance sheet size has been about 30 percent this year, the asset size of Rs 53.3 lakh crore has been viewed as
indicative of an expansionary central bank. This could not, though, be entirely out of step with other central banks. As a
bigger balance sheet means that more capital is poured into the market, which is what the Fed, ECB and Bank of Japan
have been doing under the various QE schemes, the central-bank-assets-GDP ratio is an indicator of how much help
this entity gives to the economy.

For RBI, this asset-size to GDP ratio was about 25 percent. This was very moderate relative to other central banks (32
percent for the Federal Reserve, 37 percent for the Bank of England and 40 percent for the ECB). It was 123 per cent for
the Bank of Japan. A higher ratio is representative of the central bank's quantum of QE compared to the scale of GDP.
The Japanese statistics, however, underscore the restricted productivity of the same as Japan's economic growth has been
weak. Nevertheless, others might argue, in our sense, that there is space for more balance sheet growth, and RBI should
go in for more monetary easing. Perhaps the notion of monetising the fiscal deficit with the RBI has its origin here.

How this rise of ~Rs 12 lakh crore has come about must be investigated. On the liability hand, the currency rise is about
Rs 4.7 lakh crore; beyond RBI 's jurisdiction, this occurs exogenously. The lockout made households keep money,
which was still the preferred investment option.

Where there is RBI interference, the gain to the government is two-fold. First, the debt is immediately absorbed by the
RBI, which would not affect the market as the paper supply remains unchanged. There is no shock, however, as such a
transaction is performed. Second, a circular flow of capital occurs. Assume that RBI provides the government (the
Center or States) with Rs 1 lakh crore at, say, 6 percent per annum.

The interest charged will be Rs 6,000 crore, which, ceteris paribus, will contribute to the surplus of RBI which gets
diverted back to the Centre. Hence, in a sense, if the Center is interested, it will be free funds for the nation. If it is the
Provinces, the transition from the Provinces to the Centre will take place. If market financing were to take place, the
interest would be paid to banks and FIs. Therefore, with the decision to pass 100 percent of the central bank surpluses
already taken to the government for emergencies as present today, where market financing can manipulate the market,
there are some incentives that can be leveraged by extending the RBI balance sheet with direct government
intervention.

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Competitive advantage via adopting best
environmental standards

Adopting best
environmental standards
for new units would give
India a competitive advantage

Q uick clearances are crucial to drawing global supply chains to India , in addition to the ready availability of
land with quality infrastructure and connectivity. The time taken to receive environmental approval is
typically at the top of the list of delays predicted. An effort to fix this issue is the proposed Environmental Impact
Assessment ( EIA) notice. The environmentalists have created a massive reaction. A particular solution could be a win-
win for everybody, maybe.

The suggestion that India should have anything but the best environmental norms may be nobody's suggestion. In this
basis, favourable views contribute to the market equity of businesses as well as nations. There is also no particular issue
with getting speedy regulatory clearances and maintaining the best expectations at the same time. The challenge is in
the mechanisms that exist. For each project at present, the prerequisite is for an EIA report.

This is then considered by a commission of experts who would wish to provide some clarifications. It goes through the
applications proposed to fulfil environmental requirements. It also looks at the adequacy of the kit of relaxation and
regeneration.

How do we re-engineer this? Industrial parks should be promoted by the state on its own or in a public-private
arrangement for specific types of sectors with designated areas and maximum development potential. In a specific region
with the ultimate production potential, a pharmaceutical industrial park for active pharmaceutical ingredients (API) can
be created.

For this reason, the EIA analysis should be performed with usual rigour and environmental clearance received. India
should follow the strongest global requirements, such as those of the European Union, for all fresh air pollutants, liquid
disposal, and solid waste industrial units. If the most economical approach is a popular effluent system, the organisation
creating the industrial park should create it.

Thereafter, the government might build a special purpose vehicle ( SPV) for each mine chosen for creation and assign
the mine to it. These SPVs were able to assemble land and receive approval of the landscape and woodland. For each
state, there should be standard relief and recovery packages, with only a list of displaced persons needed. If satellite
images is used to measure the number of trees and their organisms that would be destroyed, instead of collecting this
information from the local forest authority, forest clearing would be easier. It is therefore easier to figure out the net
present sum to be paid in indemnity. For a state-promoted SPV, all this will be speedier than for any private company.

Then the chosen private investor can take over these mine-specific SPVs with approval. The probability will be much
smaller for a private investor. Within two years, the mine would go into production. It would also be similarly
advantageous to have a similar SPV solution to assembling land, obtaining environmental and forest approval for local
steel and aluminium plants.

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Inefficient expenditure from govt. may
lead to a big collapse
- GDP numbers

GDP numbers:
If govt doesn’t spend
a lot more, expect a big collapse

A s the June quarter's near-24 percent decline in GDP was much worse than mainstream forecasts, the economy
is obviously in worse condition than we think it is. In the lack of sufficient evidence, these figures have been
crunched, and the updated results may be far more disappointing. In fact , given that the informal sector 's
output is extrapolated from the data of the formal sector, and that the pandemic will definitely have affected the informal
sector more seriously than the structured sector, there is a reasonably decent possibility that growth figures may turn out
to be lower.

Indeed, one field where analysts seem to have been a little more cautious is agriculture, which increased by just
3.4% y-o - y, almost 150 basis points below consensus forecasts. That does not seem to have materialised at all, amid all
the talk of the rural sector boosting the economy; economists have pointed out that rural India relies heavily on the
construction and real estate sectors that are doing well to generate employment, but both are in dire straits.

Private consumption was supposed to crash in Q1, contracting almost 27 percent; but we realised that buyers
were being careful because in Q4FY20, the slowest in 21 quarters, PFCE expanded at an
anaemic 2.7 percent y-o - y, even though market was closed for just 15 days.

Investment has been stagnant for many years now, and in the last three-quarters of FY20,
GFCF had contracted, so the negative 47 percent y-o-y in Q1FY21 is not a shock. In fact,
the GFCF may be below 22.3% of GDP seen in Q1, which is the lowest level recorded in at
least eight years, unless the government now spends severe sums on capex.

There are few signs of the government stepping up as of now. In April-July, the Centre 's budget spending increased by
just 11.3 percent on the year, relative to the planned amount of 13.2 percent. In July, the growth in spending was a mere
6% y-o-y, compared to 46% in June; in July, the budget capex reportedly dropped sharply by 47% y-o-y. As the private
sector will be very reluctant to risk more money, it is important for the government to be brave and spend substantially.
At fair interest rates, it could easily tap household savings, especially because banks don't put deposits to work.

We need to appreciate that corporate India is strapped for cash; in Q1FY21, income for a sample of around 1,400 firms
collapsed 35% y-o-y. The government also needs to help, outside the promised credit lines, MSMEs which have been
damaged by destruction, or several units might yet succumb. Hospitality, aviation, tourism, either with credit lines or
other initiatives, support for the Covid-hit industries is desperately needed; indeed, even more support for the industry is
necessary because many firms are highly likely to go belly up.

It will raise demand, give the private sector the trust to invest, until the government invests large sums in capex. There is
also an urgent need, even if for a short time during the holiday season, for some kind of demand boost. As with GST
cuts on products such as two-wheelers, a drop in personal income taxes at lower-income levels will aid. Without this,
consumption will stay slow, leaving India to record a double-digit contraction in GDP in FY21.

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