Editorial 1: The good and the sobering
Recent Context:
- Recently National Statistical Office (NSO) released the data, according to it, India’s real Gross Domestic Product (GDP) growth rose to a four-quarter high of 7.8 per cent in April-June, mainly due to a pickup in agriculture and services especially financial, real estate and professional services and contact-intensive services of trade, hotel and transportation
- Manufacturing and construction sectors, however, recorded slower-than-expected growth rates.
Growth in Construction sector is lower than expectation
- Construction sector grew at 7.9 per cent in April-June this year as against 16 per cent growth in the corresponding period last year.
- The growth was result of government capital expenditure (capex) that is likely to have spurred employment growth in construction that is a labour-intensive sector.
- On the demand side, the investment to GDP ratio was at a healthy 34.7 per cent – similar to last year. As the Centre’s aggressive budgeted spending target on capital expenditure, along with a sharp rise in spending by states has helped.
- Spending by the Centre grew at a massive 59 per cent, and for 16 major states, it rose 76 per cent. But unlike central government capex, the high state capex growth was over a very weak base.
Recognising the role of private sector in promoting growth
- Government cannot keep pumping up investments at the current rate beyond this fiscal as it needs to stick to its fiscal consolidation path. The private sector will have to play its role in order to uphold the growth.
- And the good part is, conditions for that are turning conducive. Private companies have cleaned up their balance sheets and are ready to re-leverage and drive the investment cycle.
- The government’s continued focus on infrastructure creation will keep improving connectivity and lower logistics costs, helping to “crowd-in” private investment.
There is wide opportunity for manufacturing sector to enhance its capacity
- Though there is slow growth in manufacturing sector than expected but According to the RBI’s surveys, capacity utilisation in the manufacturing sector was at 76.3 per cent, above its long-period average
- Government’s initiative such as The Production-Linked Incentive (PLI) schemes could help fast-forward private investments in specific manufacturing sectors over the next few years.
- The West’s desire to diversify global supply chains away from China presents good opportunities for manufacture sectors.
- As, sectors such as steel and cement, which are linked to infrastructure development, and some others such as petroleum products and aluminum are seeing a notable pick-up in investment activity.
The other factor which will simulate the economic growth
- There is rise in demand and consumption in urban area: Alongside, private consumption grew at 6 per cent over a high base. Most of this comes from the urban economy, where services growth rose sharply.
- Nearly two-thirds of services are urban-centric. Additionally, private corporate sector salaries are expected to grow at around 10 per cent this fiscal, which will support urban consumption.
- However, in contrast, the rural economy is seeing flat wages, weak demand under the Mahatma Gandhi Rural Employment Guarantee Act (due to movement of labour to urban areas) and risks to agricultural output from weather vagaries
Challenges ahead that may affect India’s growth
- In the second half, other headwinds would come into play, all of which could impact demand and industrial production.
- Slowdown in the West, particularly Europe: S &P Global expects that Europe will see a sharper downturn with interest rate hikes, cost of living shocks and adverse geopolitical factors.
- For India, the poor showing on merchandise exports, which has contracted in each of the past six months, will also weigh on manufacturing sector growth.
- And India’s goods exports are expected to face stronger headwinds from the Asia-Pacific region than the West. These could worsen as both Asia and the west are expected to decelerate in the second half of this fiscal
- So, despite the cushion from services exports, overall exports are on a decline this fiscal, which would weigh on domestic production sectors that serve this constituency
- Peak impact of the series of rate hikes by the RBI will play out from now. The repo rate has been raised 250 basis points since April 2022 to tame inflation.The established thesis is that rate hikes first moderate growth before they impact inflation.
- The monsoon continues to play truant. After a deficient June and above-normal July, rains have again slipped below long period average ( LPA).
- With El Niño conditions getting entrenched, rains in the rest of the season have become crucial to lift agricultural output and rural demand and subdue inflation. Rains also influence groundwater and reservoir levels for the rabi crops, which are largely irrigated.
- However, the amplified risk to agricultural output and prices is visible in the government’s proactive and reactive measures to shore up supplies — ranging from announcements of export bans/export tariffs, stocking limits, imports of pulses and market intervention at lower prices.
Conclusion
- Therefore, it is expected that GDP growth of India is going to be one of the fastest-growing G20 economy this year that shows potential of India’s economy and emerging economic leader globally.
Editorial 2: Missing in G20: Road safety
Context:
- It is high time to remind all global stakeholders to pay special attention to road safety. As, death toll in road crashes in India and several other developing countries continues to be high, the level of public awareness today is greater than ever.
- This has a lot to do with the untiring and multifaceted approach of governments, civil society organisations and individual road safety warriors, and the incessant support of various international organisations.
Road safety enhance nation’s health, growth and betterment for weaker section:
- The World Bank notes that improving road safety in India is vital to the nation’s health, well-being, and economic growth.
- The already-deprived sections of society are the most vulnerable to road crashes, they include road users like pedestrians, cyclists, two-wheelers, and unprotected children.
- Close to 70 per cent of the fatalities on the roads are people belonging to the economically productive section of the population.
Discussing about road safety on G20 Platform
- Road safety is intrinsically linked with the G20’s main agenda of economic growth and prosperity. However, the issue does not seem to have received headline space on the group’s agenda so far.
- In 2016, international road safety organisations requested G20 leaders to support the UN goal of halving the death toll on roads by 2030. The proposal, however, did not go much further.
- The ongoing events of the G20 under India’s presidency raise fresh hopes of tackling the persisting challenges of road safety.
Steps taken by Indian governments to ensure road safety
- In 2019, India enacted the Motor Vehicles (Amendment) Act 2019 — a powerful modern tool, which, if systematically implemented, would make the country’s roads significantly safer.
- However, several well-framed public programmes do not give the desired results because their implementation is not systematically monitored and evaluated, and accountability is not fixed.
- The Centre and some state governments do have an excellent record in completing development projects, including by making imaginative use of information technology. Even then, the UN goal of halving deaths and serious injuries on roads by 2030 appears difficult.
- Many of the affected countries, including India, despite their sincere efforts, have not been able to curb the number of road crashes appreciably.
Indian can play a major role in ensuring road safety at national and international level
- India’s response to the Covid-19 pandemic is a good example of its ability to effectively deal with difficult challenges.
- As a country where road safety is an issue of serious concern, India can initiate conversations and steer the G20’s resources towards collective scrutiny of ideas and practices that can bring meaningful change.
- The following initiatives can be promoted by India during the recent G 20 summit
- To convene a special meeting to formally take note of this grave challenge and deliberate on possible result-oriented solutions.
- To frame road safety records and partner with some of the countries struggling to tackle this challenge.
- To institute a road safety fund (G20 RSF) to help countries reduce road crashes significantly. Progress could be evaluated over a six-month cycle and the release of future financial aid should be contingent on the effective utilisation of funds.
- G20 should urge the countries concerned to frame a plan that sets targets for reducing the number of road accidents. The project should be equipped with adequate resources and given administrative freedom without compromising on accountability.
- The member countries should urgently consider the privatisation of road safety systems in accident-prone areas and highways by countries that receive the G20 RSF.
Conclusion
- It is expected that the G20 under India’s presidency will frame a road safety action-plan, and agree upon developing an institutional mechanism for this purpose.
- Such an approach could make the roads of large parts of low- and middle-income countries safer. This would add a feather in the cap of the current G20’s theme of “One Earth, One Family, One Future”.