Editorial 1: The Most Populous
Context:
- The UN Population Fund’s projection that India could overtake China as the world’s most populous country in the next two months — the country’s population is estimated to touch 142.86 crore by the middle of the year, a little more than China’s 142.57 crore — should not trigger anxieties or cause alarm.
Introduction: Demographers now and then
- Demographers today use a variety of metrics — fertility and replacement rates, age and region-wise data — to arrive at a far more layered understanding of population dynamics compared to 70 years ago when the country launched its first family planning programme.
- The UN report confirms a trend underlined in successive National Family Health Surveys and other government studies — the rate of population growth has slowed down appreciably in the past 10 years.
Government Policies now and then
- Except for a lapse into forced sterilisation during the Emergency, governments in India have, by and large, relied on persuasion and education. In recent years, however, coercive methods — making people with more than two children ineligible for government jobs, for instance — have become a part of the family planning playbook of some states. Such tendencies must be curbed.
What should be the approach?
- The UN report rightly points out that, “Global experience shows family planning targets can lead to… coercion of women”. In parts of the country where the TFR is above the national average — Uttar Pradesh, Bihar, Jharkhand, Meghalaya — governments must follow the time-tested methods of empowering women and investing in their education and strengthening healthcare facilities.
Silver Lining
- The UN report confirms a trend underlined in successive National Family Health Surveys and other government studies — the rate of population growth has slowed down appreciably in the past 10 years. India’s total fertility rate — number of children per woman — came down to 2 in 2020-2021 from about 3.4 in the early Nineties.
- The UN Population Fund reckons that a TFR of 2.1 is necessary for a country to attain population stability. The country is on course to achieve this if it maintains this rate in the next few years.
- Two-thirds of India’s total population is between the ages of 15 and 64.
Way Forward
- Education, skill development and creating opportunities, especially for the youth of disadvantaged sections and women, will hold the key to the country using the demographic dividend to its advantage in the next 20 years. An area of concern is the low participation of women in the labour force.
- World Bank data shows that female labour participation in India plunged from 32 per cent in 2005 to 19 per cent in 2021.
- In taking advantage of opportunities and addressing challenges, there are bound to be debates, conflicts of opinion, and dissent. The world’s most populous country will need to use and strengthen its democratic institutions to find the way forward.
Editorial 2: More room to Spend
Context:
- In recent months, there have been two significant developments relating to state governments’ finances. First, a moderation in state governments’ off-budget borrowing, and second, better than expected utilization of the funds under the central government’s capex loan scheme.
State Government’s Off Budget Borrowings
- State governments’ off-budget borrowings were earlier not subject to strict oversight by the Centre. This allowed states to push some borrowings off-budget, effectively circumventing their fiscal deficit constraints.
- However, guidelines issued by the Centre in 2021-22 warranted that incremental off-budget debt for the year would need to be adjusted over four years between 2023-2026.
- Further, off-budget borrowings made thereafter would be considered as borrowings made by the state itself for the purpose of the Centre issuing its consent under Article 293(3) of the Constitution of India.
- As a consequence of these steps, in February, the central government estimated a sharp drop in the off-budget debt of the states for 2022-23, driven by Telangana and Kerala. Considering that off-budget debt had risen sharply in recent years, and had raised concerns over-servicing, this decline is a welcome outcome.
Special Assistance as Loan to States for Capital Expenditure
- In another positive development, the Centre released Rs 812 billion to states under the “Special Assistance as Loan to States for Capital Expenditure” scheme (interest-free capex loans) in 2022-23. This is higher than the amount indicated in the Centre’s revised estimates.
- For the ongoing year, the Centre has further enhanced the allocation under the interest-free capex loan to the states to Rs 1.3 trillion. This loan is over and above the normal borrowing limit for the year and we assess it to be equivalent to 0.4 per cent of the GSDP for the year. The increased allocation for the interest-free capex loan scheme would support state governments in funding their capital spending this year.
State’s ability to execute
- However, states’ ability to scale up execution will be critical to ensure that they fully utilize the capex loan.
- Spending patterns may be influenced by assembly elections in states such as Karnataka, Telangana, Rajasthan, and Madhya Pradesh over the course of the year. Faster identification of projects under this scheme could result in a less back-ended disbursement of funds. This will also have a bearing on the borrowing requirement of states.
- However, despite the back-ended release of the interest-free capex loans in March, actual market borrowings by states in the month exceeded the indicated amount. This suggests that states are unable to project their borrowing requirement accurately in advance — something that bond market participants will have to keep in mind.
Conclusion
- In the weeks thereafter, there has been a lull in state borrowings. State governments have borrowed only 40 per cent of the indicated amount for the first three weeks of April.
- Considering that states borrowing ceilings are set to decline to 3 per cent of GSDP from 4 per cent in 2021-22, how states manage their borrowings now will be interesting to watch. The reduction in GST compensation as well as the borrowing limit would limit the resources available to states for funding their deficits now, making it all the more beneficial for them to fully utilize the capex loan scheme.